1956 and 1972 were 32 percent higher in non-"fair trade"
states. Moreover, studies conducted in places which
have abandoned resale price maintenance show no adverse
effect on small businesses. Experience in Rhode Island,
which repealed "fair trade" in 1964, Canada, which
repealed it in 1957, and Great Britain which stopped
"fair trading" in 1965, indicates generally lower prices,
more business competition, and no adverse effect on
small businesses.

Finally, the performance of small firms in the unregulated service industry sector supports the conclusion that the existence of a price discrimination statute is not necessary to the survival of small firms and the maintenance of competition. The RobinsonPatman Act applies to the sale of "commodities" in interstate commerce and does not therefore prohibit price discrimination in the sale of services. Yet, as one witness before the Review Group testified, service industries constitute one of the least concentrated sectors of the economy (Testimony of Kenneth G. Elzinga, DCRG Hearings, Tr. 264-65).

Even though Robinson-Patman cannot protect small business as

a class, the statute would provide benefits to society if it promoted the long-run antitrust goals of ensuring lower pricès through reduced concentration and if it protected smaller businesses from truly predatory actions while enabling them to counter the buying power of larger businesses. But rather than being a true antitrust law, the Act effectively is a regulatory statute. The adverse results are inherent in Robinson-Patman's role as an incipiency statute based on

price discrimination.

Moreover, the information available to the

Review Group shows that Robinson-Patman does not prevent increased

concentration in any meaningful way and that the repeal of the Act would not lead to any long-run losses in consumer welfare.

Similarly, other procompetitive ways exist to protect small businesses from predatory activity while enabling aggressive small

businessmen to counteract the buying leverage of larger firms.

a. Consistent With Its Origins, Robinson-Patman
Was Drafted, Not as an Antitrust Law Designed
to Protect Competition, But as a Regulatory Law
Designed to Protect Classes of Businesses

The essential provisions of the Robinson-Patman Act are, as

a matter of law, amendments to Section 2 of the Clayton Act, which itself is an antitrust statute. Because of this fact, proponents of RobinsonPatman steadfastly maintain that it is not a regulatory statute, but an antitrust law. Those who are critical of the statute, on the other hand, maintain that the statute, apart from its location in the United States Code, is essentially nothing more than a regulatory law, and is in total contradiction to mure important goals that are generally ascribed to antitrust statutes. The reason why these two diametrically opposite positions are held, and held with genuine conviction by participants in the Robinson-Patman debate, is that it is theoretically possible to ascribe to Robinson-Patman goals which are in accord with the antitrust laws. At the same time, it is also

equally possible to point out its anticompetitive

antitrust

-

effects on actual business practice.

and hence non

The antitrust laws, as they are embodied in the bulk of the Sherman and Clayton Acts, have as their goal the enhancement of consumer welfare by promoting the maintenance of competitive markets and actual competition, primarily on price. They do so by making unlawful two types of business conduct. Generally speaking, the first type is composed of inter-business agreements which are in restraint of trade. These agreements, such as price-fixing agreements and territorial or customer allocations, represent agreements among competitors not to compete or agreements among suppliers and customers which have the effect of foreclosing competitive opportunities in the economy. The second type of proscribed activities are those which involve actual or attempted changes in the structure of the market which may have serious anticompetitive effects. These activities, monopolization, attempted monopolization, or mergers of a type which seriously reduce the prospect of competition in a given line of commerce, are forbidden because they are not the product of, or do not represent the continuation of, genuine competition on the merits. If allowed to go unchecked, they would result in the actual reduction of competition in the marketplace and less efficient utilization of society's resources.

The problem with Robinson-Patman is that the theoretical antitrust goal which could be assigned to a "pure" version of RobinsonPatman, i.e., preventing powerful buyers from exacting non-cost justified discounts and thus from injuring more efficient competitors of the

buyer, cannot be achieved as a practical matter without conflicting
with the other antitrust goal of preserving vigorous and flexible
price competition for new customers. In other words, Robinson-
Patman reaches the goal of protecting more efficient competitors
by pricing restrictions which, if agreed to by, say, an association
of small businessmen and their suppliers, would be per se violations
of the Sherman Act. Such agreements would both insure high prices
to the sellers, particularly if they were oligopolists, and prevent
competition for buyers. One witness before the Review Group,
Professor Donald Turner, a former Assistant Attorney General in
charge of the Antitrust Division, conceded the theoretical antitrust
rationale for Robinson-Patman, but pointed out that the theoretical
goal could not be attained without collision with other antitrust
goals: 349/

Now, there is this difference about Robinson-Patman,
and I think in all candor it should be conceded. There
is an economic rationale for that aspect of the Robinson-
Patman Act that attempts to protect small buyers against
true discriminatory prices, that is, price differences
unrelated to the cost, a rationale which Fair Trade lacks.

From an economic standpoint, competition, say, at the retail market would work satisfactorily only if the various competitors in that market were not suffering from competitive disadvantages related to their relative efficiency. Now, in the strict sense, if a small buyer has to pay more for the goods that he resells simply because he is small, it has nothing to do with cost savings on the part of the seller and is an unfair advantage.

If it were possible to eliminate that unfair disadvantage without ill effects of another sort, then I think legislation of this kind would be justifiable. The problem is that you cannot.

349/ Testimony of Donald F. Turner, DCRG Hearings, Tr. 307-08.

Unlike a "pure" Robinson-Patman, concerned only with the

preservation of competition, the real Robinson-Patman Act is

explicitly directed toward the protection of individual businessmen. Under the Act, Congress has singled out two major

beneficiary classes, small businessmen and enterprises

performing the wholesale function. The appropriate governmental

agencies are charged with insuring that these classes are not treated "unfairly" in the operation of the dynamic competitive processes that characterize the marketplace.

It is precisely this function, the regulation of price

certain favored incumbents in an industry, which (along with entry regulation) characterizes the essence of economic regulation as it has developed in the American system. The Interstate Commerce Commission has as its function the regulation of pricing among truck lines to prevent "destructive competition" and to govern the competitive relationship between railroads, trucks, and water carriers. The Civil Aeronautics Board controls the

rates and competitive relationships among air carriers. The Federal Maritime Commission has as its basic function the approval and oversight of the competitive relationships in price among ocean carriers. The Securities and Exchange Commission, until 1975, controlled the competitive rate structure among securities