is not supportable. There is no evidence that price discrimination does
lead to, or should be expected to lead to, such levels of concentration
as would give rise to oligopoly pricing on the retail side. Rather,
the evidence shows that ease of entry in distribution is sufficient to
make it highly unlikely that a retailer could for long maintain price
levels above that generally characteristic of the industry.

d. Robinson-Patman Enforcement Has Not Aided Competition

There is also no evidence that Robinson-Patman enforcement orders

have had positive effect on competition and prices in the markets in which they were entered. A pilot study of eight Robinson-Patman enforcement orders prepared by Professor Robert Brooks of Vanderbilt University for the FTC does not demonstrate that such orders resulted in any meaningful benefit to the consuming public. Professor Brooks, himself, concluded in testimony before the House Small Business Committee that most of the orders he studied seemed to have had little effect, good or bad, on "competition" in those industries. In at least one industry, though, he found that there indeed had been a positive benefit. 384/

Analysis of the Brooks report by the Trade Commission staff and by staff at the Department of Justice concluded that the Brooks report really does not offer much evidence of an improvement in competition resulting from the Robinson-Patman order studied. Indeed, it appears that Robinson

384/ Subcommittee Hearings, pt. 1 at 423. The Brooks Report is reproduced at Subcommittee Hearings, pt. 1 at 278. For a critique of the Brooks Report, see Wolfe, Reform or Repeal of the Robinson-Patman Act--Another View, 21 ANTITRUST BULL. 237 (1976).

Patman orders were often directed at markets which were already competitive, and the orders could do nothing to increase or decrease competition in those markets. The only effect of the orders seemed to be to increase the number of certain middlemen by reducing the ability of firms to grant discounts to their competitors.

Specifically, an

evaluation of the report by the Antitrust Division's Economic Policy
Office found it difficult to find support in the Brooks Report survey
responses for the conclusions Brooks drew. For instance, in four of
the eight markets studied, Brooks concluded that: competition was
already very effective, it was unlikely that Robinson-Patman Act
enforcement could make it more effective, but if anything Robinson-
Patman had had a positive effect. Yet there were the survey responses
such as the following in one of these four industries:

(an auto glass shop proprietor) 'Seems to feel that
the order actually prevented competition in that it
compelled the same benefits for everyone, whether
they were trying to do a better job or not, which,
in effect would be to discourage better dealers.'

In addition, Brooks concluded that for three industries studied (dairy,
produce, and biscuits) Robinson-Patman enforcement did not improve a
situation of inadequate competition, although it did have some good effects.
Enforcement also had some bad effects, judging from the survey responses.
In the final industry (office furniture) Brooks stated that Robinson-
Patman had clearly caused improved competition.

It is difficult, however, to support Brooks' conclusion of an increased degree of price competition. In response to the survey

question, "What are the differences in vigor of competitive rivalry in price from what you would have expected without the FTC ruling?",

five respondents said that there had been no effect on price rivalry while only three said that price competition improved.

It seems entirely possible that the other benefits Brooks alleged (entry of new forms of competition, high degree of competition by middlemen) were due to the FTC order eliminating discounts to designers (buying direct) and thus creating a favorable climate for middlemen. One would naturally expect new middlemen to enter under this condition and, since discounts are made more rigid by the order, other forms of competition to arise. Clearly competition is different after the order and in a sense "new." It seems unlikely, however, that the modes of competition (service aspects, etc.) are as efficient after the order as before.

The report's conclusion that there was increased efficiency had support in the response to the survey question, "Have there been any changes in efficiency of sellers or buyers? (and what would have been expected without the order)." Four of the eight respondents stated that the market was less efficient after the order, due principally to increased use of middlemen dealers and less direct buying by designers. Two respondents noticed no effect of the order on efficiency. Only two respondents claimed the order increased efficiency. Significantly, one of these firms claiming an increase in efficiency was a dealer itself and the other was a manufacturer selling through an established network of dealers. Their replies to this question may

reflect their self-benefit from the order.

Another study by FTC staff evaluated the effect of Robinson-Patman cease-and-desist orders on industry structure. 385/ The study

concluded that. issuance of a Robinson-Patman order had no significant effect on the ultimate structure of the industry involved.

The authors, attorneys in the Compliance Division, noted that before a decision to enforce a previously issued order may be, made, the Commission must consider whether the violation of an order is de minimis, examine and critique the various cost justifications included in reports of compliance, and finally, determine whether the costs of proceeding to enforce the order are outweighed by the benefits. Furthermore, it was noted that since the Commission, out of considerations of equity, does not file a civil suit until the respondent has been notified of defective compliance, a firm under order is encouraged to "try out" various schemes for legally evading the intent of the order. The authors believed that rule making and guidelines, often suggested as an alternative to the problem-ridden cease-and-desist order, would be ineffective unless the guidelines were so clear and the penalties so stiff as to completely deter attempts at avoidance. The Robinson-Patman Act, though, cannot be so forthrightly interpreted.

Without attempting to decide whether price differentials are uniformly bad as a matter of public policy, the FTC study concluded that where those

385/ Field and Banta, An Evaluation of the Effects of Orders Issued Under the Robinson-Patman Act, printed in Hearings Before the Special Subcommittee on Small Business and the Robinson-Patman Act, 91st Cong., 2d Sess., Vol. 2 at 769 (1970).

242

discriminations which are arguably anticompetitive do occur, the structure

of the industry itself is so inherently anticompetitive that antitrust enforcement would be better directed toward detection and prevention of merger, monopolization, and predation.

In short, the Field and Banta study contradicted a central assumption underlying the Robinson-Patman Act:

that the enforcing agency,

through its cease-and-desist orders, is able to prevent those practices which, if left unregulated, would in the long run lead to substantial concentration detrimental to the public interest. The study concluded: 386/

(1) That there is no satisfactory evidence that price
discrimination is significantly related to the general
phenomenon of concentration in American industries;
(2) that there is no persuasive evidence that the
Commission's enforcement of the Robinson-Patman Price
Discrimination Act has had any significant effect on
either the structure, conduct or performance of any
important American industry; . . .

e.

Protection of Small Business Can Be Accomplished by
Pro-Competitive Alternatives

i. Actual Predatory Pricing Can Be Prosecuted

Under the Sherman Act

Empirical evidence, discussed in Section A, shows that below marginalcost pricing rarely occurs. And no matter how likely such predatory practices may be on the manufacturing level, predatory pricing on the retail level is almost out of the question, due to the ease of entry in that sector. 387/ As this Report concluded, the only type of pricing which threatens potential harm

386/ Id. at 769.

387/ Testimony of William F. Baxter, DCRG Hearings, Tr. at 58.