desist orders studied were of perpetual duration. Such orders would

extend over the life of the firm regardless of changes in conditions
or competitive environment. Similarly, many orders failed to limit

their prohibitions of discriminatory pricing to the particular
product which had been the subject of the FTC action. Finally,
many orders failed to reflect the geographic limitations of the
underlying action. Each violation of such orders may subject a firm

to a fine of $10,000 with each day of violation constituting a
separate violation. 75/

Upon advice of counsel, therefore, a businessman must consider

the cost to his entire business of a pricing action perhaps limited to a single customer, a single market and a short period of time. The risk of a broad and unconditional order applying to his pricing practices in all markets, violation of which may be tremendously expensive, may well convince him to avoid selective price reductions.

In private litigation, the risk to sellers and buyers flows from the possible award of substantial money damages to the plaintiff. award of damages in many jurisdictions does not require proof of actual injury. Damages, in these jurisdictions, are computed by multiplying the amount of the discrimination times the number of goods which the disfavored purchaser has acquired. The result, of course, is to place control of the size of the damage award in the hands of the prospective plantiff. 76

75 15 U.S.C. § 45(1) (Supp. IV 1974).

76 Fowler Mfg. Co. v. Gorlick, 415 F.2d 1248 (9th Cir. 1969); Elizabeth Arden Sales Corp. v. Gus Blass Co., 150 F.2d 988 (8th Cir. 1945).

Compounding the problem is the fact that, since Section 2 of

the Robinson-Patman Act is designated as one of the antitrust laws,
the award so computed is then tripled. 77/ The effect of this in-
creased award is to magnify in a punitive manner the adverse effects
of what may have been a good faith error in pricing. Moreover, the
treble damage provision plus the possible award of attorney's fees
makes potential awards large enough to encourage, under a contingency
fee arrangement, litigation of questionable merit. Thus, a
businessman must consider the fact that, if found to be in violation
of the Act, the sanction imposed will have little relationship either
to actual injury done to his competitors or to any benefit to him as
a result of the price reduction. The mere threat of a treble damage
complaint may intimidate a firm, causing it to withhold or withdraw
price reductions.

6. The Overall Effect of Robinson-Patman Is To Instill
Extreme Pricing Caution in Sellers and Buyers

The Robinson-Patman Act creates an overwhelming legal barrier for those firms contemplating price adjustment in response to specific competitive demands by less than all customers. The charging of prices sufficiently different in amount to affect resale prices creates a virtual presumption of illegality and rebuttal of that presumption is difficult if not impossible. The affirmative defenses are difficult

to prove and require accounting procedures foreign to

the businessman.

Other avenues of competition, such as brokerage and

promotion, are discouraged by the per se nature of the sections of the

77/ 15 U.S.C. § 15; 15 U.S.C. § 12.

statute governing those activities. And the penalties for violation

of the Act are out of all proportion to any potential injury which might result from price discrimination.

To be sure, the Act does not compel a finding of liability in every case of price discrimination. A firm charged with a violation

may be able to demonstrate lack of competitive injury or the applicability of one of the defenses. 78/ However, evidence before the Review Group and leading Robinson-Patman cases show that this possibility is slight and the risks great. A conscientious attorney must counsel restraint on the basis of numerous cases which impose liability for pricing practices similar to those that a client may So advised, a rational businessman will find that

be considering. the risks of selective discounting under Robinson-Patman are severe. The reasonable and necessary consequence of Robinson-Patman's bias must be to create in the business community an atmosphere where caution, not competition, is the rule in setting non-uniform prices. The biases built into the Act catch the unwary violator, of course, as is demonstrated by a reading of Robinson-Patman case law. But the deterrent effect on wary businessmen contemplating the legality of a price reduction is the real harm, since the pricing practices which give rise to liability under the statute in many cases are those necessary to the proper functioning of the marketplace.

B.

Robinson-Patman Reduces Pricing Flexibility, Discourages

the Development of Efficient Distribution Systems and
Frequently Operates to the Detriment of Consumers

The previous section of this chapter explains how Robinson-Patman

extends the impact of the statute beyond that of protecting competition.

The Report will now take a hard look at the problems which Robinson-Patman has caused for businessmen, both large and small, and for the American consumer. Two seeming difficulties with any discussion of the Act's effects initially must be confronted. The first is the lack of any quantitative study of the overall dollar cost of Robinson-Patman enforcement. The way in which economists and statisticians normally go about determining the cost of a particular statute or other governmental policy is to do a comparative study of business behavior before and after that policy goes into effect, or to perform a "controlled" experiment. A "controlled" experiment is carried out by comparing business behavior in one sector of the economy or region of country where the statute applies with the behavior of firms in a similar market not covered by the law. Studies of this type were conducted to determine the effect, if any, of "Fair Trade" statutes, the enabling legislation for which was recently repealed by Congress. 79/ Valid comparisons of pricing behavior and the survival rate of small businesses could be made since several states had retail price maintenance statutes, several states did not, and several had price maintenance statutes which were later repealed. Similar studies have also been done comparing regulated and unregulated markets in the trucking and domestic airline

industries.

79 Pub. L. No. 94-145, 89 Stat. 801.

With Robinson-Patman, though, such studies are not possible.

Robinson-Patman applies throughout the United States and covers the sale of most commodities, including almost all products to be sold to retailers. Moreover, insofar as Robinson-Patman inhibits businessmen from competing for new markets or new customers, the costs of RobinsonPatman are "opportunity costs," that is, the costs to an entrepreneur of having to take the second best alternative because his first choice is blocked by Robinson-Patman. Opportunity costs are inherently

difficult to measure.

The second problem is that the actual impact of Robinson-Patman depends on the degree to which Robinson-Patman is obeyed in the business community: to the extent that the statute is ignored, its adverse

effects are proportionately reduced; to the extent it is obeyed, its effects are magnified.

But again, such data is difficult to obtain.

Consequently, it is necessary to assess the economic effects of

Robinson-Patman by evaulating the requirements that the statute places

on businessmen, by analyzing actual business behavior affected by

Robinson-Patman, and by relying on a presumption which all of those involved in the legislative process must make that businessmen will for the

-

most part act in the manner logically compelled by a statute and its

sanctions. An economist testifying before the Review Group clearly defined

the limits of the analytic problem: 80/

The problem with the Robinson-Patman Act is that
it applies all across the country. We simply don't
have a country like the United States in every respect
except that it does not have the Robinson-Patman Act.
If we did, economists would be delighted. We could
measure prices in each country and find out

80/ Testimony of Kenneth G. Elzinga, DCRG Hearings, Tr. 261-62.