was, of course, the intent of the statute's drafters to discourage the use of coercive buyer pressure. Section 2(f), however, is not limited to such situations and operates without regard to the relative market power of the parties. The Section thus instills extreme caution in buyers negotiating for price breaks which, if obtained, might arguably subject them to liability under Section 2(f). Broad exposure to liability under the Robinson-Patman Act means that sellers and buyers are also exposed to that Act's costly sanctions. Under Robinson-Patman, there are two immediate consequences of violation of the Act: 73/ in an FTC proceeding a firm can be subjected to broad injunctive relief; in a private action a firm can in addition be made to pay treble damages to a complainant. shown, either of these sanctions can impose serious costs on competitors found to violate the Act. As will be A respondent found to have violated the Robinson-Patman Act in an FTC proceeding frequently will be subjected to a cease and desist order much broader than the facts underlying the actual violation. In the most extensive analysis of FTC orders under the Robinson-Patman Act to date, 74/ one commentator found that virtually all cease and 73/ Criminal violations of § 3 are punishable by imprisonment of up to one year and a fine of $5000. 15 U.S.C. § 13a. As previously stated, the Act's criminal provisions have rarely been used. 74/ Kauper, Cease and Desist: The History, Effect, and Scope of Clayton Act Orders of The Federal Trade Commission, 66 MICH. L. REV. 1095 (1968). desist orders studied were of perpetual duration. Such orders would to a fine of $10,000 with each day of violation constituting a 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. The 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 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 increased 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 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. 78 See notes 13 and text at pages 18-27, supra. B. Robinson-Patman Reduces Pricing Flexibility, Discourages the Development of Efficient Distribution Systems and 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. |