The so-called basing point system consists of taking the price of the commodity in Chicago and adding thereto the freight to the place of destination. As practiced by the petitioners, this was without regard to the fact that none of their shipments were made from Chicago but all were made from Decatur. Thus, a buyer who lived in Decatur, where the companies operate their plant, would pay the Chicago base plus freight from Chicago to Decatur, although the goods had never been in Chicago but were always in Decatur and were there delivered to the purchaser. The same thing was true on shipments to all other points, such as Kansas City, Dallas, Sioux City, Little Rock, St. Louis, St. Joseph, Missouri, and other cities. Notwithstanding the fact that Decatur is nearer to these cities and that the freight rate from Decatur to them was lower than the rate from Chicago, the purchasers in these cities were charged freight from Chicago, although the goods were shipped from Decatur. The maximum amount of discrimination is between Decatur and Chicago, and sometimes Decatur customers are discriminated against in favor of Chicago customers by as much as 16%. Wherever the actual cost of delivery from Decatur is less than the cost of delivery from Chicago, the companies added the difference to the net prices at Decatur. This is what the Commission des[223]ignated as "phantom freight," for which the companies did not pay. Discriminations under this practice have resulted at various times in differences as great as:

33¢ a hundred between customers at Decatur and Chicago

If the freight rate from Decatur were reduced while the rate at Chicago remained the same, the benefit of the freight reduction would be withheld from the customers and be added to the price of the commodity. If the freight from Decatur were increased and the rate from Chicago were increased still more, the price to the purchaser would be raised by the amount of the increase in the Chicago freight rate. If the rate from Decatur were reduced and the rate from Chicago were increased, the customers would not get the benefit of the reduced rate from Decatur but would have to pay the increased rate from Chicago. Such are the discriminations which the Commission found to exist in the application of the basing point principle, as employed by the companies.

The Commission also found that the petitioners' use of the "booking" practice resulted in discriminations which occurred by:

1. Permitting favored customers to take delivery at the old price long after the expiration of the thirty-day period within which all customers were supposed to exercise their option of converting their bookings into actual sales.

2. Converting into sales at the old price bookings made by salesmen without authorization of the customer, in anticipation of the increased price.

3. Selling favored customers at the old price where no bookings were even claimed to have been made and long after the period within which all

by the Robinson-Patman Act, 15 U. S. C. A. § 13 (a)1. The Commission claimed that the discriminations which the [222] petitioners practiced in violation of the above statute arose from the Staley companies' practices of applying the basing point system in formulating their prices and of permitting favored customers unfair use of the so-called "booking" privileges. The Commission found that there were discriminations and that such discriminations "have resulted, and do result, in substantial injury to competition among purchasers of glucose * *" The Commission ordered the companies to cease and desist from the use of these practices. The companies filed their petition before us to review the order of the Commission and the Commission cross-petitioned for enforcement.

*

On such petition for review and the cross-petition for enforcement, this matter was before us at the April Session in 1943. On May 10, 1943, we held the complaint to be sufficient but remanded the cause to the Commission for "further consideration and hearings if necessary, in order to show with more clarity, if the Commission can, wherein the discriminations occur and how they substantially lessen competition and promote monopoly, and for proper findings thereon; and for consideration of the defense urged by the petitioners, and for findings in relation thereto." Upon the remand, the Commission did not hear any additional evidence. It merely restated its findings of fact which were, for the most part, twenty-seven pages of argumentative dissertations in support of the Commission's thesis. The so-called findings of fact had to be sifted to find what the facts found were. The Commission again found that there was discrimination and that the effect of such discrimination "may be substantially to lessen competition or tend to create a monopoly," and left the order to cease and desist as originally entered. The matter is now before us for disposition after this remand and reconsideration.

The A. E. Staley Manufacturing Company operates a corn products processing plant at Decatur, Illinois. The Staley Sales Corporation is a wholly-owned subsidiary used for the purpose of marketing the manufactured products of the A. E. Staley Manufacturing Company. Among other things, the petitioners produce and sell in interstate commerce unmixed corn syrup, commonly called glucose. Shipments are usually made in tank cars but not in every instance. All shipments are made from Decatur. The companies' competitors are numerous other corporations who sell and ship similar syrup in interstate commerce. The glucose sold by the companies is used primarily in the manufacture of candy and mixed table syrup. Glucose comprises 5% to 90% of the finished weight of the candies produced and the prices paid for it are a substantial part of the total raw material cost of manufacture, especially in the cheaper lines of candy. Glucose is used in greater proportion in candies which are sold by candy manufacturers at a few cents a pound and on a narrow margin of profit. The margin of profit of such candy manufacturers is so narrow that business may be controlled on a concession of one eighth of a cent a pound. In the mixed table syrup, 85% of the mixture is glucose.

1" (a) It shall be unlawful for any person engaged in commerce, in the course of such commerce, either directly or indirectly, to discriminate in price between different purchasers of commodities of like grade and quality, where either or any of the purchases involved in such discrimination are in commerce, where such commodities are sold for use, consumption, or resale within the United States or any Territory thereof or the District of Columbia or any insular possession or other place under the jurisdiction of the United States, and where the effect of such discrimination may be substantially to lessen competition or tend to create a monopoly in any line of commerce

The so-called basing point system consists of taking the price of the commodity in Chicago and adding thereto the freight to the place of destination. As practiced by the petitioners, this was without regard to the fact that none of their shipments were made from Chicago but all were made from Decatur. Thus, a buyer who lived in Decatur, where the companies operate their plant, would pay the Chicago base plus freight from Chicago to Decatur, although the goods had never been in Chicago but were always in Decatur and were there delivered to the purchaser. The same thing was true on shipments to all other points, such as Kansas City, Dallas, Sioux City, Little Rock, St. Louis, St. Joseph, Missouri, and other cities. Notwithstanding the fact that Decatur is nearer to these cities and that the freight rate from Decatur to them was lower than the rate from Chicago, the purchasers in these cities were charged freight from Chicago, although the goods were shipped from Decatur. The maximum amount of discrimination is between Decatur and Chicago, and sometimes Decatur customers are discriminated against in favor of Chicago customers by as much as 16%. Wherever the actual cost of delivery from Decatur is less than the cost of delivery from Chicago, the companies added the difference to the net prices at Decatur. This is what the Commission des[223]ignated as "phantom freight," for which the companies did not pay. Discriminations under this practice have resulted at various times in differences as great as:

33¢ a hundred between customers at Decatur and Chicago

If the freight rate from Decatur were reduced while the rate at Chicago remained the same, the benefit of the freight reduction would be withheld from the customers and be added to the price of the commodity. If the freight from Decatur were increased and the rate from Chicago were increased still more, the price to the purchaser would be raised by the amount of the increase in the Chicago freight rate. If the rate from Decatur were reduced and the rate from Chicago were increased, the customers would not get the benefit of the reduced rate from Decatur but would have to pay the increased rate from Chicago. Such are the discriminations which the Commission found to exist in the application of the basing point principle, as employed by the companies.

The Commission also found that the petitioners' use of the "booking" practice resulted in discriminations which occurred by:

1. Permitting favored customers to take delivery at the old price long after the expiration of the thirty-day period within which all customers were supposed to exercise their option of converting their bookings into actual sales.

2. Converting into sales at the old price bookings made by salesmen without authorization of the customer, in anticipation of the increased price.

3. Selling favored customers at the old price where no bookings were even claimed to have been made and long after the period within which all

of. The evidence and stipulations are all to the contrary. The companies' competitors were using the system when the companies entered the field. The companies merely followed the system and practices which had been established by their competitors. That this was done in good faith is not questioned in the evidence.

We think the prima facie case made out by the Commission has been rebutted by the showing made by the companies and, since there is no substantial evidence to the contrary, we would not be warranted in enforcing the Commission's order. The order to cease and desist is vacated and the Commission is ordered to dismiss the complaint.

EVANS, Circuit Judge, dissenting.

I agree with the majority opinion when it states that the evidence supports the Commission's finding that the basing-point system as practiced by the A. E. Staley Manufacturing Company was discriminatory and worked to substantially lessen competition and tended to create a monopoly. Such a finding, supported by substantial evidence, necessitates our accepting it as a verity.

I can not follow the majority opinion, however, when it holds that the case made out by the Commission was rebutted by the petitioners. We part over the effect of petitioners' effort to bring themselves within the exception found in Subsection (a) of Section 2 of the Clayton Act, as amended by the Robinson Patman Act (15 U. S. C. A. Sec. 13). That section condemns and makes unlawful discriminations in prices which "may be substantially to lessen competition or tend to create a monopoly in any line of commerce.'

The Commission having made a finding supported by substantial evidence and approved by this court that such practice was indulged in, there would be nothing left to this case, were it not for subsection (b) of the same section 13, which places upon the party practicing discrimination the burden of affirmatively showing justification.

* *

was

The language of the statute, as amended, is,-"Nothing contained in Sections 12, 13, 14–21, 22-27, of this title shall prevent a seller rebutting the prima-facie case thus made by showing that his lower price made in good faith to meet an equally low price of the competitor In an effort to determine whether petitioners have established the justification permitted by the statute, it is worthy of note,

First, that such justification is limited to cases where the seller is attempting to justify "his lower price." In the instant case there is no attempt to show Staley was trying to justify a lower price. The most that the evidence shows is that Staley attempted to enter the field by complying with the existing basing-point practice. In short, Staley did not want "to stir up the animals" by starting a price war. He accepted the status quo, a status quo which followed a practice which "substantially lessened competition and tended to create a monopoly," and which was, no doubt, satisfactory to one about to enter the field. But the satisfaction was not over the fact that it was to be permitted to "lower prices," but over the fact that said practice tended to lessen competition.

I can find nothing that would justify the conclusion that Staley indulged in its practice to justify a lower price.

Second. Likewise, worthy of note is the requirement of the statutory justification that the seller's "lower price" was to meet an "equally low price" of a competitor. There is nothing to show that the practice was adopted to meet "an equally low price" of a competitor.

could make as good glucose as their competitors but that its quality was not so superior to competitors' as to command the market and that business could be had only by meeting competitors' prices. The company "sold such syrup at the same delivered prices as were quoted by competitors in the markets and at the destinations set forth" in the evidence. Their chief competitors and the largest corn syrup market in the country were in Chicago. They "found that * large factories were manúfacturing such syrup and delivering it in Chicago at prices which were lower than those prices then existing in any other market; that the delivered price in such other markets was generally equal to the Chicago delivered price plus the published freight rate on such syrup from Chicago to destination."

* *

So, at the time the companies entered the business, their competitors were using the so-called basing point system. The prices they made conformed largely to that system. For the companies to get into the Chicago market under that system, they had to absorb the freight from Decatur to Chicago. The bulk of their business was in the Chicago market and their product was sold at a price to meet competitors' lower price in Chicago. The petitioners claimed that in order to meet the competitive situation, they adopted the basing point price system in good faith, and later the so-called "booking" practice. The Commission found, however, that the companies "have not shown that the discriminations in price granted by them are within any of the excepting provisions of the statute." The Commission seeks to support this finding upon the following stipulation: "That on several occasions, and since June 19, 1936, Respondents have increased and reduced their price per hundredweight for Corn Syrup for delivery in all markets by the same amount per hundredweight without and independent of any similar and prior action by competitors."

We do not think this is substantial evidence or that there is any other substantial evidence in the record to support the Commission's finding. The basing point practice was being used by the competitors when the A. E. Staley Manufacturing Company went into business. The booking practice developed as the business went along. The evidence in support of these facts is stipulated in the record and is not in dispute.

The stipulation above quoted does not say that such increases or reductions of prices were related to the discriminatory practices with which the companies are charged. For aught that appears in that stipulation, such increases and reductions may have had nothing to do with the discriminatory practices of which the companies were found guilty. Certainly one cannot say that the booking practice discriminations were shown to be related to those independent price changes. Even if it may be inferred that all prices were pro[225]mulgated by use of the basing point system so that the price-changing mentioned in the above stipulation should be considered within the basing point practice, still § 2 (b) of the statute does not require that competitors' prices shall be first announced and promulgated before one may in good faith meet them. The companies may very well have known what the competitive situation in their industry was and what was certain to happen. In anticipation of what their competitors were certain to do, the companies promulgated prices to meet the foreseen competitive situation.

The fact that the companies were first in the field with a price is not controlling. The question here is: Were they first in the field to use the basing point pricing system? It is the use of the system that is complained

638680-47-46