SMALL BUSINESS AND THE ROBINSON-
SPECIAL SUBCOMMITTEE ON SMALL BUSINESS
AND THE ROBINSON-PATMAN ACT
;elect committee on small business
house of representatives
A RESOLUTION CREATING A SELECT COMMITTEE TO CONDUCT
STUDIES AND INVESTIGATIONS OF THE PROBLEMS
OF SMALL BUSINESS
WASHINGTON, D.C., OCTOBER 7, 8, AND 9, 1969
Printed for the use of the
Select Committee on Small Business
K^Jj .^.. ^j ypv j^
U.S. GOVERNMENT PRINTING OFFICE
WASHINGTON : 1969
NORTHEASTERN UftiyERSITY SCHOOL of I>.W LIBRAPY
SELECT COMMITTEE ON SMALL BUSINESS
JOE L. EVINS, Tennessee, Chairman
WRTPHTPATMAN Te^as SILVIO O. CONTE. Massachusetts
?Om1;TEED otttma JAMES T. BROYHILL. Xorth Carolina
JOHN C KLUCZYXSKI, Illinois FRANK HORTON. New York
JoSn D DINGELL. Michigan LAURENCE J. BURTON, Utah
VT^ AT ^mVtH Iowa -T- WILLIAM STANTON. Ohio
J AMES C. CORmIn. California DANIEL E. BUTTON, New York
JOSEPH P. ADDABBO, New York
WILLIAM L. HUNG ATE, Missouri
Bryan Haskell Jacques, Staff Director
Gregg Potvin, General Counsel
Myrtle Ruth Foutch, Clerk
Fred M. Wertheimee, Minority Counsel
Special Subcommittee on Small Business and the Robinson-Patman Act-
JOHN D. DINGELL, Michigan, Chairman
KFM SMITH Iowa SILVIO O. CONTE, Massachusetts
JAMES C. CORMAN, California FRANK HORTON, New York
Gregg Potvin, Counsel
Thomas J. Oden, Counsel
Fred M. Wertheimer, Minority Counsel
Hearing dates: ''"*^'^
October 7, 1969 •
October 8, 1969 145
October 9, 1969 195
Testimony of —
Britton, O. W., executive director, Retail Gasoline Dealers Association
of Michigan 79, S3
Greenberg, Howard, consultant. House Small Business Committee., 4
Gulan, Jerome R., legislative director. National Federation of Inde-
pendent Business 88
Jones, William K., professor of law, Columbia University 100
Kintner, Earl W., counsel. National Association of Retail Druggists, _ 27
Kirkpatrick, Miles W., chairman. Antitrust Section, American Bar
Lahr, Jack L., counsel, National Association of Retail Druggists,
accompanying Earl W. Kintner 27
McCamant, William C, director of public affairs, National Associa-
tion of Wholesalers 72
McDonald, Angus, director of research. National Farmers Union — ._ 195
Attachments to statement -■ - ' 206
Moss, Hon. John E., a Representative in Congress from the State of
Neal, Phil C, professor of law and dean of the Law School of the
University of Chicago 100
Patman, Hon. Wright, a Representative in Congress from the State of
Prepared statement 7
Pitofsky, Robert, counsel to American Bar Association Commission
To Study the Federal Trade Commission 228
Posner, Richard A., professor, University of Chicago Law School 146
Ryan, Hon. Waiter F., Associate Director, Bureau of the Census 40
Prepared statement 46
Shacklette, Baron I., assistant to Congressman Wright Patman 4
Snow, WilHam, general counsel. National Congress of Petroleum
Stigler, George J., professor of economics. University of Chicago 145
Thompson, H. C, president, National Congress of Petroleum Re-
Addendum to statement 81
Walker, Scott, economist, Federal Trade Commis-ion 60
Associated Retail Bakers of America, letter to Hon. John D. Dingell,
October 6, 1969 95
Dingell, Hon. John D., letter to Hon. Paul Rand Dixon, Chairman,
Federal Trade Commission, Mav I, 1969 74
Dixon, Hon. Paul Rand, letter to Hon. John D. Dingell, May 7, 1969.. 76
Farm Equipment Wholesalers Association, letter to Hon. John D.
Dingell, October 2, 1969 98
Farmers Union, letter to Hon. John D. Dingell, October 2, 1969 91
Federal Trade Commission, letters to Hon. John D. Dingell:
June 2, 1969 76
October 7, 1969 259
Federal Trade Commission, letters to Miles W. Kirkpatrick:
September 22, 1969 240
September 25, 1969 2o6
Additional iuformatiou — Coutiiuied ^"^^
Grocery and food chain statistics and chiarts 55
Grocery business, independent, stores closed in California, 1965-69 IS
Kolodny, Joseph, managing director. National Association of To-
bacco Distributors, synopsis of statement 91
National-American Wholesale Lumber Association, Inc., letter to
Hon. John D. Dingell, October 1, 1969 95
National Association of Wholesalers, letter to Hon. John D. Dingell,
April 22, 1969 75
National Candy Wholesalers Association, Inc., letter to Hon. John D.
Dingell, October 6, 1969 95
National Candy Wholesaler, August 1969 articles:
"Editorial — New Threat to Robinson-Patman Act Demands
Small Business Vigilance" 96
"Presidential Task Force Report Would Destroy Robinson-
Patman Act" 97
National Food Brokers Association, letter to Hon. John D. Dingell,
Octobers, 1969 1 - 92
National Office Machine Dealers Association, letter to Hon. John D.
Dingell, September 29, 1969 92
National Oil Jobbers Council, letter to Hon. John D. Dingell, Sep-
tember 30, 1969 93
New York Times, October 9, 1969, letter to editor: FTC's perfor-
Retail Jewelers of America, Inc., letter to Hon. John D. Dingell,
September 30, 1969 93
Retail trade statistics 48
United Grocers prices and retail selling prices compared (tabulation).. 20
President's Task Force Report on Productivity and Competition 271
Report of the ABA Commission To Study the Federal Trade Com-
White House Task Force Report on Antitrust Policy 291
SMALL BUSINESS AND THE ROBINSON-PATMAN ACT
TUESDAY, OCTOBER 7, 1969
House of Representatives,
Special Subcommittee on Small Business
AND the Robinson-Patman Act of the
Select Committee on Small Business,
The subcommittee met, pursiumt to notice, at 10 a.m., in room 2359,
Ray burn House Office Building, Hon. John D. Dingell (chairman)
Present: Representatives Dingell, Smith, Corman, Conte, and
Also present : Representative Hungate, of the full committee ; Gregg
Potvin, general counsel; T. J. Oden, counsel; Myrtle Ruth Foutch,
clerk; and Fred M. Wertheimer, minority counsel.
Mr. Dingell. The subcommittee will come to order.
Today the subcommittee opens its hearings on "Small Business and
the Robinson-Patman Act.''
In a sense the opening of this hearing is a historic moment, his-
toric in the sense that it'responds to the crest of the cui-rent wave of
opposition to the Robinson-Patman Act. Since its enactment in 1986,
the Congress has been able to anticipate that at least once a decade
those opposing the rationale and objectives of the act will, in one form
or another, gather their forces and attempt to stomi the gate.
Let me make it quite clear that I personally, and, I trust, the mem-
bership of the subcommittee, believe in the tenets and rationale of
the Robinson-Patman Act. I believe it is the right of the individual
small businessman to enter the marketplace as a competitor, hope-
fully to survive there, and to have a fair chance while encountering
competition and the other buft'eting forces inherent in a free enter-
The purpose of these hearings is to hear the critics of the Robinson-
Patman Act, both those who wish to question its form, its substan-
tive content and its impact, and those who question the manner of its
implementation and enforcement.
We shall also hear those who feel that more should be done to carry
out tlie congressional intent which resulted in the enactment of the
Robinson-Patman Act. It is our intent to receive and consider all
shades of opinion and to do so with the utmost objectivity. This func-
tion, however, takes place against a background in which the House
Small Business Committee resolutely intends to carry out its historic
role in assuming that the small businessmen of this Nation are given
an equitable opportunity to participate as competitors in our free
In examininf!; the various positions of those opposin<; and support-
ing: Robinson-Patman, it is inevitable that this will necessarily entail
an examination of related antitrust statutes and tlieir enforcement,
the allocation of resources at the Federal Trade C'Ommission, and the
policies implicit in any such allocation and, the Chair might note at
this point, a number of other matters. We likewise are most concerned
that consumers receive low prices and full protection. And the Chair
wishes to obser\e (hat I don't regar-d that the question of low ])rices
and full protection under the Robinson-Patman Act to be in any fash-
It is timely that these hearinirs should be held at a time when three
separate task forces recently have reported to the White House on
the state of Robinson-Patman Act enforcement and, to a degree, upon
the agency enforcing that act, the Federal Trade Commission.
As Congressman Wright Patman, a member of this committee, a
distinguished and wise member of this Congress, has said —
It is part of our public policy to halt in tlieir incipiency acts and practices
which have a dangerous tendency unduly to hinder competition or to create
monopoly, or the effect of which may be substantially to lessen comi)etition or
tend to ci'eate a monopoly in any line of commerce or to injure, destroy, or pre-
vent competition. That jtart of the public policy has often been described as a
policy to nip in the bnd, before they have come to full flower, acts and practices
forbidden by our antitrust laws. It was to effectuate that part of the public i>olicy
that the Rot)inson-Patman Act was enacted * ♦ *
Continuing to quote further —
The furthering of public policy through the enforcement of the Robinson-
Patman Act is one of the means of giving relief to small and independent business
men from the ravages of price discrimination as practiced by large competing
concerns who hold a substantial amount of economic power.
Attorney General John N. Mitchell in a recent address on antitrust
policy made a statement that I believe is important Iiere.
The danger that this superconcentration poses to our economic, political and
social structure cannot be overestimated. Concentration of this magnitude is
likely to eliminate existing and potential competition. It increases the pos.oibility
for reciprocity and other forms of unfair buyer-seller leverage. It creates nation-
wide marketing, managerial and financial structures whose enormous physical
and psychological resources pose substantial barriers to .smaller firms wishing
to participate in a competitive market.
And, finally, .super-ctmcent ration creates a "community of interest" which dis-
courages competition among large firms and establishes a tone in the market
place for more and more mergers.
This leaves ns with the unacceptable iirobability that the nation's manufae-
tnrhig and financial assets will continue to l)e concentrated in the hands of
fewer and fewer people — the very evil that the Sherman Act. the Tlayton Act.
the Roltinsfm-Patmau Act. and the Cellcr-Kefanver Anipndment were designed
It is these proV)]ems and these possibilities that we shall examine in
denth during the course of these hearings.
TliG Chair is happy to note the presence of members of the subcom-
mittee and ]iarticularly proud that his good friends and very respected
Members of this Iiody, the Honorable Neal Smith and tlie Honorable
James Corman, are present. The Chair notes that Mr. Conte, the dis-
tinojuished Raukiu<x ^finority ^rcnilxn- of lliis committee, will be
shorfly present with us.
(^Iv. Conte's statement follows :)
Opicning Remarks of Hon. Silvio O. Co^"TE, a Member of Congress From
THE State of ^Massachusetts
During the last 15 months three separate Presidential studies have been con-
ducted in the antitrust Held. The tirst two, coinnionly known as the Xeal and the
Stigler reports were general reviews of the Nation's antitrust policies, wliile the
third study, the recently completed Kirkpatrick report, focused on the activities
of the Federal Trade Commission.
All three of the studies made tindings and recommendations which questioned
the effectiveness and the appnipriateness of the Rohinson-Patman Act as it has
been interpreted and enforced since its enactment in lU'M.
On the other hand, many peo))le consider this legislation central to any chance
s:iiall Iiusiness has to function successfully in our present economy.
One of the major purposes of this hearing is to examine the tindings of these
Presidential studies concerning this act, as well as the views of other interested
The questioning of this legislation is not a new phenomenon. It has been con-
sidered (-(introversial ever since it was first enacted and it has come under attack
over the years from lawyers, economists, commentators, and now from Presiden-
tial task forces. It has lipen attacked, for example, as anticompetitive: as leading
to price and distribution rigidity resulting in higher consumer prices; and as
Aery ditiicult to comply with.
At the same time, hoA-\-ever. this act has had its most vigorous defenders who
state that the act incorporates into our economic system basic principles of fair-
ness : That it fosters rather than imjvairs competition, and that it represents
clear congressional policy to assist small business in circumstances which require
their protec-tion in our national intere.sts. ilany who believe small business to be
a vital iiart of our competitive economic system, believe this act to be vital to the
continued meaningful existence of small business in our country
Roth of these viewpoints will be presented and examined during our bearings
which will include testimony from the Commissioners of Federal Trade Commis-
sion, the agency which has played the major role in enforcing the act.
One matter which T am particularly interested in and which I intend to ex-
amine is the overall effect of this act on the Nation's consumers.
Another major purpose of these hearings is to examine the Kirkpatrick report's
findings and conclusions concerning the Federal Trade Commission. The FTC
has very important responsilulities in a number of areas directly related to the
interests of both small business and the consuming public. The Kirkpatrick reiwrt
has raised very serious and basic questions about the present status of the com-
mission — Ques^tions of priorities, of efficiency, of effectiveness, of leadership, of
misallocation of resources, and of low moi-ale. Tliis is not the first time that
questions of this nature have been raised about the work of the Commission.
One of the major criticisms set forth by the Kirkpatrick Commission is the
failure of the FTC to play a far greater role than it has in the consumer area.
In our examination of the present situation at the commission with both the
Kirkpatrick Commission and with individual members of the FTC it is my hope
that we can help contrilnite to the clearing up of whatever major problems may
Ite confronting the Commission. It is important to all of us that the FTC move
forward as elftctively and as quickly as possible to fulfill the extremely important
role that Congress has delegated to it.
l!i addition to these two areas, the committee will examine a number of other
matters covered by the three presidential studies and important to small business
and consumer interests throughout the Nation.
As the Committee on Small Rusiness, it is our desire, of course, to see the role
and interests of small business enhanced as much as is possible, providing at all
times, however, that such interest is consistent with the national and local inter-
ests of our citizens.
Mr. DiNGET.i.. The Chair is now haopy to welcome our clistinofitislied
friend, the chairman of the Committee on Rankino- rind Currency,
former chairman of this committee, a wise and distinq-uished memher
of this body, an old friend of the Chair and also of tlie father of the
chairman of this subcommittee, the Honorable Wrio-ht Patman.
Mr, Chairman, we are proud that you would be with us this morning.
Mr. Patman. Mr. Chainnan, I have with me two gentlemen who
helped me in the preparation of this statement.
Mr. DiNGELL. Mr. Chairman, if you would, identify them for pur-
l^oses of the record.
Mr. Patman. My assistant, Mr. Baron Shacklette, and the Statf Di-
rector of the Subcommittee on Foundations of this Committee, Mr.
Mr. DiNGELL. Gentlemen, we are certainly happy to welcome you
both to the committee.
TESTIMONY OF HON. WRIGHT PATMAN, A MEMBER OF CON-
GRESS FROM THE STATE OF TEXAS, ACCOMPANIED BY BARON
I. SHACKLETTE AND HOWARD GREENBERG
Mr. Patman. Chairman Dingell and members of the committee, you
know that it is needless for me to say that it is a pleasure for me to
appear before you and to express my views regarding the subject
matter you are studying here today.
I am especially proud of the work that is being done by the chair-
man of this subcommittee, John Dingell.
I have known him all his life. He is a good friend of my son, who
happens to be a State Senator in Texas now. They often visit, and I am
very proud of that. I also knew his father who started out down in
Texas. His father was one of the g^reatest men I ever knew and one
especially interested in social security. I was the first JNIember of Con-
gress that was elected from the South or West to advocate old age pen-
sions. '\^^len I came here I assisted in the organization of a steering
committee, and by the time Mr. Roosevelt was elected we had over a
hundred members of that steering committee. We had some good plans
to get some real social security legislation, worthwhile we thought, but
of course, Mr. Eoosevelt's program was so much better than ours,
really, that we yielded to that one. Mr. Dingell's father was one of the
most active participants in that program.
I congratulate this committee on its determination and its an-
nouncement of this study of attacks by study groups on our antitrust
laws and our public policy of antitrust. You have stated that these
study groups are criticizing the Robinson-Patman Act and antitrust
laws in general, and the enforcement policies essential to the survival
of small business. This criticism of our public policy of antitrust has
been made and is well known. Criticism of this kind is not new, but
this recent criticism is particularly disturbing in that it has involved
challenges through influential voices going beyond the critical reas-
sessment of the implementation of our antitrust policy, to questioning
of the underlying assumptions of that policy. This new criticism about
antitrust policy seems motivated by a kind of economic determination,
liolding in effect that sheer size and absence of free and fair competi-
tion in the marketplace must be accepted as the inescapable price for
economic progress. Of course, with that view I disagree, and I believe
that a majority of the Congress and responsible people in Govern-
ment, and yes, in private life as well, disagree with the thought that
we iniist compromise our public policy of antitrust in order to secure
"We must protect the Federal Trade Commission. You know, the
Federal Trade Commission over the years has done such important
work that naturally they would draw the fire from the people who are
working against the public interest.
The Federal Trade Commission was established by Woodrow Wilson
as an agency to protect the consumers, to protect the public interest.
And it has been doing, I think, a magnificent job in that direction.
Now, these attacks against the Robinson-Patman law and the laws
that are enforced by the Federal Trade Commission, are attacks that
are, I think, against the public interest and against consumer interest.
Whatever we do, we must protect the Federal Trade Commission be-
cause it is doing such a wonderful job and is so necessary. That is the
reason that it is being fought so by these special interests who don't
have the public interest in mind; because it is trying to protect the
consumers and the public interest.
Now, may I just ad lib just a little bit about something which I
think this committee should be very much concerned about; that is,
the one-bank holding company. The banks have the most lucrative
franchise on earth. I am not opposed to it. I am for the banking system.
They have done a wonderful job in time of peace and in time of war.
But the practices that are coming out now are bad practices, princi-
pally from the big banks. The little banks, of course, kind of follow ;
but the big banks, I think the big banking lobby is responsible for
this situation. Here is what they are trying to do, and the reason I
bring it to your attention is its importance in this fight for small bus-
iness today. You know, small business never needed friends more than
it needs them right now, because everything that is for the small man
or the consumer interest, is being challenged by the biggest powers in
the world right here today in the United States.
Now, the one-bank holding company, if it were to survive as the
big banking lobby wants it to as distinguished from all the banks,
would mean that they could change their way of doing business. Here-
tofore, they could not own interest in any concern that was not closely
related to banking. That term is important, "closely related to bank-
ing." And, of course, it has been held that most of the acquisitions that
are nonrelated would be held illegal. Of course, the Department of
Justice sees to that. It is wonderful work that they have been doing,
uj) to a point.
Now then, if they can fret away from that phrase, "buying into busi-
nesses closely related to banking," and use another phrase, they are
trying to change the phrase to "functionally related to banking," that
phrase would include nearly anything in the world. If they can get that
chanire, they can use their power to create money, which I don't object
to, if it is used in the public interest. I don't object to any power that
the banks have if they use it in the public interest, but they have gotten
away from that too much.
Last year they created on the books of the banks some $25 billion.
Well, that is a lot of money free of charge ; didn't cost them a penny.
They did it on the basis of $1 reserve, credit reserve, for every $22
created. It is a vcit lucrative franchise they have. They should l)e
]>lcased with that. But they are not. They want to extend that now to
where they can buy out even their depositors and the people who
have made it possible for them to succeed; buy them out lock, stock,
and barrel. And if they succeed in this, my dear friends, tliat means
that they can buy out just a few of the life insurance companies vritli
rich reserves and they would have enough mone^^ on the fraction:il
reserve system to buy up and own and control the most important busi-
nesses of this Nation and not be out a penny except paper. That is all,
iXe have got to watch that. It is important to small business to
watch it. If they ever get that power, small business is not very secure.
So gentlemen, t appreciate the fact that you are going into this. The
Robinson-Patman Act was created because of a need. You know, there
are all kinds of things going on. Salesmen for big concerns would go
into a big chain store in Texarkana, Tex., or an}' other place and give
them good prices. But of course, the small business store across the
street, they would give him a different price which was a lot higher.
The object of tliat law ])rimarily Avas to prevent suppliers from dis-
criminating against the small man under similar conditions. That
is all it was, very fair treatment for all. It was known by some of the
chains as being really a golden rule for them, and some of th.e chains
accepted it. And they tliought it was all right. But all of them didn't.
So it has been a good law, it has been a good face-saver for a lot of
Xow I think it is needed more than ever before. It has stood the
test of a quarter to a third of this century, and that is a long time. It
has a good enforcement provision. You know, there are triple damages
provided in case of violations of that law, and theie are a lot of law
firms in this Nation who specialize in these cases. The fact that it is
available to bring lawsuits if necessary is a deterrent to those who
would discriminate against the small man because they know and they
fear wliat could happen to them. Therefore, it is a good tiling. It is a