36-138—69 — pt. 1 7



94

United States, as well as clirec-t. Recent statistics developed by the Xatioual Oil
Jobbers Council indicate that the jobber is responsible for the distribution of
32.4% of all gasoline and 74.3% of all fuel oil sold in the Unitel States, the
balance being sold direct by the suppliers.

The petroleum jobber in the United States iinds himself in direct competition
with his supplier. The mere size of the supplier results in economic dominance
over most oil jobbers. As a practical matter, the jobber is told by his supplier
the quantities of supply, the price which he will pay, the amount of promotional
allowances which he will receive, and any other economic support which may
become necessary during the term of a jobber contract.

In negotiating his contract with his supplier, the jobber is handed a printed
form ami given little if any opportunity to modify any of the terms or condi-
tions. The contract can be cancelled generally on 30 days notice by the sup-
plier. It's strictly a "take it or leave it" contract from the jobbers' standiwint.
How does the Robison-Patman Act affect the jobber in these circumstances?
A recent opinion by the United States Supreme Court in Perkins vs. Standard
Oil of California gives a simple indication of the kinds of problems confronted
by the oil jobber. The case involved basically a Robinson-Patman violation re-
sulting in putting Mr. Perkins out of business. The case was fourteen years in
litigation, the discriminatory pricing practices taking place in 1955, continuing
through 1957. In 1969 the Supreme Court afl3rmed a total judgment of $1,298,-
213.71 on behalf of the jobber.

This kind of discrimination, we believe, continues even today in spite of the
Robinson-Patman Act. Indeed, only this past week, we have received specific
instances where possibly similar situations exist in an E}ast Coast state and
on^ in the far South West. You can therefore understand our concern that if
the Robinson-Patman Act were eliminated, or modified adversely, economic co-
ercion exercised by petroleum suppliers would be even greater than it is today.

As recently as last year, the Federal Trade Commission, in exploring the
violations of the Robinson-Patman Act and Section 5 of the Federal Trade Com-
mission Act, examined the use of games as promotional tools in the petroleum
industry. It will be noted from the transcript of the hearings that one of the
difficulties which the jobber faced was the comi>etitive and economic coercion
placed upon him by his supplier to compel him to use the games. It was clear
from the hearings, even though the Federal Trade Commission sidestepped the
issue, that this was a dominant practice throughout the industry.

Another problem faced by the jobber is that when he discovers a violation of
the Robinson-Patman Act. resulting in damage to him. the cost of litigating is
so substantial and his position with his supplier is so precarious, that the jol>ber
is generally reluct.Tnt to take on his supplier in the Federal Courts. One of the
advantages Mr. Perkins had in the ^t(nular(l Oil case was that he was no longer
a Standard jobber when he brought the litigation. Much less does the averasre
jobber have the financial wherewithal to i)ersist in litigation from the United
States District Court through the Supreme Court over a period of fourteen
years. As a practical matter, few if any jobbers are in a position to finance
such litigation, unless the jobber is substantially damaged by the actions of his
supplier to such an extent that he is compelled involuntarily to leave the in-
dustry and then sue. assuming he has financial ability to prosecute the suit. Con-
sequently, the only manner in which the average jobber can be protected is
throusrh continued cries to the Federal Trade Commission. The Federal Trade
Commission itself, though understaffed and overworked, is oftentimes the only
agency to which the abused jobber can turn for legal assistance.

It is likely that the petroleum distribution industry's principal suppliers
mieht continue to violate the Robinson-Patman Act and the Federal Trade Com-
mission Act to the STibstantial detriment of its independent jobbers. Negotiation
by the jobber with the suppliers may frequently be to no avail. The only way
that the jobber can effectively be protected is with the assistance of laws. Thp
elimination of the Robinson-Patman Act as a cause of action could only result
in strengthening the economic position of the supplier in his negotiations with
the jobber. Consequently, it is our position that under no circumstances shouM
the Robinson-Patman Act be repealed or substantially modified. We do suggest
its more vigorous enforcement by federal agencies.

Thank you for considering the interests of the independent oil jobbers.
Sincerely,

Thomas L. Jones, Executive Vice President.



95

National-American Wholesale Lumber Association, Inc.,

^'ew York, N. Y., October 1, 1969.
Hon. John D. Dingell,

Subcommittee on Small Business and the RoMnson-Patman Act, House of Repre-
sentatives, Washington, B.C.

Dear Mr. Dingell : We appreciate the opportunity to express ourselves with
regard to the Robinson-Patman Act in connection with the hearings to be con-
ducted by your Subcommittee.

We feel very strongly that the type of protection intended by this statute must
be preserved.

It is true that the nature of the lumber and wood products industry is such
that "making a case" under this statute is particularly diflBcult. Therefore, there
may be instances which would at least be questionable under the statute but
never get beyond the stage of complaint among those directly affected. Never-
theless, we are convinced that the existence of the statute acts as a desirable
deterrent to the institution of actions which would constitute unfair competitive
practices.

At this particular time we are unable to comment on the vigor of enforcement
due to the lack of knowledge of any complaints in recent years. In recent months,
however, there have been developments which necessitated presentation of the
facts to the Federal Trade Commission in one instance and the Department of
Justice in another, and in both cases there are Robinson-Patman implications.
Conceivably, subsequent developments in either or both of these situations will
place us in a better position to comment on the areas suggested in your letter
of September 17th.
Sincerely,

J. J. MuLROONEY, Executive Vice President.



Associated Retail Bakers of America.

Washington, D.C., October G, 19G9.
Hon. John D. Dingell,

Chairman, Subcommittee on Small Business and the Robinson-Patman Act, Select
Committee on Small Business, House Office Building, Washington, B.C.
Dear Mr. Chairman : We respectfully submit this brief preliminary statement
of our strong interest in preservation and enforcement of the Robinson-Patman
Act.

The following is included among the declarations of policy on national affairs
adopted by the members of the Associated Retail Bakers of America and re-
affirmed at their 51st Anniversary Convention in Atlantic City, New Jersey,
on April 28, 1969 :

Unfair and destructive price discrimination. — We oppose weakening amend-
ments to the provisions of the Robinson-Patman Act against unfair and destruc-
tive price discriminations which may injure competition, including discrmina-
tions against retail bakers on ingredients, supplies and equipment.

That policy has again become highly relevant to current events, because of
the recently published recommendations of the two Presidential task forces which
in substance call for destruction of the Robinson-Patman Act.

An opportunity to provide a detailed .statement on behalf of retail bakers will
be greatly appreciated.
Respectfully submitted.

William A. Quinlan,
General Covnsel and Washington Representative.



National Candy Whoi^salers Association. Inc..

Washington, D.C.. October 6, 1969.
Hon. John D. Dingell,

Chairman, Subcommittee on Small Business and the Robinson-Patman Act.
Washington. B.C.
Dear Mr. Chairman : Thank you for giving this association and our member.-
an opportunity to present our views on the continuing necessity for the Robinson-
Patman Act. Because of the limited time since the announcement of your hear-



96

ings, may we just tell you that we not only support the preservation and enforce-
ment of the Robinson-Patman Act but we feel that any weakening of the Act
would be disastrous to the candy wholesaling industry.

I speak on behalf of myself and Raymond J. Foley, our executive secretary
who also received an invitation from you.

We would like to ask for the privilege of filing with you at a later date a
supplementary statement and perhaps appearing as a witness in support of
the Act. This will give us more time in which to contact our members.

For your information, I, Clarence M. McMillan, am the executive vice-president
of the National Candy Wholesalers Association. Inc., with headquarters in
Washington, D.C., and representing approximately 1300 wholesale distributor
members located in all fifty states of the Union.

This association also has approximately 750 confectionery brokers and other
manufacturer representatives who are associate members and approximately
250 manufacturers of confectionery and related products who are associate
members. In our supplementary statement we will reflect the sentiments of a
number of these associate members, as will be indicated.

We would at this time compliment your lommittee on its initiative in challeng-
ing those who have publicly deprecated the Robinson-Patman Act, especially
the presidentially appointed committees headed by Phil C. Neal and George J.
Stigler. We have responded to the Neal report editorially in our magazine,
National Candy Wholesaler, in the manner shown in the enclosed reprint from
the August 1969 issue and we will appreciate your including this in your record
of the hearing as a means of showing our great concern over the proposals in
this report.

Sincerely yours,

Clarence M. McMillan, Executive Vice President.

[From National Candy Wholesaler, August 1969]

Editorial — New Threat to Robinson-Patman Act Demands Small Business

Vigilance

Small independent business again faces a serious threat to its very existence.
This is made evident by the report in this issue of National Candy Whole-
saler of the recommendations by a Presidential task force that the Robinson-
Patman Act be amended virtually to death.

Candy manufacturers, brokers, wholesalers and their customers would be
vitally affected by these changes. But they are not the only ones. Most inde-
pendent retailers of the country in all lines and the wholesalers who supply them
would severely be hampered competitively. The broker would lose, and his
manufacturers would be left defenseless against the buying power of the large
chains.

So drastic are the prosopals of this report that it is little wonder the last
administration allowed the so-called study to remain buried in the files of the
Department of Justice for one year before publishing it. It was finally released
for publication in the Congressional Record at the request of an interested

Investigation reveals that President Lyndon B. Johnson named a task force in
December 1967 to make a study of all anti-trust laws and to report within one
year. Dean Phil C. Neal of the University of Chicago law school was made chair-
man, and five law professors, three practicing lawyers and three economists were
selected to make the study. It is not yet known how these men were selected, but
it is obvious that they did not include any supporters of the Robinson-Patman

Act.

As the article in this issue reports, the task force proposed by specific amend-
ments that the Act be gutted in order to eliminate all protection of the individual
competitors and return comi)etition to the dog-eat-dog practices of the large firms,
which existed prior to 1936 when the Act was passed.

Specifically, the proposed amendments would strike out Section 2(c) entirely.
This is the brokerage provision which prohibits the manufacturer from giving and
the buyer from receiving the broker's commission. The importance of this lies in
the fact that the large mass buyer could coerce the manufacturer into giving him
this commission in the form of a discount which the small buyer could not secure
for himself. This was shown by conditions which existed in the famous A & P



97

Case of 33 years ago when this chain had its own brokerage firm and garnered
millions from its manufacturer suppliers, many of whom were candy manufac-
turers.

If Section 2(c) were removed, it would take no time for the large chains to de-
maud and get the brokerage on all their purchases. The reason this is true is that
paying the brokerage could not be attacked as a price discrimination because it
can be cost-justified. Thus, the broker would suffer and the independent whole-
saler and retailer would be discriminated against in cost of goods they sell in
competition with the chains.

The task force recommends also the elimination of Sections 2(d) and 2(e) from
the Robinson-Patman Act. This means that the large mass buyer could demand
and receive advertising and other allowances and services such as were solicited
and received by him before the Act was passed. The list published in the A »& P
Case, which is still available for inspection, included hundreds of firms who paid
A & P millions of dollars in unearned allowances and discounts.

Special services afforded to Fred Meyer, Inc., a store chain in Portland. Ore.,
but not given to the chain's competitors, brought about the recent Supreme Court
decision in that case. The protection thus afforded the wholesaler's retail cus-
tomers by the Court would be nullified, as would the FTC guidelines on adver-
tising and other allowances just issued.

This and all other progress attained through three decades of litigation under
the Robinson-Patman Act would be wiped out. There would be so little left of
value in the Act that it would probably not be worth litigating for.

Space on this page will not permit a discussion of the other very serious impli-
cations of the task force report. But they are so .serious that NCWA oflScials feel
that small business everywhere must be alerted to the dangers inherent in the
drastic proposals of this task force.

There has been no evidence yet that these proposals will be introduced in Con-
gress as specific legislation. But this Congress does have bills that propose a study
of the antitrust laws. The opponents of the Robinson-Patman Act can be expected
to seize any opportunity they can to remove the Act from the books.

There is evidence that the mounting attack on the Robinson-Patman Act is non-
partisan. Another report has just been uncovered which is said to be even more
da'uaging to the Act. This report was prepared by a group appointed by President
Xixon before he took office. It also is headed by a law professor at the University
of Chicago.

There is little action we can recommend to the friends of the Robinson-Patman
Act at this time, since no bills have been introduced in Congress to implement the
proposals. But eternal vigilance of small business is certainly important. That's
why it is so vital to maintain an alert association headquarters and staff in Wash-
ington to serve as a watch-dog for the candy industry.

Spot News — Presidential Task Force Report Would Destroy

Robinson-Patman Act

A new threat to the Robinson-Patman Act, and particularly to the vital broker-
age provision contained in it, has been posed by recommendations of a Presi-
dential task force in a report made public by the U.S. Department of Justice.

Published in the Congressional Record of May 21, 1969 as a White House task
force report on antitrust policy, the study proposes to eliminate Section 2(c), the
brokerage provision, so as to weaken or destroy the entire Act.

The task force, appointed by President Johnson in December 1967. was headed
by Phil C. Neal, dean of the law school of the University of Chicago. It made its
report on the broad field of antitrust laws, but dealt very critically with the
Robinson-Pntman Act. It even drafted new wording of all the provisions although
not asked to do so. The net result of the proposed changes would virtually de-
stroy the Act, according to C. M. McMillan, executive vice president of NCWA.

Among the changes advocated by the report are the following:

1. It would eliminate the present brokerage provision which prohibits a manu-
facturer from giving the brokerage commission to the large mass buyer.

2. It would eliminate Sections 2(d) and 2(c) which prohibit manufacturers
from giving discriminatory advertising allowances and services. It would thus,



98

among other things, nullify the effect of the Supreme Court decision in the Fred
Meyer case and the new FTC guidelines on advertising allowances.

3. It would weaken the 2(b) provision with respect to cost justification of
discriminatory prices.

4. It could relieve the buyer of most of the responsibilities for inducing illegal
price discriminations and would open the way for extreme pressure on the manu-
facturers by the big buyers.

5. It would eliminate the protection of the small buyer and bring back the
dog-eat-dog competition among the large buyers.

6. It would set a five-year time limit on all cease and desist orders and make it
necessary to litigate all over again. Many cases take more than five years to
arrive at an order in the first place, Mr. McMillan said.

One of the members of the task force in individual opinion even suggested the
Robinson-Patman Act should be repealed entirely. But a majority felt that the
proposed amendments were preferable, since repeal would not preclude the
wholesale transfer of the Robinson-Patman Act doctrine to Sections 1 and 2 of
the Sherman Act and Section 5 of the Federal Trade Commission Act.

The task force then proceeded to suggest a new section in the Robinson-
Patman Act which would weaken the application of the Federal Trade Commis-
sion Act in price discrimination proceedings.

_ The report showed that a majority of the task force felt that price discrimina-
tions are usually desirable for the economy, not withstanding the damaging
effect on the elimination of specific individual businesses.



Farm Equipmext Wholesalers Association,

Minneapolis, Minn., October 2, 1969.
Hon. John D. Dixgell.

Chairnian, Siiiirommittee on Small Business, and the Robinson-Patman Act,
2361 Rayhurn House Office Building, Washington. B.C.

Dear Represextatint: Dixgei.l : Thank you for extending this opportunity to
submit views of this segment of industry on the Robinson-Patman Act.

The position of the Farm Equipment Wholesalers Association, shared by a num-
ber of other wholesale associations whose member firms perform similar market-
ing roles with other commodity lines, is that the Robinson-Patman Act MUST be
retained, and, if the Congress deems it necessary to .spell out its intent specifically
for the benefit of the FTC and the Courts, be amended.

The Robinson-Patman Act serves an important interpretive function, along
with the Clayton Act and other statutes, to protect small businesses not only
from abuse but from destruction. If the Act has not been effective in all situations
this has been more the result of misinterpretation of Congress' intent by both the
Fderal Trade Commission and the Courts.

We believe that the Robinson-Patman Act was a responsible effort b.v the
Congress to maintain a fair and equitable climate for all business — small, medium
and large ; and is an essential counterpart of the Sherman Act, which, in address-
ing itself to the end results of monopolistic trade restraints, left a broad area
of "incipient" trade practices undefined and unrestrained.

The Clayton Act attempted to clarify some of the specific business practices
which spawn monopoly or place destructive restraints upon smaller businesses.
The Federal Trade Commission Act provided an auxiliary policing instrument
to enable al)used parties to seek relief before such policies infiicted permanent
harm or caused their demise as operating busines.ses. The Robinson-Patman
Act amendment to the Clayton Act again was a re.sponsible effort by the Con-
gress to more clearly define areas of legality and illegality, providing a better
guideline for business practices.

The current shift in emphasis to consumer protection is commendable, but it
would be tragic if the FTC role were diverted away from its original and essen-
tial function related to statutes enacted to protect business from itself.

Neither the Sherman Act, the Clayton Act or the Robinson-Patman Act have
served to protect a victimized small business in the manner intended by the
Congress. The problem is that administrative interpretations and court inter-
pretations of the intent of Congress have been infrequently in agreement, and in
treating specific practices in isolation have seriously abridged the intent of such
legislation.



99

There is urgent need for clarification by tlie Congress of a number of areas
•of trade practice;^ whicli would enable the FTC and the Courts to restore order-
liness where only confusion now exists.

Congress should spell out its meaning of "functional discounts" and establish
recognition of the marketing functions performed by (1) the wholesale jobber/
distributor, and (2) the retailer. Unless this clear distinction is incorporated in
the statutes, neither the FTC nor the Courts can make an evaluated judgment
as to whether price discrimination in extension of discounts is being employed.

Congress should recognize specifically the traditional marketing need for
"exclusive territory" provisions in contracts between manufacturers and whole-
salers without exempting either party from full compliance with the basic pro-
visions of the various statutes.

Congress also should concern itself with "franchise" dealerships where re-
straint against handling competitive lines can be exercised by implication that
a franchise will be terminated, as well as by actual termination of a contract.
This embraces the full area of contract cancellations which are not made in
good faith.

Congress, in considering contract ethics, should concern itself with a related
end-result, the preempting of customers by means of contract cancellation. Per-
haps the most effective deterrent to capricious and arbitrary franchise can-
cellation would be for the Congress to establish recognition that a customer of
a franchisee, and the retail customer of a wholesale jobber-distributor, are as.sets
of defineable monetary value which must be purchased by the preemptor if taken
over as part of a contract cancellation action.

The Robinson-Patman Act has more direct application to all businesses than
any other anti-trust provision of the Sherman Act and the supplemental statutes
enacted to deter restraint and other unfair methods of competition at their onset.
The trend of mergers and consolidations and outright acquisitions during the
past 12 years has intensified the problems which smaller regionally based or
locally based businesses must overcome in order to survive. These mergers, con-
solidations and acquisitions constitute a real and growing threat to free and
ojien competition, threatening the survival of the small independent marketing
merchant, wholesaler and retailer, who have given "immediate availability" of
product of consumer's choice to the American economy. Each of these mergers,
etc., takes a product line out of its former normal marketing channel, not only
hurting the wholesalers and retailers who had a part in building the product to
successful share of the market, but also reducing the competition in that product
category. The adverse cost-to-consumer effects of monopoly are as real in lower
echelons of business size as at the "Giant" level.

It would appear to be obvious, that the concern of your subcommittee now
should be directed toward establishing the specific intent of the Congress in
present statutes. Both the FTC and the courts need this to be spelled out if
they are to provide consistency of interpretation where injured or abused parties
are .seeking redress. More importantly, businessmen should be able to know the
specific ground rules limiting their policies.

In each of the areas of concern noted in this communication, this association
in cooperation with a great many other commodity line associations, will be
available at any time the subcommittee desires to explain the common trade