US SUPREME COURT DECISIONS

GREAT ATLANTIC & PACIFIC TEA CO., INC. V. FTC, 440 U. S. 69 (1979)

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U.S. Supreme Court

Great Atlantic & Pacific Tea Co., Inc. v. FTC, 440 U.S. 69 (1979)

Great Atlantic & Pacific Tea Co., Inc. v. Federal Trade Commission

No. 77-654

Argued December 4, 1978

Decided February 22, 1979

440 U.S. 69

Syllabus

Section 2(a) of the Clayton Act, as amended by the Robinson-Patman Act, prohibits price discrimination by sellers, but under § 2(b), the seller may rebut a prima facie case of price discrimination by showing that his lower price was made in good faith to meet a competitor's equally low price. Section 2(f) makes it unlawful

"for any person engaged in commerce, in the course of such commerce, knowingly to induce or receive a discrimination in price which is prohibited by this section."

Petitioner, in an effort to achieve cost savings, entered into an agreement with its longtime supplier, Borden Co., under which Borden would supply "private label" (as opposed to "brand label") milk to petitioner's stores in the Chicago area. Petitioner refused Borden's initial offer in implementation of the agreement, and solicited offers from other companies, resulting in a lower offer from one of Borden's competitors. At this point, petitioner's buyer informed Borden that its offer was "not even in the ball park," and that a $50,000 improvement in the offer "would not be a drop in the bucket." Borden then submitted a new offer that was substantially better than its competitor's, and petitioner accepted it. Based on these facts, the Federal Trade Commission charged petitioner with violating § 5 of the Federal Trade Commission Act for allegedly misleading Borden during contract negotiations by failing to inform it that its second offer was better than its competitor's, and with violating § 2(f) by knowingly inducing or receiving price discrimination from Borden. The FTC dismissed the § 5 charge on the ground that the issue was what amount of disclosure is required of the buyer during contract negotiations, and that to impose a duty of affirmative disclosure would be "contrary to normal business practice" and "contrary to the public interest," but held that petitioner had violated § 2(f), the FTC rejecting, inter alia, petitioner's defense that the Borden offer had been made to meet competition. The Court of Appeals affirmed.

Held: A buyer who has done no more than accept the lower of two prices competitively offered does not violate § 2(f) provided the seller has a "meeting competition" defense, and here, where Borden had such a defense, and thus could not be liable under chanrobles.com-red

Page 440 U. S. 70

§ 2(b) petitioner, who did no more than accept Borden's offer, cannot be liable under § 2(f). Pp. 440 U. S. 75-85.

(a) Since liability under § 2(f) is limited to price discrimination "prohibited by this section," and since only §§ 2(a) and (b) deal with seller liability for price discrimination, a buyer, under § 2(f)'s plain meaning, cannot be liable if a prima facie case cannot be established against a seller or if the seller has an affirmative defense. Automatic Canteen Co. of America v. FTC, 346 U. S. 61. In either situation, there is no price discrimination "prohibited by this section." And the legislative history of § 2(f) confirms the conclusion that buyer liability under § 2(f) is dependent on seller liability under § 2(a). Pp. 440 U. S. 75-78.

(b) To rewrite § 2(f) to hold a buyer liable even though there is no price discrimination "prohibited by this section" would contravene the rule that this Court "cannot supply what Congress has studiously omitted," FTC v. Simplicity Pattern Co., 360 U. S. 55, 360 U. S. 67. Pp. 440 U. S. 78-79.

(c) Imposition of § 2(f) liability on petitioner would lead to price uniformity and rigidity contrary to the purposes of other antitrust legislation. P. 440 U. S. 80.

(d) A duty of affirmative disclosure requiring a buyer to inform a seller that his bid has beaten competition would frustrate competitive bidding and, by reducing uncertainty, would lead to price matching and anticompetitive cooperation among sellers. P. 440 U. S. 80.

(e) The effect of the finding that petitioner's same conduct violated § 2(f) as violated § 5 of the Federal Trade Commission Act is to impose the same duty of affirmative disclosure that the FTC condemned as anticompetitive, "contrary to the public interest," and "contrary to normal business practice," in dismissing the § 5 charge. Pp. 440 U. S. 80-81.

(f) The test for determining when a seller has a valid "meeting competition" defense is whether he can

"show the existence of facts which would lead a reasonable and prudent person to believe that the granting of a lower price would in fact meet the equally low price of a competitor."

FTC v. A. E. Staley Mfg. Co., 324 U. S. 746. Under the circumstances of this case, Borden did act reasonably and in good faith when it made its second bid, since, in light of its established business relationship with petitioner, it could justifiably conclude that petitioner's statements about the first offer were reliable, and that it was necessary to make another bid offering substantial concessions to avoid losing its account with petitioner. Pp. 440 U. S. 82-84.

557 F.2d 971, reversed.

STEWART, J., delivered the opinion of the Court, in which BURGER, C.J.,and BRENNAN, BLACKMUN, POWELL, and REHNQUIST, JJ., joined, and in chanrobles.com-red

Page 440 U. S. 71

Parts I, II, and III of which WHITE, J., joined. WHITE, J., filed an opinion concurring in part and dissenting in part, post, p. 440 U. S. 85. MARSHALL, J., filed an opinion dissenting in part, post, p. 440 U. S. 85. STEVENS, J., took no part in the consideration or decision of the case.



























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