The Robinson–Patman Act and the Supreme Court, 1978-85

• Author: Harry L. Shniderman
• Published date: 01 September 1986
• Date: 01 September 1986
• DOI: http://doi.org/10.1177/0003603X8603100303
• Subject Matter: Article

The

Antitrust

Bulletin/Fall 1986

The Robinson-Patman Act

and the Supreme Court, 1978-85

BY HARRY L. SHNIDERMAN*

I. Introduction

665

Some have said that the Robinson-Patman Act has lost most of

its steam as it has chugged along with diminishing attention from

the Federal Trade Commission and continued disregard by the

Department of Justice. Its 50 years of travel have certainly taken

a toll, but the act has hardly been taken

out

of service.

The 8-year period 1978-85 has produced an average

of

30

reported opinions per year and 7 Supreme Court decisions.

Indeed, a check of an earlier to-year period, 1956-65, discloses

on average 22 court opinions per year. So the perception

of

a

change in climate is largely due to governmental laxity of enforce-

ment.

Treble damage suits can be a heavy and expensive reminder

that private enforcement

of

the act is ever present. Such suits may

be unprincipled responses to dealer termination, territorial inva-

sion, suits for sums due under contracts, and real or fancied

grievances. The absence

of

any element

of

governmental policy

review before institution

of

action can produce some quixotic

litigation which may not be meritorious or even target those who

have taken undue business risks.

Senior Partner, Covington &Burling, Washington, D.C.

:s

1986 by Federal Legal Publications, Inc.

666 The antitrust bulletin

Most

of

these private suits reflect money judgment

risks-

often vast amounts of money. An FTC cease and desist order,

however, could require change in basic pricing and distribution

practices on a company-wide basis, as well as invite private

tag-along suits. On the assumption that the respondent's ques-

tioned pricing reflected management's judgment as to what was

best for the company's own welfare, the threat

of

investigation

and enforcement by the administrative agency exercised to at

least a limited degree a restraining influence. The more recent

absence of such restraint may have adversely affected industry

compliance with the statute. This result will not show up in any

bare recital

of

case statistics.

Seven Supreme Court decisions since 1978 show a continued

lively interest in the statute. These important Supreme Court

developments merit analysis to see how the law has been unfold-

ing in recent years.

It

is also useful to detect whether these

decisions promote pricing flexibility in keeping with Sherman Act

goals, or whether they foster a code of pricing conduct of some

uniformity and rigidity to protect business from aggressive com-

petition

of

anature viewed in populist terms as "unfair."

II. United States Gypsum Co.

The Sherman Act section 1 price-fixing conspiracy case

against major gypsum board manufacturers was decided by the

Supreme Court in June 1978. The jury had returned a guilty

verdict, and the Third Circuit had reversed. The case had become

strongly enmeshed with the Robinson-Patman Act. The competi-

tors had been exchanging price information and this exchange

was a central part

of

the government's case. The defendants

asserted by way

of

defense that the informational exchange

among sellers was merely an effort to verify competitive prices so

they could validly be met under section 2(b)

of

the Robinson-

Patman

Act.

The district court, in its somewhat ambiguous instruction,

permitted the

jury

to consider this claimed purpose

of

complying

The Supreme Court :667

with

Robinson-Patman.

On the other hand, the trial judge stated

that if the effect

of

price verification was to fix or stabilize prices,

the exchanges could be considered as evidence

of

the mutual

agreement. In short, the claimed

Robinson-Patman

Act defense

was

not

going to justify aSherman Act price-fixing arrangement.

The

Third Circuit, in reversing, held

that

the instruction was

erroneous;

that

there could be a "controlling circumstance"

under United States v. Container Corp. which would justify the

exchange

of

price information and prevent an antitrust law

violation occurring.

The

defendants were entitled

to

an instruction that their verification practice would not violate the

Sherman Act if the jury found: (1) the appellants

engaged

in the

practice solelyto complywith the strictures of Robinson-Patman; (2)

they had first resorted to all other reasonable means of corrobora-

tion, without

success;

(3) they had good, independent reason to

doubt the buyers' truthfulness; and

(4)

their communication with

competitors was strictly limited to the one price and one buyer at

issue.I

In short, the Third Circuit would permit a

Robinson-Patman

defense to the verification practice when used as a seller's last

resort in confirming

that

there was a

bona

fide lower offer from a

competitor

that

it could meet under section 2(b).

The

Supreme

Court,

in an opinion by Chief Justice Burger,

affirmed

the

reversal

of

the jury verdict on other grounds.' In

doing so, however, it categorically rejected the use

of

section 2(b)

to justify anticompetitive conduct which would otherwise consti-

tute

proof

of

Sherman Act price-fixing.

The majority found it unnecessary to consider whether there

is in fact a general "controlling circumstance" exception to a

United States v. United States Gypsum Co., 550

F.2d

115,

126

(3rd Cir.

1977),

citing United States v. Container Corp.,

398

U.S. 333,

335

(1969).

It

is doubtful that this charge would have aided defendants

on the facts.

It

was not a charge requested by the defendants.

2United States v. United States

Gypsum

Co., 438U.S. 422

(1978).

There were three separate opinions by JusticesPowell, Rehnquist, and

Stevens

concurring and dissenting in part on various

issues.