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of any price, terms, or condition of sale of any item advertised by the group, the plan would contravene laws entrusted to the Commission for enforcement. In this connection, it is the Commission's opinion that the group publication of an advertisement containing any selling price raises a serious question whether the members of the group have agreed to and will sell at those prices. Consequently, the cooperative consideration of any advertisement which would contain any price or prices or other terms or conditions of sale as indicated on the mockup which has been submitted would be open to challenge as part and parcel of price fixing by agreement. Thus, the Commission is in no position to give its approval to any plan which would contain a basic flaw such as that.

3. Another aspect of the plan which is worthy of comment is the amount of the advertising allowances involved and the manner in which they are secured. If the agent for the members of the group should induce or knowingly receive advertising allowances which from the viewpoint of the supplier would contravene either subsection 2(a), 2(d), or 2(e) of the Clayton Act, as amended by the Robinson-Patman Act, then all members of the group, as well as their agent, would be liable to charges of violation of either subsection 2(f) of the Clayton Act, as amended, or section 5 of the Federal Trade Commission Act, or of violation of both.

In other words, the Commission is of the opinion that a program of cooperative advertising by the members would be subject to question under the laws administered by the Commission unless

(a) The fund used by or on behalf of the participating group to purchase advertising space should consist solely of the aggregate of advertising allowances properly available to the members individually under the terms of sec tion 2(d) of the Clayton Act, as amended by the Robinson-Patman Act;

(b) Use of the program would not involve any understanding or agreement, express or implied, among the members of the group concerning the retail selling price or the terms or conditions of sale of any item advertised, which would mean, among other things, that no prices, terms or conditions of sale of any of the items should appear in the advertising; and

(c) Use of the program would not invlove the inducement or knowing receipt by any of the members of the group, or by their agent, of prices or allowances, the granting of which by the suppliers would be unlawful under subsections 2(a), 2(d) or 2 (e) of the Clayton Act, as amended by the Robinson-Patman Act. We appreciate your interest in this matter and if any questions remain we hope that you will feel free to contact us.

By direction of the Commission, Commissioner Elman dissenting.

Attached are:

(Signed) JOSEPH W. SHEA, Secretary.

(1) Statement of Commissioner Anderson.

(2) Dissenting Statement of Commissioner Elman.
(3) Statement of Commissioner MacIntyre.

(4) Statement of Commissioner Higginbotham.


It goes without saying that the many small members of an industry should be able to compete on equal footing with its larger competitors. Unfortunately, there seem to be instances where that is not possible. I wish that I could dissent from what appears to be the majority in this case. I fear that for the individual industry members to join in an advertisement which would set out a single price to be charged by all those who participate in the advertisement would be looked upon with some suspicion. I call attention to the fact that the special counsel for the National Association of Retail Druggists has heretofore indicated his reluctance in the matter by stating to the annual meeting of the National Drug Trade Conference at New York, N.Y., on January 22, 1963, as follows:

*** I venture the prediction that the antitrust enforcement agencies may frown upon a straightforward advertisement which lists a single price for a product that will be charged by all stores participating in the advertisement." It offends my sense of justice to find that the small industry members are unable to avail themselves of the same benefits as do their big brothers and so, for that reason, I would very much like to join Commissioner Elman in his dissent hereto, but I believe that the law and the decisions as they now stand

preclude such "junction." It is, therefore, with reluctance that I am compelled to subscribe to the view that the program of cooperative advertising as contemplated by the inquirants would probably be in violation of law.


As everyone knows, it is becoming more and more difficult for small retailers particularly in the drug and food industries, to withstand the overwhelming competition of chainstores and supermarkets. The chains have all the advantages of mass buying power, large capital resources, and choice locations in busy shopping centers. In addition, and this is most pertinent here, a large food and drug chain can take a single ad in a newspaper to advertise products sold at the same price in all of its stores. Under cooperative advertising arrangements, the cost of these advertisements is largely borne by manufacturers of the advertised products.

Congress has recognized the need for giving small independent neighborhood retailers the opportunity to meet this kind of competition from the large chains. Under section 2(d) of the Robinson-Patman Act, a manufacturer who grants cooperative advertising allowances to some of his customers is obligated to make them available on proportionally equal terms to all of his customers. As a practical matter, however, a small neighborhood retailer cannot afford, by himself, to take a large ad in the local newspaper. The only realistic way for him to take advantage of the benefits of section 2(d) is to join with other small retailers, pool the advertising allowances to which each is legally entitled, and publish joint advertisements containing prices of the products which they sell. Obviously, a joint advertisement by small retailers which does not quote selling prices would be a waste of money. The owner of a corner grocery store is not interested in "institutional" advertising. That kind of advertising would hardly attract business away from his larger rivals, whose ads invariably feature weekend specials and the like.

What is proposed here, as I understand it, is not an agreement among competing retailers to fix prices, which of course is a per se violation of the antitrust laws, but an agreement among independent retailers in different neighborhoods, and who therefore do not compete with each other in any practical sense, to combine their advertising allowances, to which they are legally entitled under the Robinson-Patman Act, for the purpose of advertising cooperatively. In its advisory opinion here, the Commission flashes a red light on such cooperative advertising by small businessmen. I think the Commission is making a great mistake. Preservation of small independent businessmen is a central objective of every statute that Congress has directed this Commission to enforce; and unlike my colleagues, I find nothing manifestly illegal per se in the proposals submitted.

Per se violations of the antitrust laws comprise those restraints of trade which inherently have no function other than the stifling of competition. As the Supreme Court stated in Northern Pacific Railroad Co. v. U.S. 356 U.S. 1, 5. per se violations are "agreements or practices which because of their pernicious effect on competition and lack of any redeeming virtue are conclusively presumed to be unreasonable and therefore illegal without elaborate inquiry as to the precise harm they have caused or the business excuse for their use."

Although an agreement to fix or maintain prices is unquestionably illegal per se, this does not mean that every agreement or arrangement which has incidental effects on prices can similarly be condemned by a per se test. Appalachian Coals, Inc. v. U.S., 288 U.S. 344; Chicago Board of Trade v. U.S., 246 U.S. 231, 238. In his opinion for the Court is the latter case, Mr Justice Brandeis stated:

"The true test of legality is whether the restraint imposed is such as merely regulates and perhaps thereby promotes competition, or whether it is such as may suppress or even destroy competition. To determine that question the court must ordinarily consider the facts peculiar to the business to which the restraint is applied; its condition before and after the restraint was imposed; the nature of the restraint, and its effect, actual or probable. The history of the restraint, the evil believed to exist, the reason for adopting the particular remedy, the purpose or end sought to be attained, are all relevant facts."

As the Supreme Court held in Brown Shoe Co. v. U.S., 370 U.S. 294, 330, and White Motor Co. v. U.S., decided March 4, 1963, slip opinion pages 9-10, a re

straint of trade cannot be condemned as a per se violation if "[w]e do not know enough of the economic and business stuff out of which these arrangements emerge to be certain. They may be too dangerous to sanction or they may be allowable protections against aggressive competitors or the only practicable means a small company has for breaking into or staying in business * * * and within the 'rule of reason.""

It begs the question, the answer to which necessarily depends on the particular facts, to hold that the appearance in a joint advertisement of any "prices, terms, or conditions of sale of any of the items" establishes, without more, the per se illegality of the advertising plan. Plans for joint advertising by retailers are not necessarily, and in all circumstances, the equivalent of price-fixing conspiracies. Where, as is represented here, a plan has neither the purpose nor the effect of restraining competition, and involves no agreement by participating retailers to adhere to advertised prices, a per se test is inapplicable. Such a simple yardstick may be used only-as the Supreme Court pointed out in the Northern Pacific Railroad case-in dealing with practices whose "pernicious effect on competition and lack of any redeeming virtue" have been conclusively shown. Here, however, the Commission cannot escape the necessity for determining the legality of a joint advertising plan by examining it in the light of all the relevant factors stated by Mr. Justice Brandeis in the Chicago Board of Trade case and reiterated the other day by the Supreme Court in White Motor. It seems to me that the Commission, charged as it is with the duty to promote rather than discourage competition and to strengthen rather than impair the ability of small businessmen to survive, should take a more positive and encouraging attitude toward programs for joint advertising by retailers. As has recently been pointed out: "Prosecuting a practice of this kind would injure rather than preserve competition, and encourage instead of preventing monopoly" (Henry Bison, Jr., general counsel, National Association of Retail Grocers, Nargus Bulletin, February 1963, p. 92). The notion that small businessmen should be sent to jail for engaging in such a practice seems to me too fantastic to be taken seriously.


The Commission's advisory opinion in this important matter correctly advises the representatives of small business organizations regarding the application of Federal antimonopoly laws to their proposed plans. It is the duty of the Commission to so advise the representatives of these small business firms. We would do them a disservice if we should advise them otherwise. Of what benefit would we be to small business firms if we should advise them that the course of action they propose to take is approved and then they should find themselves in the toils of the law for having followed that course of action? Our duty is to assist business firms in avoiding any such result.

The Supreme Court of the United States in recent cases brought by the U.S. Department of Justice against firms for engaging in price fixing in violation of the Sherman Act have made it clear that such course of action constitutes per se violation of the Sherman Act (see U.S. v. Socony Vacuum Oil Co., et al., 310 U.S. 150, decided in May 1940). In more recent cases in which small business firms were charged with violating the Sherman Act, the Department of Justice has insisted that prison sentences be given to those found guilty. As a result, some small businessmen in Ohio in recent years were ordered to serve prison terms for violation of the Sherman Act. We should do all possible to assist small businessmen in avoiding such a predicament.


This request today evokes a moment of truth for this Commission. With unquestioned sincerity, the able and distinguished dissenting Commissioner beseeches us to cast aside years of precedent in price-fixing cases. It was in 1940, and thus after its decision in Appalachian Coals, Inc., et al. vs. United States, 288 U.S. 344 (1933), that the Supreme Court stated:

"Thus for over 40 years this Court has consistently and without deviation adhered to the principle that price-fixing agreements are unlawful per se under the Sherman Act and that no showing of so-called competitive abuses or evils which those agreements were designed to eliminate or alleviate may be interposed as a

defense" United States v. Socony Vacuum Oil Co., Inc., 310 U.S. 150, 218 (1940). The holding of this case remains undisturbed.

We are not unaware of the legal maxim-"Cessante ratione legis, cessat et ipsa lex," nor of the cases which rest on such reasoning. But the function of an advisory opinion is to declare the applicability of the present state of the law to novel and sometimes disturbing facts. To chart the future course of the law is not its task. Neither the thin subtleties of semantics nor the sharp but barren thrust of logic will much warm a businessman subject to the wintry blast of possible criminal prosecution.

Commissioner Elman does not dispute that price fixing is a per se offense. Rather he says that the plan involved herein does not factually amount to price fixing. We are constrained to note our exception.

1. The fact that the businessmen involved may have unhampered discretion to depart from the scheme involved does not mitigate the offense:

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**the fact that no penalties are imposed for deviation from the price schedule is not material." United States v. National Association of Real Estate Boards, 399 U.S. 485, 489 (1950).

2. The agreements, even if only "incidentally" affecting price may still be offensive under the antitrust laws. In Socony Vacuum, supra, the court asserted that:

"*** prices are fixed *** if the range within which purchases or sales will be made is agreed upon, if the prices paid or charged are to be at a certain level or on ascending or descending scales, if they are to be uniform, or if by various formulas they are related to the market prices." United States v. Socony Vacuum, supra, at 222.

3. There is no doubt that retail drug stores operating in the same city may be held to be in competition. In Brown Shoe Co., v. United States, 370 U.S. 294, 338 (1962), the court held:

"We believe, however, that the record fully supports the district court's findings that shoe stores in the outskirts of cities compete effectively with stores in central downtown areas * * *."

See also, United States v. Cunningham Drugstores (complaint filed June 30, 1960, Civil Act No. 20266, District Court, Eastern District of Michigan, Southern Division), complaint charging violation of section 7 of the Clayton Act by Cunningham's acquisition of other retail drugstores, both being located in Detroit.

4. No one could quarrel with the dissent's assertion that particular cases pivot on particular facts. And once allowed to frame the question in terms of the facts as it sees them the dissent's answer is inescapable. Thus, Commissioner Elman declares that the proposed plan has "neither the purpose nor effect of restraining competition and involves no agreement by participating retailers to adhere to advertised prices." Obviously if all these assertions were inescapably true, or were the only permissible inference from the "facts," a different result might be reached. But that is the very issue-whether in fact the purpose and effect of the plan could be construed to restrain competition.

In sum, if one assumes price fixing, one need not examine "all the relevant factors." Conversely, if one assumes no price fixing, one may examine "all the relevant factors." To employ such reasoning is to become encased in conundrums, Moreover, it is clear from the differing opinions within the Commission itself that the plan at best is on the periphery of violative behavior, and that reasonable men differ concerning its impact. And as Mr. Justice Holmes asserted in Nash v. U.S., 229 U.S. 373, 376, 377 (1913):

"*** the statute contains in its definition an element of degree as to which estimates may differ, with the result that a man might find himself in prison because his honest judgment did not anticipate that of a jury of less competent

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"But the law is full of instances where a man's fate depends on his estimating rightly, that is, as the jury subsequently estimates it, some matter of degree."

In view of the uncertainties and the substantial risk inherent in civil or criminal prosecution, no administrative agency should give this plan the "green light." The function of this Commission-as I see it is not to resolve a lover's quarrel over who loves the small businessman more. Hopefully, it is even handed justice we dispense-not bouquets for or vendettas against one class or group.

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