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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 businessman involved may have unhampered discretion to depart from the scheme involved does not mitigate the offense: "* * 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 390 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 drugstores operating in the same city may be held to be in competition. In Brown Shoe Co., Inc. v. United States (370 U.S. 294, 338 (1932)), 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, 1930, Civil Act No. 20266, D.C., E.D. of Mich., 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 puropse 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 men. * * *
"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 evenhanded justice we dispense-not bouquets for or vendettas against one class or group.
DISSENTING STATEMENT OF COMMISSIONER ELMAN
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 chain stores 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 ar
rangements, 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 retailer 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 in 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 pp. 9-10, a restraint 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 relvant 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. recently been pointed out, "Prosecuting a practice of this kind would injure 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.
[From the Washington Post, Apr. 16, 1963]
Independent retailers have for many years pooled their limited financial resources in cooperative advertising efforts, but now the Federal Trade Commission in an advisory opinion, concurred in by the Justice Department, has placed this practice under a long shadow. According to the majority opinion, from which Commissioner Philip Elman dissented with vigor and strong logic, cooperating retailers would be subject to charges of engaging in a price-fixing conspiracy if their advertisements make reference to price or other conditions of sale.
The absurdity of the majority decision is immediately obvious. It would be pointless for a group of independent retailers to place an advertisement which makes no reference to price, and if they cannot effectively advertise their products, they will be severely handicapped in competition against chainstore organizations.
Raising the specter of conspiracy makes little sense in this context. There is nothing sinister about 10 independents offering to sell a tube of toothpaste at a given price when consumers have a wide choice among competing stores. Furthermore, by so advertising the individual is not bound to refrain from cutting his prices.
Preservation of small businesses has been an objective of virtually every statute that Congress has directed the FTC to enforce. But if this incredibly narrow interpretation of the antitrust laws prevails, competition among retailers will surely be stifled.
[From the Wall Street Journal, Apr. 23, 1963]
The small, independent businessman may be wondering whose side the Federal Trade Commission is on, anyway-his, or his chainstore competitors'?
One of the ways small businessmen compete with the chain is by use of cooperative advertising programs. A group of independent merchants, for instance, may pool their advertising funds and jointly buy ads in newspapers or other mediums. A typical co-op ad will list the names and addresses of participating retailers and give specific prices for specific products.
But the FTC has ruled that any cooperative advertising offering the same product for sale at the same price at several independent stores could be considered as evidence of price fixing. So the participating advertisers run the risk of criminal prosecution under the antitrust laws.
Now independent merchants are legally entitled, under the Robinson-Patman Act, to advertise cooperatively. But if they are barred from including prices in their co-op ads, they'll have to make their sales messages much more bland than the sort of price-packed ads used by, for instance, a chain grocery store. Or the independents will have to employ small-space, individual ads of their
Strictly speaking, maybe a small businessman's cooperative ad campaign can amount to evidence of price fixing. But even if it does, it certainly isn't comparable to the case of, say, a group of electric equipment manufacturers who agree to parcel out markets among themselves and conspire to rig prices. Nor is it quite the sort of practice the antitrust laws were designed to prohibit.
Rather, the ruling amounts to a pesky interference with a widespread and accepted business practice, and it looks specially strange coming from an agency that's supposed to be the small businessman's protector.
[From Drug News Weekly, May 1, 1963]
CO-OP AD PROGRAMS-RETAILERS CONFUSED BY FTC ADVISORY ON PRICE LISTINGS The confusion which has resulted from the Federal Trade Commission's advisory opinion that pooled co-op ads listing prices are illegal and the belief held by some that FTC would not move against those using such ads have cause some retail druggists to hold up plans for co-op ads programs until the smoke has cleared. Some others, however, plan to continue to use co-op price ads. A spot check follows:
NEW YORK: SUGGEST FOLLOWING FTC OPINION
NEW YORK.-The Pharmaceutical Society of the State of New York has advised its members to be guided, for the present, by the Federal Trade Commission's opinion on use of prices in pooled co-op ads.
The society, in its new bulletin mailed last week, said "although not the absolute final word on the subject, the recent Federal Trade Commission advisory opinion on cooperative advertising by pharmacies has set the present standard to follow."
The bulletin took note of the fact that "some authorities" feel that neither FTC nor the Justice Department will act against pharmacists who run co-op price ads, but said, "for the present, pharmacists must treat this opinion by FTC as their guide and should act accordingly."
DETROIT: TO WAIT TILL FTC RULE IS RESOLVED
DETROIT.-Harold Ellias, Monarch Drug Co., president, Metropolitan Detroit Pharmaceutical Association, said the group will not use co-op price ads until the situation caused by the Federal Trade Commission ruling against them is completely resolved.
He said the MDPA has enough problems now without adding another.
Mr. Ellias said the MDPA board of directors will not meet until May 15 to take official action.
BOSTON "PENDING ACT OF CONGRESS, OBEY FTC"
BOSTON.-The Massachusetts Pharmaceutical Association does not wish its members to become "guinea pigs" and therefore will not recommend that they go ahead with co-op price ads at this time.
This was the statement of Samuel Silverman, executive secretary of the association, when asked to comment on the statement of Earl Kintner, counsel for the National Retail Druggists, who said he did not believe the FTC would move against druggists or others using pooled co-op ads listing common prices.
Mr. Silverman said "this is the opinion of one man who did not make a positive statement the FTC would not enforce its ruling, only his belief they would not. Mr. Silverman said that until Congress takes favorable action on this, it is still an illegal act to use pooled co-op ads listing common prices. Thus, he added, the best thing to do is to mark time pending favorable action by the Government. These are the reasons why the Massachusetts Pharmaceutical Association will not recommend that its members go ahead with this type of advertising, Mr. Silverman said.
New Co-op ad approach: Members of the Fall River (Mass.) Druggists Association last week ran, for the first time, this co-op ad listing prices on some items and stressing the association's participation in the city's spring cleanup campaign. The association was not aware of the FTC opinion on use of prices in co-op ads when the ad was run, an association official explained.
BANGOR: WAIT AND SEE, PREDOMINANT SENTIMENT
BANGOR, MAINE.-The five-county pharmaceutical association here probably will let someone else test the climate for co-op ads listing common prices despite the belief of counsel for the National Association of Retail Druggists that the Federal Trade Commission will not prosecute.