Great Atlantic & Pacific Tea Co. v. Federal Trade Commission
59 L. Ed. 2d 153, 1979 U.S. LEXIS 59, 440 U.S. 69 (1979)
Premium Feature
Subscribe to Lexplug to listen to the Case Podcast.
Rule of Law:
A buyer cannot be held liable under § 2(f) of the Robinson-Patman Act for knowingly inducing or receiving a price discrimination if the seller has a valid affirmative defense, such as the meeting-competition defense under § 2(b). Buyer liability under § 2(f) is derivative of and dependent upon the seller's liability under § 2(a).
Facts:
- The Great Atlantic & Pacific Tea Co. (A&P) decided to switch from selling brand-label milk to private-label milk to achieve cost savings in its Chicago-area stores.
- A&P asked its long-time supplier, the Borden Co., to submit a bid for the private-label milk supply contract.
- Borden submitted an initial offer that would save A&P an estimated $410,000 per year.
- Unsatisfied with Borden's offer, A&P solicited bids from other dairies and received a more favorable bid from a competitor, Bowman Dairy.
- An A&P representative then told a Borden representative that Borden's offer was 'not even in the ball park' and that a '$50,000 improvement...would not be a drop in the bucket,' but refused to disclose the specifics of the Bowman bid.
- Fearing the loss of a major customer and the underutilization of a new multi-million dollar plant, Borden submitted a new bid that doubled the estimated annual savings to A&P to $820,000.
- In submitting the new bid, Borden stated it was doing so in order to meet its competition.
- A&P accepted Borden's second offer, knowing that it was substantially better than Bowman's bid.
Procedural Posture:
- The Federal Trade Commission (FTC) filed a complaint against A&P, alleging violations of the Federal Trade Commission Act and the Robinson-Patman Act.
- An Administrative Law Judge (ALJ) found that A&P had violated § 2(f) of the Robinson-Patman Act.
- On appeal, the full FTC Commission affirmed the ALJ's finding that A&P violated § 2(f).
- The Commission held that A&P, as the buyer, could not use the meeting-competition defense because it knew that Borden's final offer was substantially better than the competitor's bid.
- A&P, as petitioner, filed a petition for review of the Commission's order in the U.S. Court of Appeals for the Second Circuit.
- The Court of Appeals affirmed the Commission's order, finding that A&P's knowledge that the bid beat competition precluded it from asserting the defense.
- The U.S. Supreme Court granted certiorari to review the judgment of the Court of Appeals.
Premium Content
Subscribe to Lexplug to view the complete brief
You're viewing a preview with Rule of Law, Facts, and Procedural Posture
Issue:
Does a buyer violate § 2(f) of the Robinson-Patman Act by knowingly accepting a price from a seller that is lower than a competitor's bid, if the seller offered that price in a good-faith but mistaken belief that it was only meeting the competitor's bid?
Opinions:
Majority - Mr. Justice Stewart
No, a buyer does not violate § 2(f) of the Robinson-Patman Act by accepting a lower price if the seller has a valid meeting-competition defense. Liability under § 2(f) is derivative, meaning a buyer can only be liable for receiving a price discrimination 'which is prohibited by this section.' If a seller's price is permissible due to an affirmative defense like the meeting-competition defense under § 2(b), then the price is not 'prohibited,' and the buyer cannot be held liable. To hold otherwise would impose a duty of affirmative disclosure on buyers, which would frustrate competitive bidding, lead to price rigidity, and run contrary to the broader pro-competitive goals of antitrust law. Here, Borden had a valid meeting-competition defense because it acted in good faith based on credible threats from a major customer and could not verify the competitor's price without risking a Sherman Act violation. Since Borden's action was defensible, A&P's acceptance of the offer was not illegal.
Dissenting - Mr. Justice Marshall
Yes, a buyer could potentially violate § 2(f) in this situation. The majority's derivative liability standard is not required by the statute's language and undermines its purpose of curbing the coercive power of large buyers. The phrase 'prohibited by this section' should be interpreted to mean that the same elements and defenses apply to buyers and sellers, but they can be evaluated independently. A buyer should be able to assert a good-faith defense, but should not be exonerated simply because the seller has one, especially if the buyer induced the seller's good-faith mistake through misrepresentation. The Court's holding effectively immunizes a 'lying buyer.' The case should be remanded for the Commission to make factual findings on whether Borden actually had a valid defense and whether A&P engaged in misleading conduct.
Concurring-in-part-and-dissenting-in-part - Mr. Justice White
No, a buyer does not violate § 2(f) if the seller has a valid defense, but this Court should not have decided the factual question of whether the defense applied. I agree with the majority's legal conclusion that buyer liability under § 2(f) is derivative of seller liability. However, I dissent from the Court's decision to determine, in the first instance, that Borden had a valid meeting-competition defense. This is a factual determination that should have been made by the Federal Trade Commission on remand.
Analysis:
This decision significantly clarifies the scope of buyer liability under the Robinson-Patman Act by establishing that it is purely derivative of seller liability. By holding that a seller's valid meeting-competition defense shields the buyer from § 2(f) liability, the Court protected the process of competitive bidding and hard bargaining. The ruling prevents the creation of a 'duty of affirmative disclosure' for buyers, which the Court feared would lead to price signaling and collusion among sellers, undermining the pro-competitive goals of the Sherman Act. The decision's primary impact is to limit the FTC's ability to pursue buyers for receiving low prices, so long as the buyer does not affirmatively mislead the seller and the seller acts in good faith, even if mistaken, to meet competition.
