Automatic Canteen v. FTC

In Automatic Canteen Co. v. Federal Trade Commission, 346 U.S. 61, 73 S.Ct. 1017, 97 L.Ed. 1454 (1953), a buyer was charged with violating section 2(f) of the Robinson-Patman Act, which forbids inducement of a discriminatory price. The question before the Court was which party the FTC or the defendant had the burden of producing evidence on the issue of the seller's costs, information that might demonstrate that the varying prices were not in fact discriminatory. The Court refused to place the burden of discovering the seller's costs upon the buyer because, among other things, "it would almost inevitably require a degree of cooperation between buyer and seller, as against other buyers, that may offend other antitrust policies," id. at 69, 73 S.Ct. at 1022, that is, section 1 of the Sherman Act. In Automatic Canteen v. FTC, 346 U.S. 61, 74, 73 S.Ct. 1017, 97 L.Ed. 1454 (1953), the Court rejected the FTC's contention that a prima facie case of 2(f) liability was made out where price differentials were shown and where the buyer knew "only that the prices are lower than those offered other buyers." 346 U.S. at 71, 73 S.Ct. at 1023. In giving content to the 2(f) requirement that the prices induced or received by the buyer must be knowingly in violation of 2(a), however, the Court refrained from the opposite, and equally extreme, position, namely that the Commission must always prove the absence of cost justification in fact. Charting, instead, a middle course based both on the statutory requirement of knowledge and on the difficulties of proof as regards cost justification, 346 U.S. at 79, 73 S.Ct. 1017, the Court required the FTC henceforth to go forward with some evidence that the buyer knew that the discriminatory prices it was receiving could not be cost justified, including but not limited to, the buyer's trade experience in a particular situation. 346 U.S. at 79-80, 73 S.Ct. 1017. See Galanti, Buyer Liability for Inducing or Receiving Discriminatory Prices, Terms, and Promotional Allowances: Caveat Emptor in the 1970's, 7 Ind.L.Rev. 962, 989-90 (1974). Consistent with its view that "(e)nforcement of the provisions of 2(f) against such a buyer should not be difficult," 346 U.S. at 79, 73 S.Ct. at 1027, however, the Court made no mention of a requirement that the FTC show the absence of cost justification in fact through its own cost study.