Corn Products Refining Co. v. Federal Trade Commission

144 F.2d 211, 1944 U.S. App. LEXIS 2780
CourtCourt of Appeals for the Seventh Circuit
DecidedJuly 6, 1944
Docket8116
StatusPublished
Cited by31 cases

This text of 144 F.2d 211 (Corn Products Refining Co. v. Federal Trade Commission) is published on Counsel Stack Legal Research, covering Court of Appeals for the Seventh Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Corn Products Refining Co. v. Federal Trade Commission, 144 F.2d 211, 1944 U.S. App. LEXIS 2780 (7th Cir. 1944).

Opinions

[214]*214LINDLEY, District Judge.

Respondent issued a complaint on October 21, 1938, amended March 25, 1939, charging that petitioners had violated Sections 2(a), 2(e) and 3 of the Clayton Act, as amended by the Robinson-Patman Act, 15 U.S.C.A. §§ 13(a, e), 14. Petitioners answered denying the charges and averring that, if the acts complained of are prohibited, the statute is unconstitutional when so applied. The ensuing order, which petitioners seek to set aside and respondent to have enforced, directs petitioners to cease and desist from (1) discriminating in prices between purchasers of glucose, starch products and corn gluten feed and meal; (2) supplying services to Curtiss Candy Company in the latter’s resale of dextrose purchased from petitioners, while failing to accord similar facilities to other and competitive customers upon proportionally equal terms; and (3) selling certain merchandise “on the condition that the purchaser shall not use similar products of a competitor.”

Sales of glucose at delivered prices based on Chicago price and freight from that city but delivered from Kansas City.

The evidence upon this phase of the controversy is not in dispute. Petitioners manufacture glucose (corn syrup) in Chicago and Kansas City, and ship it from these two points to purchasers residing in various cities in the west and southwest. From which plant deliveries shall be made is entirely within control of petitioners and the selling prices are fixed by them by adding to .the effective Chicago price the freight rate from that city to destination, regardless of whether the merchandise is forwarded from Kansas City or from Chicago. Under this formula, glucose delivered from Kansas City to places nearer that city sells at the Chicago price plus the freight from Chicago, which exceeds freight from Kansas City by substantial percentages; the excess for St. Joseph being approximately 31 cents per 100 pounds; Fort Smith, 20 cents; Hutchinson, 25 cents; Lincoln, 16 cents; Waco, 19 cents; Sherman, 20 cents; San Antonio, 19 cents ; Denver, 10 cents and Salt Lake City, 10 cents. Purchasers in these cities are manufacturers using glucose in making candy, competitively engaged in sale of their products to customers located in various states.

Glucose is a major raw material entering into many candies, constituting from 5 to 90 per cent of the weight of the finished article, being greater in the cheaper classes. The higher prices paid in cities other than Chicago “result to a greater or lesser degree” in higher material costs than those of manufacturers in Chicago. Those paying the higher prices “may attempt to recover such increased costs” by increasing the price or making sales “on a nonprofit or other basis”; the effect in any case is to reduce profit pro tanto. The result just mentioned may work out either through the absorption of higher costs in sale at competitive prices or indirectly through a reduced volume of business and the ultimate effect may be to diminish the ability of those paying the higher prices to compete with those paying the lower. These results may be avoided or augmented by the effect upon the cost to such manufacturers of such other factors as labor, taxes, rents, insurance, other ingredients, proximity to markets and delivery.

The Commission found that a purchaser located nearer freight-wise to Kansas City than Chicago who receives delivery from Kansas City is forced to pay a price which includes an item for delivery not actually incurred; that Chicago purchasers receiving delivery from Kansas City buy at a price which does not include any freight, artificial or real, and that any purchaser located nearer Chicago than Kansas City who receives delivery from the latter point is charged a price which does not include all of the actual freight. Its ultimate finding was that such discrimination results in substantial injury to petitioners’ competitors ; hinders, obstructs and tends to suppress competition among petitioners’ customers and to create a monopoly in processing and refining corn and in sale and resale of its by-products and has resulted in substantial injury to competition among purchasers by affording substantial unjustified price advantages to preferred customers and not to others, in violation of subsection (a), Section 2 of the Act.

Our inquiry is whether the evidence is such as to justify the finding that petitioners have discriminated in prices between competitive purchasers of commodities of like grade and that such discrimination will probably substantially lessen competition or tend to create a monopoly in commerce or to injure, destroy or prevent competition with any person who knowingly receives the benefit of such discrimination or whether the evidence discloses that the discrimin[215]*215ation grew out of only due allowance for differences in the cost of delivery resulting from different methods or quantities of sales and deliveries under Section 2 of the Clayton Act as amended by the RobinsonPatman Act, 15 U.S.C.A. § 13.

When purchasers receive goods from Kansas City, the sales price of which is fixed by charging the Chicago quotation plus the freight from Chicago rather than that from Kansas City, at a substantial increase of cost to the purchasers, a fictional factor is included in the sales price which is warranted in no way by actual delivery cost or other element. In some instances the price does not include all the actual freight; in others it includes more. In other words the item of freight from Chicago upon goods shipped from other points is an artificial element of cost arbitrarily added by petitioners. That it is substantial is apparent; in some instances amounting to approximately $400 per carload. Consequently, so far as this ingredient is concerned, purchasers in cities discriminated against have higher costs of manufacture than those elsewhere with whom they are competitively engaged in purchase of petitioners’ glucose and sale of candy made therefrom. The parties stipulate that the effect “may be" to diminish the ability of those paying the higher prices to compete with those paying lower prices and that such increased cost can be met only by raising the prices of finished products or by making sales on a non-profit basis. In either event, obviously, the profit is reduced, in the absence of any offsetting factor. Consequently, some competitors have moved to Chicago, thereby decreasing their cost not only by reducing the actual cost of delivery but also by elimination of the fictional freight charge to which they were subjected when located in less favorably treated communities.

In so far as the delivery price includes for freight more than the actual cost of transportation it measures a definite discrimination forbidden by statute. Upon the principle of equality, the Act forbids any difference in charges to different competitive customers not based upon actual differences in service or delivery. If a difference is to be justified because of presence of the latter element, it must have some reasonable relationship to actual cost and may not be of such character or quality as to work an unjust discrimination. Western Union Telegraph Co. v. Call Publishing Company, 181 U.S. 92, 100, 21 S.Ct. 561, 45 L.Ed. 765. The inclusion of a fictional cost of delivery, having no justification in fact, in itself suggests, upon the part of the manufacturer, arbitrary fixation of prices discriminating illegally as between competitive customers. Systematic price discrimination is irreconcilable with free, active competition.

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Bluebook (online)
144 F.2d 211, 1944 U.S. App. LEXIS 2780, Counsel Stack Legal Research, https://law.counselstack.com/opinion/corn-products-refining-co-v-federal-trade-commission-ca7-1944.