Bruce’s Juices, Inc. v. American Can Co., 330 U.S. 743 (1947)

MR. JUSTICE MURPHY, dissenting.

The issue in this case is whether sellers of goods should be allowed to use the courts to collect price differentials which have been made illegal by Congress in the Robinson-Patman Act. The Court approaches, but never quite meets, that issue. But the unmistakable effect of the Court’s decision is to permit the recovery of discriminatory prices despite the plain language and policy of the Act and despite the lessening of competition that might thereby result. I remain unconvinced, however, that such a result is consistent with the high ideals of our judicial system, or that it is made necessary by any rule of law or policy.

Section 3 of the Act makes it unlawful for any person to be a party to any sale which discriminates, to his knowledge, against competitors of a purchaser by granting to that purchaser "any discount, rebate, allowance, or advertising service charge" not available to the competitors in respect of a sale of goods of like grade, quality, and quantity. 15 U.S.C. § 13a. Section 2(a) of the Clayton Act, as amended by the Robinson-Patman Act, makes it unlawful for any person "to discriminate in price between different purchasers of commodities of like grade and quality" where the result is to lessen competition or to tend to create a monopoly. 15 U.S.C. § 13(a). It is in light of these statutory provisions that we must examine the opinion of the Court.

1. The Court proceeds on the basic assumption, unsupported by the record or by petitioner’s contentions, that the petitioner is seeking to avoid all liability for the cans sold to it by the respondent. No such assumption is justified. Petitioner’s brief, it is true, suggests two alternative theories in support of its position: (1) a transaction unlawful under the Robinson-Patman Act constitutes criminal action upon which no money judgment can be based; (2) discriminatory prices over and above the fair value of the goods cannot be collected by the seller. But petitioner does not pursue the first alternative, pointing out that only the second and narrower alternative is presented by the record. Thus, the only contention really before us is that promissory notes cannot be collected by legal action to the extent that they represent a price differential outlawed by Congress. As petitioner notes, this contention

does not require the Court to decide that the entire transaction is so tainted with illegality that the seller cannot collect even the fair value of the goods, thus giving the buyer a windfall.

If the petitioner were to prevail in this case and the promissory notes were to be declared unenforceable, respondent would still be free to recover on a quantum meruit basis if it has not already so recovered. See Penn-Allen Cement Co. v. Phillips & Sutherland, 182 N.C. 437, 109 S.E. 257.

Moreover, there is a strong indication that petitioner already may have paid the respondent the fair value of the cans. Since the passage of the Robinson-Patman Act, petitioner has had a continuing account with the respondent; under that account, petitioner paid respondent more than $2,000,000 for cans during the period from 1937 to 1942. When this suit was instituted, petitioner owed a balance of $114,000 on this account, represented by the promissory notes in issue here. To deny enforceability to those notes might thus affect only the discriminatory price differential, which the Court assumes violated the Robinson-Patman Act.

It also appears that the quantity discounts in issue were based upon the aggregate dollar value of annual sales, rather than upon individual transactions. The discriminatory differentials had a like basis. Hence, it is enough if petitioner can prove that the $114,000 in notes represents an illegal differential from this over-all standpoint.

The Court states, however, that the transactions represented by the $114,000 cannot be identified and that this figure cannot be said to reflect the separate item of price discrimination. But such sentiments are necessarily premature in the present posture of the case; petitioner has not yet had a full opportunity to present all its evidence or to try to connect the notes with a discriminatory differential. Petitioner concededly has the burden of proving that the $114,000 in notes does represent the discriminatory part of the purchase price, whether in relation to specific transactions or to the aggregate dollar volume of annual sales. If it cannot so prove, its case collapses. The important and the only point now is that petitioner should be given the chance to prove this defense. We should not shut the court’s door in petitioner’s face before it has had that chance. Nor should we prejudice that defense by holding or intimating that proof is impossible. Certainly the right to offer and prove a defense is not to be denied because a court thinks that the purported defense has not yet been proved. It is one thing to raise a defense; it is quite another to prove it. Since we are concerned here only with the first proposition, it is beside the point whether the defense has been or can be proved.

We may thus dismiss as unwarranted the Court’s fear that petitioner is going to get something for nothing if its contention is sustained. It is pleading only for the right to defend against the collection of that which Congress has declared illegal.

2. Equally irrelevant is the Court’s inquiry into whether Congress "wanted to go so far as to permit a buyer to get goods for nothing" where the Robinson-Patman Act has been violated. In the case before us, the only relevant inquiry is whether the Robinson-Patman Act was designed to allow sellers to recover illegal price differentials through court action. A determination that the Act precludes such a recovery does not involve a finding that the framers of the Act desired these sellers to forfeit all the value of the products on which they placed an illegal price differential. It involves simply a finding that the language and policy of the Act frown upon the use of the courts to effectuate what Congress clearly made illegal.

3. The Court thinks it significant that the Robinson-Patman Act makes no provision for a buyer interposing the vendor’s violation of the Act as a defense to a suit by the vendor. It is said that the triple-damage actions and the criminal proceedings are the exclusive sanctions provided by Congress for the enforcement of the Act.

This overlooks the fact, however, that a specific statutory provision is unnecessary to make an illegal contract unenforceable in the courts. Where a contract is outlawed by statute or is otherwise contrary to public policy, the illegality may be set up as a defense to a suit for enforcement despite the absence of a legislative recognition of that defense. Otherwise, the courts would become parties to the illegality by sanctioning the enforcement of the unlawful agreements. McMullen v. Hoffman, 174 U.S. 639, 669-670. This principle has been applied many times by this Court. At an early date, it was recognized that, despite the absence of a provision in the Sherman Act authorizing a defense of illegality in a private suit on a contract, such a defense might be used, that

anyone sued upon a contract may set up as a defense that it is a violation of the act of Congress, and, if found to be so, that fact will constitute a good defense to the action.

Bement & Sons v. National Harrow Co., 186 U.S. 70, 88; Continental Wall Paper Co. v. Louis Voight & Sons Co., 212 U.S. 227. Similarly, without specific statutory permission, private litigants have been allowed to invoke the policy of the antitrust laws so as to limit the scope of patent rights. Mercoid Corp. v. Mid-Continent Co., 320 U.S. 661; Sola Electric Co. v. Jefferson Electric Co., 317 U.S. 173; B.B. Chemical Co. v. Ellis, 314 U.S. 495; Morton Salt Co. v. G.S. Suppiger Co., 314 U.S. 488; Edward KatzingerCo. v. Chicago Metallic Mfg. Co., 329 U.S. 394; MacGregor v. Westinghouse Electric & Mfg. Co., 329 U.S. 402.

And so when a contract or promissory note is tainted with a violation of the Robinson-Patman Act, its enforcement should be refused by a court -- at least to the extent of the illegality involved. The failure of Congress to mention such a sanction slips into insignificance in the light of precedents in analogous situations.

4. The Court holds, however, that the Robinson-Patman Act invalidates discrimination, rather than contracts of sale at discount, and that the analogy of denying the enforcement of contracts violative of other antitrust laws is imperfect.

But such a holding misconceives the very nature of the Robinson-Patman Act and the evils at which it was directed. No one contends that the Act makes illegal all contracts of sale at a discount. Nor does anyone deny that an illegal discrimination becomes apparent only after there have been two or more sales. As the Court states, a contract may be made today which has no legal defect under the Robinson-Patman Act. But once there are two or more sales, and once there has been illegal discrimination, the illegality may reach back to the first transaction, which was free of all defects when made. That is inherent in the very nature of discrimination, and it should not surprise us to discover that fact. Discrimination may thus become evident in contracts, promissory notes, open accounts, and other forms of indebtedness. And it may put in a tangible appearance when a subsequent suit is brought to recover, among other things, what has proved to be an illegal price differential. To deny effect to that discrimination in a suit by the vendor does not require that a court hold void the entire transaction and permit the buyer to retain the goods free of any charge. It requires only that the court refuse to permit the recovery of that part of the purchase price which discriminates against the buyer who purchased the same kind and quality of goods as his competitors.

Thus, that part of a contract of sale permitting a certain discount may be or become illegal if the purchaser’s competitors are given larger discounts. Such is the whole tenor and policy of the Robinson-Patman Act. And collection of the discriminatory differential falls squarely within the area of illegality defined by the statute. Indeed, the Act is shorn of much of its meaning if the vendor is permitted to recover the fruits of his unlawful conduct. Courts should not be used for that purpose any more than they should be used to sanction recovery on contracts made wholly void by the Sherman Act. In the one case, courts are asked to give judgment for an unlawful price differential; in the other, they are asked to enforce a monopolistic agreement. In both cases, the answer should be a strong negative. The Acts are part and parcel of the same legislative policy, the Robinson-Patman Act merely elaborating some of the more subtle and refined monopolistic practices which Congress desired to eliminate. Courts should treat them accordingly.

It is no answer to say, as the Court does, that we must go outside the transaction in issue in order to give effect to a defense of unlawful discrimination. Of course that must be done, for discrimination is a relative matter depending upon the vendor’s transactions with third parties. But such an inquiry must be made by a court in suits for triple damages under the Robinson-Patman Act. American Can Co. v. Ladoga Conning Co., 44 F.2d 763. And an inquiry of that type must frequently be made in private suits where defenses are made under the Sherman Act. Discriminations and monopolies rarely if ever appear on the face of documents which are introduced for purposes of securing a recovery in a court of law. Judges constantly must look beyond the particular documents in issue. Surely, if it be assumed that a particular discount is unlawful, no factor of inconvenience or burden in looking at other transactions can justify ignoring the illegality and permitting an unwarranted recovery. And to insist that recovery must be allowed if the plaintiff shows no violation of law in proving the amount due on a promissory note is to hark back to medieval concepts of pleading and practice. The Robinson-Patman Act deals with complex economic realities. Litigants and judges must act accordingly when the Act is properly brought into issue by a defendant. If the policy of the Act is to be respected, the transaction before the court must be judged on the basis of other dealings by the vendor despite the superficial perfection of the vendor’s pleadings and proof.

Nor is recovery to be denied because only part of the illegality may be in issue. Courts must strike down illegality wherever it appears. Statutory violations are not to be countenanced merely because the violator seeks to reap only part of his illegal harvest at a time.

5. The Court intimates, without actually deciding, that courts should not allow this type of defense to be raised until the Federal Trade Commission has determined the economic effects of quantity discounts on competition. The fear is expressed that, without the Commission’s guidance, courts might strike down all quantity discounts, and create untold retroactive liabilities.

The short answer is that we should be reluctant to assume that judges are unable to comprehend the Robinson-Patman Act and the standards it sets up in regard to quantity discounts. It may be granted that the Federal Trade Commission has more technical knowledge and experience in dealing with the complexities of this problem than most courts, and the Commission’s judgment would be of inestimable value to any judge called upon to deal with quantity discounts. But, in the absence of some action by the Commission, courts must act as best they can within the framework provided by Congress. The Act, 15 U.S.C. § 13(a), specifically recognizes that quantity discounts are illegal only where they lessen or injure competition or tend to create a monopoly, and, where price differentials are justified by differences in costs of manufacture, sale or delivery, the discounts are permissible. This matter is a complex one, but it is no more complex than many other problems which face the courts.

The only alternative to the Court’s apparent position in this respect is for judges to sit idly by and allow sellers to collect illegal price differentials -- a function that hardly qualifies as an ideal toward which we should strive. Indeed, if the Court’s conception of the judicial function in suits of this nature is to be carried to its logical conclusion, judges would abdicate all their duties under the Robinson-Patman Act whenever the Federal Trade Commission has failed to express an opinion on the subject in issue. They would refuse to entertain treble damage suits, and would dismiss all criminal indictments brought on the basis of an alleged violation of the Act. It seems to me, however, that the judicial process has more vigor and responsibility than the Court seems willing to imply in this case.

6. Finally, the Court indicates that the fact that petitioner is a small business concern is a treacherous basis for deciding issues of law. As a general proposition, there can be no dispute with that attitude. But we must not blind ourselves to the equally important fact that the antitrust laws, of which the Robinson-Patman Act is an integral part, are designed primarily to aid the small business concerns and to curb the growth of giant monopolies. Many years ago, this Court had occasion to point out that trade and commerce may be

badly and unfortunately restrained by driving out of business the small dealers and worthy men whose lives have been spent therein, and who might be unable to readjust themselves to their altered surroundings. More reduction in the price of the commodity dealt in might be dearly paid for by the ruin of such a class and the absorption of control over one commodity by an all-powerful combination of capital.

United States v. Trans-Missouri Freight Assn., 166 U.S. 290, 323. The same observation applies to this case. The Robinson-Patman Act was designed in large part to protect the small business concerns, Congress realizing the disastrous effects of their being the victims of discriminatory prices. A proper treatment of the Act demands appreciation of this purpose.

We should pause long before sanctioning the recovery of discriminatory prices which Congress has found inimical to the nation’s welfare. We should be on guard against the use of the judicial process to augment the subtle destruction of small business contrary to the legislative will, and the erosion of the barriers which Congress has erected against the flood-tide of monopoly. To that end, therefore, we should reverse the judgment below, and allow courts to give full effect to the Robinson-Patman Act.

MR. JUSTICE BLACK, MR. JUSTICE DOUGLAS, and MR. JUSTICE RUTLEDGE join in this dissent.