F. T. C. v. ANHEUSER-BUSCH, INC.

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Argument of Philip Elman

Chief Justice Earl Warren: Number 389, Federal Trade Commission, Petitioner, versus Anheuser-Busch, Incorporated.

Mr. Elman, you may proceed.

Mr. Philip Elman: Mr. Chief Justice, may it please the Court.

This case is here on a writ of certiorari, the United States Court of Appeals for the Seventh Circuit.

That Court set aside an order of the Federal Trade Commission finding that respondent Anheuser-Busch has violated Section 2 of the Clayton Act which prohibits discriminations in price between purchasers which may have the effect of substantially lessening or injuring competition or tending to create a monopoly.

The respondent which makes Budweiser beer is one of the nation’s leading brewers.

In the beer industry of the United States, beers or brands of beer are divided into three broad classifications.

There are, first of all, the national or so-called premium brands which are sold in every market, in every State of the Union in large volume.

There are five such national or premium brands.

Budweiser, made by the respondent, principally in -- in St. Louis brewery and the four Milwaukee beers, Millers, Schlitz, Blatz and Pabst.

Then there are the regional beers and the local beers which as the terms indicate are sold not nationally but in more limited geographical areas.

Justice Potter Stewart: On national brands are not -- that’s not synonymous with premium brands.

The --

Mr. Philip Elman: They're known --

Justice Potter Stewart: -- the fact that national brands are higher priced, is that right?

Mr. Philip Elman: Yes.

Justice Potter Stewart: And it -- but it’s also true or am I wrong --

Mr. Philip Elman: There’s no suggestion that -- excuse me.

Justice Potter Stewart: -- that some local and regional beers are premium beers, is that correct or not?

Mr. Philip Elman: Well, the designation premium beers is attributable to the fact that in almost every market in the United States, these national beers are sold at a premium price, at a higher price than the regional or local beers.

As far as I know, there's no suggestion that they are premium in a sense of superior quality or anything of that sort.

Justice Felix Frankfurter: We'll destroy --

Mr. Philip Elman: The premium is in relation to price.

Justice Felix Frankfurter: We'll just destroy it from illusions.

Mr. Philip Elman: Well, I think those illusions are -- are very real in the sense that they affect the economics of this industry.

As the Commission found, the reason that these national beers, these premium beers are able to sell at a profit, in large volume, in almost every market in the country at this higher price, is that they are well established beers.

Their characteristics are well-known.

They enjoy excellent reputations.

And for that reason, most if not, the overwhelming majority of consumers of beer are willing to pay a few cents more per bottle or can for these beers.

To put it concretely if -- if in the Washington area, if I may speak on the basis of what -- what I think is within judicial notice, I think, if -- if I walk into a liquor store, if I see that the price of Budweiser beer per case is about the same as the price of Valley Forge or National Bohemian, I mentioned them only because they're local beers in this area and I don't mean in any sense to -- to depreciate their quality, I would assume that most people, if they can get Budweiser at the same price as these other regional or local beers, will choose Budweiser.

By the same token, if that price spread is eliminated or put it another way, if the price spread is too high, if you have to pay too much for a Budweiser or Schlitz or Pabst, the consumer may bulk at that point so that there's a very, very close relationship, competitively, in the industry which is affected by the illusion to which Mr. Justice Frankfurter has referred as there's a sensitivity of consumer reaction which is affected not only by the superior premium characteristics of the -- of the beer but also by the price.

Now, the price of these beers is not uniform throughout the country.

It varies depending upon local market factory such as differences in the cost, the distribution, differences in the cost of -- resulting from local taxation, regulation and so on, so that there isn't a uniform or a constant price for the beers throughout the country.

But as the Commission found, there is this price differential which exists in almost every market of the country.

The -- the national beers are in almost every area of the United States sold at some higher price.

Now --

Chief Justice Earl Warren: In the -- in the different regions Mr. Elman, are the prices of the premium beers usually the same?

Mr. Philip Elman: No, I don't think that you can generalize with any degree of competencies but I think there's -- there's a great degree of flexibility and fluctuation in -- in as to the price of beers that the only thing that seems to be relatively constant in the pricing structure is the existence of this price differential between the national beers and the regional and local beers.

And as the Commission found, if that differential is eliminated, it very seriously and adversely affects the ability of the regional beers to compete with the national because the consumer if he -- if he is not influenced by this price consideration, will tend in the direction of the well-known national products.

Justice Potter Stewart: Now, as among those -- excuse me.

Mr. Philip Elman: Excuse me.

Justice Charles E. Whittaker: (Inaudible)

Mr. Philip Elman: Not all.

There's nothing -- there's not -- certainly nothing illegal in a -- in a brewer to charging a higher price if he can get it.

Consumer is willing to pay for it, nothing at all.

Now, the --

Justice Charles E. Whittaker: (Inaudible)

Mr. Philip Elman: Well, Your Honor it's -- Your Honor, it's -- it's opening up the fact to this particular case which I'd like -- which I would like to present in order to give particular -- particularity to some of the generalizations that I have -- I've -- I've made.

Now, the action --

Justice Potter Stewart: Before you -- before you proceed, Mr. Elman, excuse me, as among the five national brands, as among the five national beers in any given locality, has it been the tradition that the -- their prices are the same?

Mr. Philip Elman: I don't think I can say on the basis of this record that their -- that the prices are the same.

I think there is -- there is competition, to the extent to which their competition among them has -- has resulted in -- in price variations is -- is something that this record is not really directed to.

Justice Potter Stewart: You mean it's the record too?

Mr. Philip Elman: And I don't think it's -- it's important in this case.

Now, this case involves certain price reductions which the respondent Budweiser, Anheuser -- Anheuser-Busch manufacturer of Budweiser, made in the St. Louis area, in 1954, which had the effect of wiping out this price differential between its beer and the -- and the regionals.

Now there are -- there were three regional beers in St. Louis which were respondents, principal competitors, Falstaff, Griesedieck Brothers and Griesedieck Western throughout the record, these latter two brewers are referred to by their initials simply as GB and GW and I think perhaps that there's --- it's be well to follow that example.

Now, these three regional beers were sold competitively against with -- with Budweiser, against Budweiser not only in the St. Louis market but in almost half of the United States, if not more.

Falstaff competed against Budweiser in 26 States.

GB competed against Budweiser in 13 States and GW competed with Budweiser in 20 States.

And some of the 13 and 20 States were not included in the 26 States in which Falstaff was sold so that in a very large area of the country, Budweiser was competing against these three beers.

Now, in St. Louis, in December of 1953, Budweiser was selling at $2.93 a case.

These three regional beers were all selling at the same price of $2.35 a case.

There was a price spread of 58 cents a -- a case.

This was at the whole of 30 -- wholesale level, Budweiser, respondent to its price to the retailers.

Justice Charles E. Whittaker: That was in (Inaudible)

Mr. Philip Elman: This was in St. Louis.

Now, despite the fact that Budweiser was selling at -- at a higher price in St. Louis, as the Commission found, it was doing quite well in St. Louis.

Sales in that market were on the ascendancy.

It was slowly but steadily increasing.

And during the period between the end of World War II, in December of 1953, the sales of Budweiser in the St. Louis market had more than doubled.

In 1953, this is all by way of background, there had been a long, bitterly contested strike in the beer industry.

That strike was settled in August of 1953.

And as a result, the labor cost in the beer industry generally had increased.

Consequently, on October 1, 1953, all of the national brewers raised their prices of beer, generally, throughout the country except for two states, Missouri, where St. Louis is located and Wisconsin, where Milwaukee is located and I don't know whether there's any significance to that fact.

Unknown Speaker: (Inaudible)

Mr. Philip Elman: I don't know whether there's any significance to that fact but -- but in -- in the 46 States, other than Missouri and Wisconsin, the national brewers raised their prices.

The historical pattern in the industry is that when the nationals raise their prices, the regionals and locals followed suit.

And many of them did but these three regionals in St. Louis did not raise their prices.

So that in all of the areas, not only St. Louis or I should say the part from St. Louis where there had been no increase, but in all the areas, other than St. Louis, in which Budweiser was in competition with these three regional beers, the failure of these regionals to raise their price had the effect of increasing the price spread between the -- their beers and Budweiser.

Now, against this background, the price reductions were made.

Now, at this point --

Justice Potter Stewart: What was the Budweiser (Inaudible)

Mr. Philip Elman: It was 15 cents a case.

Then there -- and there was no -- I beg your pardon, I beg your pardon.

It was the -- the 15 cents increase was not in St. Louis, it was in the 46 States of the Union other than Missouri and Wisconsin.

That was that -- that was the general range of the increase, but in St. Louis, Budweiser did not increase its price.

Now --

Justice Charles E. Whittaker: Do you say that (Inaudible)

Mr. Philip Elman: In the other area --

Justice Charles E. Whittaker: (Inaudible)

Mr. Philip Elman: -- but not in St. Louis.

But as I pointed out, they were competing not only in St. Louis but in almost half of it or more than half of the country, at least 26 States.

Now, in a few minutes, I'm going to discuss the question as to the light which is shed by the findings and the evidence as to whether there is a cause and effect relationship between the failure of these three regionals to go along and raise the prices of their beers in these -- in these markets and the price reductions in St. Louis.

But at this point, I just want to state the objective facts of the record.

On January 4th, 1954, respondent decreased the price of Budweiser, 25 cents a case from $2.93 to $2.68, still leading a differential of 33 cents but the three regionals were still selling at $2.35.

Justice Potter Stewart: Now, we're in St. Louis?

Mr. Philip Elman: We're in St. Louis.

Justice Potter Stewart: Only in St. Louis.

Mr. Philip Elman: We're in St. Louis where -- where incidentally but the price of Budweiser was the lowest in the country.

The price that -- the price at which respondent was selling Budweiser in St. Louis in December 1953 before all these occurred was $2.93.

The lowest price that it was charging in the country, the high was Los Angeles, $3.80.

In Washington, it's $3.65.

But St. Louis was the lowest price in the country.

Now, it is also, perhaps the significance the Commission thought it was, that as a result of the increase in price which Budweiser and the other nationals had made in October of 1953, Budweiser's sales dropped off drastically.

Again illustrating the sensitivity of consumer reaction to price when they raised the prices of beer, sales fell off substantially.

In December of 1953, Budweiser' sales nationally were 30% below the preceding year.

This was of course in sharp contrast to the situation in St. Louis where Budweiser was -- was doing very well, where its sales were going up, where there had been no increase in price as a result of this strike settlement.

Now, despite the fact that the price of Budweiser in St. Louis was the lowest in the country, despite the fact that Budweiser's sales were -- were on the increase in St. Louis, despite the fact that that was the one area in the country where the company was making money and not losing money, the respondent reduced its prices in the St. Louis area.

First as I say on January 4 in the amount of 25 cents and then on June 4, they wiped out the differential entirely bringing their price down to $2.35, exactly matching the price of the three regionals.

Now, the -- the trial examiner found and his findings were adopted by the Commission, that it was after the June 24, 1954 price reduction by AB, the respondent, that the roof really fell in on the St. Louis market.

He says -- and I'm reading now from his findings in the record page at 31, “I have rarely seen such a dramatic exhibition of economic power and price sensitivity in so short of time."

Apparently, the beer -- beer consuming populous in the St. Louis market equates premium quality with premium price.

The tremendous switch from other beers to Budweiser when the premium price was eliminated cannot, on this record, be otherwise accounted for.

Apparently, also, it is the first 30 cents or less of -- of premium or differential in price which touches off the reaction in the St. Louis market.

He then gives the -- the statistical data as to the actual effect on sales during this period in 1954 and Budweiser sales, for example, tripled during this short period.

The -- there's -- in -- in May of 1954 they -- their -- their share of -- of the total was 15.5%, the next month 22.6%, in July, 37.6%.

It was spectacular the way that the -- the few cents made the difference in -- in the competitive situation and in the effect in sales.

And of course, there was a corresponding decrease in the -- in the sales of the -- of the competitors.

The principal loss is being suffered by GB and GW rather than Falstaff.

Justice Potter Stewart: Now, in addition to these three regional competitors, Falstaff, GB and GW, did they have any competition from --

Mr. Philip Elman: Yes, the --

Justice Potter Stewart: -- the four nationals?

Mr. Philip Elman: The four nationals were in there but apparently in -- in St. Louis, the Milwaukee beers don't sell.

[Laughter]

Mr. Philip Elman: I mean their -- their share of the market was almost insignificant.

I don't know whether the converse is true Milwaukee but certainly, the record shows that they -- they were insignificant element in the picture.

The -- the competition there was between these -- were among the St. Louis brewers because these three -- regionals all have the breweries in St. Louis.

So that you have -- you have that situation there.

The -- the elimination in this price differential apparently made all the difference in the world and the Commission found that this was an injury to competition and so on and I --

Justice Charles E. Whittaker: (Inaudible)

Mr. Philip Elman: Substantially less -- it's substantially -- its effect was substantially to lessen competition intended to create monopoly.

Now, the words to the statute.

Now, let me refer to the specific findings as to -- on the issues which were actually in controversy before the Commission.

Before the Commission, there was no disagreement that there was a difference in price between Budweiser beer in St. Louis and price charged in other markets.

There was no controversy that there was a higher price charged to purchasers and other markets.

There was no inquiry made as to what the effects of the lowering of price in St. Louis may have been on the customers of respondent in the other markets.

The issues that were framed by the Commission's complaint and the respondent's answer were these.

Was there really an injury to competition as a result of these price reductions?

Was there a cause of relationship between the reductions in the injuries?

The respondent argued that these -- its competitors suffered these losses not because of the price reductions but because in the case of one of them, its product was inferior in the case of the other, poor business management.

There was an issue tendered as to the meeting of competition, in meeting of -- of the lower price in good faith in Section 2 (b) defense and as to all these issues to resolve against the respondent by the Commission.

The main factual line of defense was that in St. Louis, the respondent was conducting a price experiment.

They were faced with a bad situation.

Their losses nationally were -- were increasing.

Their sales were going down.

And in order to find out what was the trouble and what they could do about it, they conducted this price experiment in St. Louis.

They conducted it incidentally for -- for nine months.

In March, 1955, Budweiser raised its price from $2.35 to -- to $2.65, I believe.

I beg your pardon, $2.80, a 45 cents increase.

And almost immediately thereafter, the regionals raised their price 15 cents bringing up to $2.50 so they retained that 30 cents differential.

Justice Potter Stewart: Was there any indication as to why Budweiser raised their price if -- if their sales have been booming so much?

Mr. Philip Elman: Well, their -- their contention on the fact was that the experiment had -- had served its purpose and they no longer had to pursue it.

The trial examiner said that the experiment proved anything.

It proved that they could -- they could solve their -- their problem by lowering their prices because when they lowered their prices in St. Louis, they really starting to sell.

And he expressed skepticism as -- as to this experiment throughout this record.

At one point after another, the hearing examiner never got a satisfactory answer of this one question, why he asked them if we were -- if we were troubled about your -- your national picture.

Your sale is going down nationally.

Why -- if you -- if your sales went down after you raised your prices in October 1953 elsewhere but in St. Louis, why did you pick St. Louis to conduct this price experiment of reducing your prices where -- when your prices in St. Louis where the lowest in the country and when you had no -- no problem of -- of -- there because you were doing very well.

And he didn't get any satisfactory answer to that question until the testimony of the respondent's president came at the very close of the hearing, after all the evidence was in, after all the marketing surveys and the testimony of sales, managers and so on was in.

The very last witness in the case was called by the Commission as a rebuttal witness and that was Mr. August A. Busch Jr., President of Anheuser-Busch.

And I should like, if I may, to read his testimony because he testified with -- with great candor and it seemed -- it seemed to the trial examiner and it seems to us to be very illuminating as to what actually took place in this case.

This is -- I'm -- I'm now reading from Volume 2, page 934 and Mr. Busch as I understand as a Commission witness, he's being examined by Mr. Mayer, counsel for the Commission.

And page 934, in the middle of the page, Mr. Mayer says, “The national shippers increased their prices after the settlement of the brewer strike in Milwaukee in 1953.

Did they not answer in October 1953?”

Now was that generally true of all the brewers throughout the country?

Answer.

“No, Sir.”

For the first time I think in the history of the brewing industry, when the large shipping brewers increased their price for the first time, as I recall it in the brewing industry, the regionals and locals in some areas did not increase their price.

Question, “Did not increase their price?”

That is correct.

Question, “In some of these regionals and locals were your three local competitors in St. Louis, Falstaff, GB and GW, who are also competing with you in the State of Texas?

Were they not, Sir?”

Answer, “Yes, Sir.”

Then on page 935, the interrogation continues, Mr. -- Mr. Busch says he doesn't see any connection.

This is the -- by the third of the way down.

He still can't see any connection between the regionals not raising their prices and respondents reducing its price in St. Louis.

He says, “I still can't see any connection.

No, our adjustment wasn't made over what they were going to do.”

And then he says, “I imagine we wouldn't have done anything, had they raised, to be perfectly frank and honest with you.”

And just to -- and to confirm and amplify that, Mr. Mayer on page 938, several pages -- state in the record, page 938 nailed it down.

Question, -- this is page 938, the fourth line down.

Question, “May I suggest then, sir, that the failure of Falstaff and Griesedieck Brothers and Griesedieck Western have business sense enough in your opinion to increase their prices after the settlement of the Milwaukee strike was the real reason for the price reduction of Budweiser in January 1954, was it not?”

Mr. Busch's answer, “Competitive wise, certainly.”

Now the trial examiner thought that Mr. --

Unknown Speaker: (Inaudible)

Mr. Philip Elman: This is page 938 of the record.

Unknown Speaker: I see.

Mr. Philip Elman: Now, Mr. -- now, the trial examiner as appears from his findings on page 40, referring to this testimony of respondent's president, he thought that Mr. Busch had let the cat out of the bag.

But Mr. Busch had -- as he said, “These price reductions were ordered by his president for two admitted reasons, to get business away from its competitors and to punish them for refusing to increase prices when AB did so in the fall of 1953.

Apparently, the lesson was well taught and better learned because those three St. Louis breweries properly followed AB up with price increases in March 1955 and we're careful to keep the price difference between them and it at less than the 33 cents whose elimination had cost them so much sales bargain.

Chief Justice Earl Warren: Where is that, Mr. Elman?

Mr. Philip Elman: This -- I was just reading from the examiner's finding on page 40 of the record.

Now, that finding was -- was adopted by the Commission.

The Commission wrote its own opinion but it also adopted the findings of fact of the examiner.

Justice John M. Harlan: (Inaudible) Court of Appeals never reached the question (Inaudible)

Mr. Philip Elman: Yes, sir.

Justice John M. Harlan: (Inaudible)

Mr. Philip Elman: Right.

Justice John M. Harlan: Therefore, we have no question about the sufficiency of the findings (Inaudible)

Mr. Philip Elman: Yes, sir.

That's right.

There's no question about the sufficiency of the findings because the Court of Appeals did not reach that question, although the respondent did challenge the sufficiency of these findings in the Court of Appeals.

And if the Government prevails in this Court, the case will go back to the Court of Appeals and on in remand, that question will be opened.

I set forth these -- these findings because there is some difference of opinion between the respondent and ourselves as to exactly what the Court of Appeals held.

And we believe that to some extent, the respondent is arguing the question of injury or the competition or lessening of competition or a tendency of monopoly, that aspect of the case.

And we have here what we regard as an injury of the competition through a price reduction.

Of course, ordinarily, I suppose in the great majority of cases, the price, a reduction of the price is a manifestation of -- of a vital competitive situation.

It ordinarily reflects a -- a stimulus to competition.

But in this case, you have a price reduction which the trial examiner found was for the purpose of punishing competitors who did, to lower their prices in effect, by maintaining prices when they're -- when respondent and the other nationals were increasing theirs.

Justice Felix Frankfurter: Completely -- completely if Falstaff had cut its price still lower, that would present a different problem, would it?

Mr. Philip Elman: Yes, indeed.

Justice Charles E. Whittaker: I was --

Mr. Philip Elman: Yes, indeed.

Justice Charles E. Whittaker: -- about to ask you, if the (Inaudible)

Mr. Philip Elman: Well, Mr. Justice, if I may answer your question this way.

I think you're raising a -- a very serious question as to the scope of the meeting competition -- meeting the lower price of the competitor in good faith defense which is one of the defenses here.

It was -- it's -- it's -- it was not reached by the Court of Appeals.

I think that questions of that sort ought not to be considered by this Court.

They weren't decided by the Court of Appeals or reached by it.

But let me say this by way of an answering the context of -- of Your Honors' review of this case.

You have here a difference of price between the St. Louis market and the other markets of the country.

There's no question about that.

And the -- the argument which was made in the Court of Appeals by the respondent, not in its petition for review, didn't raise this question in its -- in presenting the appeal for the Court of Appeals, but on its reply brief.

For the first time in this case, the argument was made that it is essential prerequisite for a violation of Section 2 of the Clayton Act which speaks of discriminations in price that there'd be a discrimination and you cannot discriminate between two people unless the effect is to help one and hurt the other and that in this case, Budweiser wasn't discriminating among its competitors in St. Louis.

It was treating them all alike.

The price reductions that it made in St. Louis were uniform.

It wasn't discriminating among its customers in St. Louis.

They all paid the same price so the Court of Appeals said, “So far as St. Louis is concerned, there's no discrimination.

If there is any discrimination, it has to be against the -- the purchasers of respondent and these other markets of the country.” But says the Court of Appeals, “these customers in other markets aren't competing with the -- the retailers of Budweiser in St. Louis.

There's no competitive relationship between them.”

Now, if there's no competitive relationship between them, they aren't heard.

And if they aren't heard, by definition, the essence of discrimination is that somebody is -- is benefitted and somebody else is injured.

There's no injury to them.

Therefore, there's -- there's no discrimination.

The Court of Appeals says that there has to be some relationship between the people allegedly discriminated against, entitling them to the same prices.

And if there's no relationship here, between respondent's purchasers in St. Louis and its purchasers in other areas and that we -- we can see that they're not in -- there's no competition between the people, the retailers who buy from respondent in Los Angeles or (Inaudible) -- and -- and those at -- retailers in St. Louis there's no -- certainly not that relation and there's nothing in this record that -- that indicates that Budweiser passed on any losses it may have suffered in St. Louis to its purchasers in other markets in the form of a higher price.

As a matter of fact, the record indicates that they did very well in St. Louis.

They were operating profitably.

There weren't any losses, so far as we know.

We certainly -- the -- the Commission didn't attempt to present any evidence of that sort and the respondent made no effort to raise any issue as to whether there was any injury to competition other -- outside the St. Louis area.

In other words, no issue was tendered before the Commission based upon the contention that in order to have a discrimination between purchasers in different markets, not only did you have to show injury to competition in the market in which the price cut is made to the competitors of the seller, but that you also had to show that there was some injury to competition in other markets.

That issue was not raised in -- and nevertheless, it was the basis upon which the Court of Appeals ruled as a matter of statutory interpretation that the words “discrimination and price” require that as an essential condition defining a violation of Section 2 of the Clayton Act that there'd be adverse economic effects upon the purchasers and other markets who pay the higher price.

Now --

Justice John M. Harlan: That would mean the Court (Inaudible)

Mr. Philip Elman: As we read the opinion, the Court in effect seems to say that because there was -- it -- it assumed that the -- the correctness of the Commission's findings.

It says in the opinion, “Even if -- even if these price reductions in St. Louis were directed at respondent's competitors there, even if they were predatory.”

That was the Commission's word in its brief, which the Court of Appeals adopted.

Nonetheless, there was no violation of Section 2.

The Court of Appeals thought that the facts of this case really fell within Section 3, the criminal provision of -- of Robinson-Patman which makes it a crime to charge a lower price for the purpose of destroying or eliminating a competitor so that on the view of the facts, which the Court of Appeals assumed for purposes of its decision, the price reductions in St. Louis may be assumed to be predatory.

They may be assumed to be for the purpose of destroying respondent's competitors.

They may be assumed to be a -- as bad as you like, but under the view of the statute, which the Court of Appeals adopted, doesn't make any difference.

What happens in St. Louis is you can't show some injury to the respondent's customers in other markets.

There's no discrimination because the discrimination is between purchasers.

Now, our brief elaborates in some detail the various reasons which -- which, we think, could make it abundantly clear that the Court of Appeals adopted a most unreal artificial construction of the statute.

The statute it -- itself defines what makes a price difference and illegal discrimination.

The -- this isn't -- we're not dealing here with discrimination in the abstract.

The discrimination is, of course, a -- a differentiation of treatment which when judged by a controlling standard it -- it is as unjustified and that we don't have to speculate in the abstract as to what the standard for determining when a price difference is an illegal prohibition under Section 2 because Section 2 which we have set forth in full in our -- the appendix to our reply brief on pages 14 and 15.

Section 2 defines its own standards.

It's a -- that the -- the entire section is -- is contained in a single sentence.

It starts at the top of page 14 of our brief.

It goes all the way down to the middle of page 15.

The Court is very familiar with Section 2.

It's had it in many cases and Your Honors know that in this one single sentence, Congress packed the four provisos, three or four conditions, semicolons, colons, and -- and you cannot do what the Court of Appeals did here, pick out one word, “discriminate” and disregard the rest of the sentence and speculate as to what Congress meant by “discriminate.”

The statute said that the discrimination is really a different -- a difference in price really is a discrimination and illegal where the effect of such discrimination may be substantially to lessen competition or tend to create a monopoly in any line of commerce, any line of commerce or to injure, destroy, or prevent competition with any person who either grants, that's the seller, who either grants or knowingly receives the benefit of such discrimination or with customers of either of them.

So that under the statute, there's no question at all.

The respondent doesn't deny it.

That an injury to the competition of the seller who charges the lower price is -- is sufficient.

Now, the -- it's clear as the -- as Your Honors know that the -- the whole purpose of -- of the original Section 2 of the Clayton Act in 1914 was to protect the -- the competitors of -- of sellers.

The legislative history and the cases under Section 2 of the 1914 Act showed that what Congress was trying to protect were the -- whether -- whether the -- the businessmen in -- in one area who were faced with -- with a -- a giant national corporation coming into that area and lowering its price to the point where the -- where the local people just can't -- can't compete.

Justice Charles E. Whittaker: Even on the (Inaudible)

Mr. Philip Elman: Not at all.

No, no.

Justice Charles E. Whittaker: (Inaudible)

Mr. Philip Elman: No.

I'm -- I'm presenting the -- the findings of the Commission which show not that this is a case comparable to the ones in the House Committee report, the Clayton Act of the American Tobacco Company, Standard Oil of Indiana walking into an area, new area driving the local people out of it.

They were in there, but if these findings be upheld as we will argue in the Court of Appeals, they should be upheld when the case, as we hope, goes back to the Court of Appeals on remand.We would -- we would argue that this is a case where the seller's competition has been “substantially lessened,” a tendency to monopoly and that line of commerce has been created by reason of a -- of a price reduction, in the circumstances of this case showing that the price reductions could well have the effect.

As the trial examiner found he said there was a distinct probability if these price cuts -- these -- these price cuts continue, that the regionals might be eliminated as competitors.

Now, of course, in this case that didn't happen.

It didn't happen, but Section 2 isn't directed to the situation where there's a distraction of competitors.

Section 2 as you -- as you have held in a number of cases is like Section 7 of the Clayton Act.

You're dealing with your -- Congress was dealing here with potential monopolistic practices.

Section 2 is directed at pricing practices which if allowed to attain full maturity would have a very severe and distractive effect upon our competitive economy.

So that's -- so -- so far as Section 2 is concerned, all that the Commission is required to find is that the -- the price reductions have those effects.

Now, of course, to all these defenses are -- in the -- in the various provisos of -- of the Act available and --

Justice John M. Harlan: I'm still trying to understand (Inaudible)

Mr. Philip Elman: Well, I --

Justice John M. Harlan: (Inaudible)

Mr. Philip Elman: The Court of Appeals as we read its opinion is saying, “You cannot have a price discrimination between different purchasers unless they're really competing with each other.”

Now --

Justice John M. Harlan: (Inaudible)

Mr. Philip Elman: Well --

Justice John M. Harlan: (Inaudible)

Mr. Philip Elman: Well, if -- if the Court of Appeals means that if you charge a uniform price to all of the purchasers in one market and that -- that's no discrimination.

Then the Court of Appeals, it has in effect repealed Section 2 of the Clayton Act because Section 2 of the Clayton Act and all the cases under it make it clear that there can be in the jargon of the anti-trust (Inaudible) territorial price discrimination.

Oh, I'm not (Voice Overlap) --

Justice John M. Harlan: Which in effect you say whether their view is correct or not.

I'm trying to understand what they did say.

Mr. Philip Elman: Well, if it means --

Justice John M. Harlan: (Voice Overlap) --

Mr. Philip Elman: -- if it means -- if it means that there's no discrimination so long as you charged the same price in one area then of course it's clearly wrong.

If it means -- if it means there has to be a competitive relationship to the purchasers in another area, I think even respondent would agree that that's clearly wrong.

Now the respondent says that we -- we have read the opinion of the Court of Appeals correctly because he finds in the quotation of a -- of a statement made by Representative Utterback who was the manager of the House Bill that became the Robinson-Patman Act, an implicit holding, implicit recognition by the Court of Appeals that where the price reduction in one area is in effect passed on to the customers in other areas, but the losses suffered as a result of that price reduction are passed on in the form of a higher price, the customers in other areas so that in that situation there is an injury to -- to purchasers in other markets.

Respondent says, “That's really what the Court of Appeals held as a matter of law,” and that in this case, there was no such allegation to prove them for that reason.

The Commission said that -- the Commission's order was set aside.

Now, we don't think that's the right -- we don't -- we don't read the Court of Appeals' opinion that way, but even if the respondent is right.

If -- if that's really what the Court of Appeals held, it would still be wrong because it would still mean that no matter what a seller did to his competition in one market, no matter with what purpose, no matter with what effects on that competition, that competition of the sellers might be destroyed, it would still have to make some kind of a showing that there was an injury to the purchasers in other markets and there's -- there have -- that the Clayton Act has been on the books now for four -- some 46 years.

There have been many cases.

I don't know of a single case in -- which -- which says or even implied that you have to make two -- two -- you have to show two injuries to the competition.

One in the area in which the price cut is made and another injury to competition, competition of other purchasers in other areas.

There have been -- the number of those cases that have come before this Court.

The -- the issue, of course, was not presented, but the -- these cases have been before a number of Circuits and there is not one case which holds that you look beyond the area in which the price cut which is made.

That you don't have to find -- there's no case that says you have to look and see whether the purchasers who are charged at a higher price in other markets are also injured by it.

And we think that if -- if Representative Utterback's rather ambiguous language is read as -- as meaning that it -- it really attributes irrationality to the Robinson-Patman Act which was intended to expand the protections of the Clayton Act, not to restrict.

Congress in 1936 in the Robinson-Patman Act added Section 3 which Your Honors are familiar with.

It was before you in the Nashville Milk, Carnation and Safeway cases a couple of years ago.

Section 3 is the criminal provision that makes it a crime to charge a lower price or an unreasonably low price for the purpose of eliminating competitors.

Now, if -- if Congress makes it a crime in 1936 to -- to charge a lower price in one area for that purpose, it's -- it's incredible that it should want to take away from the Federal Trade Commission the power to deal administratively with -- with such pricing practices, practices which were clearly forbidden by the Clayton Act.

It would mean that -- that the competitors of -- of the -- of the seller who makes these price discriminations don't have any remedy of damages as was held in a national case.

It's just a crime, but you can't -- you can't -- the Federal Trade Commission can't try to nip the thing in the bud with a cease and desist order and the people who are hurt by it can't sue for trouble damages.

Now --

Justice Felix Frankfurter: Mr. -- Mr. Elman, no doubt Anheuser-Busch has engaged in interstate commerce.

The rest of my question is I doubt that there's a good answer, though I can't keep it to myself.

There has to be (Inaudible)

But my attention (Inaudible) the italicizing of that market in this Court's opinion.

No doubt Anheuser-Busch is engaged in commerce, but the discrimination must be to lessen competition or tend to clear the monopoly in any line of commerce.

Now, is the sale of beer in St. Louis a line of commerce?

Is the sale of beer in St. Louis a line of commerce?

Mr. Philip Elman: Well, the -- the -- so the far as the interstate commerce aspect is concerned here, your decision in the Moore against Mead's Bread case in 348 U.S. covers it where there's a -- you got into intrastate commerce which bears the brunt of the discrimination and it's -- and the --

Justice Felix Frankfurter: Well --

Mr. Philip Elman: -- and the other markets in interstate commerce.

Justice Felix Frankfurter: I understand that but I thought your whole argument was that the effect of commerce outside the locality of the material that --

Mr. Philip Elman: It's --

Justice Felix Frankfurter: -- this -- this --

Mr. Philip Elman: -- it's immaterial for purposes of showing a discrimination or injury to competition, but it's certainly immaterial in showing jurisdiction.

Justice Felix Frankfurter: Well, but --

Mr. Philip Elman: Jurisdiction isn't challenged.

Justice Felix Frankfurter: I'm not talking about jurisdiction.

I'm talking about whether the discrimination accepting your analysis in St. Louis tends to create a monopoly or lessens competition in commerce because the whole argument is that this doesn't touch anything outside of the St. Louis market.

Mr. Philip Elman: No, that is not the whole argument.

The whole argument -- the whole argument is that it's -- it -- it hinges --

Justice Felix Frankfurter: It doesn't lessen competition outside of St. Louis?

Mr. Philip Elman: Certainly.

Justice Felix Frankfurter: Oh.

Mr. Philip Elman: Well, the -- the -- on -- on the Commission -- on the Commission's findings, the purpose of this price reduction was to punish these three regionals who did business all over the country or -- or in a large part of the country, but who happened to be doing business in St. Louis also because that was their -- their home -- home base.

They're being punished because of their failure to go along with the price increases --

Justice Felix Frankfurter: Does the --

Mr. Philip Elman: -- in these other areas.

Justice Felix Frankfurter: But does the punishment --

Mr. Philip Elman: Now, if that is an impact on commerce, I don't know what -- commerce, I don't know what it is.

Justice Felix Frankfurter: But does the -- does the punishment touche their competitive position in commerce?

I'm asking you.

I don't see how --

Mr. Philip Elman: I think --

Justice Felix Frankfurter: -- if you say that you need to look at the effect outside of St. Louis.

Mr. Philip Elman: We don't say that you need look at the effect outside of St. Louis for purposes of determining the -- the effect on commerce.

What we're saying is in determining whether there's a discrimination, it's enough to show that outside St. Louis in interstate commerce markets, one price was charged and in Saint Louis, another price was charged then that -- that differential comes within all of the conditions and all the provisos, etcetera of the Robinson-Patman Act.

Justice Felix Frankfurter: I follow that but I don't yet see how if it is irrelevant because not such that the competitive relation is unaffected by the lowering of price in St. Louis.

That's true, isn't it?

Mr. Philip Elman: There are competitive relations not only in St. Louis --

Justice Felix Frankfurter: Outside of St. Louis.

Mr. Philip Elman: -- and outside Saint Louis are affected.

Justice Felix Frankfurter: They are?

Mr. Philip Elman: Why, yes, because -- because if -- if a price reduction in St. Louis is made for the purpose of preventing them in the future from -- from lowering their -- from -- from the regionals lowering their prices in other territories, that certainly affects competition.

Justice Felix Frankfurter: Were there findings that that would be determinative?

Mr. Philip Elman: That will be one of the --

Justice Felix Frankfurter: Were there -- were there --

Mr. Philip Elman: There are findings -- there are findings by the -- the examiner which I've read that that the -- that was the -- the purpose was punitive to punish them for not going along and that's going to be one of the questions in the Court of Appeals on remand.

Justice Felix Frankfurter: I -- I think I have to be more concrete.

That may be satisfied by proving that they wanted to punish them in the St. Louis market.

My question is, were there findings which you already are just sustaining to go back, that this would affect the competitive relationship of the Anheuser-Busch with their three competitors outside of St. Louis?

Mr. Philip Elman: Well, the -- the -- there's a finding here that this was continued.

It might drive them out of business, it drove them out of business, would drive them out of business, all of them, not just in St. Louis.

Justice Felix Frankfurter: There are such findings.

(Inaudible)

Mr. Philip Elman: Yes, sir.

Justice Felix Frankfurter: All right.

I merely want some (Inaudible)

Chief Justice Earl Warren: Mr. Barton.

Argument of Edgar Barton

Mr. Edgar Barton: Yes, Your Honor.

May it please the Court.

It is certain, Alice in Wonderland about this argument.In the Commission proceeding, there was no finding by the Commission that Anheuser-Busch engaged in any punishment of competitors in St. Louis when it made this price reduction.

Now, the facts of this case are that in January of 1954, in response to the urgent competitive conditions which have been alluded to losses of as much as 60% and 80% of sales in various States throughout the midwest.

Anheuser-Busch did reduce its price in St. Louis by this specified amount.

It didn't bring the prices down to the competitor's prices.

They were still 33 cents above.

And despite the fact that it reduced its prices in St. Louis in January to get a little closer to the competitor's prices, the sales results were minimal.

Nothing happened.

Sales didn't increase.

In July -- in June of 1954, it did reduce its price to equal the competitor's price in St. Louis.

In other words, they all sold for $2.35 to the retailer.

Now, before the examiner, when Mr. Busch was called to testify, they missed -- the examiner misunderstood the facts of the case.He thought that AB had raised its price in St. Louis when it raised outside of St. Louis in October of 1953.

And he thought that the reason for the reduction of price by Anheuser-Busch in St. Louis was because Falstaff and the others had not raised their price in St. Louis when AB raised its price.

Now, we outlined in fully, on our brief on pages 45 through 47 the facts regarding -- what I regard as the -- this crucial question in the case.

If we were guilty of punishing competitors by our price reduction, we don't believe the Court of Appeals would have held that we did not discriminate in price when we lowered prices in St. Louis.

This issue was fully talked out before the Court of Appeals half, a good part of the argument was devoted to it and the Court of Appeals obviously held that we did not have this purpose when we lowered prices.

Now, I would point out further that even though the examiner states what he states in his -- his proposed findings, it is significant that the Commission made no mention of this whatsoever in his opinion.

Now, what in fact happened was that when we got before the Commission, we pointed out that the examiner had been in error with respect to his facts in our briefs to the Commission.

And Commission counsel on argument before the Commission, conceded that the examiner had been an error with respect to his facts.

Namely, we did not raise prices in St. Louis in October 1953.

As a consequence, the Commission made no statement regarding this all important punishment issue in its opinion.

And I would point out to you that it was vital that they do so because one of the issues before the Commission was that we were lowering our prices in good faith to meet competition.

Now, it may be that the Commission wouldn't agree that this punishment issue is important with regard to the discrimination issue as a legal matter.

But they could not fail to see that it would be a vital importance with respect to the meeting competition issue.

And there is not one word in the Commission opinion relating to the punishment issue.

Now, I submit, Your Honors, under these circumstances that this case cannot be -- should not be considered by you on the basis that there was proof and found here a punishment purpose in lowering the prices.

Justice Potter Stewart: Isn't it true that the Commission adopted the findings and conclusions of the examiner?

Mr. Edgar Barton: In a -- in the order that was issued, Your Honor, there is a sentence, the standard sentence.

The -- I believe it is the Commission adopts -- let me get the exact language, Your Honor, because it's -- it's on page 48 of the record.

There's a sentence in the final order.

It reads, “It is further ordered that the findings, conclusions, and order, as modified, contained the initial decision be and they hereby are adopted those of the Commission.”

Now, Your Honor, it is perfectly clear from the argument before the Commission that the examiner was in error on this vital fact.

The Commission -- one of the Commissioners asked the question on the oral argument of Commission counsel, “didn't Anheuser-Busch raise its prices in St. Louis in October 1953?”

And the counsel quite correctly said it did not.

Now, I -- this sentence is somewhat grammatically dubious because the -- as modified, grammatically refers to all that goes before, but in any event I submit that in the absence of comment on this important issue in the Commission opinion, this sentence in the order which is of doubtful grammar should not be taken as an adoption of the issue by the Commission.

Chief Justice Earl Warren: But this have been strongly relied on it through -- in the opinion of the Commissioner on page -- on the Commission on page 59 where it says, “Considering all the factors, we conclude that the hearing examiner was warranted in finding that respondent's 1954 price reductions in the Saint Louis market were not made in good faith to meet the equally low prices of competitors.”

Mr. Edgar Barton: I think not, Your Honor.

In the --

Chief Justice Earl Warren: But what --

Mr. Edgar Barton: -- light of the --

Chief Justice Earl Warren: -- but what does that -- what does that refer to --

Mr. Edgar Barton: What --

Chief Justice Earl Warren: -- in -- in the examiner's findings?

It must refer to something.

Mr. Edgar Barton: I think it says considering all the factors, Your Honor, they have in the prior two pages of the opinion, pages -- starting on page 57 of the record in the Commission's opinion.

They are detailing the reasons that they will not accept the defense of meeting competition and in the -- continue on page 57, 58 and 59, then we reach the paragraph from which Your Honor quoted, “Considering all the factors.”

I think they are referring to the factors which they've outlined prior thereto.

It is perfectly clear from this record that the Commission did not know, did not adopt this punishment finding of the examiner.

It is clear that the examiner was in error with regard to his facts on it.

There is no support in the record, whatsoever, for the contention that AB lowered its prices in St. Louis to punish the competitors for not raising their prices.

Mr. Busch's testimony, to be sure, pointed out that if there had been a readjustment in the prices after Anheuser-Busch raised its prices outside St. Louis, there wouldn't have been this loss of sales.

That's true.

There wasn't --

Chief Justice Earl Warren: What's in the Commission find was the reason for the -- the reduction in price?

Mr. Edgar Barton: They found no reason, Your Honor.

In their opinion, they did not treat of the reason for the reduction.

Chief Justice Earl Warren: Well, didn't they say just before that sentence I read to you under the circumstances, “Respondent cannot justly claim that it was meeting competition.”

Mr. Edgar Barton: Yes, Your Honor.

They specified the reasons why they -- why we -- in their opinion could not justly claim that it was meeting competition.

They stated that we couldn't do it in their opinion because we were undercutting when we met because of our alleged, more popular acceptation.

And secondly, we couldn't do it because we weren't losing business in St. Louis, but we're losing it elsewhere.

And since we weren't losing business in St. Louis, we couldn't lower our price there because that would be aggressive rather than defensive.

Chief Justice Earl Warren: And that -- and that you didn't do it in good faith.

Mr. Edgar Barton: For that reason, we didn't do it in good faith.

That's right, Your Honor.

They --

Chief Justice Earl Warren: Well -- but does -- I just wondered.

It says that -- says considering all the factors.

Mr. Edgar Barton: Your Honor, I -- I would -- in that connection pointed out that if the Commission had found that we had lowered our price for a punishment purpose, it would have been extremely germane to have mentioned it in its opinion.

It would have been the fact which would have -- no other fact would have needed to be mentioned, but they didn't do it because they realized that there was no basis for that finding in the record.

Chief Justice Earl Warren: Did they say so?

Mr. Edgar Barton: They did not say so in their opinion, Your Honor, and they -- they did not --

Chief Justice Earl Warren: On the contrary they said -- on the contrary, they approved the findings, did they not (Voice Overlap) --

Mr. Edgar Barton: They did in their -- in the order.

Chief Justice Earl Warren: They approved the findings by a sentence which can be construed to mean as modified.

Mr. Edgar Barton: I -- I don't quite know how one reads that sentence, if it is read grammatically, it -- they did not approve all of the findings.

Justice Hugo L. Black: Well, is there anything in there anywhere that -- which you could point that would show us that they modified it with reference to your -- this particular finding that you are discussing?

Mr. Edgar Barton: No.

There is nothing other than what I've mentioned, Your Honor, in the opinion or in the order.

There is on page -- and it's on page 1100 -- I mean 14 -- 1514 of the record, a colloquy between Commissioner Seacrest and Mr. Mayer who was counsel for the Commission at which time the fact that was in issue, namely, whether AB raised its price in St. Louis, in October 1953, was conceded to be wrong by Mr. Mayer.

In other words, Commissioner Seacrest was asking that question in the light of my argument to the Commission that the examiner had aired in his finding.

Justice Hugo L. Black: Where is that argument?

Is it here?

Mr. Edgar Barton: The argument before the Commission is not part of the record, Your Honor.

It -- yes, I'm sorry.

It is part of the record.

The whole record is before the Court.

It's not part of the printed record, but the whole record is in -- before the Court and there has been a stipulation entered into between counsel making that whole record part of the proceedings here.

Now, if Your Honor pleases, as I said, all the retailer purchasers after we reduced our price in St. Louis paid exactly the same price for Budweiser and that was the same price that was paid by them for all other brands.

Chief Justice Earl Warren: We'll recess now, Mr. Barton.

Print this transcript Transcript: 

Argument of Edgar Barton

Chief Justice Earl Warren: -- you may proceed.

Mr. Edgar Barton: Thank you Your Honor.

During the course of the price reductions that AB made in St. Louis, it overhauled its sales methods and intensified them.

The amount spent for advertising both in St. Louis and outside St. Louis was increased to the level of its competitors in St. Louis and increased outside and all these things were done for the purpose of obtaining more business.

With reference to the question Your Honor asked as to why Budweiser price was raised in March of 1955.

The reason which appears in the record is that in that -- at that time Anheuser-Busch put out a new product, which was called Busch Lager and was retailed as (Inaudible) of the regional beers in St. Louis.

It was also put out over a wider area.

That one didn't go over and a new product Busch (Inaudible) was put out and that's was presently on the market, but in connection with putting out the new product it was inconsistent to have Budweiser in the new product selling at the same price, so Budweiser was raised, the amount which was specified.

Thereafter, several months after the price raise in March of 1955 the Federal Trade Commission charged that our price reduction in St Louis violated the Clayton Act as amended by Robinson-Patman.

Now, in essence the facts found by the Commission here, and I think the facts are important is that AB is not a -- one of the delights of industry such as might be true in the Standard Oil case back in the days when before this Clayton was passed.

Anheuser-Busch has 70% of national sales of beers.

As a matter of fact all of the competitors in St Louis were among the largest 35 brewers in United States and Falstaff was number 4 among the brewers in the United States.

Now its true Budweiser sold at many markets in the country at various prices depending upon that differing freight rates from St Louis to those markets, depending upon the different tax rate that exist.

There's a great variety of taxes for beer which is up in Washington DC and in Missouri.

Missouri has the lowest tax on beer than any State in the Union.

And --

Justice Potter Stewart: Is all the beer actually brewed in St Louis, or do you have breweries around country?

Mr. Edgar Barton: We have two other breweries Your Honors.

There's a brewery in North New Jersey and there's a brewer -- brewery in Los Angeles, California.

Falstaff on the other hand have seven breweries located conveniently around the 1/3 of the country in which they do business.

And therefore they have lower freight rates from their breweries to markets than we have from St Louis to those markets.

Now the Commission expressly recognized therefore, that it would be contrary to market reality to require a uniform pricing by AB or by any other brewery.

At the time of our temporary price reductions in St Louis our competitors there accounted for 83% of the market.

We had 12% and 5% was represented by other national shipping breweries and some others.

All the competitors in St Louis they stated were substantial companies doing business as counsel said over a wide area and they have between 75% and 90% of their sales outside St Louis where there was no price reduction.

Petitioner concedes that there was no proof of any sales below cost during either price reductions and indeed there was a concession of the trial that we operated profitably in St Louis during the period.

The only claimed result of the price reduction was that AB, the last place seller in St Louis temporarily gained some sales in the St Louis market while its competitors accounted for somewhat less of the market during that period than they previously had, 2/3 of the market rather than 4/5 of the market.

Now on these bare facts, the Commission found that we violated the Robinson-Patman Act stating that we've discriminated in price because we reduced the prices in St Louis and didn't reduce them elsewhere and that we injured competition because the difference in our prices in St Louis and markets elsewhere caused the diversion of sale to us from our competitors in St Louis.

That's what they held and the meeting competition event was inapplicable they said for two reasons.

First, they said its -- they claim that our reduced prices which at their lowest exactly equal to our competitor's prices did not meet an equally low price but rather under kept them and they held further in denying the meeting competition defense that since we were not losing sales in St Louis but losing them elsewhere, we couldn't reduce our prices in St Louis in order to recoup some of those loses, even though the competitors inside St Louis and outside St Louis to whom we are losing the business were by and large the same and it was feasible for us to reduce the prices in St Louis to recapture part of that business and it wasn't feasible for us to do it outside St Louis.

The way they expressed however, more advantageous it was for us to do it in St Louis.

The Commission on the basis of these findings and these facts which they found issued an order which would prohibit AB from ever making any reduction in price any place that it had a competitor which is every place, unless it proportionally reduced its prices everywhere simultaneously.

Unknown Speaker: Where is that order found?

Mr. Edgar Barton: The order is at R 488 Your Honor.

Unknown Speaker: 2849 the same words there is where the reference is made.

Mr. Edgar Barton: Now it's true that the counsel for the Government now concedes that that order maybe unduly broad, but I submit to Your Honors that that order is a precise -- precise reflection of whole commission theory in this case and that the concession which is made with the respect breadth of the order is really a concession with regards to the theory of the case.

Now I might say that in the Court of Appeals we made four contentions.

We urge that there was no discrimination in the price demonstrated.

This issue arose not on the petition for review but when the Commission filed its brief in the Court of Appeals and expressly stated that it was not concerned with differences in price among the markets but solely with the reduction in price in one market without simultaneous reductions elsewhere.

Second we argued that even there was a discrimination in price there was no injury to competition shown from the discrimination as required by the statute.

Third that in any event AB had met an equally low price of competitor in good faith.

And fourth, that order was illegal in the sense that its effect was to eliminate and deprive AB of statutory defenses and would be completely anti-competitive.

The Court of Appeals held that AB did not discriminate the price between different purchasers as required by the statute.

It refused to adopt the Commission's position that a price discrimination as demonstrated here by a mere price reduction in one market without simultaneous reductions everywhere.

Rather it held that whereas here different prices in different markets were characteristic of all sellers in the industry, a mere price reduction in one market did not mean that there was a discrimination in price within the meaning of Section 2 (a) of the act.

Based upon the legislative history, it held that price discrimination means more than mere difference in price and notice that the Commission did not complain about the common fact this is having different prices in different markets.

Viewing the cases it did, it did not reach the Commission's contention that in the alleged diversion, temporary diversion of sale has amounted to injury within 2 (a).

And although it didn't reach the Commission's restrictive interpretation of Section 2 (b) of the Act, the Court of Appeals expressly stated that they did not reach these questions.

Having stated what this case involves perhaps it is -- perhaps it is well also to state what it does not involve.

First, despite the argument made counsel in the -- for the Government in the petition for certiorari and its main brief, the case does not involve the proposition that a price discrimination under 2 (a) is limited to sales at different prices to competing purchasers.

We have never so contended.

We do not now so contend and the Court below did not so hold.

The Commission's argument in the petition for certiorari in its main brief was directed not upon what the Court held, but rather upon what the Commission called the thrust of the opinion and upon the Court's emphasis on certain facts.

In our brief, filed here, we demonstrated the Court of Appeals obviously recognized that 2 (a) covered sales at different prices to non-competing customers by its full quotation from Congress and had it back, which outlined the possibility of discrimination in price between non-competing purchasers under certain circumstances.

We noted that when the Commission's brief referred to the legislative history relied upon by the Court of Appeals it omitted that portion which referred to sales below cost which could be referable only to price discrimination among non-competing purchasers.

Now in its reply brief and its oral argument, I do not believe that petitioner repeats the precise position which it took in the petition for certiorari in its main brief but appears to have abandoned it.

It now contends that the Court below construed the statute so as to make it applicable to different prices to non competing purchasers only when adverse economic effects upon purchasers paying higher prices are shown.

However, this is not correct either.

To be sure, the legislative history shows that the relationship between non competing purchasers is required, but this does not mean and the Court of Appeals did not hold or even infer that injury to purchasers paying the higher price was required.

Rather, the legislative history shows and the Court of Appeals held by inference if not expressly, that what is required to create the relationship between non competing purchasers was proof of sales below cost or necessary profit in the area of the lower prices thereby leaving that deficit if such losses has occurred to be made up by higher prices to other purchasers elsewhere.

However, this case does not involve sales and loss in one market until the competitors were forced out of business while at the same -- same time making up those losses in other markets.

They expressly conceded during the proceeding that the increased sales of AB and St. Louis allowed it to operate properly within that area.

They expressly found there was no proof of -- that we used income or profit from the rest of our businesses to stabilize losses in Saint Louis or indeed that were any losses in St. Louis and counsel here concedes that those findings were made. Consequently there were no losses to be passed on by higher prices to purchasers in other areas, Moreover, the St. Louis competitors were not just local competitors, but they were substantial company, doing business through out a wide area and they were willing to transport from St. Louis and the outside.

It was expressly found as I said that 75% to 90% of their business was done outside of St. Louis.

It was apparent to these competitors.

They couldn't be put of a business or their competition impaired by AB's price reduction in St. Louis.

Now, with respect to the first issue here, the issue of whether not AB discriminated in price that -- that was the decisive issue in the Court of Appeals, I turn first to the words of the statute.

Justice Potter Stewart: Is that the only issue before us?

Mr. Edgar Barton: No Your Honor.

If I'm not --

Justice Potter Stewart: (Voice overlap)

Mr. Edgar Barton: I do not believe it is.

I think that if Your Honor should find that the Court of Appeals was wrong on this issue, that it's within your power to examine the further issues in the case under a long line of cases and that for reasons which I would like to state later, it's desirable to do so.

Justice Potter Stewart: But on that the Government disagrees with you I think.

Mr. Edgar Barton: The Government disagrees that this case is ripe for such decision.

I don't think they disagree that the Court is without the power to do so.

Justice Hugo L. Black: Do you mean we should decide all of those questions that were left undecided?

Mr. Edgar Barton: Yes Your Honor I believe so for reasons which I would like to state when I take those up.

Now the Statute itself, Section 2(a) --

Chief Justice Earl Warren: How large is directed in this case, is it a very voluminous one?

Mr. Edgar Barton: The record is three volumes and in it appears --

Chief Justice Earl Warren: No -- no I mean the unprinted record.

Mr. Edgar Barton: No, the unprinted record -- that which is not printed is very little.

We printed practically everything.

Chief Justice Earl Warren: I see.

Mr. Edgar Barton: We printed everything except the argument before the Commission and the proposed findings before the examiner.

Now the statute itself, 2 (a), provides in pertinent parts that it shall be unlawful to discriminate in price between different purchasers where the affect of such discrimination maybe substantially lessen competition or great monopoly in any line of commerce.

Thus, there are at least three separate elements which must be proved before a violation of the statute is found.

First, that a seller discriminates in price between different purchasers Second, that there may be in any line of Commerce, the injury to competition required by the statute and third, that that injury to competition was caused by the discrimination in prices.

The Commission here asked the Court of Appeals to hold that a mere reduction of prices in St. Louis without reducing prices in other marketing areas was itself to discriminate in price.

The Court of Appeals held as I've stated that AB and not -- was not shown to have discriminated in price between different purchasers as required by the Act.

It held that to discriminate in price between different purchasers meant more than to merely reduce prices in one area or to charge different prices in different areas.

If I understand them correctly here, the Commission now argues to this Court that AB discriminated in price because it contends any difference in price between markets is a discrimination in price.

You'll recall when counsel read the statute, he substituted the word “different” for “discrimination” and construed discrimination to mean difference.

Now, since it's customary in many industries for companies to have different prices in different markets, the ramifications of the adoption of this doctrine are extremely pervasive and will inevitably deter normal pricing activities which have no anti trust significance.

This Court has never draft -- directly passed upon the meaning of discriminate in price in a territorial price case.

Balian against Arden Farms, a decision in the Ninth Circuit, directly involved the question and came to the same conclusion as the Seventh Circuit in this case, namely, that a mere difference in price didn't constitute a discrimination.

This Court denied certiorari in Balian.

Now, in this case the Court of appeals applied the plain dictionary meaning of discriminate that is, differentiating unfairly in its opinion.

The Commission's main brief to this Court concedes as much but claims that another dictionary meaning which it mis-cites should been used.

But all the legislative history is in accord with the meaning of discriminate applied by the Court of appeals.

That legislative history demonstrates that the term discriminate in price means more that a mere difference in price.

Congressman Utterback's statement, Congressman Utterback was the Floor Manager of Robins-Patman, he has been much with his statement -- had been much relied upon by this Court, in other cases, Congressman Utterback stated quite plainly and I quote “It has meaning as simple English A discrimination is more than a mere difference.”

We have found nothing in the legislative history to the contrary and nothing contrary is cited in either the Commission's briefs.

In fact, petitioner now appears to agree that a discrimination is more than a mere difference when it states in its reply brief at page 7 that discrimination in legal usage means more than a differentiation in treatment which judged by controlling legal standard is invidious.

Now if the differentiation must be invidious then I submit that discrimination must be more than a mere difference.

Justice Hugo L. Black: Did I misunderstand the argument, I'm wondering, I -- I understood the argument to be that the statute defined its own invidiousness, that's what I thought he was arguing.

Mr. Edgar Barton: Your Honor, I'm not entirely clear what he was arguing on that point.

I take it that his argument was that discrimination should be interpreted as difference.

Justice Hugo L. Black: I thought difference but there -- there's some standard set out in there as I understood him to argue it.

Mr. Edgar Barton: Well the standard is what he said was set out to determine if that were the effective clause Your Honor.

Now I submit that you cannot read the word --

Justice Hugo L. Black: That was justified by difference in cause, what about that?

Mr. Edgar Barton: That is a defense Your Honor to the statute, but that doesn't go to the question of whether it's a discrimination.

Justice Hugo L. Black: Well if it's a defense it would mean but -- whatever -- whatever attitude (Inaudible) the parties have to present it.

It would show that all differences are not discrimination within the meaning of the statute.

Mr. Edgar Barton: Well your Honor I take it that there would be -- it would be a misreading of the statute however to say that the word did -- that would be construing the whole statute to be discrimination, and then you would determine whether it would have the necessary -- or for the difference you have the necessary effect and whether it was not otherwise exculpated by one of the sections proviso of the statute and then you would say that it is -- if it falls in that category it is a -- not a discrimination if it were exculpated or a discrimination otherwise but our contention is that by the plain meaning of the word discrimination and by the legislative history the word discriminate has a meaning apart from the rest of the section of the statute.

Justice Hugo L. Black: What would -- what would you say would have to be proven with invidiousness of --

Mr. Edgar Barton: I would say--I would say Your Honor that it has to be proved in a territorial price case, what has been proved in the prior cases pertaining to this matter, namely, in Moore against Mead, in Puerto Rico, in the Maryland Baking Case, and in E. B. Muller that there was on the part of the seller who sold at a lower price in an area, sales below cost or --

Justice Hugo L. Black: Why do they have to be below cost?

Mr. Edgar Barton: Because that Your Honor is indicia invidiousness.

It's an indicia of showing that there's been an unfair lowering of the price in that area.

Justice Hugo L. Black: I thought it was to protect the purchaser from different prices, am I wrong in that?

Mr. Edgar Barton: The object was two-fold Your Honor in your passage of Clayton and Robinson-Patman.

The object was one, to protect competing purchasers against having different prices charged as between them where there was injury to competition and where there was no defense.

In connection with territorial price cases the intention as clearly disclosed by the Section 2 of the original Clayton Act and as disclosed by Congressman Utterback's statement was that there should be some relationship between the purchasers receiving a different prices and in a territorial line case that was to be established by the showing of sales below cost or necessary profits in the area of the lower price or alternatively in accordance with the decisions of this Court that there was clear intent on the part of the discriminator to eliminate competition in area of the price reduction.

Justice Hugo L. Black: Now if I understand your argument on the territories, I don't know whether I'm part of that yesterday.

Mr. Edgar Barton: Yes Your Honor, I appreciate your question.

Justice Hugo L. Black: I can't say what part it is.

As I understand it if you say that this company or any other that does a national business is free under this Act, may be he is, fixed prices differently in each city in the country if he wants to do so without violating the Act so long as it's not something invidious or some evil purpose connected with it?

Mr. Edgar Barton: Yes Your Honor that's my contention.

Justice Hugo L. Black: That's rather --

Mr. Edgar Barton: And now -- and I want to point why I think that's true.

Justice Potter Stewart: Doesn't the -- doesn't the Commission concede that?

Mr. Edgar Barton: No Your Honor.

I don't think they do.

I think the Commission's position here looked at logically on the basis of what counsel has said is that any difference in price between markets is a discrimination.

Now he says that that's not illegal unless it has the required effect and it wouldn't be illegal if the affirmative defenses were approved.

Justice Felix Frankfurter: Could the Federal Trade Commission make an explicit finding that the price was lowered not below cost but was lowered so drastically in order to bludgeon or refuse the word to bludgeon a rival competitor out of existence?

Mr. Edgar Barton: If they -- if they made such a finding I believe Your Honor there would a discrimination in here.

Justice Felix Frankfurter: But I understood -- I may have misunderstood, but I understood the word bludgeon wasn't used, more delicate language was used but is -- wasn't it – isn't that government's case?

Mr. Edgar Barton: No Your Honors it isn't.

If Your Honor was to bear with me on that I -- before the luncheon I tried I tried -- I wanted to try to make my position clear that there was no finding here of -- in purpose to eliminate the competitors.

Justice Felix Frankfurter: I am not saying that there was because that involves your colloquy with the Chief Justice as to what findings were incorporated in the Commission's determination.

Mr. Edgar Barton: Yes.

Justice Felix Frankfurter: But I just wondered as to whether you would agree that there could be discrimination in the center of price lowering which is not so obviously, say what you call unfair namely that it's -- it doesn't even cover the out-of-pocket expenses, you would agree to that?

Mr. Edgar Barton: I would agree to that Your Honors.

I say that --

Justice Felix Frankfurter: And that rests on -- on facts?

Mr. Edgar Barton: That's right it rests on facts Your Honor, but the Commission's position here is not based on that.

The Commission's position here on this discrimination point is based on the theory that any difference in price is a discrimination without more.

Now why shouldn't it be the law that any difference is a discrimination or reductions in price and differences in price in various markets in every areas are evidence of normal competitive activities in most industries.

They reflect not only different costs and market conditions but also active competition for business.

In fact the petitioner's reply brief, page 8, I'd like to refer to it in the middle of the page.

The bottom of the page says, “There's a significant difference legally as well as factually between normal and legitimate pricing activities designed to obtain a larger share of business in a marketing area and those which represent a punitive or destructive attack on local competitors and impair the health and -- the vitality and health are the processes of the competition.

Now I submit Your Honor that that is precisely my point that this is the question of whether there is a purpose or whether the price discrimination is of the type that will sap the vitality of competition that determines whether it is a discrimination in price.

Justice Felix Frankfurter: But your argument really is that this Court hasn't before it the finding or determination by the Federal Trade Commission that this was punitive move by Anjeuser-Busch.

Mr. Edgar Barton: That is certainly true Your Honor.

Justice Felix Frankfurter: That's a -- that's not a legal question, that's -- that's reading the record and finding out what really is before us?

Mr. Edgar Barton: No, I don't quite think so Your Honor because I think it is clear that --

Justice Felix Frankfurter: I didn't say that isn't illegal.

That's also illegal.

Mr. Edgar Barton: That's also some type.

Justice William O. Douglas: As I -- as I've followed the -- the Governmental view correctly I judge that you are substantive and in agreement but on a very narrow decision here in the Court of Appeals, Court of Appeals was wrong and --

Mr. Edgar Barton: Your Honor --

Justice William O. Douglas: -- not the question what not to favor long and decided in your favor by all those grounds but then that the real issue is whether this discrimination that he finds had the invidious purpose that was attributed to it by the Commission.

It -- isn't the real controversy here?

Mr. Edgar Barton: No it really isn't Your Honor.

They -- they -- Commission's interpretation in the Seventh Circuit and you've -- the brief is up before this Court.

We have had the Seventh Circuit brief right here.

Their contention in the Seventh Circuit was that any lowering of price without simultaneous lowering elsewhere is a discrimination in price.

Then they said that the discrimination here had the adverse effect because AB gained business and some other competitors lost business during the period of price reduction.

And then they said that there wasn't and the meeting competition defense was not established because of the reasons that they've outlined -- that I've outlined.

They did throw into their brief before the Seventh Circuit this contention that we had done for the purpose of punishing.

Curiously enough, when they argued this point before the Court of Appeals they can didn't claim Your Honor that the finding of the examiner on this point had been adopted in the order.

Rather they state it in the brief which is before Your Honor in the Seventh circuit that there was specific language in the opinion which adopted it.

Well that was obviously wrong and we pointed that out to the Court of Appeals.

Now, suppose for example that a manufacturer is losing sales in general.

Justice William O. Douglas: But just to follow up --

Mr. Edgar Barton: Yes.

Justice William O. Douglas: -- my question --

Mr. Edgar Barton: Alright.

Justice William O. Douglas: -- with you.

If there were a case on all force with this plus the clear cut admitted finding that the reduction in -- in St. Louis or the pertinent question was made for the purpose of using against it as a club over that these competitors in other markets, would you concede that would be covered by 2 (a)?

Mr. Edgar Barton: Your Honor I think that would be a closer case than this one.

I'm not entirely sure that 2 (a) should be so construed to say that action if taken would per se be a discrimination, but I think it'd be a closer case, but I would point out further --

Justice John M. Harlan: What more could you prove?

Mr. Edgar Barton: Pardon?

Justice John M. Harlan: What more would you have to prove --

Mr. Edgar Barton: Well I think --

Justice John M. Harlan: -- Justice Douglas puts to you?

I don't understand why you say that wouldn't be a 2 (a) discrimination?

Mr. Edgar Barton: Well Your Honor maybe it would be.

I'm not going to take a firm decision that it is not.

Justice John M. Harlan: You'd have to assume that much.

Mr. Edgar Barton: I'm not going to take a firm decision it's not.

Justice Potter Stewart: But it's at least arguable.

Mr. Edgar Barton: It's says it's arguable.

Justice Potter Stewart: As a the matter of statutory construction if there has to be competition, there has to be differential -- differentiations made in price among competing purchasers or purchasers within a relationship to each other for this statute 2 (a) to be applicable.

Mr. Edgar Barton: That's right.

That's our contention Your Honor.

Now why should it -- just take a couple of examples that deter -- that outline and elucidate why a difference is not a discrimination?

Suppose a manufacturer is loosing sales generally throughout the country, there are a number of things that he can try to do.

He can try to increase his advertising.

He can try change his package or his product, but if it is a product on the classical theory he'll decide, well let's try lowering prices.

Lower prices means more sale, but there is such a thing inelastic demand and he may wish to try out that lowering of prices to try it in one or two markets to see how it goes and then if it works there, lower generally.

Now there a lowering of prices in one market and not others, sales may increase.

But if you try -- tried it and be successful under the Commission's theory it'd be violating the Robinson-Patman Act.

Or suppose in a very competitive market where there are number of strong competitors one competitor changes its price.

Product is binding a small patented gadget or he gets an advertising campaign that catches on and that competitor begins to take over increase in share of the businesses.

Our manufacturer can't make the thing, product's change.

His advertising agency can't produce the same catchy slogan.

So you have to reduce prices slightly in order to try to make up for that advantage.

Or suppose that the manufacturer is not selling it all on a particular market and he wants to enter the market in order to get a toe hold as Hamms Beer is trying to do in this market as you may have noticed in the Washington Post advertisement yesterday, coming into the market at local beer prices even though they sell them in Chicago and all the rest of the country, this part of the country at so-called premium prices.

Now, there are many other examples.

It's perfectly true that none of those situations are precisely the case we have here.

But the point is, that localized price reductions or difference in price between different markets serve a perfectly legitimate purpose and it is with the view towards permitting the continuation of these and other legitimate purposes that the statute should be construed.

And I might point out that none of these illustrations come within the statutory defenses.

If they are to be preserved, therefore it must be by construction of some other term in the statute.

Thus Congress and Utterback have told it and these illustrations have shown that a discrimination in price is more than a mere difference in price.

But what in addition is required?

Well, I pointed out in answer Justice Black's question at least that the Congressman Utterback's statement shows clearly that the other circumstance which is required is proof that the seller who had the different prices is selling below cost and necessary profits.

And I don't understand in the light of the terms of that statement how the Commission can claim, as it does in its reply in its brief, Reply (B) that the decision below would leave business organizations free to cause to conduct territorial price foray so long as they were willing to absorb loses.

If they had loses, there would be discrimination in price under the statute.

Now, this analysis is consistent with the legislative history as contained in the House committee Report of the original Section 2 of the Clayton Act which is relied upon by petitioner in its brief in part as the report on the bill which became the Clayton Act.

This committee report demonstrates that the evil at which Section 2 was directed in connection with territorial price differences was lower prices involving sales of a commodity at below the cost of production with the intent of destroying the business of competitors of the seller and obtain a monopoly.

Now, it's not a sufficient answer to claim that this legislative history is wholly inapplicable because the bill was changed in conference before enactment.

The evil remains the same.

It is true that the language of the bill was changed and that the language requiring proof of purpose was eliminated when the bill was rewritten by the conference committee as is claimed by counsel.

However, it is clear that the House report described the evil at which the territorial price aspects to the bill were drafted and that is still the evil, I submit.

Moreover, the prior adjudicated price cases in which the violation has been found, uniformly involve situations of this nature, sales below cost to drive out the sole competitor and obtain a monopoly.

As counsel said in answer to Mr. Justice Whittaker's question this morning, he is not talking about in this case, a case like the Standard Oil case.

He's talking about the case that the Commission made in -- in this situation and it's a case that's far different from those cases that have been brought under this Act.

It was true in the only territorial price case has been before the District Court, Moore against Mead there, there was terribly low cost as disclosed in the record and the clear purpose was as found in the -- as stated in the opinion to drive a competitor out of business.

It was true in Porto Rican and it was true in Muller.

In Maryland Baking, there was a clear purpose to punish a competitor for who went into a business that the discriminator didn't want him to go into.

There wasn't clear proof of sales below cost but the issue was not made.

In none of these cases was the meaning of the statutory term “discriminated in price” at issue.

However they are -- each one of them consistent with our position.

In the one case that we found in which this was an issue, Balian, the absence of such facts led the Ninth Circuit to hold that the price reduction made (Inaudible) in Los Angeles but not elsewhere was not in price discrimination within the meaning of the act.

Justice Felix Frankfurter: Was cutting -- was cutting below the normal profit, whatever that is, I know that it specially is termed but cutting very, very below the normal profit which the cutter could well stand for long period but his rivals can't, could that be found, if not would it not be fairly be would that be found -- could that be found by the Commission to have punitive purpose?

Mr. Edgar Barton: I don't that --

Justice Felix Frankfurter: Suppose it is below cost --

Mr. Edgar Barton: Yes, I don't think it has to be below cost, Your Honor.

I think it clearly does not have to be below cost.

In these cases here to which I made reference, the proof was that it was actually below cost.

Justice Felix Frankfurter: I understand that.

Mr. Edgar Barton: I do not contend that here.

Justice Potter Stewart: But is it at the fact here that their -- their actual profits were not from -- in St. Louis from the St. Louis business?

Mr. Edgar Barton: Your Honor, they -- they all (Inaudible).

The sales went up as counsel pointed out and they had the record doesn't disclose what the profit picture was in Saint Louis.

Counsel made, conceded that it was profitable, but there was no reference in the record to that fact.

Now, the doctrine of these cases demonstrate as determined by the Court of Appeals that AB did not discriminate in price under the facts of this case.

The Commission opinion is barren of any reference to sales below cost or at reduced profits or any purpose or design of eliminating its competitor or punishing a competitor, not a word in the Commission opinion about that.

And under these circumstances it's apparent that the Commission has not brought this case within the definition of discrimination in price as established by the legislative history and by the adjudicated cases.

There's no warrant whatsoever for the Commission's contention that the holding of the Court below would permit severe price reductions for the purpose of driving competitors out of business.

Justice Felix Frankfurter: Are you -- are you or have you argued, if so I missed it, but are you arguing that if the record should be interpreted to disclose those findings by the Commission that this is a punitive foray or punitive movement are you arguing that the -- that your evidence before the Commission did not warrant such argument?

Mr. Edgar Barton: No, Your Honor.

I am arguing that the Commission --

Justice Felix Frankfurter: I mean are you – (Inaudible)

Mr. Edgar Barton: Well -- well I think --

Justice Felix Frankfurter: It's no use for them to argue about that.

Mr. Edgar Barton: No, Your Honor.

Justice Felix Frankfurter: (Inaudible)

Mr. Edgar Barton: Yes, Your Honor.

The -- there is no evidence to support a finding of that nature, but I'm arguing primarily that the Commission did not make that finding.

Justice Felix Frankfurter: I -- I thought of it.

Mr. Edgar Barton: Now, and that I might point out that this pattern of the prior cases had a reduction for the purpose of driving competitor out of business is not even remotely the factual allegations or proof in this case and the Court below was dealing with this case and not with the hypothetical case.

Chief Justice Earl Warren: Does the testimony Mr. Busch that -- that Mr. -- having read the -- reflect anything on that?

Mr. Edgar Barton: Your Honor -- Your Honor, I would ask that it -- it does.

I take -- I think reflect the actual fact of what the purpose was.

And I would -- the testimony is about eight or ten pages in length.

And I would like, if possible that the Court read that testimony because it discloses on its face quite candidly that the only purpose, if we're reducing prices here, was to get more business and to try to find some answer to the problem that they had.

It was no purpose whatsoever to punish competitors for not having raised prices.

He stated quite candidly that if they hadn't lost business, there probably have been no reason to reduce prices and that's quite true.

Chief Justice Earl Warren: I didn't think that was the statement he read.

I thought the statement he read was to the effect that that if they had -- if they had raised their prices too, there wouldn't have been any reduction on the part of -- of AB.

Mr. Edgar Barton: Well Your Honor, I think that --

Chief Justice Earl Warren: Am I wrong in that?

Mr. Edgar Barton: No, he said -- you did not -- he said competitive-wise certainly that their failure to raise prices was competitive-wise a reason for his reduction.

Chief Justice Earl Warren: And I thought he said also that if that hadn't been -- hadn't been for the fact that they didn't raise their prices, then it wouldn't have been done.

Mr. Edgar Barton: He did say that but he said it in a context, Your Honor, of explaining that if there had been no loss of sale, it would not have been necessary to lower prices in St. Louis to get more sales.

Now --

Justice William J. Brennan: Do you mean by that as a pattern of what he was saying in effect to us at the regional and the local rate made increases outside of St. Louis that normally and apparently had been the fact then that AB would not have suffered the loss of the markets outside of Saint Louis which made it necessary to indulge in this experiment in St. Louis?

Mr. Edgar Barton: That's right, Your Honor.

That is what his testimony was.

What everything he said was consistent with the record and that was the fact.

Now, this analysis I submit indicates that the words “discriminating in price” are not to be construed out of context.

Petitioner's position is that any difference in prices of discrimination but is not actionable under 2 (a) unless it causes injury to competition.

But if the rule were that a mere difference in price constitutes a discrimination within the meaning of the statute then any manufacturer selling at different prices in more than one marketing area would be at the mercy of consumer reaction as to -- as to whether he'd be -- be found in violation.

If consumers decided to buy more of his products in the areas where he had a lower price for any number of legitimate reasons then he's violating 2 (a) under the Commission's decision here.

The inevitable tendency of the adoption of such rule would for all sellers to have uniformly high prices throughout the United States.

It is difficult if not impossible to envisage the public interest.

How the public interest would be served by such a construction of the statute.

For under these circumstances 2 (a) would become a price fixing law inconsistent with the overall Congressional policy of protecting free competition.

Every reduction in price in a particular market and every difference in price would become vulnerable.

No seller could risk reducing his price in any market without reducing -- even though to gain business he lost elsewhere because if you obtain more business in the area of the price reduction, you can never be sure that the Commission or some treble damage plaintiff would sue in a Court and claim he has violated the law.

Since the seller could never know in advance whether his price, sales had increased as a result of the price reduction, who would never reduce prices unless he thought so.

In any realistic view of the Commission's proposition, 2 (a) becomes a compelling deterrent to active price competition and price competition is the very essence of competition itself.

Petitioner's position would create the incongruous result that price competition would be more restricted than none-price forms of competition such as advertising, sales promotion, and other forms of sales activity which do not benefit the public would recommend.

If sales gained were due to price competition, lowering prices in one area but not lowering them elsewhere, they'd been forbidden.

If due to a better finance advertising program by a seller in that area, they would enjoy a preferred legal position.

I submit the statute should not be construed to create this situation.

After all, prices are, as this Court stated in Socony Vacuum like this, the central nervous system of the economy and any restrictions which would interfere with the free movement of price is to be avoided unless absolutely required by Congress.

Justice Hugo L. Black: But that's what the 2(a) does, isn't it?

That it does --

Mr. Edgar Barton: You mean --

Justice Hugo L. Black: -- it does restrict competition.

Mr. Edgar Barton: Yes, Your Honor, it does.

And the question before this Court is how much 2 (a) is to be construed to restrict competition.

There is as I'm sure Your Honor, realizes by the question, a – somewhat of an inconsistency between 2(a) in the Sherman Act.

It's been stated by the Court many times.

And the question here is, “Is 2 (a) to be construed to -- in a practical effect become a price-fixing law for any manufacturer who does business on a national basis?”

Is he going to have to charge the same price in every area or be -- run the risk of violating 2 (a), so that – that's the construction problem is before the Court.

To be sure, 2 (a) does limit competition in some respect, the question is how much should it limit competition?

Justice Hugo L. Black: What was the difference in price that they made among testimony of Saint Louis?

Mr. Edgar Barton: There would be no question there'd be a discrimination in price.

Justice Hugo L. Black: So really it's a question of how far it reaches.

Mr. Edgar Barton: There's a question of how far it reaches in a territorial price case, Your Honor.

Now, as I pointed out earlier in an answer to your question, we don't -- we can think that the case can be decided on the ground that it was decided by the Court of Appeals.

That doesn't mean this Court has to take all the languages the Court of Appeals used.

Justice William J. Brennan: (Inaudible)

Mr. Edgar Barton: Yes.

Justice William J. Brennan: Mr. Elman made the observation I think that throughout the hearing, the examiner tried to get from AB an answer the question why did you pick St. Louis?

If you were suffering lost sales outside of Saint Louis when the regionals didn't go though when you went up why didn't go out to try your experiment somewhere else?

Mr. Edgar Barton: Your Honor, we answered that question.

Justice William J. Brennan: Well, that's what I wanted.

What was the answer?

Mr. Edgar Barton: The answer to that question was that Saint Louis with the home market of Anheuser-Busch.

It's where brewery was located.

There's no point from St. Louis to other area.

Therefore, St. Louis was the place where there'd be no extra cost in doing it.

Secondly, we had well presented the St. Louis area.

That was our home market.

Our competitors had 30%, (Inaudible) had something like 25% and one or the others had 35%.

We had a potential for growth in St. Louis for increased sales by decreasing prices there.

In St. Louis, we distributed directly to retailers.

We didn't have to depend on chain that the price reduction would be passed on to retailers by the wholesalers where we distribute in most other areas.

Those are the reasons that we reduced prices in St. Louis and we told them, time and time again in the record.

Now, we contend, Your Honor here that even if this Court should not adopt the reasoning adopted below.

The Court could and should examine the other two contentions and rule on them here.

Now, it's clear that the Court has the power to do so.

It's clear also, it seems to me, that the Court should do so here for two reasons.

In the first place, this case in its various facets has attracted wide attention in the commercial world.

And until this issue of whether difference in prices is discrimination and whether therefore manufacturers can be sued for having different prices, it's a clog on commercial competition.

And it should be decided and decided here now.

Secondly, the Commission is carrying -- has instituted a number of cases in industries diverse as oil and milk based the same theory.

If the theory is wrong, they should be told so to save time and for that reason, we think that the other two issues should be examined.

Now, in connection with the issue of injury to competition, the Commission's sole basis for claimed injury here is that some of these competitors temporarily lost business in St. Louis and we temporarily gained something.

Now, that has never been considered by any court to be a sufficient basis to find injury to competition.

In all of the other cases where there has been a finding of injury to competition based on a territorial price case, there has been one competitor in an area.

The sales have been below that competitor's price or below cost.

The period of the price reduction has been an extended one so that the competitor was driven out of business and also, there's been a destruction of a channel of distribution of the competing seller as in Maryland Baking.

Now, here we have no one of these things, or anything that's comparable to it.

The fact here is that there are multiple substantial competitors in the area of the price reduction.

The price reductions were made only in the one city, in the County of St. Louis and the competitors were firmly entrenched elsewhere.

Reductions were completely temporary in nature. Competitors listed the effects of those reductions.

The reductions were at no time below their price of the competitors.

All the competitors continued to sell to the same retailers to whom they'd sold previously.

All the competitors pursued normal competitive activities putting out new brands, advertising programs and last but not least, the competitors continued to make substantial profit.

On that basis, Your Honor, we contend that there was no injury to competition.

It's a legal question really in this case whether there was injury to competition because the facts they're not really disputed, the only question is whether temporary diversion of sales from substantial companies amounts to injury to competition within the meaning of Robinson-Patman and I submit that it does not.

Justice Hugo L. Black: Whether that you -- you're arguing I suppose that the injury to competitors by the verdict is their business, this is not an injury to competition.

Mr. Edgar Barton: We do argue that in our brief, Your Honor but we don't concede and don't think there's injury to competitors here either.

Justice Hugo L. Black: Well If it takes their business -- if I read now the current posture that is I understand is that the basic charge the Commission made according to it's charge, and I think you've made the adjoining issue on it right there where they said it is charged, they said your step was so good and respondent discriminated in price between different purchasers (Inaudible) rate and quality with the effect among other things that the verdict substantial business from respondent to competitor to the respondent.

Mr. Edgar Barton: Your Honor, we take issue that that is legal injury under Section 2 (a).

Justice Hugo L. Black: I'm sure that's not enough injury to competition.

Mr. Edgar Barton: That's right, Your Honor.

That it's not.

Justice Hugo L. Black: They are taking the position as I understand it that the change in or difference in price in anyone place it that it affects diversion of business from competitors of that place for national policy is a violation of 2 (a).

Mr. Edgar Barton: That is their position, Your Honor and we think it's wrong.

Thank you.

Chief Justice Earl Warren: Mr. Elman.

Argument of Philip Elman

Mr. Philip Elman: The Court, please, though the argument has covered a broad ground, I believe that the issue actually presented to this Court for a decision is rather narrow is a very important one.

And that issue is the correctness of the construction of the statute which was made by the Court of Appeals at the very threshold of the appeal and on the basis of its disposition of that question the Court of Appeals did not reach the issues which were actually presented for review in the petition for review of the respondent.

There were issues as to whether the findings as to injury to competition were adequately sustained by the evidence, whether there was a -- the respondent had established the meeting competition in good faith defense but the Commission's order was too broad.

The Court of Appeals, in its opinion which appears in Volume 3 of the record starting at page 1550, assumes without upholding but it assumes the findings of the Commission that there was such an injury to competition as required by Section 2.

It assumes the correctness of those findings without examining them.

The Court of Appeals as I mentioned earlier, accepted as a premise of its decision that this was a quote, “predatory pricing practice.”

It assumed that it was directed at respondent's competitors.

It said, “Notwithstanding, those findings of injury to competition in the St. Louis market, that there was no discrimination because there was no discrimination between purchasers there could be no violation of Section 2,” the Court of Appeals said that there has to be a relationship between the purchasers who had charged the different prices in order for there to be a discrimination.

It says that where two purchases from a seller are competing with each other, that competition creates a relationship that entitles them to comparable treatment as to the price.

It also quoted the statement of Representative Utterback as to the prices being so low as to involve a sacrifice of -- of profits and costs that made up in a higher price.

From that statement, the respondent finds that the Court of Appeals does not limit its holding of a relationship to situation where are there are competing customers, but it also -- it may exist according to respondent's reading between non competing customers if there is a sale at so low a price that it affects the purchaser in another area, a non competing purchaser who pays the higher price.

That's a very narrow construction of the statute, but it is an extremely important one because if that is accepted in our view, it (Inaudible) Section 2 of the Clayton Act of 1914 as it was incorporated and broadened by the Robinson-Patman Act in 1936.

It would require a showing not only that there'd be an injury even if the injury would be a complete destruction of the seller's competition in the market of the price cut that would not be enough.

You would also have to show a relationship to the purchasers and other markets paying the higher price.

That relationship, Mr. Barton conceded in response to the questions from the bench would be established if there was a purpose to destroy competitors.

Now, I cannot understand and I don't think --

Chief Justice Earl Warren: Go ahead and finish this afternoon.

Mr. Philip Elman: I don't -- and I don't see how the existence of a purpose in one market to destroy the competitors of the sellers in that -- of the seller in that market has anything to do with the purchasers in the other markets who pay the higher price and I think it was for that reason that he was somewhat reluctant to concede that that was a violation of the statute because if you need a relationship between purchasers, clearly the -- the existence of the predatory purpose assuming the facts are required which is of course another question that, that has nothing to do with the relationship to the purchasers in the other areas.

Similarly, he said it does not have to be a reduction below cost and he conceded in response to Mr. Justice Frankfurter's question that if it was below the normal profit, that that's a violation -- that could also be a violation but that also could indicate a relationship.

We -- we don't see how even a reduction below cost in one area has anything to do with the price in another area unless it'd be assumed as a matter of law that whenever a seller reduces his prices in one area, it necessarily comes out as either it's capital or it's profits or whatever he -- he makes from his business all over the country.

We -- if -- if the statute is to be interpreted as meaning to Federal Trade Commission or a plaintiff in a private treble damage action who was injured by -- by this kind of a practice has to make present cost accounting date to show that that lawsuit had actually been incurred by the seller when he reduces his price for a discriminatory purpose.

And that he has actually passed them on to the purchasers in the other market we think that is the -- that -- that the Clayton Act has been substantially appealed.

Justice Hugo L. Black: I would like to ask you one question just to clearing my mind (Inaudible).

Suppose in California, Mississippi, and North Carolina, they were selling this beer at a low cost or at high prices as they were in St. Louis, your injury shown was nothing more as far as St. Louis is concerned than the diversion of business from Anheuser-Busch's competitors in St. Louis, is that the Government position that territorially speaking they have -- the price has to be the same in all those places?

Mr. Philip Elman: No that is the Government's -- that's not the Commission's position.

It never has been the Commission's position.

In this very case prior to January 1954 there were different prices for Budwiser all over the country.

The Commission has never challenged the existence of different prices.

Justice Hugo L. Black: What is the -- what is the standard then --

Mr. Philip Elman: The standard is whether the lowering --

Justice Hugo L. Black: In St. Louis.

Mr. Philip Elman: The standard -- the standard of the -- of -- of the statute is whether the -- the lower price has the effect of substantially lessening competition or injuring, destroying or preventing competition or tending to create a monopoly and does not come within the provisos as to -- with giving the -- the fact the respondent before the Commission the defense of fluctuating market conditions, cost justification, meeting competition in good faith and so on, but beyond all that Mr. Justice, beyond the explicit provisos the whole purpose of Section 2 which -- which has to be considered in construing it is that it was intended to prevent injuries to competition, destructions of a competition in any action.

Justice Hugo L. Black: But those were -- there were -- what I want to get at is that so far as here when I read the -- in Commission's opinion at the beginning they -- what it is they charged, they indicate that diversion of business of Anheuser-Busch's competitors in St. Louis by reason of a price different, lower than -- than it is outside of St. Louis is enough to violate the Act.

Mr. Philip Elman: I don't think that the -- that that is -- that it's really an accurate statement of Commission's position.

That -- that you have here --

Justice Hugo L. Black: I said that was the impression I said -- (Voice overlap)

Mr. Philip Elman: I think if Your -- Your Honor you will read the trial examiner's opinion here which the Commission adopted and it added to it its own opinion, because you read the two of them together if you also read -- I -- I hesitate to add to your burden sir, but just -- to understand the Commission's position in this classification is you not only have to read what it -- it -- it said here, you have to read what it said in cases like the -- the General Foods case and the Pure (Inaudible) case and from -- from the whole context of Federal Trade Commission action in this field, it seems to me it's wholly unjustified to -- to attribute to the Commission a position which we denied in our reply brief that any difference in price is a price discrimination.

Justice Hugo L. Black: Do you have -- do I understand you to say it has to be --

Mr. Philip Elman: There has to be an injury.

Justice Hugo L. Black: -- predatory is that word or what is it?

Does it have to be predatory or does is it have to be doing it to injure --

Mr. Philip Elman: There has to be --

Justice Hugo L. Black: (Voice Overlap) somebody as the word was used or hold the trouble with the head?

Mr. Philip Elman: Well in its brief in this Court the respondent has quoted for on page 17 of Anheuser-Busch's brief, they have quoted from a statement of the Commission and its policy towards geographic price of things which you have it here and we -- we -- they say if I may take the time with you, injury to competition which one seller imposes upon another raises a few problems since it is a conception which can be traced back to the beginnings of the Antitrust Laws.

It usually arises when the discriminating seller quotes lower prices to the customers of his competitors in such a way, in such a way -- in such a way that he jeopardizes the continuance of effective competition by these competitors and thus tends to acquire a monopoly of the commodity sold, except where such a tendency toward monopoly appears the Commission did not regard an effort to get business from a competitor by sporadic -- sporadic price reductions as illegally injurious to that competitor, they don't use the word predatory.

But I think --

Justice Hugo L. Black: Well that's struck to mean it's our --

Mr. Philip Elman: The statute is -- is without --

Justice Hugo L. Black: I understand that but I'm -- I'm trying to find out, do you say that there has to be some purpose shown to do evil or to injure competition?

Mr. Philip Elman: I think that in almost every case were the Commission finds that there is an injurious destructive effect on competition or a monopolistic tendency the evidence upon which that kind of finding has to be predicated would exclude a legitimate normal competitive purpose of just striving to get a business with expected competitors.

Justice Charles E. Whittaker: But -- but the finding does have to supported by evidence?

Mr. Philip Elman: Of course and that -- and whether it's supported by evidence in this case is question which will be considered by the Court of Appeals on remand if the Court so –-

Justice Charles E. Whittaker: Now I would like to ask you if I may please just this, addressing my attention first to the competition between sellers, is it your position that because Anheuser-Busch reduced prices, but never too less than Falstaff and Griesedieck in the St Louis area, it's legally possible that a finding of discrimination is yet sustainable on the record.

Mr. Philip Elman: Yes that's the Commission's --

Justice Charles E. Whittaker: Alright now then number two, is it your position that because Anheuser-Busch sells beer at $3.15 per case in Philadelphia, a thousand miles in North from St. Louis and at the same time sold it in St. Louis at $2.93 a case that there is a discrimination between purchasers which may tend to the lessen competition at either market?

Mr. Philip Elman: The difference in price and the elimination of the price differential between the national beer, premium beer and the regional beer gets you -- has the hurdle of a discrimination.

It does not get you past the hurdle of substantially lessening competition tending to a monopoly etcetera, etcetera.

The Commission's -- the Commission certainly cannot find an illegal discrimination from the fact, the mere fact of the difference in price.

It has to show these consequences so far as the process of competition is concerned, that's in the statute.

Justice Charles E. Whittaker: Well I -- as I understand the statute.

It makes in one package a discrimination between purchasers unlawful where the effect is to substantially lessen competition or tend to create a monopoly.

So --

Mr. Philip Elman: They also have proviso –-

Justice Charles E. Whittaker: Yes I know it, but the discrimination is not simply because there is a difference unlawful unless it's in the case were the effect is the condemned one, isn't that true?

Mr. Philip Elman: That's right, and in the effect, the effect qualifies, modifies and gives substance and color to the -- to what's discrimination.

Justice Charles E. Whittaker: Alright.

Chief Justice Earl Warren: Mr. Elman before you sit down would you -- would you state the Government's position on whether this Court or the Court of Appeals should review this record to -- to determine the other issues that are involved?

Mr. Philip Elman: But we did not think it would be appropriate for us to ask Your Honor to review those questions or for us to argue them here under the -- under the well established practice of the Court.

You've got here a -- a decision of the Court of Appeals on an initial question of statutory construction which on its view made it unnecessary to reach all the questions that were -- that were the subject matter of these 1500-page record before the Commission.

The issues before the Court of Appeals are not just simple issues of law.

You've got here as Mr. Justice Whittaker has pointed out, a very imprecise kind of statute.

You've got findings of fact which are -- are contested as being without evidentiary support that their arguments -- that the findings made by the examiner are not really the findings of the Commission.

You have the arguments here as to the scope of the Commission's order and whether they're -- there are provisos of the statute that are implicit.

It should be explicit and so on.

It's a -- all -- there's a -- there's a range of -- of questions that's -- that's presented and argued in the -- in the brief for the respondent which we would -- we would be very glad to have the Court consider them and it isn't for any fear that this Court is any less favorable a forum for us than the Court of Appeals, we don't argue that.

Thank you.