The Antitrust Laws of the United States of America: A Study of Competition Enforced by Law

By A. D. Neale | Go to book overview

CHAPTER VIII
THE CLAYTON ACT. II. PRICE-DISCRIMINATION

I. Section 2 of the Clayton Act before 1936; the Robinson-Patman Act amendments to section 2; the legal issues raised by the RobinsonPatman Act

There remains the practice of price-discrimination which was made unlawful by section 2 of the Clayton Act. It is clear that what the 1914 Congress had in mind when writing this section was the vigorous local price-cutting that some of the big 'trusts' had been found to adopt as a weapon against inconvenient competitors. With its huge resources the 'trust' could cheerfully face a period of selling well below cost in a selected area where, for example, an obstinate 'independent' was refusing to sell out or where an impudent new entrant was making inroads into the local market. It was not uncommon for small concerns to be put out of business by predatory price-cutting of this kind. In short, the competition which the Congress regarded as threatened by price-discrimination was that between the discriminating supplier and his competitors; they were not much concerned with the effect of discrimination on the supplier's customers.

It was realized that not every difference in price was discriminatory; that, for example, a bulk buyer might properly get more favourable terms than one who bought in penny numbers. There was also a strong desire not to penalize the small firm which found it necessary to lower its price in a particular area or to a particular customer in order to meet a price offered by a powerful competitor. The law makers tried to meet these points in a proviso to the general prohibition.1

It was found in practice that the proviso made the section very

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1
The original section 2 of the Clayton Act read as follows: 'That it shall be unlawful for any person engaged in commerce, in the course of such commerce, either directly or indirectly, to discriminate in price between different purchasers of commodities, which commodities are sold for use, consumption, or resale . . . where the effect of such discrimination may be to substantially lessen competition or tend to create a monopoly in any line of commerce: Provided, that nothing herein contained shall prevent discrimination in price between purchasers of commodities on account of differences in the grade, quality, or quantity of the commodity sold, or that makes only due allowance for differences in the cost of selling or transportation, or discrimination in price in the same or different commodities made in good faith to meet competition. . . .'

-216-

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