An Interpretation of the Robinson' Patman Act

Abstract

TWENTY years ago in my little book on unfair competition,2 I asserted that the prohibition of unfair competition contained in the Trade Commission Act was designed to prohibit methods and practices which were unfair from an economic point of view and that this was the only sound construction of the statute. Unfair competition is obviously the antithesis of fair competition and is to be determined with reference to the latter. Fair competition means essentially a competition of producing and selling efficiencies. Each competitor is free to obtain as large a share of the total available business as his producing and distributing efficiency may permit, in competition with the similar respective efficiencies of others also endeavoring to obtain shares of this business. The social justification of this principle of competition, as well as the reason for its adoption by society as the basis of business operation, is the belief that in the long run this system will produce a greater sum total or maximum of utilities with less sacrifice or cost, socially considered, than any other system of production and distribution. If the practical operation of the system is to yield results even approximating the foregoing theoretical objective, however, it 'Paper delivered at Week-end Conference on Price Policies, Harvard Business School, March 13, 1937. ' Stevens, Unfair Competition, University of Chicago Press, 1917. is necessary that there be adequate motives to ensure that the social group will devote the maximum of intelligence, ingenuity, and energy to the process. For this purpose competition uses (1) the private profit motive, and (2) the essentially democratic though much condemned principal that anyone may engage in any business regardless of his training, experience, or equipment, and succeed or fail according to his ability or efficiency. For this competitive system to function properly, it is essential that no unfair methods of competition shall be employed. In procuring a share of the business, no one concern should use or employ any means other than its own producing and selling fficiency, which will restrict, interfere with, or hamper the producing and selling efficiency of its competitors. From the economic point of view it was the use of methods other than this producing and selling efficiency that the unfair competition section of the Federal Trade Commission Act was designed to prevent. Of these methods, price discrimination was undoubtedly one. This practice had been one of the major weapons employed by the Standard Oil and American Tobacco Companies, but recently dissolved at the time the T ade Commission and Clayton Acts were passed. The debates in Congress on these statutes indicate the belief that Section 5 of the Trade Commission Act prohibited price discrimination. They also indicate that old Section 2 of the Clayton Act was intended merely as an extra precaution. It was an attempt to make certain that the bogus independent and local price discriminations of