FTC v. Borden Company

PETITIONER: FTC
RESPONDENT: Borden Company
LOCATION: Juvenile Court

DOCKET NO.: 106
DECIDED BY: Warren Court (1965-1967)
LOWER COURT: United States Court of Appeals for the Fifth Circuit

CITATION: 383 US 637 (1966)
ARGUED: Jan 19, 1966
DECIDED: Mar 23, 1966

Facts of the case

Question

Media for FTC v. Borden Company

Audio Transcription for Oral Argument - January 19, 1966 in FTC v. Borden Company

Earl Warren:

Number 106, Federal Trade Commission, Petitioner, versus the Borden Company.

Mr. Hummel, you may proceed with your argument.

Robert B. Hummel:

Mr. Chief Justice, may it please the Court.

This case is here on certiorari to the Court of Appeals for the Fifth Circuit.

The Court of Appeals set aside an order of the Federal Trade Commission which had directed the Borden Company to cease discriminating in price between competing purchasers in a case which arose out of the sales of evaporated milk, allegedly in violation of Section 2 (a) of the Clayton Act as amended by the Robinson-Patman Act.

It's pertinent here that Section 2 (a) makes it unlawful to discriminate in price between purchasers of commodities “of like grade and quality” where the effect maybe substantially to lessen competition.

The Borden Company sells milk, evaporated milk under the well known Borden brands all over the United States.

It also sells evaporated milk to certain customers under the brands of the labels of those customers referred to in this record as private label milk.

Physically, the milk in each instance was identical both the milk itself and the containers and the question presented is whether the Borden label milk and the private label milk are to be considered commodities of like grade and quality within the meaning of Section 2 (a).

The question arose very briefly in these circumstances.

The Commission held that because the goods were physically identical, they were like grade and quality.

It went on to find discrimination and injury and price between the customers for Borden and the customers for the private label milk.

It concluded that the two-price system may have the effect substantially less than competition both at the primary line that is vis à vis the competitors of Borden, packers of milk and at the secondary line that is wholesale and retail customers for the Borden milk.

Now, those findings are not an issue here because the court below did not reach them.

We're not asking for review.

I think whatever it is useful to put the legal issue in context to review just generally the basis for those conclusions.

The Commission noted at the primary line level that there had been a decline generally in the evaporated milk sales throughout the industry, that 10 producers largely in the Midwest area had dropped out of this business since 1950 that there had been no new entrants and that in the circumstances, there was a little need to ship the competitive balance between competitors.

It said that Borden was a large and powerful concern compared to its competitors and if the price structure which it was utilizing had placed a severe strain on small competitors, one it going out of business and all the others lost large and important accounts on a permanent basis.

They found finally in this market setting that there was a clear threat to the entire Midwest competition if the discrimination were to be continued, and that the elimination or serious impairment of competition was likely.

At the secondary line, the Commission found that there was large price differences between the competing customers, one in particularly to the Columbia, South Carolina area which is an area close to one of the Borden plants since Borden sold the private label milk at an FOB plant price whereas it sold the Borden brand milk at a delivered price, uniform throughout the United States.

Now this in compared prices around the Borden plant, the Court -- the Commission found that there was a large discrepancy among customers.

They found that there was a low or nonexistent profit margin in the sale of evaporated milk.

It was largely handled by distributors as an accommodation and often used as a loss leader.

It found that the effect of the -- of the discrimination was therefore to draw customers away not only with respect to evaporated milk but also with respect to other items handled by the wholesalers and retailers.

It pointed a testimony that a price such as that which Borden offered with the private label milk would have been a great aid to the wholesalers and retailers in meeting their competition.

It should have on these points and Borden says that it never refused to sell private label milk to any customer so long as it had productive capacity available, and that is not disputed in this record.

But it is also undisputed however that Borden did not disclose the availability of the private label milk to all of its Borden plant customers.

It -- at page 741 of the record, there's an exhibit which is a letter from Borden's merchandizing manager for evaporated milk in which he instructs the Atlanta office of Borden that brokers are not to discuss the terms of private label milk sales with customers and that all inquiries are to be referred to the home office.

And at page 826 of the record is a another letter sent out by the Borden Merchandizing Manager in which he says and this is at page 827, “We are in a position to take on a few more selected accounts.

Naturally, we prefer to deal with the best and the ones that can do us the most good.