United States v. National Dairy Products Corporation – Oral Reargument – December 05, 1962

Media for United States v. National Dairy Products Corporation

Audio Transcription for Oral Argument – March 21, 1962 in United States v. National Dairy Products Corporation

Audio Transcription for Oral Reargument – December 05, 1962 in United States v. National Dairy Products Corporation

Earl Warren:

Number 18, United States, Appellant, versus National Dairy Products Corporation, et al

Mr. Friedman.

Daniel M. Friedman:

Mr. Chief Justice and may it please the Court.

This case which is here on direct appeal under the Criminal Appeals Act to the District Court for the Western District of Missouri, presents the question of the constitutionality of the provision in Section 3 of the Robinson-Patman Act which makes it a crime to sell goods at unreasonably low prices for the purpose of destroying competition.

The District Court in this case, dismissed the number of counts under that section, on the ground that the statutory provision is so vague and indefinite as to violate the Fifth and Sixth Amendments.

The appellee, National Dairy Company, is a large company engaged in the business of purchasing, processing, distributing and selling milk throughout the United States.

The violations involved in this indictment involved the area of Kansas and Missouri which is served by National’s plant in Kansas City.

Now, in this big two-state area, National sells directly to customers in the Kansas City area itself.

And in the rural areas throughout these two states, it sells through distributors and the indictment alleged that in such sales, National competes both with other large dairies and also with a number of small dairies.

The indictment was in 15 counts and it charges National Dairy in parallel counts.

That is a count under the Sherman Act followed by a count under the Robinson-Patman Act relating to various activities in numerous markets.

More specifically under the Robinson-Patman Act, National and in one count a Mr. Wise, its vice-president and director, are charged with selling at unreasonably low prices for destroying competition in each of seven different areas.

The counts are basically identical under all the Robinson-Patman Act charges.

And I would like to invite the Court’s attention to the first of the Robinson-Patman Act charges at page 9 of the record.

This is typical of the Robinson-Patman Act counts.

The offense charged is stated in paragraphs 22 and 23.

The first paragraph, paragraph 22 begins, and in the language of the statute said that National are engaged in the foresaid interstate commerce sold milk to its distributor in the Paola-Osawatomie, Kansas market at unreasonably low prices for the purpose of destroying competition in that market in violation of Section 3.

Then the second paragraph, paragraph 23 goes on and particularizes the sales of unreasonably low prices charged in the statutory language in paragraph 22.

It alleged — pursuant to an effectuation of the offense, National utilized the advantages it possesses by reason of the fact that it operates in a great many different geographical localities in order to finance and subsidize a price war against small dairies selling milk in competition with it and its distributor in the Paola market.

By intentionally selling milk to its distributor Martin at prices below National’s cost.

So what we have in this indictment is a charge that in this particular market and there’s seven of them, National sold at unreasonably low prices for the purpose of destroying competition and the particularization without the sales at unreasonably low prices here charged where sales below cost.

(Inaudible) of the statute, isn’t it?

Daniel M. Friedman:

That is correct, Mr. Justice —

As the thrust of your argument that we don’t have to decide whether the statute is good or bad except in the context of this indictment, is that your point?

Daniel M. Friedman:

Well, let me put it this way if I may, Mr. Justice.

I think the Court has to look at the statute first to see whether it is —

It was charged from the beginning.

Daniel M. Friedman:

Exactly.

But then all that the Court has to do to sustain the statute in this case is to say that at least, as applied to the sales charged in this case, selling below cost, the statute clearly does provide a sufficiently definite standard.

But I shall, in my argument, first argue generally as to what the statutory standard is and then go on to show that without having to reach what maybe a more difficult problems in other cases, it certainly is constitutional to decide the violation here charged.

Daniel M. Friedman:

Now, the statute is set forth at pages 2 and 3 of our brief on re-argument and the statute contains three subsections.

The first two of them deal with discrimination in price and the third subdivision which is the one on which we are here concerned which is on lines four to seven of page 3, makes it a crime to sell or contract to sell goods at unreasonably low prices for the purpose of destroying competition or eliminating a competitor.

So the statute is composed of two elements in addition to the sale of the goods that must be at unreasonably low prices and it must be for the purpose of destroying competition or eliminating a competitor.

Now, while I said that these are separate elements and the Government must prove both of them, we think the elements are interrelated.

And we think that the ‘unreasonably low prices’; the meaning of that phrase draws its meaning and has helped in interpretation by the second clause, the specific purpose.

In other words, we think that the frame of reference within which the meaning of ‘unreasonably low prices’ is to be determined is the second section requiring for conviction the purpose of destroying competition.

We think as I shall now demonstrate that this clause from the basic purpose of the statute from its legislative history and from our entire antitrust experience of more than half a century dealing with predatory pricing, what the statute is directed at.

Now, a major purpose of the Robinson-Patman Act, and when I say the Robinson-Patman Act here, I’m not limiting it just to Section 3.

I also include the civil price discrimination provisions contained in Section 2 of the Clayton Act was to prevent predatory pricing.

That is pricing which is designed to destroy competition or eliminate a competitor.

This statute was written against the history of many years of our experience under the antitrust laws with the devices by which monopolists and powerful firms have been able to destroy their competition to put competitors out of business, to force weaker firms into cooperation with it.

And this history had shown that one of the favorite devices which these large firms and monopolists employed was cutting prices in warfare against a smaller firm, and in most instances of course, what was done was using the profits in one area when they were not competing in order to attack a weaker competitor and another but not all and this history is shown in some of the early landmark Sherman Act cases which we have described in our brief, for example, this Court’s decision in the American Tobacco case, the decision of Judge Learned Hand as the district judge in Corn Products case and both of these leading cases, sales below costs were a very effective method by which these tremendous combinations were put together in which competition was suppressed and by which recalcitrant smaller firms were driven to the war.

And in 1914, when Congress passed the original Clayton Act, it referred to this practice and the House Committee report which we have quoted in our brief stated that it was a common practice of great and powerful combinations to lower prices of their commodities oftentimes below the cost of production in certain communities and sections where they had competition with the intent to destroy and make unprofitable to the business of their competitors.

And similarly, as we’ve set out in our brief, the legislative history of the Robinson-Patman Act shows congressional concern with this predatory price cutting.

Now, most of the legislative history dealing with the Robinson-Patman Act related again to discrimination and it was in many instances, this was what being discussed but not all of it there is evidence for example that people were terribly concerned about the practice of this large firms cutting prices.

Now, in terms of the effect on competition, it doesn’t really matter whether the large firm is cutting prices in one area and using its profits in another area to subsidize them or whether it’s big enough that it can afford to take a loss in a particular area.

In both instances, the smaller firm that is faced with this price cutting find itself in the position that it can’t hold up very long, it’s either going to go out of business or it may find that it just has to give in.

It’s going to stop its price warfare.

Much of this price warfare in these areas is designed not to put someone out of business but to get them to bring their prices up to the level of the large firm thinks appropriate.

And all these experience in history to us illuminates what the Congress was driving at in this third clause of Section 3.

We think that what we have in Section 3 is this, we have the first two clauses which deal with price discriminations and those are made crimes.

We have the third clause which then goes on to make it a crime to sell at unreasonably low prices for the purpose of destroying competition.

We think what Congress intended to reach by that clause was the same type of predatory practices that history have shown, were frequent methods by which large economic firms throw their competitors to the wall and which however did not come within the precise boundaries of the discrimination.

I’d like to illustrate that.

First of all, many large firms may sell multiple products.

So they have for example a firm selling milk at unreasonably low prices in a particular area.

It would necessarily have to make that up on selling milk in other areas at higher prices.

It could make it up by selling butter or cheese or some other dairy products.

In that situation, there would not be discrimination than the meaning of Section 3.

Similarly, products such as milk, there are frequently local variations in price.

Daniel M. Friedman:

The nature of the milk industry as such that milk is sold at different prices so that the mere proof that a company sold milk at one price in the Kansas City, Missouri market and at another price in the Chicago market might not itself be sufficient to establish discrimination and therefore we think what Congress did was to go on and prohibit sales at unreasonably low prices the same kind of predatory sales which did not however have the particular element of discrimination which is condemned by Section 2.

And we think in the light of this experience and this purpose that the phrase to sell unreasonably low prices for the purpose of destroying competition means that a price is unreasonably low when it lacks any rational foundation in the seller’s normal business methods which would justify it being said other than a purpose to destroy competition.

Let me illustrate if I may.

Ordinarily, a seller operates at a profit.

Now, if a seller is selling a product at a price which could not be justified by the business considerations, the exigencies of the business which a reasonable man would rely on in setting his prices.

And if you add to that, the further specific intent, the predatory purpose the intention to destroy competition, we think that is selling at unreasonably low price for this purpose.

And we think certainly, at least where the product is priced below cost with the predatory purpose.

This is plainly an unreasonably low price.

There may be situations of course in which selling below price, below cost has a legitimate business purpose for example —

Byron R. White:

(Inaudible)

Daniel M. Friedman:

Yes, Mr. Justice.

For example let me give the case of a businessman who was trying to get rid of surplus merchandise or merchandise which is spoiled now which is obsolete, he may find that the appropriate business method, the normal practice of getting rid of this merchandise is to sell it below cost to clear it out.

But in that situation, in that situation, he would not have the intent to destroy competition.

Byron R. White:

Would you say that — would you say that it’s unreasonable to sell below cost where you’re merely lowering your cost to meet the price of the competitor?

Daniel M. Friedman:

No, Mr. Justice, not that.

Byron R. White:

Even thought it’s saying that the competitor’s business —

Daniel M. Friedman:

Well —

Byron R. White:

— absolutely that they go to either keep your business or take away some business —

Daniel M. Friedman:

That’s the normal process of competition.

Byron R. White:

Yes.

Daniel M. Friedman:

It’s trying to take away business from a competitor.

Every seller is trying to take business away from the competitor but this statute goes beyond that fact.

This statute requires a purpose to destroy competition or to eliminate a competitor.

Byron R. White:

But it’s perfectly reasonable to lower your price below cost to meet the price of the competitor even though you’re after him.

Daniel M. Friedman:

Even though you’re after him provided — provided Mr. Justice, you’re not doing this for the purpose of destroying him or —

Byron R. White:

Well, let’s say you are doing it for the purpose of destroying him.

Daniel M. Friedman:

Well, if you were doing it for the purpose —

Byron R. White:

Will you say it’s an unreasonable — unreasonably low price?

Daniel M. Friedman:

If it’s below cost.

Byron R. White:

Yes, but you’re meeting his price.

Daniel M. Friedman:

That is — well, you’re meeting his price but it seems to me — meaning —

Byron R. White:

You said there were two elements that were necessary.

Daniel M. Friedman:

That’s right.

Meeting his price — meeting his price is — happens to be the case but it seems to me the basic question is whether it was done for the purpose of destroying competition.

Byron R. White:

No, but we still have to decide whether it was an unreasonably low price.

Daniel M. Friedman:

Well, yes and I’m suggesting that if —

Byron R. White:

You’re suggesting that it is even though it’s — it’s lowered only to meet the competitor’s price.

Daniel M. Friedman:

No, no, Mr. Justice, sir.

If I’m not — I didn’t make myself clear.

If it’s done for the purpose of meeting a competitor’s price then we’d say that would not be an unreasonably low price.

In other words, it would not prove the first element because in that situation —

Byron R. White:

Yes, but these things can’t be kept in this kind of categories when you’re meeting some competitor’s price.

That just isn’t a descriptive term or just an isolated purpose that may very well be for destroying the competitor, that’s why you’re meeting its price.

Daniel M. Friedman:

Well, if —

Byron R. White:

I mean both of them are perfectly consistent for the purpose of meeting him price — meeting his price and destroying him is perfectly consistent.

Daniel M. Friedman:

Well, I would — I would —

Byron R. White:

Especially if you — in this case — does this record show whether there was some differential between the — between the major’s price and the independent’s price?

Daniel M. Friedman:

It doesn’t so show but the allegation of the Sherman Act counts as one of their purposes was to eliminate a differential between the price charged by the small dairies to selling milk and glass containers in the price these people charge for selling milk in paper cartons so this is apparently what is involved in the case.

The record does not show that as I say because it comes up on the dismissal of the indictment.

William J. Brennan, Jr.:

We say one statute as I remember in this Screws case by requiring the presence of requisite intent.

But here even though you have the requisite intent, you don’t violate the statute unless the price is unreasonably low.

Daniel M. Friedman:

That’s correct.

William J. Brennan, Jr.:

And so your — I don’t think you have come up — flashed with the problem under our other cases to whether or not unreasonably the low satisfies the standard for a definite one.

Daniel M. Friedman:

Well, I will address myself to that right now.

William J. Brennan, Jr.:

Because I can sell on this statute at a low price to eliminate a competitor, to get rid of him and still not violate them.

Daniel M. Friedman:

Well, but we — as I say, we think that the statutes, the words ‘unreasonably low’ have to be interpreted in the light of the basic purpose and we think that when it’s interpreted in light of the purpose that a price is unreasonably low when its level cannot be justified except in terms of attempting to destroy competition or eliminate a competitor.

We then think it does come within the cases which this Court has previously upheld statutes of this type —

How should we deal with the statute?

Odd states do not apply, you can produce cases on both sides of the question that’s one of the most mixed up fields of law that I know.

Daniel M. Friedman:

Well I —

What is your position?

Daniel M. Friedman:

I’d say you’d just deal with it as applied and let me explain why.

The basic theory of the rule of definiteness is to enable a person to know when he acts whether he is violating the statute.

Question of notice.

Daniel M. Friedman:

Notice, that’s correct Mr. Justice.

The question that seems to us in terms of this case is whether this appellee or these appellees were fairly unnoticed when they did the things charged in the indictment that is selling below cost for a predatory purpose that they were violating this statutory prohibition against selling unreasonably low prices for that purpose.

And we think that whatever may be the difficulties in other cases, certainly, a businessman who sells below cost for this stated purpose of destroying competition can have no doubt that he is violating the unreasonably low prices.

Now, the trouble is that when you put in costs, that’s got — that’s about as vague as unreasonable.

Daniel M. Friedman:

Well, because —

What is your position?

Is it out of pocket cost?

What are you going trying to prove in this case?

Daniel M. Friedman:

Well we — in this case, the indictment allegedly sold intentionally below cost.

Well, I know but —

Daniel M. Friedman:

And we — we believe we can prove that they sold below cost as shown on their books.

Now, we would say ordinarily that’s not I have to say not so alleged in the indictment but we think it falls intentionally.

But we think going a little beyond that that costs means basically the costs as shown on their books.

Well, my trouble is that if you take the premise that you are to treat the question of vagueness and turns that the statute is applied, how can we tell from this record until there has been a trial to know how it’s going to be applied.

Daniel M. Friedman:

Well, we can tell I think Mr. Justice because the indictment here alleges that the sales we’re below cost.

Yes, but cost still got that element of vagueness in it.

Daniel M. Friedman:

Well, I think Mr. Justice its terms intentionally selling below cost not inadvertently that in that situation as — I suggest that they knew they were selling below cost and therefore, if it can be shown that they were selling below cost are shown in their books or if it can be shown that they gave some indication they knew they were selling below cost then we think clearly that meets the standard.

But what that’s arguing is that the second element of intention and you call it intention for the purpose of destroying competition, infuses definiteness either into unreasonably low prices or which seems to me to be equally indefinite cost — internal cost.

Daniel M. Friedman:

That’s point — the exact point I have in mind.

William J. Brennan, Jr.:

If you look at you’re brief on page 6 near the bottom, you defined what’s unreasonably low.

It has no rational justification existing or foreseeable business condition other than this seller’s desire to destroy competition.

But I would think that under the statute, his desire to destroy competition or eliminate a competitor would be wholly legitimate.

Daniel M. Friedman:

It would be wholly legitimate he was not selling it at an unreasonably low price.

In other words, we think the two are interrelated we think.

William J. Brennan, Jr.:

Well, I would think it’s quite the opposite that they were two distinct things.

Daniel M. Friedman:

Well, they’re two separate things but I think the one borrows meaning from the other.

Daniel M. Friedman:

In other words, what is unreasonably low has to be related to the basic purpose for which the sales are made that is whether they are a legitimate business activity, a pricing practices which a reasonable seller would normally follow absent an intention to destroy competition or whether they are in fact intended for the purpose of destroying the competition.

And may I suggest that there are going to be many cases where this is like so many other areas of the law that it’s a matter that will have to be resolved for the jury.

The jury will get all of this evidence and the jury will have to make the value judgment as question of decree really, whether —

Arthur J. Goldberg:

(Inaudible)

Daniel M. Friedman:

Almost certainly.

I think it’s — I think it’s more precise than that and I think it’s as precise as such phrases as requiring a broadcaster to hire more than the number of employees he needed prohibition against adopting more than a reasonable allowance for depreciation.

Just unreasonable charges, unreasonable waste of natural gas, a host of standards which this Court has adopted and I think Mr. Justice Holmes’ statement in the Nash case many years ago in upholding the Sherman Act is very pertinent here in which he pointed out that the law is full of instances where a man’s fate depends upon its estimating rightly that is as the jury subsequently estimates at some manner of degree.

And also, in the Regan case in which this Court upheld a criminal indictment involving charges of deducting more than a reasonable allowance for compensation pointed out that the mere fact that appeal statute is so framed as to require a jury upon occasion to determine a question of reasonableness is not sufficient to make it too vague to afford a practical guide to permissible conduct.

Now, I just like to say one thing with respect to the cases upon which our opponents rely and which this Court has struck down statutes as unduly vague.

The leading case of course is the Cohen case which said that a prohibition on willfully charging unjust or unreasonable prices for necessaries was bad.

We think the basic distinction between that case and the other cases that they rely on — and this case is that in those cases, the standards of unreasonable prices were just up in the air.

It was not tied to any specific thing by which you could identify it.

There’s no basic purpose of the statute.

And in this case, we think, that the statute does get meaning after two facts.

First, it appears not just unreasonable prices but unreasonably low, and unreasonably low, we think in the light of our antitrust history discloses a basic concept here, predatory prices.

And in addition to that here, in contrast to the Cone case where the only intent was the requirement of willfulness.

In this case, we have the specific intent.

And in conclusion, I just like to suggest to the Court that I find it difficult to see really how the Congress could draw a more definite standard.

Hugo L. Black:

It could say, couldn’t it, below cost?

Daniel M. Friedman:

Yes, yes, Mr. Justice, it could say below cost but we think —

Hugo L. Black:

That’s what you’ve been arguing, below cost.

Daniel M. Friedman:

Below cost in this case but the statute is not —

Hugo L. Black:

I would think it contains much more difference as my Brother Harlan is suggesting below cost.

I would think probably that the — to meet the standards, that’s not what we have.

Daniel M. Friedman:

No.

Well, we have two things Mr. Justice.

We have a broader standard which we think below cost is clearly an unreasonably low price but we suggest that may be other areas where the sales even not below cost may violate the statute.

Potter Stewart:

I thought that you answered Mr. Justice White to the effect that a price which was lower to meet a competitors price and which was below cost and which I have behind that in the purpose of destroying that competitor’s competition would not violate the statute.

Daniel M. Friedman:

No, I’m sorry.

I misspoke myself.

Potter Stewart:

Well, Perhaps I misunderstood you.

Daniel M. Friedman:

That would violate the statute if it was for the purpose of destroying a competitor.

That is nearly for the purpose of meeting this competition.

Again, it’s basically a question of the intent with which these price cuts were met.

Potter Stewart:

How about the practice that the generation so ago, Henry Ford adopted if have it right, he reduced his prices below cost.

This was considered by the traditional conventional business community as something not only highly unreasonable but radical and unheard of and revolutionary and he did so in order to increase the volume which would end up if he succeeded as in fact he did succeed by making the big profit but he reduced his current prices below their current cost.

Daniel M. Friedman:

But this it seems to me —

Potter Stewart:

And —

Daniel M. Friedman:

— would be not violating the statute because there, it would be — this would be arguable certainly, but certainly a legitimate business justification.

This is one way of increasing your volume.

Potter Stewart:

The jury would have thought he was crazy.

The business community did.

Daniel M. Friedman:

Well, but there was — I think in that situation, there wouldn’t have been the requisite intent to destroy competition.

Potter Stewart:

I think — don’t you think?

Well, I don’t know the history and perhaps you know it better than I do.

Daniel M. Friedman:

I don’t know.

Potter Stewart:

Certainly, he was not doing this in order to help his competitors.

Daniel M. Friedman:

No, not to help.

He was doing this to get more business but not to put them out of business.

Oh, that’s I gather your problem now at this stage at least.

Daniel M. Friedman:

No.

Let me ask you this.

When you say below cost, you say we should take the statute as applied.

And by applied, you say, you should read the statute in relation to the indictment which refers to cost.

Daniel M. Friedman:

Yes.

Now, do you take the next step and say, the cost in the indictment means cost as reflected on the books?

How do you define cost?

How should we read cost in the indictment assuming that we should read the indictment into the statute?

Daniel M. Friedman:

Well, I would say that I think cost means one of two things as used in the indictment.

Either the cost as shown by their books or if they did not have books which showed cost whatever their normal sound accounting practice has shown.

Daniel M. Friedman:

In other words, if a seller did not show cost on his books but under his accounting system, the price is reflected.

That would be the situation because, again, it’s the seller’s cost and again, it’s the question of the —

Does the concept embrace direct cost only?

Does it include undistributed cost?

Daniel M. Friedman:

I would say it includes both direct and —

Everything.

Daniel M. Friedman:

That’s right.

Of course, I might point out the — strangely enough that this is a peculiar situation that it’s to the defendant’s interest to show that their cost are as low as possible and presumably to the Government’s interest in proving below cost to show that their cost are as high as possible.

But I would say that if their books, their regular books show that their sales were below cost, that would meet the standard if conversely they show that their sales were above the cost on their books under this indictment, we haven’t proven our —

Really, what’s your argument all comes down to if I get it is that in the context of this practice in the antitrust atmosphere a reasonable businessman would know what he’s up against in the statute.

Daniel M. Friedman:

That — that is —

That’s really what it comes down to.

Daniel M. Friedman:

That’s right but this statute with the intent and with the whole history gives this businessman fair warning as to what conduct —

And that argument would go whether it’s — I would suppose without regard to whether you read cost into the statute or just take the statute on its face.

Daniel M. Friedman:

We — we think —

The way that businessman knows that price cutting with predatory purposes is a violation of the antitrust laws, always has been and therefore he takes a calculated risk that what he does is going to be — he’s going to be able to sell it to the jury but as far as notice is concerned, that’s enough.

Daniel M. Friedman:

That’s right.

That’s really the essence of that.

Daniel M. Friedman:

That’s right, and particularly, if I may just add, when he sells below cost.

Thank you.

Byron R. White:

(Inaudible) have a — that short circuited in communication.

Daniel M. Friedman:

I’m sorry.

Byron R. White:

What — what’s your final conclusion that you are lowering a price below cost to meet the price of a competitor is reasonable.

That’s an — that’s a reasonable price, I take it.

Daniel M. Friedman:

That’s correct.

Byron R. White:

But if you combine it with the purpose of destroying a competitor —

Daniel M. Friedman:

Yes.

Byron R. White:

— then it’s unreasonable and violates the statute.

Daniel M. Friedman:

That’s correct.

Byron R. White:

So that if I do not lower my prices below cost but I just have a price that’s a bit a long way above cost, if I combine that with the purpose to destroy competition, that price — that violated the Section 3 also.

Daniel M. Friedman:

Not necessarily.

That would depend on the basis upon which you set your price.

In other words —

Byron R. White:

Well, I set it on the basis that I want to destroy competition.

Daniel M. Friedman:

And there were no —

Byron R. White:

I’m going to destroy my competitor.

Let’s assume.

Daniel M. Friedman:

You’re going to destroy your competitor but there’s the further qualification that this price could not be justified on any of the other normal business exigencies.

In other words, let me put it — I will see if I can put it — perhaps put it this way, Mr. Justice.

If I set a price which a normal reasonable businessman would feel was a fair price under all the circumstances and if in setting that price, I still have the intention to destroy competition, that does not violate the statute because the second — the first element, the element of unreasonably low that there’ll be no other rational justification for the price other than the intent to destroy competition is lacking.

Byron R. White:

Of course, perhaps our difference really is that when the antitrust division would or wouldn’t say something as for the purpose of destroying a competitor.

You would normally assume that someone intended the consequences of his act, I suppose.

And if you lower the price to meet the price of the competitor and it destroys them, I would think you might have some trouble with your people.

Daniel M. Friedman:

Well, I would think — I suggest to things Mr. Justice.

First, that we think this requires something more than merely intending the normal consequence of an intent, we think there has to be something more — there has to be some showing of purpose.

But certainly, of course, this is a question for the jury in this kind of case.

In other words, the jury will have to draw the inference from all of the evidence before it.

Byron R. White:

And would you say that — that — you say that hard core of this statute is that this is unreasonably low — is below cost and everyone knows that this would be unreasonably low, would you also argue that a — that a fair measure of unreasonableness is — if the price is discriminatory?

If you lower a price and it becomes discriminatory under the Robinson-Patman Act that that is a an unreasonably low price without relation to (Voice Overlap) —

Daniel M. Friedman:

The mere — not the mere fact that’s it’s being discriminatory alone.

Byron R. White:

Well, I know.

But let’s assume that you add to that the purpose to destroy competition.

Daniel M. Friedman:

Well, I was — I —

Byron R. White:

It’s a discriminatory price and it violates Section 2 and it’s for the purpose of destroying competition.

Daniel M. Friedman:

That’s covered — that is covered by — that is a provision of Section 3.

There are other provisions which specifically deal with price discrimination.

Byron R. White:

Yes, but that says in one section in another section of the country, isn’t it?

Daniel M. Friedman:

One of them does, yes.

Now I would — I would say again —

Byron R. White:

Well, I was talking about the same — right the same city.

Daniel M. Friedman:

I would say this, Mr. Justice.

I would think the discrimination that you suggest would be significant in determining what the basic purpose of the price was.

In other words, if a seller — it was found that a seller discriminated between two customers in the same city.

Byron R. White:

Well, if I prove — if the Government proved its case, it proves that a — proves that there’s a discriminatory price, not the same price as the — that they’re selling across the street for and it is for the purpose of destroying competition that it’s way above the cost.

Is that —

Daniel M. Friedman:

I would not think that’s enough.

Mr. Justice Goldberg, did you have question?

William J. Brennan, Jr.:

(Inaudible)

Daniel M. Friedman:

That’s right, because it would be a legitimate business practice.

Hugo L. Black:

Now, you have to look — do they have to determine much of the general attitude about competitors or special competitors?

Daniel M. Friedman:

Well —

Hugo L. Black:

I have an idea that at least in country merchants, the dream of all of this to reduce a competitor as much as they can, that they would not be unhappy if their competition reduced their competitors to a lower number.

You have — you have quite a problem there when you start at that mode because maybe one of the objects of competitive system is if the other — one man will try to do so good and do so well that he’ll drive the others out of business.

Daniel M. Friedman:

Well, of course the —

Hugo L. Black:

Now, we hope he can’t do it and that’s the (Voice Overlap) —

Daniel M. Friedman:

The essence of the competitive system is that if you’re more efficient than I am, the chances are, you’re going to profit and I’m going to fail and perhaps this may have the consequence of driving me out.

But this it seems to me is something quite different.

Hugo L. Black:

The motive of — motive of all revenue is very much alike, isn’t it?

Daniel M. Friedman:

Well, the motive maybe a matter of degree first of all, and secondly, I think one difference is the — I mean this is just what they do in terms of their pricing.

How well they go?

What the circumstances are?

What other explanations there may be for this?

Thank you.

Earl Warren:

Thank you, Mr. Friedman.

Mr. Chadwell.

John T. Chadwell:

Mr. Chief Justice and may it please the Court.

I think I should remind the Court — I’m sure it’s unnecessary to do so but I think I should remind the Court at the outset, there is not one word in this statute about cost.

Sellers cost or anybody else’s cost or the word cost.

The statute says it shall be an offense to sell at unreasonably low prices for the prescribed intent.

That’s what the statute says and that’s all the statute says.

John T. Chadwell:

Now, the Government has made a halfway admission, what I think they must and should admit mainly that this statute has two separate and distinct elements of which would — which must constitute the offense.

First is selling below cost and the second is with the intent to destroy competition.

Now, each must be proved, the Government admits that, and yet, and yet, the Government contends in effect that though they are separate and distinct, though they are separate and distinct, selling below cost which isn’t even mentioned in the statute.

Selling below cost proves at least prima facie, both that the sale at the price was unreasonable and that the price — and that the intent was anticompetitive.

Now, I think in order to straighten out this situation in the light of the words of the statute itself, I should have the temerity to start by reminding the Court of the Cohen Grocery case, of Cline against Frink Dairy and of the many cases which have followed.

They have held expressly and explicitly that the term ‘unreasonably high price’ or ‘unreasonably low price’ or ‘unreasonable price’, or ‘unreasonable profit’ is unconstitutionally vague.

Now, those decisions are expressed and there they are and the Cohen case has been woven into the firm fabric of the law of this nation and it has been referred to by this Court over and over again, and as a matter of fact a — a situation which the Government has not referred to in its brief or in the record when this very clause, the Section 3 of the Robinson-Patman Act was before this Court in the Nashville Milk case.

This Court referred to the unreasonably low price clause as a vague provision.

And in the footnote in the decision, went so far as to say that the lower court had indicated that it would give rise to constitutional difficulties if the matter had to be faced citing both Cohen and Cline against Frink Dairy and those cases have not been referred to by the Government and Nashville has not been referred to the Government.

Now, Mr. Friedman spent — I beg your pardon.

After all you can’t rely too heavily on that footnote.

John T. Chadwell:

I don’t rely upon the footnote except for this —

This simply presents us to the problem that we have flushed there.

John T. Chadwell:

Yes, sir.

And I will say this Mr. Justice, and I will say this, that in making that observation, the Court whether — whether going into it fully or not on that occasion, I do not know, but the Court certainly was following intensely or not the legislative history of these things.

Why if Your Honor please, if you look at the legislative history which we have outlined in our brief, there is not one word in any statement by any member of the House or Representatives or by the Senate with respect to this unreasonably low price cost.

Not one word.

It is not construed, it is not stated to mean below cost, there is not — there was no committee report on it except the conference report.

There’s no committee report that mentions unreasonably low — the unreasonably price clause.

It isn’t referred to or interpreted by a member of Congress nor is it referred to or interpreted in a committee report and there’s not one word in it about selling below cost.

Now, the Government can get no comfort whatsoever out of the legislative history in this case insofar as supplying meaning to this vague term ‘unreasonably low prices’ is concerned.

And I say on the basis of the decided authorities that that clause itself has been decided by this Court in — in cases I — which I contended directly in point to be too vague to stand the test of the Fifth and Sixth Amendments.

May it please Your Honors, I want to make this additional observation.

Mr. Justice Holmes did say in the Nash case that law is full of instances where a man’s faith and — on estimating rightly some matter of degree, but Mr. Justice Holmes said that in the context of the Nash case in which the Court held of course that the — unreasonably that the — that the Sherman Act was constitutional against the — an attack of vagueness.

And after Mr. Justice Holmes made that observation in the Nash case, he concurred in the Cohen Grocery case, he concurred and Cline against Frink and prior to that time, he had ripped in the International Harvester case and certainly he’d not — did not mean by that observation and the Court did not mean by that observation that a statute need not to have an ascertainable standard of guilt.

May I ask you a question?

John T. Chadwell:

I beg your pardon.

A part of this indictment had charged that you sell below cost, and by cost, meaning below the price that you paid for the raw milk.

How would you say then as to vagueness?

John T. Chadwell:

I would say if the Court had — if the statute had explicitly — had explicitly outlawed selling below cost and have used those terms, the Court — the statute should have defined cost in order to make it sufficiently definite.

John T. Chadwell:

It should have defined cost as 30 states have done when they have enacted selling below cost statutes as has been done and in almost every instance — in every instance that I can now think of, we referred to them in our brief.

The state has defined what cost means and in answer Your Honors question, they have some time said, it shall mean cost of production.

With respect to a retailer, they have sometimes said it shall mean the invoice cost of the merchandise.

We sell above that Your Honor as to a retailer.

In other instances, they have said, it shall be the invoice cost of the merchandise plus a markup of 2%, 4%, 8% some of them have gone up as high as 12%.

Some of them have said — have separated retailers from manufacturers and have specified a certain definition of cost for the one and a somewhat different definition of cost for the other.

I say Mr. Justice Harlan that it is necessary to supply some meaning for the term cost or else the statute would fall as vague for vagueness just as much as the unreasonably low price would.

Let me illustrate it, if Your Honor please.

Hugo L. Black:

Now you’re — you’re putting them on that much of parody, do you?

You may be shaking some of your followers.

If you say it’s just as definite to say that it’s unreasonable as it is to say that it’s below cost.

Now, I understand you put them on a parody.

John T. Chadwell:

I said that if —

Hugo L. Black:

I have not yet been able to do so in my mind.

John T. Chadwell:

Oh no sir, I didn’t mean to put them below on the same parody at all.

I — perhaps, I misspoke what I meant to convey to the Court.

What I say is this, the unreasonably low price clause is clearly invalid and under Cohen and the other cases.

It cannot be equated with the term below cost.

There are two reasons why it cannot be.

In the first place, below cost is not necessarily unreasonable.

There are many instances where below cost is perfectly reasonable, some have been mentioned by Mr. Justice White, others occurred to us all.

It is very possible that a sale will be below cost under the circumstances where the costs are lowered, are increased rather during a period of production.

The fact of the matter is that prices are set before the sale is made of course.

Certain prices are set if period goes by during which production takes place, the manufacturer does not sell a volume that he thinks he’s going to or else other circumstances contribute to increase cost and it ends up that he sells below cost as it finally determined on the books of the company.

I say that since there are so many instances and other instances were given by the Government.

There are so many instances whereas sales below cost could under no circumstances be considered unreasonable that you cannot equate the term unreasonably low prices with the term below cost because they’re not — the two are not synonymous in any sense.

Hugo L. Black:

But the law wouldn’t have to — it could pass the law saying you shall not sell at below cost.

John T. Chadwell:

I —

Hugo L. Black:

I’m not saying also that that is declared unreasonable.

John T. Chadwell:

Oh, no.

John T. Chadwell:

No, no.

I didn’t mean that, Your Honor.

I meant if this — if the Court — if Congress saw fit to outlaw sales below cost explicitly which certainly they might do in following the state statutes, then I think a mere provision that selling cannot be below cost should be further defined in some manner so that a businessman —

Hugo L. Black:

You mean that the Constitution requires that?

John T. Chadwell:

Yes sir, because I think the term cost by itself is not sufficiently definite.

The —

Hugo L. Black:

A merchant goes out to buy a lot of clothing and he at least some of them did it and they pay so much per suit of clothes.

That’s what the suit or clothes cost him.

You’re not talking about the cost of that during business but the suit or clothes cost them $40.

John T. Chadwell:

We’re talking about the sellers cost now Your Honor as a matter of fact.

Hugo L. Black:

I’m talking about now about the merchant who has bought it and it’s cost him $40 per suit.

John T. Chadwell:

Yes.

Hugo L. Black:

Would you say that the law have said that if he sold it below cost that wouldn’t be — couldn’t be held to that $40 that he paid for it?

John T. Chadwell:

I would say that there’s no determination merely by using the term cost that he would be in the clear in selling above only his invoice cost because it cost him to do business.

Hugo L. Black:

I understand that.

John T. Chadwell:

He has many other costs.

And as a matter of fact, Mr. Friedman, in answer to the question of one of the justices, indicated that he would have to go above his direct cost and above his overhead or just — or general cost.

Now, there’s a very serious question in a businessman be he a retailer or a be he a manufacturer as to whether his cost for purposes of the selling below cost statute, if there were one, would be invoice cost, as Your Honor just stated so he’d be in the clarity —

Hugo L. Black:

I’m talking about just what he paid for.

John T. Chadwell:

Yes sir, what he paid for.

If he merely pay — if he merely resells at a price above what he paid for, it is true that he is above his material cost.

But he is not above his cost at the time that the merchandise goes out of his place of business because he has got many other costs.

In the event of a — of a manufacturer, he has his — let us say a dairy company —

Hugo L. Black:

I didn’t intend to divert you because we don’t have that here.

John T. Chadwell:

Well —

Hugo L. Black:

Here, I think we have quite a different case.

John T. Chadwell:

I don’t think we do have it here, Your Honor.

That is true, but I say that even if the Court should construe this in spite of the legislative — complete absence of legislative history justifying it, even if the Court construe — should construe this as say — as — meaning selling below cost contrary to our contention, I still think there would be a very serious problem and that the statute would not be safe but that Court, I contend, does not have to reach that point because this statute does not say cost in the first place, and in the second place, there is not a word in the legislative history, not one word that would justify the Court in construing the statute to mean selling below cost.

As a matter of fact, and I think I should call this to the attention of this Court, the only word in the debates in the Congress, the only thing that was said about this unreasonably low price cost, and to me this is very significant, where statements made by two well-known congressmen supporting the antitrust laws, Congressman Patman and Congressman Celler.

Congressman Patman said that it is very indefinite as to what unreasonably low price means, so as Congressman Patman said, it’s in our brief, and it is not further elaborated.

John T. Chadwell:

Congressman Celler in commenting upon Section 3 as a part of the Robinson-Patman Act which also covered the — all of the — all of the risk discrimination provisions of the Robinson-Patman Act said that, “the congressman’s colorful language, the courts will have to double its own time with it.

And it we’ll be Herculean task to make it yield at any sense”.

Now, that’s the legislative history of this clause and —

Prophetic.

John T. Chadwell:

— and I — and I say that the words of Congressman Celler and of Congressman Patman were as indicated I think quite prophetic.

Would you —

John T. Chadwell:

The —

— would you take two or three minutes?

I know — I don’t want to interrupt you anymore.

John T. Chadwell:

Yes, sir.

What should we do if it’s one thing to construe this statute on its face that presents one set of problem?

John T. Chadwell:

Yes, sir.

And the Government shies away from it in their argument.

It’s another thing to construe the statute as applied and my ultimate question, if that is the approach we should take, how in the world can we construe this problem of vagueness at all on this record?

John T. Chadwell:

I think, Your Honor, that it has to be construed on the statute itself.

Yes.

John T. Chadwell:

Now, we are indicted under this statute that contains this unconstitutionally vague language and this — and the indictment charges us in the words of the statute with selling at unreasonably low prices.

That is the indictment and that is as Mr. Friedman stated is in the first paragraph of the charging clause.

That is the charge against us.

Now it says, pursuant to and in effectuation of the offense charged in paragraph 22 confining the charge to that in paragraph 22.

We are — we have intentionally sold below cost.

Now, the lower court, and I’m not going to labor at this point in the oral argument but the lower court construed this statute — this indictment to mean not only selling below cost but also — but otherwise — otherwise selling at unreasonably low prices was not confined to selling below cost.

The lower courts so construed it.

The Government lawyer in presenting this matter to the lower court so argued the matter and that is the record before this Court.

Now, I say under those circumstances that this Court must construe this as the lower court did, as charging an offense and must pass upon this statute, the constitutionality of this statute on the basis of the words of the statute itself must do so on the face of the statute namely construing the words unreasonably low price to be charged — construing indictment as the lower court did to charge unreasonably low price sales.

And so, I contend that the Court does not have to apply it.

It is not necessary to have a trial here to determine what the cost were or to determine what the facts were because as the Court will know, Mr. Wise, who was indicted here was entitled to have the statute under which he is indicted, entitled to have that statute specific, have — and contain within itself in the words of the statute an ascertainable standard of guilt the statute must do so.

It does not protect his rights under the Fifth and Sixth Amendment to be advised for the first time in this indictment as to what the statute means.

The Congress didn’t advise him, the words of the statute don’t advise him and I say he’s entitled to be advised by the statute itself or we ignore the requirements of the Fifth and Sixth Amendments and he was not informed in the words of the statute itself as to what unreasonably low prices mean.

And I think, therefore, that the lower court was amply justified and should upon our motion to dismiss the counts of the indictments based upon the statute for that reason.

John T. Chadwell:

Now, I don’t know that I have been directly responsive to Your Honor’s question.

I’ve tried to explain our position on it.

Perhaps I’ve gone too far.

But if Your Honor means — if Your Honor meant to inquire whether we — whether there’s got to be a trial (Voice Overlap)

Now, what I’m thinking of is this.

Why is Congress into — you were a lawyer and he says, here is the statute and am I violating the law if I do this?

And then he says, I want to put this fellow out of business and I’m going to sell at 2 cents where my cost — direct cost is 50 cents.

Is that illegal?

And any lawyer would tell him of course it was under the statute.

Now, what I’m getting at is that if the statute is a question of notice we’re dealing with.

John T. Chadwell:

Yes, sir.

And therefore, the proof in the trial shows that extreme situation.

Why hasn’t he had sufficient on this that what he’s doing is illegal?

John T. Chadwell:

Well, because if Your Honor please, I do not think that this statute bears any relation whatsoever to the term cost.

Let us assume — let us assume that there might —

But it includes it (Voice Overlap).

John T. Chadwell:

May or may not —

My hypothetical case would certainly fall within the statute.

John T. Chadwell:

Well, it may or may not.

The — there could be circumstances, I would say, under which he would be amply justified in selling at 2 cents instead of 50 cents taking the extreme case.

There certainly could be.

They would not necessarily be unreasonable low — unreasonably low.

Let us assume, let us assume that he was — that he found it necessary to do so in order to meet competition of the defendant.

Let us assume that — our competitor, let us assume that he found it necessary to do so in order to close out a line.

Let us assume that he had founded — that he found it necessary to do so in order to make any sales at all.

But isn’t that the risk?

That doesn’t go to the question of notice, that’s the risk that Mr. Justice Holmes is talking about when he said you’re going to take — calculate the risk of this.

John T. Chadwell:

Well, no sir.

I believe that it goes to the question of notice because I think we’re entitled to have the statute specified that if you sell below a defined cost that you then are violating the first element of the offense and I don’t think the statute does this.

And I urge — (Voice Overlap) excuse me.

Arthur J. Goldberg:

(Inaudible) code of practice under the statute, that type in the field of definition.

John T. Chadwell:

Your Honor, I don’t think it should necessarily mean a code of common practices.

Let us assume that contrary to the legislative history, the Congress did want to legislate in this field of selling below cost, I think that Congress should establish some kind of a standard as to the meaning of cost which a businessman would be enabled to follow intelligently in determining whether he was violating the law or not.

Now, Your Honor knows cost as well better than I am and Your Honor knows very well that there are so many debatable arguments, debatable points as to whether certain indirect cost should be allocated and how they should be allocated.

Arthur J. Goldberg:

Doesn’t that settle everyday in ordinary business practice as well understood and defined in the Court in Small case and where the course of business very well-settled and understand the practice that that is read into the statute?

John T. Chadwell:

Well, Your Honor, it is certainly not a well-settled practice.

Let me take an illustration.

Earl Warren:

Well, you give it after lunch please.

John T. Chadwell:

Yes, Your Honor.

Earl Warren:

— Chadwell, you may continue your argument.

John T. Chadwell:

Mr. Chief Justice, may it please the Court.

At adjournment, Mr. Justice Goldberg, I was attempting to comment upon the question that Your Honor asked or a comment which Your Honor made which was in effect that the Congress doesn’t have to write a detailed code of accounting in the statute, and of course I think that is correct.

We do have — I do — I would like to make two or three comments on that.

First is that if Congress meant to outlaw below cost selling, they didn’t do so, that is they didn’t specifically refer to below cost selling at any time nor does the legislative history indicate that they meant to do so.

And the second is that if the Congress did mean to outlaw below cost selling, I think we’re entitled to some specification as to what is meant by a cost.

Now, that doesn’t mean in any way a detailed specification of course, that would be out of place in the statute.

But assuming that it is meant seller’s own cost which is what the Government contends over here, seller’s own cost even if you look just at the seller’s books and nothing else, doesn’t define what the Congress meant by cost but for the reason that got into my answers to Mr. Justice Black’s question that is, it is very, very questionable as to what cost should mean or would mean unless Congress defines it in a situation of this sort as was said in this Small case.

There is no general understanding as to what a reasonable or unreasonable price is so that the Lever Act will struck down both in its civil aspects and in its criminal aspects in the Small case for that reason.

Likewise, we say here, there is no general business understanding as to what a sale of below cost would mean.

Does it mean the invoice price that the seller paid for the goods?

Does it mean production cost in the case of a manufacturer who has labor cost, material cost and all the rest in his plant?

Does it mean in addition to that that the seller should include overhead cost of the type that are quite controversial which would include general administrative and the like?

Now, the Congress would not have to specify all that but we say they could give some guidelines that would make it reasonably clear what the statute was meant to cover as indeed the states have done and the states had have sales below cost provisions.

But basically, I want to state and reiterate that our position is that there’s no word — nothing about cost in the statute.

If this case comes up in the merits —

John T. Chadwell:

I beg your pardon.

If you lose it, it comes up in the merits.

You said, this still be in front of the (Inaudible) Congress meant.

John T. Chadwell:

Yes, sir.

(Inaudible)

John T. Chadwell:

Well, yes sir, it does.

And if Your Honor please, on that connection, I would like to call the Court’s attention to our brief, pages 82 to 83 in which we have collected all of the cases that have raised the question of vagueness of the statute under the Criminal Appeals Act.

And we state there that so far as we have been able to determine in every case brought to this Court, on direct appeal under the Criminal Appeals Act, after the District Court had held an act of Congress unconstitutional for vagueness.

This Court has looked to the face of the statute and has determined the matter on the face of the statute otherwise, otherwise and we list the cases in there.

The constitutional doctrine of vagueness, it seems to us, could never be decided except after trial and that has not been the case because we are entitled we say to a specification in the statute rather than in the indictment as to what we must do to comply with.

And following what I said to Mr. Justice Goldberg a moment ago when a client consults counsel on a matter of this kind, you’re unable to tell him.

Well, you’ve got to go below production cost.

I mean you’ve got to stay above production cost but you don’t have to worry about fully distributed cost and all of these problems of allocating to particular products.

It is true as Mr. Friedman said that many corporations make a great variety of products.

What sort of overhead must be allocated, some specification in the statute as in the statutes of the states, we contend, should be specified if the Congress meant to outlaw sales below cost.

I would also like to comment for a moment on the rule of reason question which I believe was brought up.

I think Mr. Justice Goldberg referred to it.

+Inclined, the Court, Cline against Frink Dairy, the Court there distinguished the holding of the Nash case which upheld the constitutionality of the Sherman Act.

From Cohen and the price cases, holding that the there has been no ascertainable business standard for the meaning of unreasonably low prices or as there has been a standard for many years both in the common law and of course in the statute law or — and the case law here as to the meaning of the rule of reason in antitrust cases.

That distinction was pointed out clearly in the Cline case and we think it is applicable of course to the situation in the case at bar.

The unreasonably low price clause requires the alleged transgressor to know from the statute what his price ought to be in dollars and cents.

He must be able to determine it whereas under the rule of reason the question is whether competition has been reduced and that is an ascertainable matter which of course is submitted to the jury in those cases where the rule of reason is invoked.

I think the problem we have here on this cost question is illustrated by the position the Government has taken here.

The contrary positions they have taken with respect to cost in their brief.

They say at one point, the Government brief 40, all appellees had to do was to sell above cost being the question as to the meaning of cost, if so they would be safe.

At another point, at Government brief page 37, they say that certain borderline cases may arise where the selling price is above the seller’s cost.

But it is argued that the property is too small for the price to be reasonable which would indicate that the Government itself is uncertain as to whether there could be situations arise where a sale above cost would be claimed by the Government to be at an unreasonable price.

I think I should — I would like to comment in closing that the nonuse of this statute for the 26 years since it has been in effect is it seems to me noteworthy.

The fact of the matter is that this is the first case contested in the courts that has been brought under this statute, the second indictment that has been brought under the statute in the 26 years of its existence.

The first one having been settled and having been brought in 1959, 23 years after the statute was adopted.

To say the least, the fact if its nonuse would indicate that it has not been an important part of the antitrust law.

I also want to make this observation in closing that the cases upon which we rely starting with Cohen, required seems to us, that this statute should be determined on its face to be invalid, to violate the rule against vagueness and that we and Mr. Wise, the individual defendant here as well as the corporation, are entitled to the protection of having that action taken so that he will not be put to trial on an indict — on a statute, the meaning of which at this time and at no time had been made clear to him or to anyone else.

I thank the Court.

Byron R. White:

Mr. Chadwell.

John T. Chadwell:

I beg your pardon, sir.

Byron R. White:

You — you don’t suggest that Section 3 hasn’t been an important consideration in counseling the businessmen in —

John T. Chadwell:

It hasn’t been an important consideration to the Department of Justice or in courts.

Byron R. White:

Well, how about the lawyers and businessmen?

John T. Chadwell:

Are you referring to the third clause?

Byron R. White:

Yes.

John T. Chadwell:

I don’t think that anyone has been able to counsel very well on it.

I know I haven’t been because it has been very uncertain as to what it means.

That has —

Byron R. White:

Which means it probably has been a very important matter in counseling business —

John T. Chadwell:

Well, we’ve had to do our best, as Your Honor knows.

I — of course we do.

But the fact of the matter is that the Department of Justice hasn’t considered it to be an important part of the antitrust laws as my position because they haven’t filed proceedings under it.

It hasn’t been an important part of the antitrust enforcement procedures since its adoption in 1926.

Byron R. White:

But can you say — and you suggest that selling below this statute really gives no businessman or no lawyer a clear message that selling below cost for no reason of it and to destroy competition is a crime.

Does it — you say that you get no notice out of the statute that that is banned?

John T. Chadwell:

Get no notice that selling below cost is in and of itself a violation of the first clause of this clause three, the first element of this clause three, because there are so many instances where selling below cost is perfectly prosecuted.

Byron R. White:

Yes —

John T. Chadwell:

That is —

Byron R. White:

Yes, but I just — but that isn’t my question.

My question is — just what I said it was —

John T. Chadwell:

Yes, sir.

But I am following what I’ve just said, if Your Honor please.

Let us assume that a businessman is — wants to do a number of these things which anyone would say in and of themselves, a perfectly innocent sales below cost such as selling a large stock of merchandise of below cost and let us assume he is doing so for the purposes — for the purpose alleged in the — in the statute for the purpose of eliminating the competitor.

Can he be sure under the statute or is he — does he receive reasonable notice under the statute that the sale below cost is an unreasonable — is an unreasonably low price under those circumstances.

I —

Byron R. White:

That’s similar to the question I asked about meeting the price of the competitor.

John T. Chadwell:

That’s another case, that’s another instance where he could go below cost for the purpose of — for the predatory purpose and yet could he say that that is an unreasonably low price.

He must be enabled to say that in order to form a judgment as to whether he has violated the statute.

And I say that he cannot say that under so many instances including the one of meeting competition, which Your Honor suggests, that the first clause which has to be separated from the intent clause in determining its constitutionality —

Byron R. White:

But — so your answer to the question is apparently that the statute does not give you ample notice that selling below cost for the single and only purpose of destroying a competitor is a crime?

John T. Chadwell:

Yes, sir.

Because there are so many instances where —

Byron R. White:

Well, but your answer is that it gives you no ample notice.

John T. Chadwell:

Correct.

Earl Warren:

Very well.

John T. Chadwell:

Thank you, Your Honor.