Federal Trade Commission v. Fred Meyer, Inc.

1968-03-18

Headline: Promotional payments favoring a big chain are unlawful when suppliers deny comparable terms to competing independent retailers; Court reverses appeals court and extends protection to retailers buying through wholesalers.

Holding: The Court held that Section 2(d) covers retailers who buy through wholesalers, so suppliers that give promotional allowances to direct‑buying chains must make comparable terms available to competing retailers, and the appeals court judgment is reversed.

Real World Impact:

Protects small retailers who buy through wholesalers from discriminatory promotional payments.
Requires suppliers to offer comparable allowances to retailers competing with direct‑buying chains.
Remands to the FTC for order modification and further proceedings.

Topics: price discrimination, retail competition, promotional allowances, chain stores

Summary

Background

Fred Meyer is a Portland area chain of 13 supermarkets that ran annual coupon-book promotions featuring dozens of reduced-price items. Suppliers paid Meyer at least $350 for each coupon page and sometimes gave discounts, free replacements, or cash redemptions. The Federal Trade Commission found that these payments and reductions gave Meyer an unfair advantage and violated sections 2(a) and 2(d) of the Robinson‑Patman Act. Two suppliers named in the record were Tri‑Valley and Idaho Canning; two wholesalers were Hudson House and Wadhams. The Ninth Circuit disagreed with the Commission’s reading of §2(d) and set aside part of the Commission’s order, prompting the Supreme Court to review the statute’s scope.

Reasoning

The central question was whether §2(d) requires suppliers who give promotional allowances to a direct‑buying retailer to make comparable allowances available to competing retailers who buy through wholesalers. The Court held that “customers” under §2(d) include such competing retailers, not only the direct buyer or the wholesaler, so suppliers who favor a direct‑buying chain must make comparable terms available to those competing retailers. The Court emphasized competition among resellers at the same functional level and rejected the Ninth Circuit’s narrower test that required direct dealing or tracing of goods through wholesalers. The Court reversed the Court of Appeals on this point and remanded for modification of the Commission’s order.

Real world impact

Independent retailers who obtain goods through wholesalers now have statutory protection against promotional payments that favor chains. Suppliers and chains must adjust promotional programs or ensure wholesalers pass on comparable benefits. The decision is an interpretation of the statute and the case is remanded to the Commission for further proceedings and order revision, so additional implementation steps will follow.

Dissents or concurrances

Justice Fortas concurred, stressing practical arrangements that treat the wholesaler and retailer as a unit and allowing wholesalers to administer programs so retailers can participate. Justices Harlan and Stewart dissented, warning about practical burdens, antitrust complications, and lack of notice to respondents under the novel construction.