United States v. AT&T (D.D.C. 1981)

Law 552 - Antitrust - Instructor: Dwight Drake

United States v. AT&T (D.D.C. 1981)

What products did Western Electric provide Bell Operating Companies?

What had AT&T done to promote the Western Electric bias?

What was AT&T’s defense to the activities of Western Electric?

What was the standard for testing vertical integration? Per se?

What had AT&T done that killed its motion to dismiss?

Did the Consent Decree require divestiture of Western Electric? Why not?

Who was hurt the most by AT&T’s activities of buying from itself through Western? Consumers? Competitors of AT&T? Western Competitors?

What parallels exist between the old AT&T and Microsoft today?


FTC v. Morton Salt Co. (Supt. Ct. 1948)

Basic Facts: Morton Salt offered the same quantity discounts to all wholesalers and retailers. Only five companies were large enough to take advantage of large case price discount. FTC found violation of Clayton 2 price discrimination, and issued cease and desist order. Ct. of appeals set aside order.

What was Ct. of Appeals rationale for setting aside order?

Per Court, was is purpose of Robinson-Patman Act as related to small businesses?

Per Morton Salt, how much injury to competition must be shown to sustain a price discrimination claim under Clayton 2?


FTC v. Morton Salt Co. (1948)

Holding: Reverse and sustain FTC cease and desist order for price discrimination under Clayton 2.

- Robinson-Patman designed to deprive large buyer of price advantages which are not justified by sellers reduced costs.

- Standard quantity discounts are discriminatory under Robinson-Patman whenever have defined effect of competition.

- Burden of proof on cost-savings defense is upon Morton, not government.

- Need not prove actual injury to competition, only that there “is reasonable possibility” it “may” have such effect. Here, it was obvious – inferred.

- Fact that salt is small item relative to all grocery store volume is irrelevant.

- Purpose of Robinson-Patman to protect small businesses.

- Greatly handicap Act to require proof of injury; “reasonable possibility” of injury to competition is self-evident when some customers purchase for less than other customers.


J. Truett Payne Co. v. Chrysler Motors Corp. (Sup. Ct. 1981)

Basic Facts: Chrysler offered Birmingham dealers cash incentives based on number of cars sold in excess of quota, and paid bonuses when quota of

autos had been purchased. P went out of business and sued under Clayton 2 for price discrimination.

What was jury verdict in Dist. Ct.?

What was the issue on appeal to Fifth Circuit? What did Fifth Circuit hold?

What was the Plaintiff’s theory of damages?

Why did the Supreme Court reject the “automatic damages” theory?

Did the Court acknowledge the use of easy, lenient damage rules in antitrust?

Why did the Court refuse to apply the lenient damage rules in this case?


Boise Cascade Corp. v. FTC (D.C. Cir. 1988)

Basic Facts: Boise, as both wholesaler and retailer of office products, received wholesale discounts on all purchases and thus had better pricing than other retailers. FTC held Boise violated section 2(f) of Robinson-Patman. This was petition to D.C. Circuit for review.

Note Statutory summary on top of page 627.

How significant were Boise’s purchases from manufacturers?

How did court view the Morton Salt inference – that substantial price discrimination between competing purchasers over time causes competitive injury?

Why did court believe this inference might be rebutted in this case?

How does the Boise “rebutting inference” holding differ from the “cost justification” and “meeting competition” defenses?


Morton lives on - Boise “Rebutting Inference” Rejected

Texaco Inc. v. Hasbrouck (Sup. Ct. 1990): Held functional discounts to dual distributors illegally discriminated against independent retailers. Arguments based on market competition that favored buyers as wholesalers and complaining buyers as retailers all rejected. Morton Salt presumption of competitive injury applied.

Chrome Lighting v. GTE Products Corp (9th Cir. 1997): Sylvania gave discounts to larger players in lighting market, and P had gone out of business. Court rejected arguments that market was competitive and P had failed to show competitive injury. Strong language about legislative intent to protect individual competitors, not just competition. Rejected primary-line price discrimination standard of Brooke Group that requires showing of threatened injury to competition. Secondary-line cases different because of Clayton Act intention to protect secondary-line competitors. Morton Salt inference may not be overcome by showing of no harm to competition.

Documents

United States v. AT&T (D.D.C. 1981)