85 F.T.C. legal consequences of particular departures from that system. The Commission's opinion, accordingly, neither operated to approve or disapprove the premises on which the matter was presented. The opinion, moreover, did not foreclose the possibility that means to insulate against or avoid illegal discrimination, might be devised. No such measures were subsequently proposed to the Commission however. In the period following the Commission's 1967 General Foods advisory opinion, it became increasingly apparent that the opinion was being divergently interpreted by the business community as well as other interested individuals and groups. On the basis of representations by a number of interested parties, including the Cost of Living Council and National Commission on Productivity, the Federal Trade Commission very carefully reviewed and reconsidered the matter. On Dec. 26, 1973, it issued a statement to clarify Advisory Opinion No. 147. Many of the same points that you advanced also concerned the Commission. For example, you observed: Nowhere in the Opinion, however, is there any consideration as to whether the "delivered price" system may have anti-competitive or anti-consumer effects by disallowing the implementation of efficiencies which may lower prices to consumers. In fact, nothing in the Robinson-Patman Act or Section 5 of the Federal Trade Commission Act requires use of a "delivered price" system or prevents the supplier from selling goods "F.O.B. plant" ***. The Commission, in its clarifying statement of Dec. 26, 1973, addressed some of these very concerns. It announced its intent to scrutinize delivered price systems in the food products industry in order to determine whether they are unfair to customers or to ultimate consumers, and thus violate Section 5 of the FTC Act. It additionally announced in that connection that it intended to develop empirical information on the impact of delivered price systems on food prices. Such an investigation was, accordingly, directed by the Commission. In its clarifying statement, the Commission also sought to make it clear that although the granting of "backhaul" allowances (based on the customer's actual freight costs) by a seller using a uniform zone delivered pricing system could indeed raise Robinson-Patman questions, a nondiscriminatory option offered by such a seller to all customers to purchase at a true f.o.b. shipping point price, would not. Some unfortunate confusion has arisen as a result of the Commission's use of the term "true f.o.b. shipping point price." In fact, no question of unlawful discrimination would arise so long as the f.o.b. price is (1) uniform and (2) available to all customers on a nondiscriminatory basis. No legal requirement exists that the alternative f.o.b. price be of any particular amount or computed in any particular way. The availability to customers of such an option would preclude any 1173 legally recognizable competitive injury resulting from any customer's election to purchase at the higher “delivered” price. Antitrust enforcement is premised on the concept that the selfregulating forces of competition are preferable either to government regulation, on the one hand, or private utilization of economic power, on the other, applied to gain control over, or to apply anticompetitive strictures within, competitive markets. Antitrust, therefore, targets trade practices falling within the latter category. Neither the Commission's Advisory Opinion No. 147 nor its clarifying statement of Dec. 26, 1973 are viewed by the Commission as being "regulatory" in nature. The Commission's investigation of the food products industry is actively in progress. That investigation is at once multi-faceted and complex. Included within its compass is the impact on prices and the fairness to customers and to ultimate consumers of delivered pricing systems operative in the food products industry. It is not possible at this stage of investigation to specify final completion dates for various phases of this investigation. If and as constraints of an antitrust nature may be disclosed, however, the Commission will take direct and affirmative action. If no such constraints are disclosed, it is not contemplated that the Commission would take any action which would serve to encroach upon the traditional prerogative of sellers to unilaterally determine their own prices and terms of sale. By direction of the Commission. Letter of Request Nov. 8, 1974 Dear Mr. Chairman: This is a request, in accord with your highly commendable speech in Detroit last Oct. 7, for the Commission to take action to eliminate government-mandated waste in the transportation of goods. As you stated in your Detroit speech, "By the time you get a piece of meat from the pasture to the plate, it carries with it numerous transportation charges." Consumers end up paying these charges, whether they are included in the price of meat for dinner or in the price of ball bearings, metal tubing, electronic devices and other components contained in the refrigerator we use to store that piece of meat. The Federal Trade Commission's Advisory Opinion No. 147 is a form of government regulation which mandates the kind of waste in transportation which increases the price of the hypothetical piece of meat (and the refrigerator). We hereby request, therefore, that the Commission repeal Advisory Opinion No. 147 and issue a policy 589-799 O 76 75 85 F.T.C statement approving the kind of discount for backhauling which the Opinion now prohibits. Advisory Opinion No. 147, released Oct. 24, 1967, prohibits a company from receiving any discount from a supplier's "delivered price” if that company uses its own trucks to haul purchased goods from the supplier's warehouse or factory - even though (1) the company may be able to haul the goods more cheaply than the common carrier, and/or (2) the company may realize substantial savings by hauling the goods in trucks which will be in the supplier's vicinity in any event and which now return to the company garage empty because Opinion No. 147 makes such backhauls illegal. In effect, the Advisory Opinion mandates the wasteful empty return trip plus any savings the company may be able to realize over the cost of carrier transportation. This is precisely the kind of waste which your Detroit speech highlights as inflationary, and this is an opportune time for the Commission to eliminate this cause of waste of transportation facilities and motor fuel resources. The Advisory Opinion, in fact, concedes that the conclusion it reaches "may seem unreasonable from one point of view" but determines that this conclusion is a necessary result of the supplier's use of a “delivered price" system. Nowhere in the Opinion, however, is there any consideration as to whether the "delivered price" system may have anti-competitive or anti-consumer effects by disallowing the implementation of efficiencies which may lower prices to consumers. In fact, nothing in the Robinson-Patman Act or Section 5 of the Federal Trade Commission Act requires use of a "delivered price" system or prevents the supplier from selling goods "F.O.B. plant" and adding a transportation charge to those customers which utilize common carriers for transportation. The net result is simply an absoluté disincentive to efficiency. I hope that the Commission will be able to act on this request expeditiously and favorably, in the consumer's interest. Sincerely, /s/ Mark Silbergeld Supplemental Letter of Request Dec. 12, 1974. Dear Mr. Chairman: On Nov. 8, 1974, I wrote to you regarding the Commission's Advisory Opinion No. 147, which appears to mandate certain inefficiencies in 1173 industrial transportation, while implementing Section 2(a) of the Robinson-Patman Act, as interpreted by the Commission. While awaiting your reply, I have discovered a Dec. 26, 1973, F.T.C. news release which "clarifies" Opinion 147, seemingly by authorizing the establishment and use of true "F.O.B. factory" prices by sellers which continue to use zone delivered pricing systems. The Dec. 26 statement continues, however, to prohibit allowances for backhaul. The statement also discloses the Commission's stated intent to: 1. Scrutinize delivered pricing systems in the food products industry in order to determine whether they are unfair to customers or to ultimate consumers, and thus violate Section 5 of the F.T.C. Act. 2. Develop empirical information on the impact on food prices of such delivered price systems which will enable it to make this determination. In view of continuing double-digit food inflation, the outcome of these inquiries is, obviously, of great interest and significance to consumers. Therefore, I would appreciate it if, in your forthcoming reply to my original letter, you could indicate some approximate target date by which the Commission anticipates that it will be able to take some action on or make some disposition of the delivered pricing system inquiry. I look forward to your reply with interest, and appreciate your attention to this matter. Sincerely, /s/ Mark Silbergeld Collection and distribution of cost production statistics from and to members in the printing industry. (Docket 459 - United Typothetae of America, et al., 6 F.T.C. 345) Opinion Letter Mar. 24, 1975 Dear Mr. Fellman: The Commission has considered the request in your letter of Dec. 19, 1974, for advice as to whether your client, Printing Industries of America, Inc. (hereinafter referred to as “P.I.A."), may engage in a proposed course of action without violating the cease and desist order issued by the Commission in the above-captioned matter on Aug. 17, 1923. Your letter states that your client, P.I.A., is the successor to United Typothetae of America. 589-799 O 76 76 85 F.T.C. From your letter, it appears that P.I.A. proposes to collect certain statistics and disseminate them to the industry it represents. The proposal is referred to as the "Budgeted Hourly Cost Program” and will be available to both P.I.A. members and non-members. The program will include three basic features: (1) seminars; (2) collection and dissemination of information; and (3) providing computerized data services. In regard to (1), P.I.A. will hold a series of regional educational seminars to acquaint printers with the realities of cost accounting techniques as applied to the printing industry and inform them of the "Budgeted Hourly Cost Program." The seminars will be designed to sell printers the value of accurate cost accounting. In regard to (2), members joining the program will provide basic cost data. This data will be compiled on a regional basis and average regional costs will be developed. Such costs will be returned to the members for comparison purposes. In regard to (3), P.I.A. will transmit the sheets containing the members' basic cost data to a computer service company for processing. P.I.A. will receive back a printout by the computer of the Budgeted Hourly Cost Comparison Sheets. These sheets will be distributed to the regional affiliate association of members. P.I.A. will encourage the affiliates to hold their own educational seminars in conjunction with the distribution of the sheets. Thus, industry members will be provided “with a method of accurately computing their own costs of operation and with a means of comparing an individual company's cost with an average of the costs that have been reported in the geographic region in which the industry member competes." The order in Docket No. 459, inter alia, prohibits respondent: 2. From requiring or receiving from members and others using respondents' uniform cost accounting system, identified and itemized statements of production costs for the purpose of calculating average, normal or standard costs of production and from publishing them to members and the trade generally as "Standard Price List" or "Standard Guide" or association cost or price list under any other name. On the basis of the facts submitted, you are advised that the Commission is of the opinion that the operation of proposed "Budgeted Hourly Cost Program," particularly the publishing or dissemination to members and others of average costs of production, would violate the order issued in this matter. By direction of the Commission. Dec. 19, 1974 Dear Sir: Letter of Request With Exhibits We are writing to you on behalf of our client Printing Industries of America, Inc., 1730 North Lynn Street, Arlington, Virginia 22209, and |