Foundation for Later Life Enrichment Fund

ADVISORY OPINIONS Proposed course of action by gerontology research foundation does not qualify for Non-Profit Institutions Act exemption to the Robinson-Patman Act. [File No. 783 7007, Foundation for

Later Life Enrichment Fund, July 19, 1978]
Advisory Opinion Letter
July 19, 1978
Dear Mr. Helfand:

This is in response to your letter of November 7, 1977, requesting advice concerning the exemption to the Robinson-Patman Act provided by the Non-Profit Institutions Act, 52 Stat. 446, 15 U.S.C. § 18c.

The Commission understands that the Foundation for Later Life Enrichment is a_ not-for-profit, non-private foundation, under Section 509(a)(2) of the Internal Revenue Code. The Foundation was created to fund gerontology research. You have advised that, in this connection, it intends to provide high quality goods and services to the aged at low cost.

Certain manufacturers reportedly have agreed to donate products; others will sell to the Foundation at wholesale prices. Your question is whether manufacturers, under the Non-Profit Institutions Act’s exemption, may sell products to the Foundation for resale at prices below wholesale, making the difference in price a donation to the Foundation.

The Non-Profit Institutions Act exempts from the requirements of the Robinson-Patman Act “‘purchases of their supplies for their own use * * * by charitable institutions not operated for profit.” Assuming, but without need to decide, that a gerontology research foundation would come within the class of institutions covered by the Non-Profit Institutions Act, the issue presented is whether the purchase and resale transactions here proposed would constitute purchases of supplies for its “‘own use” by the institution in question. The Commission has concluded that they would not. In Abbott Laboratories v. Portland Retail Druggists Ass’n, Inc., 425 U.S. 1 (1976), the Supreme Court construed the language “for their own use”, when applied to hospitals, to mean “use” that is part of and promotes the intended institutional operation of the hospital in the care of persons who are its patients. The dispensation or sale of

drugs to patients under the hospital’s care, or to persons essential to the hospital’s function, were deemed to be for the hospital’s “own use”. Prescription sales by the hospital to classes of persons such as former patients or walk-in buyers, on the other hand, were deemed not to be within the exemption. As the Court explained: * * * such sales would make the commercially advantaged hospital pharmacy just another community drug store open to all comers for prescription services and devastatingly positioned with respect to commercial pharmacies. This would extend the hospital’s own use concept beyond that contemplated by Congress in 18c. [425 U.S. pp. 17-18.] The Commission does not view the purchase of products for resale to the elderly as in any manner a function integral to the operation, institutionally, of a gerontological research foundation. The question that is presented is not with respect to the status of gifts or contributions nor does it deal with the status of supplies purchased for consumption or use by the Foundation itself or its staff. Although the proposed purchase and resale activity may accrue to the Foundation’s benefit and the proceeds therefrom utilized for its general purposes, that is not enough. The exemption applies only to purchases by a charitable institution not operated for profit, when such purchases are for the institution’s “own use”. The Commission, in this regard, notes the statement by Justice Marshall, in his concurring opinion in Abbott, respecting the Congressional intent:

* * * Congress was primarily interested in directly aiding nonprofit institutions by lowering their operating expenses, but not interested in indirectly aiding such institutions by providing them with the means of raising additional money particularly when such resales of supplies would put the institution in competition with retail business not eligible for exemption * * *. [425 U.S. pp. 22-23.] The Commission, accordingly, does not regard the purchase of products at prices below wholesale, by the Foundation for Later Life Enrichment, for resale at retail to the elderly, exempt from the requirements of the Robinson-Patman Act. The Non-Profit Institution’s exemption is limited to purchases of ‘supplies, by covered

institutions, for their own use.
By direction of the Commission.
Letter of Request
November 7, 1977