Uo 909 Proposed trucking allowance program of food and grocery seller would not violate the Robinson.Patman…

ADVISORY OPINIONS "Uo

Proposed trucking allowance program of food and grocery seller would not violate the Robinson.Patman Act or the Motor Carrier Act of 1980. (813 7002, Procter Gamble Co.

July 29, 1981

Dear Mr. Hemminger:

This is in response to your request, contained in your letters dated September 2 1980, March 18, 1981, and April 16, 1981, on behalf of the Procter & Gamble Company (P & G), for an Advisory Opinion pursuant to Sections 1.1-1.4 of the Federal Trade Commission Rules of Practice and Procedure, 16 C. R. ** 1.1-1.4(19801. Specifically, you set forth P & G' s intention to offer customers, who elect to pick up certain P & G products at specified P & G shipping point plant locations, hauling allowances that would be deducted from P & G's uniform delivered price. The Commission nnderstands that these allowances would be offered on certain P & G products on an experimental basis, rather than on every product sold by the company, although P & G intends that, if results of the experiment are favorable, it would expand the allowance program to other products. You have requested that the Commission advise you of the legality of instituting P & G's allowance program in relation to Section 2 of the Clayton Act, as amended by the Robinson-Patman Act, 15 U. C. 13 (1970), and to Section 8 of the Motor Carrier Act of 1980, Pub. Law 96-296, 94 Stat. 798 (July 1 1980) ("Section 8" In reviewing your request, the Commission has concluded that Section8 appears to be a limited exemption from the Robinson-Patman Act, as that statute was interpreted by the Commission in Advisory Opinion No. 147 72 F. C. 1050 (19671 (digest). Section 8 appears to permit a limited class ofsellers- sellers of food and grocery products" - to engage in practices similar to those the Commission believ, in Advisory Opinion No. 147, might violate the Robinson-Patman Act. The Section 8 exemption applies, however only if all of that statute s other requirements are met.

The Commission has carefully reviewed your Request in light of the applicable statutes and has concluded that the allowance program P & G intends to institute would appear, based on the facts you have supplied in support thereof, to be consistent with the terms of

, Although Section 8 does not (tssign OInyenforcement responsibilities to the FTC. the Commission believes that it hils authority to interpret Section 8 by virtue of its effect on the Robhu\On.PatmanAct amendments to the Clayton Act, II statute which the Commission has the authority and obligation to enforce. 15C. 21(a) (1970). The legislative history of Section 8 recognizes Congress ' desire to have the Commission continue to enforce effee. tively the RobinsoJ1 PlltlIlln Act.

98 F.

the Section 8 exemption to the Robinson- Patman Act:

(1) P & G appears to be a "seller of food and grocery products who wil offer allowances with respect to "purchased food and grocery products." The products on which it intends to offer allowances-Downy and Bounce fabric softeners, Biz detergent and Comet cleanser-are prodncts sold primarily in grocery stores. In this connection, the Commission would point out its view that P & G could fall outside the Section 8 exemption if it offered allowances otherwise conforming to that statute on products that are not sold primarily in grocery stores, notwithstanding the fact that in terms of other products, P & G is a " seller of food and grocery products." Allowances under Section 8 may be offered only with respect to "purchased food and grocery products.

(2) The allowances P & G intends to offer would appear "not to exceed" P & G' s "actual cost" of delivery to a particnlar customer.

This conclusion is based solely on data snpplied by P & G in support of its request, comparing proposed allowances and actual costs on a customer-by-customer basis, for customers in Ilinois and the St. Louis metropolitan area. These data, for pnrposes of this conclusion have been assumed to be true for these customers and, moreover representative for all P & G customers wherever they are located. The Commission wonld caution that this conclusion is based solely on these assumptions. Should P & G offer allowances that in some cases do exceed the actual cost P & G would have incurred to deliver, such allowances, of course, would fall outside the scope of the Section 8 exin this connectionemption. The Commission would add, however, that P & G's plan to reevalnate the dollar value of its allowances as costs change over time appears consistent with Section 8. 131 P & G' s intended allowances would seem to be "available to all customers.

P & G has averred in its request and a subsequent submission that it intends to offer allowances to all customers, regardless of their retail trade identification as operators or snppliers of grocery stores drug stores, general merchandise retail stores, and so forth. This would seem to be required by Section 8, the terms of which do not modify or limit the word "customer. " This term, to be generally consistent with other laws administered by the Commission, simply ADVISORY OPINIONS 911

means any person who purchases from P & G for resale. Also P & G's intention to "broadly announce" its allowances is helpful to meet Section 8's availabilty test.

(4) P & G's allowances, as calculated by uniform application of a formula under which the amount of allowance on identical quantities of products varies only by distance traveled by the customer are "nondiscriminatory" in application, as that term is used in Section 8.

The Commission understands the term "nondiscriminatory" in Sec. tion 8 to mean, in part, that customers located the same distance from the shipping point ("similarly situated") should receive equal allowances, all other things being equal. The uniform application of P & G's single-mode allowance formula would appear to result in equal allowances for similarly situated customers. In addition, the Commission would point out that P & G' s intention to see to it that customers actually travel the distance they specify is consistent with Section 8' s requirements that compensation be not in excess of actual cost and that compensation be on a nondiscriminatory basis. Sellers should be encouraged to engage in this type of oversight, so long as it, too, is conducted on a nondiscriminatory basis, to guard against overcompensation and the potential for discriminatory allowances to which some but not all customers wonld be entitled and which might be hidden in inflated customer reports of distance to be traveled. Furthermore, P & G' s intention to permit customers to designate one shipping point for pick up and another for calculation of the distance component of the allowance formula appears acceptable only if the resulting calculation is based upon the distance from the closer shipping point. P & G's program clearly would fall outside the Section 8 exemption if cnstomers were permitted to pick up at a nearby location and receive an allowance calculated by reference to a more distant shipping point. Such a practice would appear to result in discriminatory allowances to certain customers and, moreover, might lead to the conclusion that P & G uses a "basing point" pricing system rather than a system of uniform delivered prices. (5) P & G's plan to make pick-up allowances available on truckload quantity shipments does not . appear to make those allowances "unavailable" to an identifiable class of customers of food and grocery products.

98 F.

P & G intends not to permit customers to pick up or receive any allowances on less-than-truckload (LTL) quantity shipments. In support of this intention, P & G has presented information which tends to show that about 90% of its shipments at present are in truckload lots and, further, that the remaining 10% of LTL shipments arise from a variety of reasons, among them P & G' s inabilty to fil a truckload order resulting in L TL shipments to customers who ordinarily purchase in truckload lots and a customer-who can otherwise purchase in truckloads-choosing to purchase L TL for its convenience. In addition, P & G has submitted its views that virtually all retail grocery stQres are either operated hy or supplied by grocery distribution centers (whether operated by retail grocery chains or independent grocery wholesalers or retailer-owned cooperative wholesalers) which have the ahilty to, and normally do purchase in truckload quantities to obtain the best price and maintain optimum inventory levels and which, moreover, have the capabilty to take advantage of P & G' offer of truckload allowances.

For purposes of this Advisory Opinion, consistent with the Commission s Rules, the Commission is prepared to accept these assertions as given. Thus, these asserted facts form the basis for the Commission s belief that P & G's plan to limit allowances to truckload quantities is consistent with Section 8's requirement that compensation be made available to all customers on a nondiscriminatory basis. This conclusion might not hold true, however, if it appeared that an identifiable class of customers lacked the capabilty ever to purchase in truckload quantities.' Under those circumstances , some form of allowance might be required for L TL shipments to meet Section 8' availabilty" test. The Commission expresses no view as to whether P & G's assumptions may be true outside the recognzed food and grocery distribution industries.

Your letter with its attached exhibits requesting this Advisory Opinion has been placed on the Commission s public record, in accordance with Section 1.4 of the Commission s Rules, 16 C. * 1.4 (19801. Your separate request for continuing confidential treatment of Exhibit C of your Advisory Opinion request, pursuant to Rule 1.4, has been considered by the Commission. The Commission wil not disclose Exhibit C without giving P & G ten days advance notice of intended disclosure, as required by Section 6(f) and Section 21(c) of the Federal Trade Commission Act, as amended, 15 U. 46(f), 57b-2(cl.

By direction of the Commission.

I Sw, fot lImple Universal-Rundle Carp. 65 r. C. 924 (1964).