Guide to antitrust



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PRICE DISCRIMINATION

There is no necessity for an agreement, combination, association, or conspiracy for any person to be found liable for price discrimination.

In order for a violation to occur, the person accused of price discrimination must have engaged in at least two transactions, crossing state lines. Further, both of these sales must be for “use, consumption or resale” within the United States.

While the statute specifically states that it is unlawful for any person “to discriminate in price between different purchasers of commodities of like grade and quality...” or to knowingly grant or receive a benefit from such discrimination, the case law which has resulted from the statute has broadened the definition of price discrimination and the kinds of transactions which will be included in that definition.

The term “price discrimination” now includes the following types of business practices:

A different price charged to different purchasers. The statute clearly states that a difference in price can only occur when the price difference results from differentials in the “cost of manufacture, sale, or delivery resulting from the differing methods or quantities in which such” goods are sold. Further, price changes are allowable when they result from “changing conditions affecting the market for or the marketability of the goods concerned” [15 USC ‘ 13(a)].

Differences in terms and conditions of sale. Granting one purchaser free freight while charging freight costs to another purchaser is discriminatory. Charging one price for goods “delivered” to a customer and charging the same price for goods “delivered f.o.b. terminal” has been found to be discriminatory.

Preferential credit terms. Requiring one dealer to pay C.O.D. while granting another dealer credit terms can support a price discrimination claim. Likewise granting different credit terms to similar customers can be found to be discriminatory pricing. However, any person is entitled to extend different terms to competing purchasers as long as the credit decision is made in a nondiscriminatory manner so that the same standards of credit worthiness are applied to all customers who compete with each other. For example, history of late payments and financial difficulties are sufficient business justification for denial of credit.

It is all too simple for credit executives to believe themselves to be immune from antitrust responsibilities. It was generally believed to be the sales department that would be culpable for antitrust activity. The courts believe differently. Through the years of case law, the courts have come to hold one doctrine to be true, time and time again. That doctrine is that CREDIT TERMS EQUALS PRICE.





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