text:
T. Justin Moore, Richmond, Va., and David W. Robinson, Columbia, S.C. (W. C. McLain, Arthur M. Williams, Jr., Columbia, S.C., George D. Gibson, John W. Riely, Richmond, Va., Robinson, McFadden & Dreher, Columbia, S.C., and Hunton, Williams, Gay, Moore & Powell, Richmond, Va., on brief), for petitioner S.C. Generating Co.
Irvine F. Belser, Asst. Atty. Gen. of South Carolina (T. C. Callison, Atty. Gen. of South Carolina, on brief), for petitioner S. C. Public Service Commission.
William H. Schroder, Atlanta, Ga., and William C. Chanler, New York City (Troutman, Sams, Schroder & Lockerman, Atlanta, Ga., and Winthrop, Stimson, Putnam & Roberts New York City, on brief), for respondent Georgia Power Co., movant for intervention.
Theodore French, Atty., Federal Power Commission, Washington, D.C. (Willard W. Gatchell, Gen. Counsel, and Howard E. Wahrenbrock, Solicitor, Federal Power Commission, Washington, D.C., on brief), for respondent Federal Power Commission in both Cases.
South Carolina Generating Company and the South Carolina Public Service Commission filed these petitons for review of an order of the Federal Power Commission reducing rates on the wholesale purchase of electric energy established in a long-term contract negotiated at arm's length in interstate commerce between the Generating Company, the selling utility, and the Georgia Power Company, the purchasing utility.
The Generating Company is a South Carolina corporation formed to construct and operate a steam electric generating station known as Plaint Urquhart, located near North Augusta, South Carolina, on the Savannah River. The Urquhart plant as originally built had a rated capacity of 150,000 KW made up to two 75,000 KW generators. The entire capital stock of the Generating Company is owned by the South Carolina Electric and Gas Company (E & G), a South Carolina electric utility, which distributes and sells electric energy in a large area of South Carolina. Georgia Power Company (Georgia Company), an intervenor here, generates and distributes energy throughout the State of Georgia. The South Carolina Public Service Commission is charged with general utility regulation within South Carolina; its counterpart in Georgia is the Georgia Public Service Commission, a respondent in both cases.
E & G, in common with most other utilities in the electric power industry, experienced a substantial increase in business during the post-war years, and during this period had frequently been confronted with the necessity of adding to its generating capacity. In the summer of 1950, plans were being studied for the purpose of locating additional facilities for E & G in its service area in the western central portion of the state, special consideration being given to a site near Brancheville, South Carolina, and certain plant equipment was on order for delivery in August, 1952. Before final plans were completed and a definite site chosen, the Atomic Energy Commission announced that the Savannah River Hydrogen Bomb Project would be located about fifty miles west of the Brancheville site under consideration. The location of the project in E & G's service area would be of substantial economic benefit to the utility, since the Project would require large quantities of dependable energy and would bring with it additional commercial and residential consumers. Accordingly, E & G advised E. I. du Pont de Nemours and Company, prime contractor for the A.E.C., that it was prepared to construct additional facilities in the area of the proposed Project which could supply the A.E.C.'s power requirements. The initial rates proposed by E & G during negotiation were rejected by du Pont as excessive. Lower rates, however, would have been impossible under conventional utility financing, since E & G's mortgage, like most utility mortgages, restricted bonded indebtedness to 60 per cent of the total of any property additions. Money to finance the proposed power facilities was needed at a low cost in order to make possible the low rates required by du Pont. To overcome this obstacle, the Generating Company was formed by E & G for the purpose of financing construction of the steam generating station at Urquhart, which could supply the required capacity to A.E.C. The new corporation was financed on a debt ratio of 90 per cent-- 75 per cent in mortgage bonds, 15 per cent in ten-year notes, and the remaining 10 per cent in common stock which was purchased by E & G. This high debt financing provided money at a low cost and made possible lower rates to A.E.C., and consequently, du Pont agreed to accept a capacity of 30,000 KW from one of the generating units to be constructed at the new plant. The financing of the Generating Company was made possible by certain commitments and guarantees of E & G hereinafter more fully described.
The Georgia Company at about the same time was also in need of additional power and was contemplating the construction of a one unit steam station near Augusta, Georgia, on the Savannah River across from the Urquhart site. Officials of E & G notified the Georgia Company of their plans to build the two unit 150,000 KW capacity at Urquhart, financed through the Generating Company. Both utilities instituted independent cost studies to determine whether the cost of purchasing the required capacity for the Augusta area from the Generating Company would result in savings to the Georgia Company over the costs entailed in constructing their own facilities to supply the additional capacity. Thereupon, on November 19, 1951, after some negotiation, a long-term contract for the sale of the capacity of one of the 75,000 KW units to be built at the Urquhart plant was entered into between the Georgia Company and the Generating Company. On the same day, E & G contracted to purchase the remainder of the capacity of the other unit not required by the A.E.C., amounting to 45,000 KW. Nearly a year and a half later, on March 9, 1954, after the Urquhart plant was put into operation, du Pont executed a contract with the Generating Company for the purchase of 30,000 KW to which E & G was made a party.
The Georgia Power contract, the one in issue here, is for a period of teenty-five years, and provides for a two-part rate consisting of an energy charge and a capacity charge. The energy charge, which is not in dispute, is based upon fuel and maintenance costs plus taxes not related to income and is established initially in the contract at the rate of $.00315 per KWH. The capacity charge, computed on a KW basis, is divided into three components. The first is a finance component designed to provide interest and amortization of the 90 per cent debt in twenty-five years and an 8 per cent return on equity, and results in a figure of $10.50 per KW per annum. The second is an operations component including operating, administrative, and general expenses not included in the energy charge, which amounts to $4.80 per KW per annum. The total of these components constitutes the basic capacity charge of $15.30 per KW per annum. To this basic capacity charge is added the third component, a fixed charge of $7.20 per KW per annum, which does not relate to any costs on the books of the Generating Company but was designed to divide equally between the Generating Company and the Georgia Company the savings accruing to the Georgia Company from the agreement as compared with the costs of construction and operation of a generating station of its own. Thus, the contract provides for a total capacity of $22.50 per KW per annum.
The net savings to the Georgia Company as a result of this contract were estimated at $5.38 per KW per annum in capacity costs, or a total of $403,500.00 per annum. Annual savings in respect of the fuel or maintenance were estimated at between $175,000.00 and $200,000.00. Thus total savings to the Georgia Company through the purchase of its requirements from the Generating Company amounts to approximately $600,000.00 each year.
Among the other provisions of the contract is an article which subjects the capacity charge to an escalation formula for variations between the estimated and the actual investment and between the estimated and the actual expenses and taxes. Similar provisions are made in regard to the energy charge. In addition, a 'recapture clause' provides that upon twelve months' notice the Generating Company may reduce the total contract capacity of the Georgia Company by 25,000 KW, and on thirty months' notice it may terminate the agreement and recapture the entire contract capacity. In the event of an outage of one of the two units at Plant Urquhart, the Georgia Company is guaranted by the contract one-half of the capacity of the remaining unit (37,500 KW).
The du Pont contract, like the Georgia Company contract, provides for a basic capacity charge of $15.30 per KW per annum, but contains an additional fixed charge of only $3.70 per KW, resulting in a total capacity rate of $19.00 per KW per annum. The contract with the parent company, E & G, provides for a total rate of $15.30 per KW per annum with no additional fixed charge. Both contracts have escalation provisions similar to that contained in the Georgia Company contract, but neither the du Pont nor the E & G contract contains a 'recapture' provision. To secure the power requirements of the A.E.C. the parent company, E & G, was made a party to the du Pont contract, along with the Generating Company, and gave certain performance guarantees to du Pont. It was necessary for E & G to make improvements on its transmission system to insure high quality service. In addition, A.E.C.'s requirements of 30,000 KW are guaranteed by E & G in the event of an outage of one or both of the units at Plant Urquhart, except in a situation where an outage of both units occurs through a force majeure.
The Georgia Power contract, the only one of the three within the jurisdiction of the Federal Power Commission, was filed with the Commission and accepted for filing on October 1, 1953. On October 29, 1954, an order was issued by the Commission initiating a proceeding whereby the Generating Company was required to make a showing of facts necessary for the Commission to determine whether or not the rates agreed upon with the Georgia Company were just, reasonable and non-discriminatory. A hearing was held and testimony was taken. In addition to the testimony of expert witnesses supporting the fairness of the contract on behalf of the Generating Company, officials of the Generating Company, E & G, and the Georgia Company testified as to the advantages of the contract to both contracting parties. Two witnesses testified on behalf of the Federal Power Commission. Representatives of the South Carolina Public Service Commission entered an appearance expressing approval of the contract, while a representative of the Georgia Public Service Commission took the position before the Commission that the contract was discriminatory and unfair. The Presiding Examiner, in a written report, upheld the contract as not unjust, unreasonable or discriminatory. The Commission staff filed exceptions to the examiner's report and oral argument was heard. The Commission, one Commissioner dissenting, set aside the findings of the Presiding Examiner, taking the view that the contract rate would provide revenues to the Generating Company in excess of the cost of service, including a fair return upon the amount prudently invested. Accordingly, the Commission made the finding that the contract rate for service to Georgia Power was in excess of a just and reasonable rate and was unjust and unreasonable, and reduced the rate from $22.50 per KW per annum to $21.948 per KW per annum, and also nullified the escalation provision as applied to the capacity charge.
The principal attack upon the order of the Commission is directed against its power to set aside the rate fixed by the contract between the utilities and to impose a new rate based upon the cost of service designed to produce a fair return upon the amount prudently invested. It is pointed out that the contract between the Generating Company and the Georgia qpower was negotiated at arm's length and was advantageous to both parties. It enabled the corporate system, composed of E & G and the Generating Company, to secure a needed source of additional power and to sell at wholesale a portion of the product at substantial profit, and to use the remainder to supply its consumers in South Carolina at reasonable terms. At the same time, the arrangement furnished Georgia Power a dependable source of energy at a cost much less than would have been incurred by building an additional plant, so that its retail consumers in Georgia were also benefited. Hence it is said that the Commission was obliged to approve the contract and had no power under the Federal Power Act, 16 U.S.C.A. 791a et seq. to substitute a lower rate based upon the cost of service, even though it would produce a reasonable return upon the amount invested.
The contention is based upon the companion decisions of the Supreme Court in United Gas Pipe Line Co. v. Mobile Gas Service Corp., 350 U.S. 332, 76 S.Ct. 373, 100 L.Ed.2d 373, and Federal Power Commission v. Sierra Pacific Power Co., 350 U.S. 348, 76 S.Ct. 368, 100 L.Ed. 388, in both of which the Court set aside an order of the Federal Power Commission raising the rate for supplying energy prescribed in a contract between the utilities. In the Mobile case the question arose under 4(c), (d) and (e) and 5(a) of the Natural Gas Act, 15 U.S.C.A. 717 et seq., which gives the Federal Power Commission supervision of the rates of natural gas companies. The case involved a long-term contract between a natural gas pipe line company and a distributing company. The contract fixed a substantially lower rate for gas to be supplied to a particular consumer than was charged for other gas. The purpose was to induce a manufacturer of cement to build a plant in Mobile. Subsequently the pipe line company, without the consent of the distributing company, filed new schedules more closely approximating the rates charged for the gas furnished to other consumers and the new schedules were put into effect with the consent of the Commission. This action was disapproved by the Supreme Court, which held that the Natural Gas Act did not give natural gas companies the right to change their contracts unilaterally, and that the Commission had no power to modify the contract rate unless it should find it would be 'unjust, unreasonable, unduly discriminatory or preferential' (350 U.S. 348, 76 S.Ct. 369) under 5(a) of the statute.
The Sierra case arose under 205(c), (d) and (e) and 206(a) of the Federal Power Act, which are substantially similar to the corresponding sections of the Natural Gas Act. There was involved a contract for the supply of electric power by a producer to a distributor at a special low rate which was fixed to forestall competition from another source. Later, when power from this other source was no longer available, the producer filed a new rate with the Commission increasing the cost to the distributor by 28 per cent and the Commission approved the new rate after finding upon investigation that it was not unjust, unreasonable, unduly discriminatory or preferential. Assuming that this finding was equivalent to a finding that the contract rate was unreasonable, the Supreme Court nevertheless set aside the order of the Commission, since it did not appear that the old rate was so low as to affect adversely the public interest.
From the discussion in the Mobile case we learn that the Commission is not empowered by the Natural Gas Act to fix the rates initially. Under the statutory scheme all rates are established initially by the utilities, by contract or otherwise, and all rates are subject to modification by the Commission upon a finding that they are unlawful. The basic duty is imposed on the utility by 4(c) and (d) of the Gas Act (and by 205(c) and 205(d) of the Power Act) of filing with the Commission rate schedules and contracts in force and all changes in such schedules. This scheme differs from that prescribed by the Interstate Commerce Act, 49 U.S.C.A. 1 et seq., under which all rates to shippers must be uniform and no provision for individual contracts is made. The basic powers conferred upon the Commission by 4(e) and 5(a) of the Gas Act and 205(e) and 206(a) of the Power Act) are to review the rates and contracts made in the first instance by the utilities and, if they are found to be unlawful, to determing a just and reasonable rate to be thereafter observed.
It was held that this procedure precludes a producer from changing contracts unilaterally to serve its own private interest, but affords an avenue of relief when the interest of the producer coincides with the public interest. In such case the utility has the right to complain and ask the Commission to investigate the rate, and if it finds after hearing that the contract rate is so low as to conflict with the public interest, it has authority to increase the rate.
It is now contended that these rulings demonstrate that the Commission had no power to set aside the agreed rate and to impose a new rate based on the cost of service in accordance with the orthodox methods of rate making in utility cases. It is argued very strongly that the contract was beneficial to the South Carolina area, since it furnished the E & G system with an adequate supply of energy under advantageous terms and thus enabled it to serve its South Carolina consumers at a reasonable cost, and also was beneficial to the Georgia area, since it furnished the Georgia Power Company with energy at a cost below that which a plant of its own would have entailed and enabled it to serve its retail consumers at a reasonable cost. Hence it is said that the contract did not adversely affect the public interest.
The argument seems to have great logical force but on examination it soon appears to be an attempt to generalize from a particular situation without recognizing the significant difference in the facts in the pending case. The Supreme Court was dealing with rates, too low to permit an adequate return according to accepted standards, which had been adopted to serve the interest of the producing utilities-- in the Sierra case for the purpose of cutting off competition-- but the public interest was served by the lower cost to the ultimate consumers. The practical effect of the decision is to compel contracting utilities to abide by their agreements unless it is shown that the agreed rate is so low 'as to * * * impair the financial ability of the public utility to continue its service, cast upon other consumers an excessive burden, or be unduly discriminatory.' These quoted clauses form the cornerstone of the utilities argument, but it is plain that they are directed to rates too low to be ordinarily imposed.
In the pending case, to the contrary, we are dealing with a rate that was too high according to accepted standards of rate regulations. When the rate was filed the Commission had the power under 205(e) of the statute to enter upon a hearing on its own initiative concerning the lawfulness of the rate; and in doing so it obviously acted within the scope of its authority. Consequently, the primary question before us is not whether the Commission had the power to act but whether its finding that the contract rate was unreasonable was supported by substantial evidence on the whole record. See the review provisions of the Federal Power Act, 16 U.S.C.A. 825l(b), and the related provisions of the Administrative Procedure Act, 5 U.S.C.A. 1009. The case before us comes down to the inquiry whether the utilities were justified in retaining for themselves the savings inherent in a situation which developed in 1950 and led to the organization of the Generating Company. At that time the pressing need for more power, felt by E & G, the Georgia Power Company, and the Atomic Energy Commission, culminated in an arrangement which was beneficial to all concerned. Undoubtedly the successful solution was due in large measure to the experience and enterprise of the interested parties, but it does not follow that they were entitled to all of the savings which actually flowed from the natural growth and economic development of the area. The problem presented to the Commission was not substantially different from that which usually arises when a public utility, by the force of circumstances a natural monopoly, seeks to furnish a commodity to the general public; the reasonableness of its proposed rate must be considered, and the answer is found by allowing a reasonable return upon the investment.
We do not think that the Supreme Court denounced this accustomed procedure in the Mobile and Sierra cases when it concluded that the unusually low rates which the utilities had voluntarily set up to serve their own interests were not unjust or unreasonable; and hence the Commission in the pending case, bearing in mind that its duty is to protect the public interest as distinguished from the private interest of the utilities, and finding that the contract rate is unreasonably high was justified in fixing a lower rate for the benefit of the retail consumers in Georgia after providing a reasonable return on the moneys invested by the utilities.
It is objected that the reduction of rates may not benefit the Georgia consumers since it may lead the E & G system to exercise the option granted it by the contract on twelve months' notice to reduce the contract demand of Georgia Power by 25,800 KW and on thirty months' notice to terminate the agreement and recapture the entire capacity. There is, however, no indication at present that such a step is contemplated and if an attempt should be made in the future, notice of the change would necessarily be filed with the Commission which would then have the opportunity to consider what should be done under the changed situation. In the meantime, its present order will be effective. See Pennsylvania Water & Power Co. v. F.P.C., 343 U.S. 414, 72 S.Ct. 843, 96 L.Ed. 1042.
It is also suggested by the South Carolina Public Service Commission that the Federal Power Commission had no authority to alter the terms of the contract, since the State Commission has approved the creation of the Generating Company and the contracts under which it serves the South Carolina consumers. It is obvious, however, that the State Commission is without power to control the decisions of the Federal Power Commission when it is acting within the scope of its authority in a matter involving interstate commerce. P.U.C. of Rhode Island v. Attleboro Steam & Electric Co., 273 U.S. 83, 47 S.Ct. 294, 71 L.Ed. 549; U.S. v. Public Utilities Commission,345 U.S. 295, 303, 304.
We come then to consider the specific objections to the conclusions of the Federal Power Commission in the exercise of its power under Sec. 206(a) of the statute to determine the just and reasonable rate to be observed after finding that the contract rate was unreasonable. First, the Generating Company objects to the Commission's action in determining the amount of Federal income taxes that should be included in the cost of service. The Commission made allowance only for the taxes paid by the Generating Company as a separate corporate entity, and rejected the contention that the allowance should be computed with reference to the system as a whole, since in practical effect the Generating Company is merely a department of a single enterprise for which E & G, the parent company, has furnished the credit and financial backing. The amount of the tax of the Generating Company considered as a separate corporate entity is substantially less than that borne by the system as a whole, according to the computations of the utility. Under the Commission's method the Federal income taxes are $217,434.00 and the State income taxes are $43,854.00, or a total of $261,288.00. If the taxes are calculated on the system as a whole, the Federal income taxes amount to $398,002.00 and the State income taxes to $53,377.00, or a total of $450,379.00.
A striking difference in the debt ratios in the capitalization of the parent and subsidiary companies brings about this result. The Generating Company was purposely capitalized with a 90 per cent debt ratio in order to cut down the costs of financing the enterprise and make possible the sale of electric energy to consumers at a lower price. Accordingly, interest payments on the debt, which are deductible in computing taxable income, are relatively large. On the other hand, the income tax of E & G is relatively high, because it is obliged to maintain a low debt ratio and a high common equity ratio in order to protect its financial standing and secure a favorable market for the system's securities; and the need for a high ratio of common equity as compared with the debt, became greater when the Generating Company was formed. The result was that in 1954, after the new plant had been built, the system capitalization ratio consisted of 62.8 per cent debt, 9.4 per cent perferred stock, and 27.8 per cent common equity, so that the interest payments of the system as a whole are comparatively small and the income tax comparatively high. The testimony of financial experts on behalf of the company shows that the figures last quoted represent a substantial increase in the common equity over that of the parent company in 1951, before the subsidiary was organized. In order to finance the new company, it was necessary for the parent company to provide funds for investment in the common stock of the subsidiary and also to provide a proportionately larger amount of its new money requirements by the sale of equity securities. In short, it was necessary for the parent company to provide equity leverage for the debt of its subsidiary. The essential part which the parent company played in the organization of the new enterprise is also shown by the various commitments which it made in guaranteeing the payment for equipment as well as payment of the bonds and notes of the subsidiary and, to some extent, the performance of its contracts. For these reasons the utilites contend that the Commission's determination of the amount of revenues that should be allowed to the Generating Company on account of income tax expense should be increased by the sum of $189,091.00.
The Commission does not explain in its opinion why the technical distinction between the two corporate entities is observed in determining the allowance for income taxes, while for the purposes of fixing the rate of return on the investment the system is considered as a single enterprise.
The apparent inconsistency may be reconciled, or justified, by reasons that do not occur to us. No reasons are advanced in the Commission's opinion, if in fact reasons exist. In these circumstances, in deference to the Commission's primary function, we are reluctant to draw an inference of arbitrariness without affording an opportunity for further explanation. On the other hand, a reviewing court cannot perform its proper function when the regulatory body has failed to make adequate exposition of the grounds for its action. We realize the limits upon the scope of judicial review of rate orders, as taught in Hope Natural Gas Co. v. Federal Power Commission, 320 U.S. 591, 64 S.Ct. 281, 88 L.Ed. 333. But in a later case, Colorado-Wyoming Gas Co. v. Federal Power Commission, 324 U.S. 626, 634, 65 S.Ct. 850, 854,98 L.Ed. 1235, the Supreme Court set aside an order of the Federal Power Commission, and speaking through Mr. Justice Douglas, as it had done in the Hope case, said: 'We have repeatedly emphasized the need for clarity and completeness in the basic or essential findings on which administrative orders rest. * * * Their absence can only clog the administrative function and add to the delays in ratemaking.' The same section of the Administrative Procedure Act (Sec. 8(b), 5 U.S.C.A. 1007(b)), which calls for findings of fact, requires with equal force 'a statement of * * * the reasons or basis therefor, upon all the material issues of fact, law, or discretion presented on the record.' This case must therefore be remanded for a fuller explanation as to the different treatments of capitalization ratio and allowance for income taxes.
The Generating Company makes the additional contention that the rate of return should be 6 per cent and not 5.55 per cent as allowed by the Commission. The difference in money return on the amount of the investment found by the Commission approximates $57,000.00 per annum. For its position the Generating Company relies primarily on the testimony of an experienced investment banker familiar with the financial background of the E & G system and the marketing of utility securities. He was of the opinion that 6 per cent was necessary to assure the successful financing of the system in the near future, basing his opinion in large measure on a theoretical capitalization ratio of 50 per cent debt, 15 per cent preferred stock, and 35 per cent common equity which he considered the setup that the company should ultimately maintain.
The Commission, on the other hand, based its determination on the cost of capital, using the actual capitalization ratios of the system. Testimony as to the cost of the debt and of the preferred stock given by an expert witness was accepted by the Commission and his estimate of the cost of the equity capital was raised from 7.9 per cent to 10.5 per cent so as to take into account the relative thinness of the equity capital, the upper trend of the money market, and other conditions.
The company concedes that a cost of capital study is a recognized means of arriving at a rate of return but it contends that the Commission's conclusions were not supported by the testimony, because its expert witness failed to express an opinion as to what the rate of return should be. It is said that the Commissioners are not financial experts and are therefore not entitled to take the evidence and to draw an expert conclusion therefrom. This position is at variance with a decision of the Supreme Court in Market St. Ry. Co. v. Railroad Commission of California, 324 U.S. 548, 65 S.Ct. 770, 89 L.Ed. 1171, where the Court held that an order of the Commission fixing a rate of return was not unsupported by the evidence and rendered invalid by the fact that the Commission evaluated the situation without the aid of expert testimony. Under these circumstances the finding of the Commission on this point should not be disturbed.
The Generating Company also objects to the finding of the Commission that the automatic escalation clause of the contract, providing for adjustment of the basic capacity charge, is unjust and unreasonable. The clause is designed to increase or decrease the capacity charge in case of variations between the estimated and the actual amount of investment and of expenses of operation of the plant. Similar provisions are made in regard to changes in the energy charge. The Commission retained a provision for automatic escalation of the capacity component in respect to future changes in the rate of Federal income taxes and also retained the escalation provisions in regard to the energy charge. It gave no reason for its action other than to make the general finding that the escalation provisions of the basic capacity charge are unjust and unreasonable and in contravention of 205 of the statute and 35.3 of the Commission's regulations. We recognize that the retention or elimination of such a clause is a matter for the determination of the regulatory body upon findings of fact. In the absence of such findings, however, we think the question should be re-examined by the Commission upon the remand of the case.
The amount allowed the utility for interest during construction is also the subject of objection on the part of the Generating Company. The examiner found upon uncontradicted evidence that the equity funds used by the parent company during construction cost approximately 10 per cent. He allowed 8 per cent for the purpose of inclusion in the rate base but the Commission reduced this amount to 6 per cent, which it held was reasonable and consistent with its past practice. The Commission does not make clear why this actual expense, which was involved in the construction of the plant, should not be considered a part of the investment on which a reasonable return should be allowed. In its opinion it declares that the Generating Company should not be permitted to capitalize profits on investment before commercial operation of the plant has begun. This may be true, but it does not explain why an element of cost actually experienced should not be included in the rate base. Accordingly this matter should also be examined on remand so that the Commission may make adequate findings in explanation of its determination.
Objection is also made to the Commission's allowance of a 3 per cent annual rate of expense depreciation. The utility offered evidence in support of this rate and the examiner adopted it in his computation. The Commission however reached the conclusion that a 2.75 per cent rate was adequate for this purpose. This conclusion is not without support in the evidence. The 2.75 per cent rate had been used by the E & G company for many years on substantially similar property and was also used by one of the company's witnesses in a study presented to the Commission's staff; but a shift to 3 per cent seems to have been made for the purpose of the hearing. Under these circumstances it can not be said that the determination of the Commission was without substantial basis in the evidence.
The order of the Commission will remain suspended and the case remanded for further proceedings as indicated in this opinion.
PARKER, Chief Judge (concurring in part and dissenting in part).
The Generating Company is a wholly owned subsidiary of the South Carolina Electric and Gas Company, hereafter referred to as E & G, which is engaged in generating and distributing electric energy in the State of South Carolina, and which in 1950 was contemplating an addition to its generating capacity. About that time the construction of the Hydrogen Bomb Project in South Carolina by E. I. duPont de Nemours and Company was commenced and the Generating Company was organized by E & G to supply the electric energy required by the project, a separate corporation being organized because of the restriction which existed on the amount of E & G's mortgage indebtedness and the necessity of acquiring additional capital for the new construction at a low rate if the energy was to be supplied to duPont at a rate to which duPont would agree. The Generating Company was accordingly financed on a ratio of 90% debt to 10% of common stock, and proceeded to construct at Urquhart on the Savannah River a power plant of 150,000 KW capacity, which was large enough to take care of the needs of E & G and duPont and provide additional energy, which was sold to the Georgia Power Company.
Prior to the construction of the Urquhart plant, the Georgia Power Company, which had been contemplating additions to its own generating system, determined that it could save money by purchasing energy from the Generating Company instead of building an additional plant of its own. It accordingly entered into a twenty-five year contract with the Generating Company by the terms of which that company undertook to furnish and Georgia Power agreed to purchase the full capacity of one of the two 75,000 KW units to be installed by the Generating Company at Urquhart. The 75,000 KW capacity of the other unit was sold to duPont and E & G, 30,000 KW being sold to duPont and 45,000 KW to E & G.
The Charge to all three of the customers of the Generating Company, i.e. Georgia Power, duPont and E & G, was divided into an energy charge and a capacity charge. The energy charge is not in dispute. The capacity charge to Georgia Power was $22.50, to duPont $19.00 and to E & G $15.30. The $22.50 capacity charge to Georgia Power embraced an item of $15.30, corresponding to the capacity charge to E & G and an additional item of $7.20. The $15.30 item was and is made up of two components. The first is a finance component designed to provide interest and amortization of the 90% debt in twenty-five years and an 8% return on equity, and results in a figure of $10.50 per KW per annum. The second is an operations component including operating, administrative, and general expenses not included in the energy charge, which amounts to $4.80 per KW per annum. The remaining $7.20 added to the capacity charge in the rate fixed by the contract with Georgia Power does not relate to any costs on the books of the Generating Company but was designed to divide equally between that company and Georgia Power the estimated savings to Georgia Power from the agreement as compared with the construction and operation of a generating station of its own, the estimated saving being around $600,000 per year. The contract provided for termination on notice, and contained escalation clauses under which both the energy charge and the capacity charge were related to certain costs. Under the escalation clause relating to the capacity charge, that charge to Georgia Power had been increased to $25.11 per KW.
The Commission held that the reasonableness of the rate should be determined by cost of service to the utility furnishing the energy and not by the value of the service to the purchaser, and upon its findings as to the cost of service to the Generating Company ordered that the capacity charge be reduced to $21.948 per KW. It ordered also that the escalation provision for change in the capacity charge be eliminated for the future, except with respect to increase or decrease in the federal income tax rate.
'The value-of-service approach advocated by Generating Company would result in a chaotic structure based in part upon the cost to the buyer of supplying substitute power. Such 'regulation' would, in fact, be no regulation at all and would completely disregard the public interest and the ultimate consumer which the Act is designed to protect. Cf. Phillips Petroleum Co. v. (State of) Wisconsin, 347 U.S. 672 (74 S.Ct. 794, 98 L.Ed. 1035). Mississippi River Fuel Corp. v. Federal Power Commission, 8 Cir., 1941, 121 F.2d 159.
There is nothing in the record to sustain a holding that the action of the Commission in fixing the rate in its order is 'arbitrary, capricious, an abuse of discretion or otherwise not in accordance with law' when the cost of service principle is applied.1 The attack here clearly relates to matters involving the exercise of the discretion vested in the Commission by Congress; and it is too well settled to admit of argument that as to such matters we may not substitute our judgment for that of the Commission.
'With regard to the income tax allowance, Generating Company uses a hypothetical system capitalization ratio instead of its own actual ratio in order to erase the effect of higher tax costs which E & G Co. may incur as a result of the heavy debt financing of Generating Company. This is an attempt to enjoy the benefits of the high-debt financing, i.e., the construction of low cost capacity and the consequent sale to duPont, while making Georgia Power Company and ultimately the consumers in Georgia assume fictitious costs. As such, the allowance proposed by Generating Company is unreasonable.
And I do not think that the Commission's action in this respect can be held arbitrary or unreasonable or an abuse of discretion because, in determining the rate of return to be allowed on invested capital, it looked to the capital structure of E & G rather than to that of the Generating Company; but, if there is inconsistency between this and the treatment of interest on debt, it does not follow that the determination of the Commission with respect to the treatment of interest is to be condemned. The condemnation would rest rather upon allowing a return upon a greater equity invested capital than the Generating Company actually had. If this was error, however, it was error favorable to the Generating Company of which it cannot and does not complain. Certainly, the Commission cannot be held guilty of abuse of discretion in requiring that the income of the Generating Company be computed with accuracy merely because, in the company's interest, it allowed the rate of return to be based upon the E & G system capital ratio rather than upon that of the company itself.
Other attacks upon the Commission's order merit but brief consideration. The fixing of the rate of return at 5.55%, instead of at 6% as contended by the company, the allowance of 6% interest on funds used during construction, instead of 10%, and the allowance of a depreciation rate of 2.75% instead of 3%,-- all of these were peculiarly matters for determination by the informed judgment of the Commission. See Safe Harbor Water Power Corp. v. Federal Power Comm., 3 Cir., 179 F.2d 179, 200-201; State Corp. Comm. of Kansas v. Federal Power Comm., 8 Cir., 206 F.2d 690, 713-714; Market Street Ry. Co. v. Railroad Commission of State Of California, 324 U.S. 548, 559-561, 65 S.Ct. 770, 89 L.Ed. 1171. The same is true with respect to the Commission's elimination of the escalation caluse from the capacity charge of the contract. It is to be noted that the escalation clause was allowed with respect to the energy charge, which does not reflect any return on a rate base. As the Commission was not required to adopt any specific formula in determining rates (Federal Power Comm. v. Hope Natural Gas Co. supra), abuse of discretion could not possibly be predicated of elimination of the escalation clause, which when applied to the capacity charge, necessarily involves the 'cost of reproduction' or the 'prudent investment' principle as to some of the matters embraced within the charge. It is well settled that 'prudent investment' and 'cost of reproduction' are not to be accepted as exclusive tests but are merely matters to be considered in the fixing of rates. Los Angeles Gas & Electric Corp. v. Railroad Comm. of California, 289 U.S. 287, 304-308, 53 S.Ct. 637, 77 L.Ed. 1180.
In considering whether the Commission has abused its discretion in ordering the rate reduction in this case, it must be borne in mind that the basic capacity charge on the sale in interstate commerce to the Georgia Power Company was $22.50 per kilowatt, whereas the charge to duPont was $19.00 and to E & G $15.30.2 While the question of discrimination is not before us, these figures were pertinent as bearing upon the reasonableness of the basic capacity rate, which could be sustained as to Georgia Power only on the value of service theory, which the Commission very properly refused to adopt. In the light of the entire record before us, I see no basis upon which the action of the Commission can be said to be 'unjust or unreasonable in its consequences' or be set aside as an abuse of discretion. See Federal Power Comm. v. Hope Natural Gas Co., supra, 320 U.S. 591, 602, 64 S.Ct. 281, 88 L.Ed. 333. I think, therefore, that the decision of the Commission should be affirmed.

matches: v. v. v. v. v. v. v. v. v. v. v. v. v. v. v. v.


The claimant was self-represented at formal proceedings below and during the course of this appeal.
The respondent was represented by Courtney C. Stabnick, Esq., and Douglas L. Drayton, Esq., Pomeranz, Drayton & Stabnick, L.L.C., 95 Glastonbury Boulevard, Suite 216, Glastonbury, CT 06033-4453.
This Petition for Review from the February 16, 2018 Finding and Award in Part/Dismissal in Part of Ernie R. Walker, the Commissioner acting for the First District, was heard October 26, 2018 before a Compensation Review Board panel consisting of Commission Chairman Stephen M. Morelli and Commissioners Scott A. Barton and Jodi Murray Gregg.
STEPHEN M. MORELLI, CHAIRMAN. The claimant has appealed from a Finding and Award in Part/Dismissal in Part (finding) by Ernie R. Walker (commissioner) concluding that the claimant was not entitled to additional indemnity benefits or medical treatment for a compensable injury sustained on November 24, 2014. Although the claimant’s treating physician recommended that the claimant receive further treatment, the commissioner did not find this argument persuasive. The commissioner also noted that the claimant had already been paid permanent partial disability benefits for his back and cervical spine. The claimant has appealed from this decision. However, the respondent has filed a motion to dismiss the appeal, arguing that it was statutorily untimely and this board lacks jurisdiction to consider the appeal. We find the respondent’s motion meritorious and therefore dismiss the claimant’s appeal.
The commissioner reached the following factual findings at the conclusion of the formal hearing. The commissioner noted that the claimant was employed by the respondent-employer in its public works department on November 24, 2014, when the claimant slipped and fell while getting out of his truck and sustained injuries to his neck and back. The respondent accepted this claim. Subsequent to this incident, the claimant treated for his injuries with his authorized treating physician, John J. Mara, M.D., an orthopedic surgeon.
The claimant presented medical records from St. Francis Hospital in support of his position. The respondent presented into evidence copies of two voluntary agreements acknowledging permanency ratings for the claimant’s back and cervical spine, a copy of a check reflecting the benefits paid pursuant to these agreements, and medical reports from the respondent’s medical examiner, Steven E. Selden, M.D., an orthopedic surgeon, and the commissioner’s examiner, Stephan C. Lange, M.D., an orthopedic surgeon. The respondent argues that its exhibits provide a basis for its argument that the claimant has already received all of the medical treatment and indemnity benefits associated with the compensable injury.
Based on the evidence presented, the commissioner concluded that both Selden and Lange had opined that the claimant was at maximum medical improvement and entitled to a five percent permanent partial disability rating for his back and neck. See Respondent’s Exhibit 1, p. 3; Respondent’s Exhibit 2, p. 7. However, the commissioner found that this award had already been paid. The commissioner also found credible and persuasive the opinions of Selden and Lange indicating that the claimant did not require further medical treatment. The commissioner therefore denied the claim for additional benefits and medical treatment for the November 24, 2014 injury.
Within the twenty-day period subsequent to the issuance of the February 16, 2018 finding, the claimant did not file a motion to correct or any other form of post-judgment motion; nor did he file a petition for review in accordance with the provisions of General Statutes § 31-301(a) during that time period.1 The claimant filed a petition for review on April 5, 2018, and the respondent filed a motion to dismiss on May 4, 2018.2 The respondent contends that because this appeal was commenced in an untimely manner, we lack jurisdiction to rule on this appeal. We agree with the respondent.
consistent with Mankus v. Mankus, 4958 CRB-1-05-6 (August 22, 2006), aff’d, 107 Conn. App. 585 (2008), cert. denied, 288 Conn. 904 (2008), and Brockenberry v. Thomas Deegan d/b/a Tom’s Scrap Metal, Inc., 5429 CRB-5-09-2 (January 22, 2010), aff’d, 126 Conn. App. 902 (2011) (per curiam) ... “[o]nce a determination is reached that we lack subject matter jurisdiction no further inquiry is warranted.” Mankus, supra. Our decision in Bond v. Lee Manufacturing, Inc., 5868 CRB-8-13-8 (April 21, 2016), also stands for the proposition that prior to taking any action on the merits of an appeal, we must resolve any questions pertaining to whether we have jurisdiction to consider the appeal. In Brown v. Lawrence & Memorial Hospital, 5853 CRB-2-13-5 (April 21, 2014), the claimant offered an explanation for her late filing of an appeal, but we concluded that we were not in a position to consider the matter because “[o]ur courts have determined that the failure of a party to file a timely appeal deprives the board of jurisdiction over the appeal.” Id.
Id.; see also Stec v. Raymark Industries, Inc., 299 Conn. 346 (2010).
the claimant was obligated, if she was dissatisfied with or confused about the trial commissioner’s Finding and Denial, to either appeal to this tribunal within twenty days, or file an appropriate motion with the trial commissioner seeking a correction or clarification within that period. See Garvey v. Atlas Scenic Studios, Inc., 5493 CRB-4-09-9 (February 14, 2012). Otherwise, her appellate rights would be extinguished pursuant to General Statutes § 31-301 (a). The claimant failed to take either action within that twenty-day window. Given that the claimant, although aggrieved by the December 14, 2016 decision of the trial commissioner, took no responsive action within twenty days, we therefore lack subject matter jurisdiction to consider the appeal.
In the present matter, the claimant failed to exercise his right to respond to the finding within the jurisdictional time period. Having failed to exercise this right, we may not offer the claimant relief at this juncture. As we indicated in Sutherland Hofler, supra, when an aggrieved party fails to file a motion to correct (which occurred both in that case and in the present case), our ability to review the facts found by the commissioner is sharply limited even when we retain jurisdiction to do so.
Even had we retained jurisdiction to consider the claimant’s appellate arguments, we would deem these arguments an effort to retry the factual findings of the trial commissioner on appeal. Macon v. Colt’s Manufacturing, 5505 CRB-1-09-10 (September 27, 2010), appeal dismissed, A.C. 32785 (December 13, 2010), is dispositive of that issue. Our standard of review is limited to addressing findings of fact that are “clearly erroneous.” Berube v. Tim’s Painting, 5068 CRB-3-06-3 (March 13, 2007). The trial commissioner in this matter, similar to the trial commissioner in Macon, reached findings of fact which were consistent with the testimony and evidence that he found credible and probative, but were unsupportive of the relief the claimant sought. In neither Macon nor the present case was a Motion to Correct filed challenging the factual findings of the trial commissioner. Therefore, as we pointed out in Stevens v. Raymark Industries, Inc., 5215 CRB-4-07-4 (March 26, 2008), appeal dismissed, A.C. 29795 (June 6, 2008), when this occurs, “we must accept the validity of the facts found by the trial commissioner, and ... this board is limited to reviewing how the commissioner applied the law.” Id. See also Admin. Reg. § 31-301-4.
Id.; see also Samaoya v. Gallagher, 102 Conn. App. 670, 675 (2007).
After considering the documents filed by the claimant and the oral argument presented before this board, we conclude that the claimant believes that the commissioner’s factual findings were erroneous. He argues that the respondent improperly barred him from receiving treatment for his injury and the formal hearing was not held in a fair manner because it failed to protect his interests. He also argues that the trial commissioner should not have found credible the witnesses produced by the respondent.
It is of course well settled that a claimant has the burden of proof in proceedings before our commission in order to establish that he or she is entitled to relief. See Torres v. New England Masonry Company, 5289 CRB-5-07-10 (January 6, 2009). As such, it may therefore be reasonably inferred that in the matter at bar, the commissioner simply was not persuaded by the claimant’s evidence. Of particular note is the fact that the commissioner specifically found the opinions of Selden and Lange, neither of whom recommended additional treatment, credible and persuasive. As an appellate body, we are bound by the commissioner’s conclusions in this regard. In any event, we lack jurisdiction to take any action due to the untimely filing of the appeal.
There is no error; the February 16, 2018 Finding and Award in Part/Dismissal in Part of Ernie R. Walker, the Commissioner acting for the First District, is accordingly affirmed and the appeal is dismissed for lack of jurisdiction.


text:
88 S.W. 648 (Mo. 1905), Sluder v. St. Louis Transit Co.
Attorney: Morton Jourdan and Sears Lehmann for appellant; George W. Easley and Boyle, Priest & Lehmann of counsel. Campbell & Thompson for respondent. George W. Easley with Boyle, Priest & Lehmann on validity of Vigilant Watch Ordinance. Given Campbell for respondent in reply.
Appeal from St. Louis City Circuit Court. -- Hon. Franklin Ferriss, Judge.
Morton Jourdan and Sears Lehmann for appellant; George W. Easley and Boyle, Priest & Lehmann of counsel.
(1) The motions to elect should have been sustained. The petition blends causes of action arising ex delicto with causes of action arising ex contractu. The Vigilant Watch Ordinance could only be passed under the power of the city to contract. Charter, art. 10, secs. 1, 2. It could not be passed under its power to legislate. Charter, art. 3, sec. 26; Fath v. Railroad, 39 Mo.App. 452; Fath v. Railroad, 105 Mo. 537; Senn v. Railroad, 106 Mo. 152; Moran v. Car Co., 134 Mo. 641; Byington v. Railroad, 147 Mo. 673; Murphy v. Railroad, 153 Mo. 253; Saunders v. Railroad, 153 Mo. 253; Holwerson v. Railroad, 157 Mo. 245; Anderson v. Railroad, 161 Mo. 411; Nellis on Street Railways, 306, sec. 10. The cases of Jackson v. Railroad, 157 Mo. 621, and Weller v. Railroad, 164 Mo. 180, 120 Mo. 655, were cases under a speed ordinance, and cannot be decisive of the principle here involved, and cannot be held to overrule the long line of cases specially decided on the Vigilant Watch Ordinance. A rule established and followed for a long series of years cannot be fairly overruled by inference or construction from rulings on questions involving entirely different propositions. There is a very broad distinction in the exercise of these two powers. One is public and general, the exercise of sovereignty; the other, private and proprietary. One legislative, the other contractual. State exrel. v. St. Louis, 145 Mo. 572; Trust Co. v. Arkansas City, 76 F. 282; Power Co. v. Colorado Springs, 105 F. 1; Seltzenger v. Tamaqua, 187 Pa. St. 539; Schaub v. Lancaster City, 156 Pa. St. 362; Weston v. Syracuse, 158 N.Y. 274. If these positions are correct, then the plaintiff has joined in the same count a cause of action arising out of contract with two causes of action arising out of tort for common law negligence. The common law distinctions between actions ex contractu and ex delicto are in substance retained by our code. Sumner v. Rogers, 90 Mo. 329. The rule in this State is that such actions cannot be blended in the same count. Kendrick v. Railroad, 81 Mo. 521; Harris v. Railroad, 51 Mo.App. 128; Linnville v. Harrison, 30 Mo. 228; Jamison v. Copher, 35 Mo. 351; Ederlin v. Judge, 36 Mo. 483; Southworth Co. v. Lamb, 82 Mo. 242. The fact that the injuries grew out of the same transaction would authorize the joining of them in the same petition, but they would have to be stated in separate counts, with a prayer for separate relief. 1 Burns' Anno. Code, sec. 413. (2) The court erred in permitting the plaintiff to testify as to the rate of speed of the car. He "no more than saw the car when the carriage was struck." He showed no experience or observation in regard to the speed of cars, and in the short length of time, only one or two seconds, during which the car was under his observation, he could not judge of its speed, except by mere inference and deduction from the facts stated by him. Koenig v. Railroad, 173 Mo. 720. (3) The court erred in permitting the plaintiff to testify to his earnings for the corresponding months of the previous year, for the purpose of showing the loss of earnings caused by the injury. (4) The court erred in refusing the instruction in the nature of a demurrer to plaintiff's evidence. Both the plaintiff and his driver were negligent in going upon the track in front of a moving car, without looking or listening for the same, and such action upon the part of both of them, and each of them, was the proximate cause of the injury, and without such negligence on their part, the accident would not have happened. It is the duty of the passenger, as well as the driver, when there is an opportunity to do so, to learn of danger, and avoid it if possible. Smith v. Railroad (Me.), 32 A. 967; Railroad v. McLeod, 29 So. 76; Brannen v. Railroad, 115 Ind. 115; Meenagh v. Buckmaster, 50 N.Y.S. 85; Bush v. Railroad, 62 Kan. 709; Dean v. Railroad, 18 A. 718; Township of Crescent v. Anderson, 8 A. 381; Hoag v. Railroad, 111 N.Y. 199; Roach v. Railroad, 21 S.E. 67; Koehler v. Railroad, 44 F. 574; Aurelius v. Railroad, 49 N.E. 857; Slater v. Railroad, 32 N.W. 264; Miller v. Railroad, 27 N.E. 339; Railroad v. Boyts, 45 N.E. 812; Brickell v. Railroad, 24 N.E. 449. (5) The eighth instruction given on behalf of plaintiff is erroneous. It ignores the plea of the personal negligence of plaintiff in permitting the driver to go upon the track in the face of open and obvious danger. It ignores the proof in the record that the driver was subject to the orders and under the control of the plaintiff. We are not contending for the rule of "identification" founded upon the old case of Thorogood v. Bryan, 8 C. B. 114; nor for a rule, the effect of which "would be to make an innocent person answerable for the wrong act of another, over whom he has and exercises no control, and who is neither his servant nor his agent." Becke v. Railroad, 102 Mo. 550. Our contention is that the plaintiff shall be responsible for the act of one who was under his control and "subject to his orders." It seems clear in this State that if the driver, Cavanaugh, was subject to the orders and under the control of the plaintiff, plaintiff cannot, because of the negligence of Cavanaugh, recover. This question turns upon the fact of whether the plaintiff has the right to control the driver. If he had such right and failed to exercise it, he is responsible for the driver's act. If he had not such right, he is not liable. Becke v. Railroad, 102 Mo. 550; Dickson v. Railroad, 104 Mo. 504; O'Rourke v. Railroad, 142 Mo. 352; Borough of Carlisle v. Brisbane, 113 Pa. St. 552; Dyer v. Railroad, 71 N.Y. 228; Larkin v. Railroad, 85 Iowa 492; Roach v. Railroad, 21 N.E. 67; Mullen v. Owasso, 100 Mich. 103; Railroad v. Hogeland, 66 Me. 149; 1 Thomp. Neg. (2 Ed.), sec. 502, note 22; 2 Thomp. Neg. (2 Ed.), sec. 1621; Little v. Hackett, 116 U.S. 366; Follman v. City of Mankato (Minn.), 29 N.W. 317; Robinson v. Railroad, 66 N.Y. 11; Payne v. Railroad, 49 Iowa 523. If the plaintiff allowed the driver to take full control of the team, when he had the right and power to control and direct him, he is liable for the negligence of the person to whom he submitted such control. Holmes v. Mather (Eng. Ct. of Ex., 1875), 16 Am. Rep. 384; Sharrod v. Railroad, 4 Ex. 580. It was the duty of the plaintiff, as well as of the driver, to learn of the danger and avoid it if possible. The hiring of the outfit did not excuse the plaintiff's failure to exercise care for his own protection. Railroad v. McLeod, 29 So. 76; Smith v. Railroad, 32 A. 967; Miller v. Railroad, 128 Ind. 97; Hoag v. Railroad, 111 N.Y. 199. The rule of non-imputability of the negligence of the driver, however, when no contract is shown does not absolve the passenger from ordinary care for his own safety. The instruction now under discussion directed the minds of the jury to the sole inquiry whether the driver was negligent or not, and was "erroneous as calculated to mislead them." 1 Thomp. Neg. (2 Ed.), sec. 503; 2 Thomp. Neg. (2 Ed), sec. 1621.
Campbell & Thompson for respondent.

matches:
v.
art. 10
art. 3
v.
v.
v.
v.
v.
v.
v.
v.
v.
v.
v.
v.
v.
v.
v.
v.
v.
v.
v.
v.
v.
v.
v.
v.
v.
v.
v.
v.
v.
v.
v.
v.
v.
v.
v.
v.
v.
v.
v.
v.
v.
v.
v.
v.
v.
v.
v.
v.
v.
v.
v.
v.
v.
v.
v.
v.
v.
v.
v.
v.
v.


text:
Section 2 (a) of the Clayton Act, as amended by the Robinson-Patman Act, prohibits price discrimination by sellers, but under 2 (b) the seller may rebut a prima facie case of price discrimination by showing that his lower price was made in good faith to meet a competitor's equally low price. Section 2 (f) makes it unlawful "for any person engaged in commerce, in the course of such commerce, knowingly to induce or receive a discrimination in price which is prohibited by this section." Petitioner, in an effort to achieve cost savings, entered into an agreement with its longtime supplier, Borden Co., under which Borden would supply "private label" (as opposed to "brand label") milk to petitioner's stores in the Chicago area. Petitioner refused Borden's initial offer in implementation of the agreement and solicited offers from other companies, resulting in a lower offer from one of Borden's competitors. At this point petitioner's buyer informed Borden that its offer was "not even in the ball park" and that a $50,000 improvement in the offer "would not be a drop in the bucket." Borden then submitted a new offer that was substantially better than its competitor's and petitioner accepted it. Based on these facts, the Federal Trade Commission charged petitioner with violating 5 of the Federal Trade Commission Act for allegedly misleading Borden during contract negotiations by failing to inform it that its second offer was better than its competitor's, and with violating 2 (f) by knowingly inducing or receiving price discrimination from Borden. The FTC dismissed the 5 charge on the ground that the issue was what amount of disclosure is required of the buyer during contract negotiations and that to impose a duty of affirmative disclosure would be "contrary to normal business practice" and "contrary to the public interest," but held that petitioner had violated 2 (f), the FTC rejecting, inter alia, petitioner's defense that the Borden offer had been made to meet competition. The Court of Appeals affirmed. Held: A buyer who has done no more than accept the lower of two prices competitively offered does not violate 2 (f) provided the seller has a meeting-competition defense, and here where Borden had such a defense and thus could not be liable under [440 U.S. 69, 70] 2 (b) petitioner, who did no more than accept Borden's offer, cannot be liable under 2 (f). Pp. 75-85.
(a) Since liability under 2 (f) is limited to price discrimination "prohibited by this section," and since only 2 (a) and (b) deal with seller liability for price discrimination, a buyer, under 2 (f)'s plain meaning, cannot be liable if a prima facie case cannot be established against a seller or if the seller has an affirmative defense. Automatic Canteen Co. of America v. FTC, 346 U.S. 61 . In either situation, there is no price discrimination "prohibited by this section." And the legislative history of 2 (f) confirms the conclusion that buyer liability under 2 (f) is dependent on seller liability under 2 (a). Pp. 75-78.
(b) To rewrite 2 (f) to hold a buyer liable even though there is no price discrimination "prohibited by this section" would contravene the rule that this Court "cannot supply what Congress has studiously omitted," FTC v. Simplicity Pattern Co., 360 U.S. 55, 67 . Pp. 78-79.
(c) Imposition of 2 (f) liability on petitioner would lead to price uniformity and rigidity contrary to the purposes of other antitrust legislation. P. 80.
(d) A duty of affirmative disclosure requiring a buyer to inform a seller that his bid has beaten competition would frustrate competitive bidding and, by reducing uncertainty, would lead to price matching and anticompetitive cooperation among sellers. P. 80.
(e) The effect of the finding that petitioner's same conduct violated 2 (f) as violated 5 of the Federal Trade Commission Act is to impose the same duty of affirmative disclosure that the FTC condemned as anticompetitive, "contrary to the public interest," and "contrary to normal business practice," in dismissing the 5 charge. Pp. 80-81.
(f) The test for determining when a seller has a valid meeting-competition defense is whether he can "show the existence of facts which would lead a reasonable and prudent person to believe that the granting of a lower price would in fact meet the equally low price of a competitor." FTC v. A. E. Staley Mfg. Co., 324 U.S. 746 . Under the circumstances of this case, Borden did act reasonably and in good faith when it made its second bid, since, in light of its established business relationship with petitioner, it could justifiably conclude that petitioner's statements about the first offer were reliable and that it was necessary to make another bid offering substantial concessions to avoid losing its account with petitioner. Pp. 82-84.
STEWART, J., delivered the opinion of the Court, in which BURGER, C. J., and BRENNAN, BLACKMUN, POWELL, and REHNQUIST, JJ., joined, and in [440 U.S. 69, 71] Parts I, II, and III of which WHITE, J., joined. WHITE, J., filed an opinion concurring in part and dissenting in part, post, p. 85. MARSHALL, J., filed an opinion dissenting in part, post, p. 85. STEVENS, J., took no part in the consideration or decision of the case.
Denis McInerney argued the cause for petitioner. With him on the briefs were Raymond L. Falls, Jr., and William T. Lifland.
[ Footnote * ] Thomas A. Rothwell and Arthur H. Brendtson filed a brief for the Small Business Legislative Council as amicus curiae.
The alleged violation was reflected in a 1965 agreement between A&P and Borden under which Borden undertook to supply "private label" milk to more than 200 A&P stores in a Chicago area that included portions of Illinois and Indiana. This agreement resulted from an effort by A&P to achieve cost savings by switching from the sale of "brand label" milk (milk sold under the brand name of the supplying dairy) to the sale of "private label" milk (milk sold under the A&P label).
At this point, A&P's Chicago buyer contacted Borden's chain store sales manager and stated: "I have a bid in my pocket. You [Borden] people are so far out of line it is not even funny. You are not even in the ball park." When the Borden representative asked for more details, he was told nothing except that a $50,000 improvement in Borden's bid "would not be a drop in the bucket."
Borden was thus faced with the problem of deciding whether to rebid. A&P at the time was one of Borden's largest customers in the Chicago area. Moreover, Borden had just invested more than $5 million in a new dairy facility in Illinois. The loss of the A&P account would result in underutilization of this new plant. Under these circumstances, Borden decided to submit a new bid which doubled the estimated annual savings to A&P, from $410,000 to $820,000. In presenting its offer, Borden emphasized to A&P that it needed to keep A&P's business and was making the new offer in order to meet Bowman's bid. A&P then accepted Borden's bid after concluding that it was substantially better than Bowman's.
Based on these facts, the Federal Trade Commission filed a three-count complaint against A&P. Count I charged that A&P had violated 5 of the Federal Trade Commission Act by misleading Borden in the course of negotiations for the private-label contract, in that A&P had failed to inform Borden that its second offer was better than the Bowman bid. 3 [440 U.S. 69, 74] Count II, involving the same conduct, charged that A&P had violated 2 (f) of the Clayton Act, as amended by the Robinson-Patman Act, by knowingly inducing or receiving price discriminations from Borden. Count III charged that Borden and A&P had violated 5 of the Federal Trade Commission Act by combining to stabilize and maintain the retail and wholesale prices of milk and other dairy products.
An Administrative Law Judge found, after extended discovery and a hearing that lasted over 110 days, that A&P had acted unfairly and deceptively in accepting the second offer from Borden and had therefore violated 5 of the Federal Trade Commission Act as charged in Count I. The Administrative Law Judge similarly found that this same conduct had violated 2 (f). Finally, he dismissed Count III on the ground that the Commission had not satisfied its burden of proof.
A&P filed a petition for review of the Commission's order in the Court of Appeals for the Second Circuit. The court held that substantial evidence supported the findings of the Commission and that as a matter of law A&P could not successfully assert a meeting-competition defense because it, unlike Borden, had known that Borden's offer was better than Bowman's. 6 Finally, the court held that the Commission had correctly determined that A&P had no cost-justification defense. 557 F.2d 971. Because the judgment of the Court of Appeals raises important issues of federal law, we granted certiorari. 435 U.S. 922 .
"Thus, at the least, we can be confident in reading the words in 2 (f), `a discrimination in price which is prohibited by this section,' as a reference to the substantive prohibitions against discrimination by sellers defined elsewhere in the Act. It is therefore apparent that the discriminatory price that buyers are forbidden by 2 (f) to induce cannot include price differentials that are not forbidden to sellers in other sections of the Act . . . . For we are not dealing simply with a `discrimination in price'; the `discrimination in price' in 2 (f) must be one `which is prohibited by this section.' Even if any price differential were to be comprehended within the term `discrimination in price,' 2 (f), which speaks of prohibited discriminations, cannot be read as declaring out of bounds price differentials within one or more of the `defenses' available to sellers, such as that the price differentials [440 U.S. 69, 78] reflect cost differences, fluctuating market conditions, or bona fide attempts to meet competition, as those defenses are set out in the provisos of 2 (a) and 2 (b)." 346 U.S., at 70 -71 (footnotes omitted).
The Court thus explicitly recognized that a buyer cannot be held liable under 2 (f) if the lower prices received are justified by reason of one of the seller's affirmative defenses.
The petitioner, relying on this plain meaning of 2 (f) and the teaching of the Automatic Canteen case, argues that it cannot be liable under 2 (f) if Borden had a valid meeting-competition defense. The respondent, on the other hand, argues that the petitioner may be liable even assuming that Borden had such a defense. The meeting-competition defense, the respondent contends, must in these circumstances be judged from the point of view of the buyer. Since A&P knew for a fact that the final Borden bid beat the Bowman bid, it was not entitled to assert the meeting-competition defense even though Borden may have honestly believed that it was simply meeting competition. Recognition of a meeting-competition defense for the buyer in this situation, the respondent argues, would be contrary to the basic purpose of the Robinson-Patman Act to curtail abuses by large buyers.
The short answer to these contentions of the respondent is that Congress did not provide in 2 (f) that a buyer can be liable even if the seller has a valid defense. The clear language of 2 (f) states that a buyer can be liable only if he receives a price discrimination "prohibited by this section." If a seller has a valid meeting-competition defense, there is simply no prohibited price discrimination.
"The imposition of a duty of affirmative disclosure, applicable to a buyer whenever a seller states that his offer is [440 U.S. 69, 81] intended to meet competition, is contrary to normal business practice and, we think, contrary to the public interest.
"We fear a scenario where the seller automatically attaches a meeting competition caveat to every bid. The buyer would then state whether such bid meets, beats, or loses to another bid. The seller would then submit a second, a third, and perhaps a fourth bid until finally he is able to ascertain his competitor's bid." 87 F. T. C. 1047, 1050-1051.
The effect of the finding that the same conduct of the petitioner violated 2 (f), however, is to impose the same duty of affirmative disclosure which the Commission condemned as anticompetitive, "contrary to the public interest," and "contrary to normal business practice," in dismissing the charge under 5 of the Federal Trade Commission Act. Neither the Commission nor the Court of Appeals offered any explanation for this apparent anomaly.
Because both the Commission and the Court of Appeals proceeded on the assumption that a buyer who accepts the lower of two competitive bids can be liable under 2 (f) even if the seller has a meeting-competition defense, there was not a specific finding that Borden did in fact have such a defense. But it quite clearly did.
The test for determining when a seller has a valid meeting-competition defense is whether a seller can "show the existence of facts which would lead a reasonable and prudent person to believe that the granting of a lower price would in fact meet the equally low price of a competitor." FTC v. A. E. Staley Mfg. Co., 324 U.S. 746, 759 -760. "A good-faith belief, rather than absolute certainty, that a price concession is being offered to meet an equally low price offered by a competitor is sufficient to satisfy the 2 (b) defense." United [440 U.S. 69, 83] States v. United States Gypsum Co., 438 U.S. 422, 453 . 16 Since good faith, rather than absolute certainty, is the touchstone of the meeting-competition defense, a seller can assert the defense even if it has unknowingly made a bid that in fact not only met but beat his competition. Id., at 454.
Thus, Borden was informed by the petitioner that it was in danger of losing its A&P business in the Chicago area unless it came up with a better offer. It was told that its first offer was "not even in the ball park" and that a $50,000 improvement "would not be a drop in the bucket." In light of Borden's established business relationship with the petitioner, Borden could justifiably conclude that A&P's statements were reliable and that it was necessary to make another bid offering substantial concessions to avoid losing its account with the petitioner.
[ Footnote 1 ] Title 15 U.S.C. 13 (f) provides: "It shall be unlawful for any person engaged in commerce, in the course of such commerce, knowingly to induce or receive a discrimination in price which is prohibited by this section." Title 15 U.S.C. 13 (a) and (b) provide in pertinent part: "(a) . . . It shall be unlawful for any person engaged in commerce, in the course of such commerce, either directly or indirectly, to discriminate in price between different purchasers of commodities of like grade and quality, where either or any of the purchases involved in such discrimination are in commerce, where such commodities are sold for use, consumption, or resale within the United States or any Territory thereof or the District of Columbia or any insular possession or other place under the jurisdiction of the United States, and where the effect of such discrimination may be substantially to lessen competition or tend to create [440 U.S. 69, 72] a monopoly in any line of commerce, or to injure, destroy, or prevent competition with any person who either grants or knowingly receives the benefit of such discrimination or with customers of either of them: Provided, That nothing herein contained shall prevent differentials which make only due allowance for differences in the cost of manufacture, sale, or delivery resulting from the differing methods or quantities in which such commodities are to such purchasers sold or delivered . . . . "(b) . . . Upon proof being made, at any hearing on a complaint under this section, that there has been discrimination in price or services or facilities furnished, the burden of rebutting the prima-facie case thus made by showing justification shall be upon the person charged with a violation of this section, and unless justification shall be affirmatively shown, the Commission is authorized to issue an order terminating the discrimination: Provided, however, That nothing herein contained shall prevent a seller rebutting the prima-facie case thus made by showing that his lower price or the furnishing of services or facilities to any purchaser or purchasers was made in good faith to meet an equally low price of a competitor, or the services or facilities furnished by a competitor."
[ Footnote 2 ] The Bowman bid would have produced estimated annual savings of approximately $737,000 for A&P as compared with the first Borden bid, which would have produced estimated annual savings of $410,000.
[ Footnote 3 ] Section 5 (a) of the Federal Trade Commission Act, 38 Stat. 719, as amended, 15 U.S.C. 45 (a), provides in relevant part: "(1) Unfair methods of competition in or affecting commerce, and unfair or deceptive acts or practices in or affecting commerce, are declared unlawful."
[ Footnote 4 ] The Commission also found that the interstate commerce requirement of 2 (f) was satisfied.
[ Footnote 5 ] Under 2 (a) and (b) of the Act, a seller who can establish either that a price differential was cost justified or offered in good faith to meet [440 U.S. 69, 75] competition has a complete defense to a charge of price discrimination under the Act. Standard Oil Co. v. FTC, 340 U.S. 231 . See n. 1, supra. With respect to the meeting-competition defense, the Commission stated that even though Borden as the seller might have had a meeting-competition defense, A&P as the buyer did not have such a defense because it knew that the bid offered was, in fact, better than the Bowman bid. With respect to the cost-justification defense, the Commission found that Commission counsel had met the initial burden of going forward as required by this Court's decision in Automatic Canteen Co. of America v. FTC, 346 U.S. 61 , and that A&P had not then satisfied its burden of showing that the prices were cost justified, or that it did not know that they were not. The Commission upheld the Administrative Law Judge's dismissal of Count III of the complaint.
[ Footnote 6 ] The Court of Appeals, like the Commission, relied on Kroger Co. v. FTC, 438 F.2d 1372 (CA6), for the proposition that a buyer can be liable under 2 (f) of the Act even if the seller has a meeting-competition defense. The Kroger case involved a buyer who had made deliberate misrepresentations to a seller in order to induce price concessions. While the Court of Appeals in this case did not find that A&P had made any affirmative misrepresentations, it viewed the distinction between a "lying buyer" and a buyer who knowingly accepts the lower of two bids as without legal significance. See n. 15, infra.
[ Footnote 7 ] H. R. 8442, 74th Cong., 1st Sess. (1935); S. 3154, 74th Cong., 1st Sess. (1935).
[ Footnote 8 ] F. Rowe, Price Discrimination Under the Robinson-Patman Act 423 (1962). Section 2 (f) has been described by commentators as an "after-thought." Id., at 421; J. McCord, Commentaries on the Robinson-Patman Act 96 (1969).
[ Footnote 9 ] Commentators have recognized that a finding of buyer liability under 2 (f) is dependent on a finding of seller liability under 2 (a). McCord, supra, at 96 ("[Section] 2 (f) cannot be enforced if a prima facie case could not be established against the seller on the basis of the transaction in question under Section 2 (a) or if he could sustain an affirmative defense thereto"); Rowe, supra, at 421 ("the legal status of the buyer is derivative from the seller's pricing legality under the Act"); H. Shniderman, Price [440 U.S. 69, 77] Discrimination in Perspective 136 (1977) (a buyer can be liable under 2 (f) only if the price received "cannot be excused by any defenses provided to the seller").
[ Footnote 10 ] In presenting the Conference Report to the House, Representative Utterback summarized the meaning of 2 (f) by stating: "This paragraph makes the buyer liable for knowingly inducing or receiving any discrimination in price which is unlawful under the first paragraph [ 2 (a)] of the amendment." 80 Cong. Rec. 9419 (1936).
[ Footnote 11 ] Section 2 (e) provides: "It shall be unlawful for any person to discriminate in favor of one purchaser against another purchaser or purchasers of a commodity bought for resale, with or without processing, by contracting to furnish or furnishing, or by contributing to the furnishing of, any services or facilities connected with the processing, handling, sale, or offering for sale of such commodity so purchased upon terms not accorded to all purchasers on proportionally equal terms." 15 U.S.C. 13 (e).
[ Footnote 12 ] Contrary to the respondent's suggestion, this interpretation of 2 (f) is in no way inconsistent with congressional intent. "[T]he buyer whom Congress in the main sought to reach was the one who, knowing full well that there was little likelihood of a defense for the seller, nevertheless proceeded to exert pressure for lower prices." Automatic Canteen Co. of America v. FTC, 346 U.S., at 79 . Here, by contrast, we conclude that a buyer is not liable if the seller does have a defense under 2 (b).
[ Footnote 13 ] More than once the Court has stated that the Robinson-Patman Act should be construed consistently with broader policies of the antitrust laws. United States v. United States Gypsum Co., 438 U.S. 422 ; Automatic Canteen Co. of America v. FTC, supra, at 74.
[ Footnote 14 ] A duty of affirmative disclosure might also be difficult to enforce. In cases where a seller offers differing quantities or a different quality product, or offers to serve the buyer in a different manner, it might be difficult for the buyer to determine when disclosure is required.
[ Footnote 15 ] In Kroger Co. v. FTC, 438 F.2d 1372, the Court of Appeals for the Sixth Circuit held that a buyer who induced price concessions by a seller by making deliberate misrepresentations could be liable under 2 (f) even if the seller has a meeting-competition defense. This case does not involve a "lying buyer" situation. The complaint issued by the FTC alleged that "A&P accepted the said offer of Borden with knowledge that Borden had granted a substantially lower price than that offered by the only other competitive bidder and without notifying Borden of this fact." The complaint did not allege that Borden's second bid was induced by any misrepresentation. The Court of Appeals recognized that the Kroger case involved a "lying buyer," but stated that there [440 U.S. 69, 82] was no meaningful distinction between the situation where "the buyer lies or merely keeps quiet about the nature of the competing bid." 557 F.2d 971, 983. Despite this background, the respondent argues that A&P did engage in misrepresentations and therefore can be found liable as a "lying buyer" under the rationale of the Kroger case. The misrepresentation relied upon by the respondent is a statement allegedly made by a representative of A&P to Borden after Borden made its second bid which would have resulted in annual savings to A&P of $820,000. The A&P representative allegedly told Borden to "sharpen your pencil a little bit because you are not quite there." But the Commission itself referred to this comment only to note its irrelevance, and neither the Commission nor the Court of Appeals mentioned it in considering the 2 (f) charge against A&P. This is quite understandable, since the comment was allegedly made after Borden made its second bid and therefore cannot be said to have induced the bid as in the Kroger case. Because A&P was not a "lying buyer," we need not decide whether such a buyer could be liable under 2 (f) even if the seller has a meeting-competition defense.
[ Footnote 16 ] Recognition of the right of a seller to meet a lower competitive price in good faith may be the primary means of reconciling the Robinson-Patman Act with the more general purposes of the antitrust laws of encouraging competition between sellers. As the Court stated in Standard Oil Co. v. FTC, 340 U.S., at 249 : "We need not now reconcile, in its entirety, the economic theory which underlies the Robinson-Patman Act with that of the Sherman and Clayton Acts. It is enough to say that Congress did not seek by the Robinson-Patman Act either to abolish competition or so radically to curtail it that a seller would have no substantial right of self-defense against a price raid by a competitor."
[ Footnote 17 ] The facts of this case are thus readily distinguishable from Corn Products Co. v. FTC, 324 U.S. 726 , and FTC v. A. E. Staley Mfg. Co., 324 U.S. 746 , in both of which the Court held that a seller had failed to establish a meeting-competition defense. In the Corn Products case, the only evidence to rebut the prima facie case of price discrimination was testimony by witnesses who had no personal knowledge of the transactions in question. Similarly, in the Staley Mfg. Co. case, unsupported testimony from informants of uncertain character and reliability was insufficient to establish the defense. In the present case, by contrast, the source of the information was a person whose reliability was not questioned and who had personal knowledge of the competing bid. Moreover, Borden attempted [440 U.S. 69, 85] to investigate by asking A&P for more information about the competing bid. Finally, Borden was faced with a credible threat of a termination of purchases by A&P if it did not make a second offer. All of these factors serve to show that Borden did have a valid meeting-competition defense. See United States v. United States Gypsum Co., 438 U.S., at 454 .
[ Footnote 18 ] Because we hold that the petitioner is not liable under 2 (f), we do not reach the question whether Borden might also have had a cost-justification defense under 2 (a).
I concur in Parts I, II, and III of the Court's opinion, but dissent from Part IV. Because it was thought the issue was irrelevant where the buyer knows that the price offered is lower than necessary to meet competition, neither the Commission nor the Court of Appeals decided whether Borden itself would have had a valid meeting-competition defense. The Court should not decide this question here, but should remand to the Commission, whose job it is initially to consider such matters.
For the reason stated by the Commission and the Court of Appeals, I am also convinced that the United States made a sufficient, unrebutted showing that Borden would not have a cost-justification defense to a Robinson-Patman Act charge.
I agree with the Court that the Federal Trade Commission and the Court of Appeals applied the wrong legal standard in [440 U.S. 69, 86] assessing A&P's liability under the Robinson-Patman Act. However, I cannot join the Court's interpretation of 2 (f) as precluding buyer liability under this Act unless the seller could also be found liable for price discrimination. Neither the language nor the sparse legislative history of 2 (f) justifies this enervating standard for the determination of buyer liability. To the contrary, the Court's construction disregards the congressional purpose to curtail the coercive practices of chainstores and other large buyers. Having formulated a new legal standard, the Court then applies it here in the first instance rather than remanding the case to the Commission. Given the numerous ambiguities in the record, I believe the Court thereby improperly arrogates to itself the role of the trier of fact.
Section 2 (f) provides that "[i]t shall be unlawful for any person . . . knowingly to induce or receive a discrimination in price which is prohibited by this section." (Emphasis added.) The Court interprets the italicized language as "plainly meaning" that a buyer can be found liable for knowingly inducing price discrimination only if his seller is first proved liable under 2 (a) and 2 (b). Ante, at 76, 81. Under this construction, proceedings involving only the Commission and a buyer will turn upon proof of a seller's liability, and whenever a seller could successfully claim the meeting-competition defense, the buyer must be exonerated.
In my view, the language of 2 (f) does not compel this circuitous method of establishing buyer liability. Sections 2 (a) and 2 (b) of the Act define the elements of price discrimination and the affirmative defenses available to sellers. When Congress extended liability to buyers who encourage price discrimination, a ready means of defining the prohibition was to rely on the elements and defenses already delineated in 2 (a) and 2 (b). Thus, the phrase "which is prohibited by this section" in 2 (f) incorporates these elements and [440 U.S. 69, 87] defenses by reference, making them applicable to buyers. So construed, 2 (f) simply means that the same elements of a prima facie case must be established and the same basic affirmative defenses available, whether buyer or seller liability is in issue. The section does not require that another party actually satisfy all of the conditions of 2 (a) and 2 (b) before buyer liability can even be considered. Determining buyer and seller liability independently, I believe, places less strain on the "plain meaning" of the language of 2 (f) than does the absolutely derivative standard the majority announces today.
In construing 2 (f), the Court relies on Congress' delay in adding the section to the final bill and on a remark by Representative Utterback during the legislative debates. Ante, at 75-77, and n. 10. The delay provides little logical justification for the Court's interpretation; rather, it more likely reflects Congress' late realization that halting the abusive practices of buyers 1 could not be accomplished solely through imposition of liability on sellers. Representative Utterback's statement, 80 Cong. Rec. 9419 (1936), amounts to a slight paraphrase of 2 (f) and in no way supports the Court's derivative standard.
I agree with the Court's suggestion, ante, at 80, that we must resolve the dilemma confronting a buyer who properly invites a seller to meet a competitor's price and then fortuitously [440 U.S. 69, 88] obtains a lower bid. Congress could not have expected the buyer to choose between asking the seller to increase the bid to a specific price or accepting the lower bid and facing liability under 2 (f). Rather, it must have intended some accommodation for buyers who act in good faith yet receive bids that beat competition. This does not mean, however, that a buyer should be liable under 2 (f) only if his seller also would be liable. That solution to the buyer's dilemma would enable him to manufacture his own defense by misrepresenting to a seller the response needed to meet a competitor's bid and then allowing the seller to rely in good faith on incorrect information. The Court purports to reserve this "lying buyer" issue, ante, at 81-82, n. 15, but the derivative standard it adopts today belies the reservation. If "prohibited by this section" means that a buyer's liability depends on that of the seller, then absent seller liability, the buyer's conduct and bad faith are necessarily irrelevant.
"We believe that it is very probable that Borden did not have such a defense. To have a meeting competition [440 U.S. 69, 91] defense, the record must demonstrate the existence of facts which would lead a reasonable and prudent person to conclude that the lower price would, in fact, meet the competitor's price. As noted, Borden had serious doubts concerning whether the competing bid was legal. Specifically, it believed that the other bid only considered direct costs. It should have asked A&P for more information about the competing bid. By not making the request, it was not acting prudently. As the record clearly indicates, A&P had knowledge of Borden's belief that other dairies might submit bids that did not include all costs." 87 F. T. C. 1047, 1057 n. 19 (1976) (citations omitted; emphasis in original).
Furthermore, if the Court truly intends to avoid deciding the "lying buyer" issue, then it should remand the case for determination of whether the exception applies here. Testimony before the Administrative Law Judge directly raised the possibility that A&P misled Borden to believe a still lower price was necessary than Borden had offered when it first responded to the Bowman bid. App. 117a-118a, 123a-124a, 141a-142a. 6 Both the Administrative Law Judge and the [440 U.S. 69, 92] Commission credited that testimony, see 87 F. T. C., at 979, 1021-1022; 87 F. T. C., at 1049 n. 3, but since evidence of misrepresentation was not material under the standard they applied, there were no clear findings of fact on the point. Under these circumstances, this Court should not attempt to elide such testimony by the unsubstantiated conclusion that Borden's final bid was unaffected by any misrepresentation. Ante, at 81-82, n. 15; see n. 6, supra.
Accordingly, I dissent from the Court's adoption of a derivative standard for determining buyer liability and its resolution of disputed factual issues without a remand.
[ Footnote 1 ] See S. Rep. No. 1502, 74th Cong., 2d Sess. (1936); H. R. Rep. No. 2287, 74th Cong., 2d Sess., 3-7, 17 (1936); H. R. Conf. Rep. No. 2951, 74th Cong., 2d Sess. (1936); FTC, Final Report on the Chain-Store Investigation, S. Doc. No. 4, 74th Cong., 1st Sess. (1935); FTC v. Henry Broch & Co., 363 U.S. 166, 168 -169 (1960); W. Patman, Complete Guide to the Robinson-Patman Act 7-10 (1963); F. Rowe, Price Discrimination Under the Robinson-Patman Act 8-14 (1962). See generally Hearings on Price Discrimination (S. 4171) before a Subcommittee of the Senate Committee on the Judiciary, 74th Cong., 2d Sess. (1936); Hearings on H. R. 8442, H. R. 4995, and H. R. 5062 before the House Committee on the Judiciary, 74th Cong., 1st Sess. (1935).
[ Footnote 2 ] See S. Rep. No. 1502, 74th Cong., 2d Sess., 3-4, 7 (1936); H. R. Rep. No. 2287, 74th Cong., 2d Sess., 3-7, 14-17 (1936); Patman, supra, at 7-10, 148-151; Rowe, supra, at 8-23. The Court recently noted in United States v. United States Gypsum Co., 438 U.S. 422, 455 n. 30 (1978), that "[i]t may also turn out that sustained enforcement of 2 (f) . . . will serve to bolster the credibility of buyers' representations and render reliance thereon by sellers a more reasonable and secure predicate for a finding of good faith under 2 (b)." (Citation omitted.) But if neither a buyer nor a seller can be liable when the seller relies in good faith on the buyer's misrepresentations, then enforcement of 2 (f) will not "bolster the credibility" of buyers. Thus, the derivative standard of liability adopted by the Court today is inconsistent with the premise underlying the Court's suggestion in United States Gypsum, see Note, The Supreme Court, 1977 Term, 92 Harv. L. Rev. 57, 288, 291-294 (1978), and it eliminates one means of reassuring sellers that they may rely on buyer representations.
[ Footnote 3 ] Given this preface to Automatic Canteen, language in that opinion provides little support for the Court's adoption today of a derivative standard with respect to the buyer's meeting-competition defense. Moreover, to the extent the majority believes its resort to literal construction of 2 (f) forecloses further inquiry, it ignores the broader teaching of Automatic Canteen. That case adopted a common-sense approach for [440 U.S. 69, 90] interpreting the often ambiguous Robinson-Patman Act, tempering a "merely literal reading of the language" with considerations of "fairness and convenience" when necessary to achieve Congress' purpose. 346 U.S., at 79 , and n. 23. On that basis, Automatic Canteen allocated to the Commission the burden of production regarding a buyer's cost-justification defense, even though the Commission does not bear that burden in a proceeding against a seller. Id., at 75-76; FTC v. Morton Salt Co., 334 U.S. 37, 44 -45 (1948). Indeed, the Court's interpretation of 2 (f) today, which places buyers in the litigating position of their sellers, may also be incompatible with Automatic Canteen's specific holding on the burden of production.
[ Footnote 4 ] Because the Court reverses the judgment without remanding for further consideration and does not expressly reach the merits of the cost-justification issue raised by A&P, ante, at 85 n. 18, I need not address that issue either.
[ Footnote 5 ] Considering the recent admonition in United States Gypsum, supra, at 456 n. 31, that "[t]he case-by-case interpretation and elaboration of the 2 (b) defense is properly left to the other federal courts and the FTC in the context of concrete fact situations," the Court's action is particularly inappropriate. While I question the Court's decision to undertake resolution of this factual question, without even determining which party bore the burden of persuasion, I do not understand Part IV of its opinion as purporting to modify in any sense what was said last Term in United States Gypsum about the scope of the meeting-competition defense for sellers.

matches: v. v. v. v. v. v. v. v. v. v. v. v. v. v. v. v. v. v. v.


§ 145-4 Procedure for subdivision of parcel into two and not more than four parcels when no new streets are required.
§ 145-6 Final subdivision plat.
§ 145-7 Compliance with other provisions required.
§ 145-11 Off-street parking and loading.
§ 145-15 Street rights-of-way and width.
§ 145-17 Gas and water mains.
§ 145-18 Streetlighting; poles and wires.
§ 145-20 Stormwater drainage or storage basins.
§ 145-26 Powers of Board.
§ 145-27 Factors to be considered.
§ 145-28 Requests for variances.
§ 145-29 Filing fee for application for preliminary approval.
§ 145-30 Deposit upon filing of application for preliminary approval.
§ 145-31 Deposit for costs incurred by Village relating to required improvements.
§ 145-32 Deposit for Recreational Trust Fund.
§ 145-34 Fees to be considered minimums; additional sums.
Coastal erosion hazard areas — See Ch. 66.
Drainage — See Ch. 74.
Environmental quality review — See Ch. 76.
Filling, excavation and grading — See Ch. 84.
Flood damage prevention — See Ch. 94.
Historic preservation — See Ch. 100.
Site plan review — See Ch. 132.
Sprinkler systems — See Ch. 137.
Stormwater management — See Ch. 139.
Water — See Ch. 168.
Wells — See Ch. 172.