Association, filed an antitrust lawsuit against major book publishers. The retailers allege that these publishers regularly giant chain stores with secret discounts and Promotional deals that are not made available to smaller Discriminatory price differentials can take a variety of forms, some of which can be quite subtle. The classic case of the simplicity Pattern Company illustrates just how sub tie such price discrimination can be. The Federal Trade Commission charged the simplicity Pattern Company with violating section 2e of the Robinson-Patman Act. The FTC argued that Simplicity, a manufacturer of sewing patterns, had practiced nation in offering promotional services to retailers. Specifically, Simplicity offered a large chain of retail variety stores free catalogs and display cases but did not offer them to small, independent fabric stores. The FTC found Simplicity guilty of violating section the Robinson-Patman Act. Simplicity appealed to the circuit court, which reversed the FTC’s decision. On appeal by the FTC, the Supreme Court upheld the original FTC decision. In finding the FTO, the court argued that since variety and independent fabric stores were in competition, the granting of free catalogs and display cases was a discriminatory promotional allowance favoring the variety stores, resulting in a competitive disadvantage to the independents. Simplicity argued their motives for selling were different. In the case of variety stores, the patterns were sold on a volume basis as an important merchandise item on which the stores intended to make a profit For the fabric stores, however, patterns were sold on a limited basis as an accommodation to customers and thus were not a significant merchandise category on which the stores intended to make a profit. Simplicity argued that if the stores were not actually in competition, then the actions of Simplicity with respect to promotional allowances could not be viewed as impeding competition because such competition had never existed. This case actually hinged on the competitive structure issue of stores were actually in competition with each other in the sale of s patterns Sub- sequent observers of this case believe that if Simplicity had presented a better documented case for its argument of no competition between the variety and fabric stores, it may have won the case. It is, of course, debatable as to the outcome whether would have been different if the competitive structure issue had simply been better articulated. But bring up the kinds subtle issues and interpret difficulties I hat often emerge when dealing with the issues of price discrimination in channels of distribution a governed by the Robinson-Patman Act. It is no wonder that confusion and inconsis- tencies have been common in court interpretations involving the Robinson-Patman Act throughout its history. Consequently, accurate generalizations about whether specific channel pricing policies and practices constitute price discrimination are difficult to make." A study by Norton Marks and Neely Inlow. however, found that the courts have focused main on more flagrant violations involving price discrimination. Moreover, large firms (sales exceeding $1 billion) constituted almost 40 percent of the defendants who came most frequently from the food, tobacco gas and petro- chemical industries.
Price Maintenance A supplier's attempt to control the prices charged by its channel members for the supplier's products is typically referred as price maintenance or fair trade. The supplier, in effect, dictates the prices charged by channel members to their customers. Thus, prices at which products are sold by channel members are not based on the discretion of the channel members in response to market forces, but rather on the requirements of the supplier. Such price maintenance arrangements can help manufacturers gain greater control over the distribution of their products.