## Facts

- Automatic Canteen Company of America purchased candy and related products for resale through a large network of vending machines across many states.
- The Federal Trade Commission (FTC) charged Automatic Canteen with violating § 2(f) of the Robinson–Patman Act by knowingly inducing or receiving unlawful price discrimination.
- The FTC presented evidence that Automatic Canteen received (and sometimes solicited) prices up to about 33% below those offered to other purchasers and knew it was being favored.
- The FTC did not attempt to prove that the differentials exceeded cost savings available to sellers from dealing with a large buyer (i.e., it did not negate cost justification).
- After the FTC denied a motion to dismiss at the close of the FTC’s case, Automatic Canteen presented no evidence; the FTC issued a cease-and-desist order.
- The Seventh Circuit affirmed, concluding the FTC need not show absence of cost justification to make a prima facie § 2(f) case.
- The Supreme Court granted review and reversed.

## Issues

1. To establish a prima facie violation of § 2(f) by a buyer, must the FTC prove that the price discrimination was of a type prohibited by the Act (including that it was not within a seller defense such as cost justification), or is proof of a known lower price and competitive effect enough?
2. Under § 2(f), does “knowingly” require only knowledge of a price difference, or knowledge (actual or chargeable) that the discrimination was unlawful (i.e., not within seller defenses)?

## Decision

- The Supreme Court reversed the Seventh Circuit and remanded for further proceedings.
- The Court held that § 2(f) buyer liability is tied to whether the discrimination is “prohibited” by the Act; a buyer does not violate § 2(f) if the lower price is within a seller defense (e.g., cost justification) or is not known by the buyer not to be within such a defense.
- The Court held that proof the buyer knew it was receiving a lower price than other buyers does not, by itself, establish a prima facie § 2(f) violation or shift to the buyer the burden to prove justification.

## Legal Principles

- Section 2(f) prohibits only knowingly inducing or receiving a price discrimination “which is prohibited” by the Robinson–Patman Act; not every differential is unlawful.
- A buyer’s § 2(f) liability depends on the illegality of the discrimination under seller-side standards and defenses, including cost justification.
- “Knowingly” in § 2(f) requires more than awareness of a lower price; it requires knowledge (or chargeable knowledge) that the differential is outside the seller’s statutory defenses.
- The FTC cannot make a prima facie § 2(f) case merely by showing (1) a price differential, (2) buyer awareness of being favored, and (3) competitive effect, without evidence supporting an inference that the discrimination was prohibited or that the buyer knew it was prohibited.
- The burden does not automatically shift to the buyer to prove cost justification solely because it received a lower price.

## Conclusion

The Court limited § 2(f) to situations where a buyer knowingly induces or receives a price discrimination that is actually unlawful under the Robinson–Patman Act, and it required the FTC to present evidence of prohibited discrimination (or buyer knowledge of its prohibited character) rather than relying on the buyer’s mere awareness of favorable pricing.


Automatic Canteen Co. of Am. v. Fed. Trade Comm’n, 346 U.S. 61 (1953)