## Facts

- Henry Broch & Co. acted as a broker for Canada Foods Ltd., selling apple concentrate for a 5% commission (higher than other brokers’ 4% based on Broch’s claimed added services).
- Canada Foods set a price of $1.30 per gallon (50-gallon drums) for its 1954 pack and authorized brokers to sell at that price.
- The J. M. Smucker Co. sought a lower price; Canada Foods stated the price could be lowered only by reducing brokerage.
- Canada Foods offered to sell to Smucker at $1.25 per gallon if Broch reduced its commission from 5% to 3%; Broch agreed and the sale was completed.
- Smucker thereafter received the $1.25 price on later purchases, while other customers continued to pay $1.30; Broch continued to receive 5% commission on other sales.
- The brokerage reduction ($814.73) financed about half of the total price reduction granted to Smucker ($1,629.47).

## Issues

1. Whether a seller’s broker is covered by “any person” under § 2(c) of the Clayton Act as amended by the Robinson-Patman Act.
2. Whether a selective reduction in brokerage that enables a lower price to a favored buyer constitutes an unlawful “allowance or discount in lieu of brokerage” under § 2(c).
3. Whether such conduct is excused by § 2(a)’s cost-justification proviso, by the buyer’s lack of knowledge, or by the allowance being conveyed indirectly through the seller.

## Decision

- The Supreme Court reversed the Seventh Circuit and reinstated the FTC’s cease-and-desist order against Broch.
- A seller’s broker is within § 2(c)’s term “any person.”
- The selective commission reduction operated as an unlawful allowance in lieu of brokerage to the buyer within § 2(c).
- The conduct was not made lawful by § 2(a)’s cost-justification proviso.
- The buyer’s lack of knowledge of the brokerage reduction was immaterial.
- Section 2(c) applies whether the allowance reaches the buyer directly or indirectly through the seller.

## Legal Principles

- Section 2(c) prohibits any person, including a seller’s broker, from granting commissions, brokerage, or allowances/discounts in lieu thereof to the other party to a sales transaction, except for services actually rendered.
- A brokerage reduction that selectively finances a favored buyer’s lower price, without proportionally equal treatment for other buyers, is an unlawful allowance in lieu of brokerage.
- Section 2(c) is not avoided by invoking § 2(a) cost-justification for price differentials when the concession is brokerage-type in substance.
- Buyer awareness or intent is not an element; liability turns on the making of the prohibited allowance.
- Indirect mechanisms (broker reduces commission so seller can invoice a lower price) fall within § 2(c).

## Conclusion

The Court held that a seller’s broker violates Robinson-Patman Act § 2(c) when it selectively reduces its commission to enable a lower price for a favored buyer, and that neither asserted cost savings, the buyer’s ignorance, nor indirect structuring through the seller defeats § 2(c) liability.


F.T.C. v. Henry Broch & Co., 363 U.S. 166 (1960)