Federal Trade Commission v. Henry Broch & Co.

Henry Broch & Co. (Broch) (defendant) acted as a sales broker for Canada Foods Ltd., a food-processing company. For every sale that Canada Foods made through Broch, Broch received a 5 percent sales commission. All other sales brokers that Canada Foods utilized received a 4 percent commission. Broch’s commission was higher because, unlike the other brokers, it stocked Canada Foods’ products ahead of sales. Canada Foods’ set price for bulk purchases of apple concentrate was $1.30 per gallon. Broch entered into sales negotiations for the apple concentrate with potential buyer J. M. Smucker Co. (Smucker) on behalf of Canada Foods. Smucker offered a price of $1.25 per gallon through Broch to Canada Foods. Canada Foods, through Broch, replied that the only way that price could be obtained would be through a reduction in Broch’s brokerage fee from 5 percent to 3 percent. Smucker agreed to this. This deal was not offered to any other buyer—all other sales of Canada Foods’ apple concentrate, whether through Broch or another broker—were at $1.30 per gallon, and Broch continued to receive a 5 percent commission on all such sales in which it was involved. The Federal Trade Commission (FTC) (plaintiff) alleged that Broch violated § 2(c) of the Robinson-Patman Act by engaging in unlawful price discrimination. After a hearing, the FTC entered a cease-and-desist order. Broch sought review in the court of appeals, which reversed. The FTC then sought review in the United States Supreme Court. Broch argued that the reduction in price was a price differential permitted under § 2(a) of the Robinson-Patman Act, which allowed for such differentials due to cost savings. Broch also argued that the reduction in the commission was justifiable due to the elimination of services that the seller or the broker normally performed. Broch additionally argued that there was no evidence of any intent to enact unfair pricing.