Non-Profit Institutions Act - Exemptions for Hospital and Non-Profit Institutions; RPA Claims by Injured Drug Store Competitors

Last Revised: 8/3/01 17:30

Two years after the Robinson-Patman Act was enacted in 1936, the Non-profit Institutions Act was enacted as an amendment to the RPA. This amendment exempts from the requirements of the Robinson-Patman Act many transactions involving hospitals, libraries, universities and [other] non-profit institutions. The wording of the statute must be read quite carefully, and even then the courts have disagreed as to the meaning of the most significant words used in the statute.

The exempting statute, entitled The Non-Profit Institutions Act, 15 U.S.C.A. Section 13c, provides:

Section 13c. Exemption of non-profit institutions from price discrimination provisions.

Nothing in the Act approved June 19, 1936 (Public, Numbered 692, seventy-fourth Congress, second session), known as the Robinson-Patman Antidiscrimination Act, shall apply to purchases of their supplies for their own use by schools, colleges, universities, public libraries, churches, hospitals, and charitable institutions not operated for profit.

[end of statute]

The key words and phrases to keep in mind when reading this statute are: (i) "own use", (ii) "hospitals", (iii) "charitable institutions", and (iv) "not operated for profit".

From 1936 to 1998, the United States Supreme Court has only referred to the Non-Profit Institutions Act three times, in 1983, 1987 and 1988. Most of the United States Courts of Appeals have never mentioned the statute in any published opinion. Only four U.S. Courts of Appeals have referred to the statute: the 9th, 8th, 5th and D.C. Circuit Courts of Appeals (in 8 decisions). Only 15 U.S. District Court opinions have referred to the statute.

The point is that the scope of the exemption is not known and there is substantial room, under existing case law, for arguing that sales of drugs or other goods to hospitals, schools, colleges, universities, public libraries and [other] non-profit institutions are in violation of the RPA, assuming the fact situation is not clearly covered by the literal terms of the statute.

It should be known that the statute and its exemptions are to be narrowly construed, according to existing case law. Exemptions are not to be handed out liberally by the judges and courts deciding cases presented to them.

The courts have held that purchases by government agencies are not exempt under the Non-Profit Institutions Act because they were not explicitly covered by the wording of the statute.

Some food for thought. If a federally or state financing health clinic (which dispenses medical services and low-cost or no-cost drugs) is open to anyone, does the clinic have any "membership" to whom its services are limited. If not, isn't the clinic selling drugs to the public in the same way as, and in competition with, the local drug store across the street?

In such a case, would the courts find any exemption?

Isn't the health clinic just another government agency and not entitled to any exemption?

Anyway, you see what some of the issues can be under this non-profit exemption from the prohibitions of the RPA.

The 3 United States Supreme Court cases, in summary, are:

Abbott Laboratories v. Portland Retail Druggists Assn., Inc., 425 U.S. 1, 96 S. Ct. 1305, 47 L. Ed. 2d 537, 1976 U.S. LEXIS 94 (1976). Abbott Laboratories Summary - Extract from Supreme Court's Decision.

City of Lafayette, Louisiana v. Louisiana Power & Light Co., 435 U.S. 389, 98 S. Ct. 1123, 55 L. Ed. 2d 364, 1978 U.S. LEXIS 19 (1978). City of Lafayette, Louisiana Summary - Extract from Supreme Court's Decision.

Jefferson County Pharmaceutical Association, Inc. v. Abbott Laboratories, 460 U.S. 150, 103 S. Ct. 1011, 74 L. Ed. 2d 882, 1983 U.S. LEXIS 18 (1983), pet. for reh. den. (1983). Jefferson County Pharmaceutical Summary - Extract from Supreme Court's Decision.

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