Discount rate

“ If, however, in the city in question, the rate of interest were at a very high point, it is evident that the price of long bills would not rise in the same proportion as that of short; for the purchaser must bear the discount, which has to be deducted from the long bill before it can become equally available with the short bill ”

“ To the former, who intends maybe to draw a few hundred pounds on London in a day or two against the shipment he is preparing, the difference between selling his draft next week instead of this may mean, if the rate should move in his favor, the gain of an additional half per cent.; but to our home manufacturers, who sell their wares in sterling and stipulate for payment in bills on London, the see-saw of rates is but of academic interest. They pay attention to the course of discount, because they may have to melt some of their paper before pay-day comes round ”

“ It has been shown that the rate at which the banks make advances to the discount houses has an important effect upon the market rate of discount in London, but the banks exercise a still more important and direct effect upon this discount by being themselves large buyers of bills. It is impossible to gauge exactly the extent to which they hold bills among their assets, since many of them in their balance sheets include their discounts along with their loans and advances. ”

“ The chief value of the single rate equivalent to the discount series is in its use for comparative purposes, as it indicates which of two discount series is the more favorable. When a large number of selling prices must be computed, all having the same discount series, the single rate method of calculation also has a great advantage over the long method, which makes use of the series. ”

“ Whatever leads to unusual draughts on the resources of banks, immediately causes a rise in the rate of discount—a rise dictated both by the wish to make increased profits, and the wish to avoid a dangerous decrease of resources. ”

“ This may be the legal rate of interest, or any percentage agreed on in advance.
Sometimes wholesale merchants or manufacturers grant esteemed customers, in consideration of prompt payments, a discount from the regular prices. ”

“ The company's schedule prescribed certain rates, which we may call the book rates, but upon a large part of them a discount of 5 per cent was made if they were promptly paid. The consumers very generally availed themselves of this discount. The discount rates constituted the actual collections, and may be called the actual rates. For the fiscal year which was examined the book rates amounted, in round numbers, to $93,000, while the actual rates amounted, as the master found, to $88,000. The percentage of reduction made by the ordinance was computed to be 22.88. ”

“ If the discount exceeds such costs, it cannot be justified as a functional discount, particularly where, as here, the excess has a negative effect on competition.↑ In their brief filed as amici curiae, the United States and the Federal Trade Commission suggest the following definition of "functional discount," which is adequate for our discussion: "A functional discount is one given to a purchaser based on its role in the supplier's distributive system, reflecting, at least in a generalized sense, the services performed by the purchaser for the supplier." ”

“ On the one hand, it recognizes that the quantity discount may be utilized arbitrarily and without justification in savings effected by quantity sales, to give a discriminatory advantage to large buyers over small ones. ”

“ It seems to me that a discount which gives a lowered cost to so large a proportion of respondent's customers and is withheld only from those whose conditions of delivery obviously impose greater handling costs, does not permit the same inferences of effect on competition as the quota discounts which reduce costs to the few only and that on a basis which ultimately is their size. ”

“ Inasmuch as the sale or purchase, under this method, must be booked on a cash option basis, this treatment seems to result in a departure from true cost or in the mistake of booking only some of the elements which enter into the cost of merchandise. The price at which a merchant can sell his product must include all direct and indirect costs and provide a margin for profit. The sales discount offered is simply one of these indirect costs. It cannot be more accurately estimated than can the salesman’s salary which is a part of the sale price. ”

“ Shniderman, 60 Harv.L.Rev., at 599-600 (Commission's approach to functional discounts "may have been influenced by the possibility of subtle price discriminating techniques through the employment of wholesalers receiving more than ample discount differentials") .↑ "In practice, the competitive effects requirement permits a supplier to quote different prices between different distributor classes-so long as those who are higher up (nearer the supplier) on the distribution ladder pay less than those who are further down (nearer the consumer) ." ”

“ We generally agree with this description of the legal status of functional discounts. A supplier need not satisfy the rigorous requirements of the cost justification defense in order to prove that a particular functional discount is reasonable and accordingly did not cause any substantial lessening of competition between a wholesaler's customers and the supplier's direct customers. ”

“ The rates of interest and discount charged are an important element in the cost of doing business and, if loaning and discounting is discontinued, sales of property to meet maturing obligations are forced, with the result of price readjustments between the town in question and the outside world which speedily change the relations between purchases and sales. ”

“ When the discount has ceased to exist through its absorption against premium on stock or the general surplus, it should no longer be reported because it is then a matter of ancient history with which the present is not concerned. ”

“ They press their wares upon one at the hotels and in their shops, and the purchaser never knows whether he is buying at a bargain or paying two or three prices. It is not at all uncommon for the dealer to begin negotiations with the assertion that he has but one price and that his conscience will not allow him to ask more than a fair price, and conclude [252] by selling at a twenty-five or fifty per cent discount. It may be that natives are treated differently, but the foreigner is likely to be charged "what the traffic will bear." ”

“ But suppose the sale is concluded, and one of these lines is given for the balance, do you then understand that the whole sum due is to be taken in goods?-Yes. The reason why I expect to get the shawl for a little less if large part of the price is wanted in money, is because I never consider that I realize above what I pay in goods for my hosiery, and very often there is a heavy discount off. ”

“ It does not seem to me that one can fairly draw the inference that competition probably is affected by the carload-lot discount. Indeed, the discount is so small in proportion to price, salt is so small an item in wholesale or retail business and in the consumer's budget that I should think it farfetched even to find it reasonably possible that competition would be substantially affected. ”

“ An allowance of 8 cents a pound, which is made on bills ordered sent by express or freight, cost of transportation payable on arrival, by the purchaser, is equivalent to a discount of front 15 to 30 per cent. from catalogue prices, varying according to quality, style, copyright, and other considerations, on different books. ”

“ As regards the income from purchase discount, the effect of entering the voucher net is to bring onto the books the purchase discount income as soon as the voucher is entered. Purchase discount is not usually looked upon as earned until payment of the bill is made and thus the right to the discount established. This method then necessitates at the close of the fiscal period an adjustment of the difference between the Discount columns in voucher register and cash book, in order to defer to the next period the discount not yet earned on all vouchers unpaid at the close of the period. ”

“ What is not sold during the year becomes a remnant which is disposed of at a discount. Certain styles are not to the taste of the public, and are left to be sold at half price. All of the advances and losses must be covered by the total of sales, or the ruined manufacturer will have to cease producing. ”

“ Riggs' apparent acceptance of it as the final word on discounts, one may ask if it recognizes all the elements necessarily involved in a discussion of the problems raised by discount financiering. From the literature of the subject one may read the following claims: Discount is a measure of the risk involved in a new enterprise; discount is a market adjustment that reflects the current value of money; discount is a sacrifice of principal for a slightly reduced interest annuity; discount is a dividend declared before the dividend is earned ”

“ Do you believe, that, if any person had notes which insured to him the payment of all the Government demands upon himself, though he had no demands upon him directly, he would not find numbers of persons who would exchange those notes for him at a premium or a discount?—Then you would have a certain proportion of the monetary system of the country circulating at a discount. ”

“ The usual method by which money is loaned in the great [Pg 138] industrial centers is called discount, which is the exchange of a certain sum of money for a note or other credit paper of a larger amount, the interest thus being taken out in advance. Much borrowing in the form of discount is for the same purpose as other borrowing—to acquire control of more productive agents, to embark on new enterprises. The peculiarity of the discount money-market is that an unusual number of loans are made to meet contracts that have already been made. ”

“ The adoption of the premium advertising system enables complainants to give a discount upon purchases of small as well as large amounts, one coupon or stamp being given with each 5, 10, or 25-cent cash purchase, or multiple thereof, as the case may be. And a larger discount in merchandise can be given than otherwise there could be because, as a result of large purchases of the merchandise given in exchange for the tokens, the articles are secured at much less than the regular retail price. ”

“ When the price is made, the profits are calculated with the idea that the customer may take advantage of the cash discount; that is, the price after the discount is deducted includes a legitimate profit. We cannot debit the customer with the amount of the bill less the discount, for we do not know that he will take advantage of the discount; and so, the charge to the customer and credit to sales account is an amount which may never be received. ”

“ The sales of both dairies to retail stores during the period in question were handled under plans which gave most of their customers-the independently owned stores-percentage discounts off list price which increased with the volume of their purchases to a specified maximum while granting a few customers-the grocery store chains-a flat discount without reference to volume and substantially greater than the maximum discount available under the volume plan offered independent stores. These discounts were made effective through schedules which appeared to cover all stores ”

“ It is everywhere accepted as valid. And it in a measure substantiates Mavor's statement that "freight rates, like rent, are rather the effect of price movements than the cause of them." When tariffs are high because prices are high, we are afforded a fair illustration of value of service as an element in rate making. ”

“ The largest portion, or 362l. goes into the pockets of the booksellers; and as they do not advance capital, and incur very little risk, this certainly appears to be an unreasonable allowance. The most extravagant part of the charge is the thirty-three per cent. which is allowed as profit on retailing the book.
It is stated, however, that all retail booksellers allow to their customers a discount of ten per cent. upon orders above 20s., and that consequently the nominal profit of forty-four or thirty-three per cent. is very much reduced. ”

“ The cash discount allowed is usually so large that a purchaser can ill afford not to take advantage of it. Two per cent. discount for cash within 10 days, for example, with "60 days net" is equivalent to a return of 12 per cent. per annum on one's capital. In actual practice the allowance is often even more liberal. Hence where competition is at all keen the business man is practically forced to adopt the system of cash payments, depending upon his bank to advance to him, on his own notes, the necessary funds. ”

“ These discriminations could be overcome by assessing a duty in ad valorem terms, but this method is open to the objection, first, that it increases administrative difficulties and tends to decrease revenue through undervaluation; and, second, that as prices advance, the ad valorem rate increases the duty per pound at the time when the consumer most needs relief and the producer can best stand competition; while if prices decline the duty is decreased at the time when the consumer is least burdened by the price and the producer most needs protection. ”