Source: https://www.chanrobles.com/usa/us_supremecourt/333/683/case.php
Timestamp: 2020-04-09 22:40:50
Document Index: 341040593

Matched Legal Cases: ['§ 5', '§ 1', '§ 2', '§ 2', '§ 2', '§ 5', '§ 5', '§ 1', '§ 1', '§ 5', '§ 5', '§ 5', '§ 5', '§ 1', '§ 5', '§ 6', '§ 46', '§ 2', '§ 2', '§ 2', '§ 2', '§ 2', '§ 2', '§ 2', '§ 2', '§ 2', '§ 7', '§ 47', '§ 5', '§ 2']

FTC V. CEMENT INSTITUTE, 333 U. S. 683 (1948)
US Supreme Court Decisions On-Line> Volume 333 > FTC V. CEMENT INSTITUTE, 333 U. S. 683 (1948)
Subscribe to Cases that cite 333 U. S. 683
Decided April 26, 1948*
1. The Commission has jurisdiction to conclude that conduct tending to restrain trade is an unfair method of competition violative of § 5 of the Federal Trade Commission Act, even though the self-same conduct may also violate the Sherman Act. Pp. 333 U. S. 689-693. chanrobles.com-red
2. The legislative history of the Federal Trade Commission Act shows that the purpose of Congress was not only to continue enforcement of the Sherman Act by the Department of Justice and the federal courts, but also to supplement that enforcement through the administrative process of the Federal Trade Commission. Pp. 333 U. S. 692-693.
3. The filing by the United States of a civil action in a federal district court to restrain the respondents and others from violating § 1 of the Sherman Act, though based largely on the same alleged misconduct as in the Commission proceeding, does not require that the Commission proceeding be dismissed. Pp. 333 U. S. 693-695.
4. Since all of the respondents were charged with combining to maintain a delivered-price system in order to eliminate price competition in interstate commerce, some who sold cement in intrastate commerce exclusively were nevertheless subject to the jurisdiction and order of the Commission. Pp. 333 U. S. 695-696.
5. The Commission was not disqualified to pass upon the issues involved in this proceeding, even assuming that the members of the Commission, as a result of its prior ex parte investigations, had previously formed the opinion that the multiple basing point system operated as a price-fixing restraint of trade violative of the Sherman Act. Pp. 333 U. S. 700-703.
6. It was not a denial of due process for the Commission to act in these proceedings after having expressed the view that industrywide use of the basing point system was illegal. Tumey v. Ohio, 273 U. S. 510, distinguished. Pp. 333 U. S. 702-703.
7. Although the alleged combination be treated as having had its beginning in 1929, evidence of respondents' activities during years long prior thereto and during the NRA period was admissible for the purpose of showing the existence of a continuing combination among respondents to utilize the basing point pricing system. Pp. 333 U. S. 703-706.
(a) The Commission's consideration of respondents' pre-1929 and NRA code activities was within the rule that testimony as to prior or subsequent transactions, which for some reason are barred from forming the basis for a suit, may nevertheless be introduced if it tends reasonably to show the purpose and character of the particular transactions under scrutiny. Pp. 333 U. S. 704-705.
(b) Administrative agencies such as the Commission are not restricted by rigid rules of evidence. Pp. 333 U. S. 705-706.
(c) A letter written prior to the filing of the complaint by one, since deceased, who was president of a respondent company chanrobles.com-red
and an active trustee of the association, in which he stated that free competition would be ruinous to the cement industry, was admissible in evidence even though the statement may have been only the writer's conclusion. P. 333 U. S. 706.
8. Cement Mfrs. Protective Assn. v. United States, 268 U. S. 588, is not decisive of the issues in the present case. Pp. 333 U. S. 706-709.
9. Individual conduct or concerted action may fall short of violating the Sherman Act and yet constitute an "unfair method of competition" prohibited by the Federal Trade Commission Act. P. 333 U. S. 708.
10. The Commission made adequate findings that respondents collectively maintained a multiple basing point delivered-price system for the purpose of suppressing competition. Pp. 333 U. S. 709-712.
11. There was substantial evidence to support these findings. Pp. 333 U. S. 712-720.
12. Maintenance by concerted action of the basing point delivered-price system employed by respondents is an unfair trade practice prohibited by the Federal Trade Commission Act. Pp. 333 U. S. 720-721.
13. Respondents' multiple basing point delivered-price system resulted in price discriminations between purchasers, in violation of § 2 of the Clayton Act as amended by the Robinson-Patman Act. Corn Products Co. v. Federal Trade Comm'n, 324 U. S. 726; Federal Trade Comm'n v. Staley Co., 324 U. S. 746. Pp. 333 U. S. 721-726.
14. The differences in respondents' net returns from different sales in different localities, resulting from use of the multiple basing point delivered-price system, were not justifiable under § 2(b) of the amended Clayton Act as price discriminations "made in good faith to meet an equally low price of a competitor." Pp. 333 U. S. 721-726.
15. The objections to the form and substance of the Commission's order are without merit. Pp. 333 U. S. 726-730.
A cease and desist order issued by the Federal Trade Commission in proceedings against respondents under the Federal Trade Commission Act and the amended Clayton Act was set aside by the Circuit Court of Appeals. 157 F.2d 533. This Court granted certiorari. 330 U.S. 815816. Reversed, p. 333 U. S. 730. chanrobles.com-red
We granted certiorari to review the decree of the Circuit Court of Appeals which, with one judge dissenting, vacated and set aside a cease and desist order issued by the Federal Trade Commission against the respondents. 157 F.2d 533. Those respondents are: The Cement Institute, an unincorporated trade association composed of 74 corporations [Footnote 1] which manufacture, sell and distribute cement; the 74 corporate members of the Institute; [Footnote 2] and 21 individuals who are associated with the Institute. It took three years for a trial examiner to hear the evidence, which consists of about 49,000 pages of oral testimony and 50,000 pages of exhibits. Even the findings and conclusions of the Commission cover 176 pages. The briefs, with accompanying appendixes submitted by the parties, contain more than 4,000 pages. The legal questions raised by the Commission and by the different respondents chanrobles.com-red
The second count of the complaint, resting chiefly on the same allegations of fact set out in Count I, charged that the multiple basing point system of sales resulted in systematic price discriminations between the customers of each respondent. These discriminations were made, it was alleged, with the purpose of destroying competition in price between the various respondents in violation of § 2 of the Clayton Act, 38 Stat. 730, as amended by the Robinson-Patman Act, 49 Stat. 1526. That section, with chanrobles.com-red
Jurisdiction. -- At the very beginning, we are met with a challenge to the Commission's jurisdiction to entertain the complaint and to act on it. This contention is pressed by respondent Marquette Cement Manufacturing Co., and is relied upon by other respondents. Count I of the complaint is drawn under the provision in § 5 of the Federal Trade Commission Act, which declares that "Unfair methods of competition . . . are hereby declared unlawful." Marquette contends that the facts alleged in Count I do not constitute an "unfair method of competition" within the meaning of § 5. Its argument runs this way: Count I in reality charges a combination to restrain trade. Such chanrobles.com-red
As early as 1920, this Court considered it an "unfair method of competition" to engage in practices "against public policy because of their dangerous tendency unduly to hinder competition or create monopoly." Federal Trade Commission v. Gratz, 253 U. S. 421, 253 U. S. 427. In 1921, the Court, in Federal Trade Commission v. Beech Nut Packing Co., 257 U. S. 441, sustained a cease and desist order against a resale price maintenance plan because such a plan
Id. at 257 U. S. 454. The Court, in holding that the scheme before it constituted an unfair method of competition, noted that chanrobles.com-red
the conduct in question was practically identical with that previously declared unlawful in Dr. Miles Medical Co. v. John D. Park & Sons Co., 220 U. S. 373, and United States v. Schrader's Son, Inc., 252 U. S. 85, the latter a suit brought under § 1 of the Sherman Act. Again, in 1926, this Court sustained a Commission "unfair method of competition" order against defendants who had engaged in a price-fixing combination, a plain violation of § 1 of the Sherman Act. Federal Trade Commission v. Pacific States Paper Trade Assn., 273 U. S. 52. In 1941, we reiterated that certain conduct of a combination found to conflict with the policy of the Sherman Act could be suppressed by the Commission as an unfair method of competition. Fashion Originators' Guild v. Federal Trade Commission, 312 U. S. 457, 312 U. S. 465. The Commission's order was sustained in the Fashion Originators' case not only because the prohibited conduct violated the Clayton Act, but also because the Commission's findings brought the "combination in its entirety well within the inhibition of the policies declared by the Sherman Act itself." In other cases, this Court has pointed out many reasons which support interpretation of the language "unfair methods of competition" in § 5 of the Federal Trade Commission Act as including violations of the Sherman Act. [Footnote 3] Thus it appears that, soon after its creation, the Commission began to interpret the prohibitions of § 5 as including those restraints of trade which also were outlawed by the Sherman Act, [Footnote 4] and chanrobles.com-red
Despite this long and consistent administrative and judicial construction of § 5, we are urged to hold that these prior interpretations were wrong, and that the term "unfair methods of competition" should not be construed as embracing any conduct within the ambit of the Sherman Act. In support of this contention, Marquette chiefly relies upon its reading of the legislative history of the Commission Act. We have given careful consideration to this contention because of the earnestness with which it is pressed. Marquette points to particular statements of some of the Act's sponsors which, taken out of their context, might lend faint support to its contention that Congress did not intend the Commission to concern itself with conduct then punishable under the Sherman Act. But, on the whole, the Act's legislative history shows a strong congressional purpose not only to continue enforcement of the Sherman Act by the Department of Justice and the Federal District Courts, but also to supplement that enforcement through the administrative process of the new Trade Commission. Far from being regarded as a rival of the Justice Department and the District Courts in dissolving combinations in restraint of trade, the new Commission was envisioned as an aid to them, and was specifically authorized to assist them in the drafting of chanrobles.com-red
appropriate decrees in antitrust litigation. [Footnote 5] All of the committee reports and the statements of those in charge of the Trade Commission Act reveal an abiding purpose to vest both the Commission and the courts with adequate powers to hit at every trade practice, then existing or thereafter contrived, which restrained competition or might lead to such restraint if not stopped in its incipient stages. These congressional purposes are revealed in the legislative history cited below, most of which is referred to in respondents' briefs. [Footnote 6] We can conceive of no greater obstacle this Court could create to the fulfillment of these congressional purposes than to inject into every Trade Commission proceeding brought under § 5 and into every Sherman Act suit brought by the Justice Department a possible jurisdictional question.
There is a related jurisdictional argument pressed by Marquette which may be disposed of at this time. While review of the Commission's order was pending in the Circuit Court of Appeals, the Attorney General filed a civil action in the Federal District Court for Denver, Colorado, chanrobles.com-red
We find nothing to justify a holding that the filing of a Sherman Act suit by the Attorney General requires the termination of these Federal Trade Commission proceedings. In the first place, although all conduct violative of the Sherman Act may likewise come within the unfair trade practice prohibitions of the Trade Commission Act, the converse is not necessarily true. It has long been recognized that there are many unfair methods of competition that do not assume the proportions of Sherman Act violations. Federal Trade Commission v. R. F. Keppel & Bro., 291 U. S. 304; Federal Trade Commission v. Gratz, 253 U. S. 421, 253 U. S. 427. Hence, a conclusion that respondents' conduct constituted an unfair method of competition does not necessarily mean that their same activities would also be found to violate § 1 of the Sherman Act. In the second place, the fact that the same conduct may constitute a violation of both acts in nowise requires us to dismiss this Commission proceeding. Just as the Sherman Act itself permits the Attorney General to bring simultaneous civil and criminal suits against a defendant based on the same misconduct, so the Sherman Act and the Trade Commission Act provide the Government with cumulative remedies against activity detrimental to competition. Both the legislative history of the Trade Commission Act and its specific language indicate a congressional chanrobles.com-red
Objections to Commission's Jurisdiction by Certain Respondents on Ground That They Were Not Engaged in Interstate Commerce. -- One other challenge to the Commission's jurisdiction is specially raised by Northwestern Portland and Superior Portland. The Commission found that "Northwestern Portland makes no sales or shipments outside the Washington," and that "Superior Portland, with few exceptions, makes sales and shipments outside the Washington only to Alaska." These two respondents contend that, since they did not engage in interstate commerce, and since § 5 of the Trade Commission Act applies only to unfair methods of competition in interstate commerce, the Commission was without jurisdiction to enter an order against them under Count I of the complaint. For this contention, they chiefly rely on Federal Trade Commission v. Bunte Bros., 312 U. S. 349. They also argue that, for the same reason, the Commission lacked jurisdiction to enforce against them the price discrimination charge in Count II of the complaint.
The fact that one or two of the numerous participants in the combination happen to be selling only within the borders of a single state is not controlling in determining the scope of the Commission's jurisdiction. The important factor is that the concerted action of all of the parties to the combination is essential in order to make wholly effective the restraint of commerce among the states. [Footnote 7] The Commission would be rendered helpless to stop unfair methods of competition in the form of interstate combinations and conspiracies if its jurisdiction could be defeated on a mere showing that each conspirator had carefully confined his illegal activities within the borders of a single state. We hold that the Commission did have jurisdiction to make an order against Superior Portland and Northwestern Portland.
Goods may be sold and delivered to customers at the seller's mill or warehouse door, or may be sold free on board (f.o.b.) trucks or railroad cars immediately adjacent to the seller's mill or warehouse. In either event, the actual cost of the goods to the purchaser is, broadly speaking, the seller's "mill price" plus the purchaser's cost of chanrobles.com-red
The best known early example of a basing point price system was called "Pittsburgh plus." It related to the price of steel. The Pittsburgh price was the base price, Pittsburgh being therefore called a price basing point. In order for the system to work, sales had to be made only at delivered prices. Under this system, the delivered price of steel from anywhere in the United States to a point of delivery anywhere in the United States was, in general, the Pittsburgh price plus the railroad freight rate from Pittsburgh to the point of delivery. [Footnote 8] Take Chicago, Illinois, as an illustration of the operation and consequences chanrobles.com-red
As commonly employed by respondents, the basing point system is not single, but multiple. That is, instead of one basing point, like that in "Pittsburgh plus," a number of basing point localities are used. In the multiple basing point system, just as in the single basing point system, freight absorption or phantom freight is an element chanrobles.com-red
of the delivered price on all sales not governed by a basing point actually located at the seller's mill. [Footnote 9] And all sellers quote identical delivered prices in any given locality regardless of their different costs of production and their different freight expenses. Thus, the multiple and single systems function in the same general manner, and produce the same consequences -- identity of prices and diversity of net returns. [Footnote 10] Such differences chanrobles.com-red
Marquette introduced numerous exhibits intended to support its charges. In the main, these exhibits were copies of the Commission's reports made to Congress or to the President, as required by § 6 of the Trade Commission Act. 15 U.S.C. § 46. These reports, as well as the testimony given by members of the Commission before congressional committees, make it clear that, long before the filing of this complaint, the members of the Commission at that time, or at least some of them, were of the opinion that the operation of the multiple basing point system, as they had studied it, was the equivalent of a price-fixing restraint of trade in violation of the Sherman Act. We therefore decide this contention, as did the Circuit Court of Appeals, on the assumption that such an opinion had been formed by the entire membership of the Commission as a result of its prior official investigations. But we also agree with that court's holding that this belief did not disqualify the Commission. chanrobles.com-red
Moreover, Marquette's position, if sustained, would to a large extent defeat the congressional purposes which prompted passage of the Trade Commission Act. Had the entire membership of the Commission disqualified in the proceedings against these respondents, this complaint could not have been acted upon by the Commission or by any other government agency. Congress has provided for no such contingency. It has not directed that the Commission disqualify itself under any circumstances, has not provided for substitute commissioners should any of its members disqualify, and has not authorized any other government agency to hold hearings, make findings, and issue cease and desist orders in proceedings against unfair trade practices. [Footnote 11] Yet, if Marquette is right, the Commission, by making studies and filing reports in obedience to congressional command, completely immunized the practices investigated, even though they are "unfair," from any cease and desist order by the Commission or any other governmental agency. chanrobles.com-red
There is no warrant in the Act for reaching a conclusion which would thus frustrate its purposes. If the Commission's opinions expressed in congressionally required reports would bar its members from acting in unfair trade proceedings, it would appear that opinions expressed in the first basing point unfair trade proceeding would similarly disqualify them from ever passing on another. See Morgan v. United States, 313 U. S. 409, 313 U. S. 421. Thus, experience acquired from their work as commissioners would be a handicap, instead of an advantage. Such was not the intendment of Congress. For Congress acted on a committee report stating:
Marquette also seems to argue that it was a denial of due process for the Commission to act in these proceedings after having expressed the view that industrywide use of the basing point system was illegal. A number of cases are cited as giving support to this contention. Tumey v. Ohio, 273 U. S. 510, is among them. But it provides no support for the contention. In that case, Tumey had been convicted of a criminal offense, fined, and committed to jail by a judge who had a direct, personal, substantial pecuniary interest in reaching his conclusion to convict. A criminal conviction by such a tribunal was held to violate procedural due process. But the Court there pointed out that most matters relating to judicial disqualification did not rise to a constitutional level. Id. at 273 U. S. 523.
Neither the Tumey decision nor any other decision of this Court would require us to hold that it would be a violation of procedural due process for a judge to sit in chanrobles.com-red
a case after he had expressed an opinion as to whether certain types of conduct were prohibited by law. In fact, judges frequently try the same case more than once, and decide identical issues each time, although these issues involved questions both of law and fact. Certainly the Federal Trade Commission cannot possibly be under stronger constitutional compulsions in this respect than a court. [Footnote 12]
Alleged Errors in re Introduction of Evidence. -- The complaint before the Commission, filed July 2, 1937, alleged that respondents had maintained an illegal combination for "more than eight years last past." In the Circuit Court of Appeals and in this Court, the Government treated its case on the basis that the combination began in August, 1929, when the respondent Cement Institute was organized. The Government introduced much evidence over respondents' objections, however, which showed the activities of the cement industry for many years prior to 1929, some of it as far back as 1902. It also introduced evidence as to respondents' activities from 1933 to May 27, 1935, much of which related to the preparation and administration of the NRA Code for the cement industry pursuant to the National Industrial Recovery Act, 48 Stat. 195, held invalid by this Court chanrobles.com-red
May 27, 1935, in Schechter Poultry Corp. v. United States, 295 U. S. 495. All of the testimony to which objection was made related to the initiation, development, and carrying on of the basing point practices.
We conclude that both types of evidence were admissible for the purpose of showing the existence of a continuing combination among respondents to utilize the basing point pricing system. [Footnote 13]
The Commission did not make its findings of post-1929 combination, in whole or in part, on the premise that chanrobles.com-red
any of respondents' pre-1929 or NRA code activities were illegal. The consideration given these activities by the Commission was well within the established judicial rule of evidence that testimony of prior or subsequent transactions, which for some reason are barred from forming the basis for a suit, may nevertheless be introduced if it tends reasonably to show the purpose and character of the particular transactions under scrutiny. Standard Oil Co. v. United States, 221 U. S. 1, 221 U. S. 46-47; United States v. Reading Co., 253 U. S. 26, 253 U. S. 43-44. Here, the trade practices of an entire industry were under consideration. Respondents, on the one hand, insisted that the multiple basing point delivered price system represented a natural evolution of business practices adopted by the different cement companies not in concert, but separately, in response to customers' needs and demands. That the separately adopted business practices produced uniform terms and conditions of sale in all localities was, so the respondents contended, nothing but an inevitable result of long continued competition. On the other hand, the Government contended that, despite shifts in ownership of individual cement companies, what had taken place from 1902 to the date the complaint was filed showed continued concerted action on the part of all cement producers to develop and improve the basing point system so that it would automatically eliminate competition. In the Government's view, the Institute, when formed in 1929, simply took up the old practices for the old purpose, and aided its member companies to carry it straight on through and beyond the NRA period. See Fort Howard Paper Co. v. Federal Trade Commission, 156 F.2d 899, 906.
Furthermore, administrative agencies like the Federal Trade Commission have never been restricted by the chanrobles.com-red
rigid rules of evidence. Interstate Commerce Commission v. Baird, 194 U. S. 25, 194 U. S. 44. And, of course, rules which bar certain types of evidence in criminal or quasi-criminal cases are not controlling in proceedings like this, where the effect of the Commission's order is not to punish or to fasten liability on respondents for past conduct, but to ban specific practices for the future in accordance with the general mandate of Congress.
The Old Cement Case. -- This Court's opinion in Cement Mfrs.' Protective Assn. v. United States, 268 U. S. 588, known as the Old Cement case, is relied on by the respondents in almost every contention they present. We think it has little relevance, if any at all, to the issues in this case.
In that case, the United States brought an action in the District Court to enjoin an alleged combination to violate chanrobles.com-red
Id. at 268 U. S. 606. In the Old Cement case and in Maple Flooring Mfrs.' Assn. v. United States, 268 U. S. 563, decided the same day, the Court's attention was focused on the rights of a trade association, despite the Sherman Act, openly to gather and disseminate statistics and information as to production costs, output, past prices, merchandise on hand, specific job contracts, freight rates, etc., so long as the Association did these things without attempts to foster agreements or concerted action with reference to prices, production, or terms of sale. Such associations were declared guiltless of violating the Sherman Act because, "in fact, no prohibited concert of action was found." Corn Products Refining Co. v. Federal Trade Commission, 324 U. S. 726, 324 U. S. 735. chanrobles.com-red
In the second place, individual conduct or concerted conduct which falls short of being a Sherman Act violation may, as a matter of law, constitute an "unfair method of competition" prohibited by the Trade Commission Act. A major purpose of that Act, as we have frequently said, was to enable the Commission to restrain practices as "unfair" which, although not yet having grown into Sherman Act dimensions, would most likely do so if left unrestrained. The Commission and the courts were to determine what conduct, even though it might then be short of a Sherman Act violation, was an "unfair method of competition." This general language was deliberately left to the "Commission and the courts" for definition because it was thought that "[t]here is no limit to human inventiveness in this field;" that, consequently, a definition that fitted practices known to lead towards an unlawful restraint of trade today would not fit tomorrow's new inventions in the field, and that for Congress to try to keep its precise definitions abreast of this course of conduct chanrobles.com-red
would be an "endless task." See Federal Trade Commission v. R. F. Keppel & Bro., 291 U. S. 304, 291 U. S. 310-312, and congressional committee reports there quoted.
The Commission's findings of fact set out at great length, and with painstaking detail, numerous concerted activities carried on in order to make the multiple basing point system work in such way that competition in quality, price, and terms of sale of cement would be nonexistent, and that uniform prices, job contracts, discounts, and terms of sale would be continuously maintained. The Commission found that many of these activities chanrobles.com-red
"the capacity, tendency, and effect of the combination maintained by the respondents herein in the manner aforesaid is to . . . promote and maintain their multiple basing point delivered-price system and obstruct and defeat any form of competition which threatens or tends to threaten the continued use and maintenance of said system and the uniformity of prices created and maintained by its use. [Footnote 14]"
The Commission then concluded chanrobles.com-red
Thus, we have a complaint which charged collective action by respondents designed to maintain a sales technique chanrobles.com-red
Disposition of this question brings us to the related contention that there was no substantial evidence to support the findings. We might well dispose of the contention as this Court dismissed a like one with reference to evidence and findings in a civil suit brought under the Sherman Act in Sugar Institute v. United States, 297 U. S. 553, 297 U. S. 601:
When the Commission rendered its decision, there were about 80 cement manufacturing companies in the United chanrobles.com-red
States, operating about 150 mills. Ten companies controlled more than half of the mills, and there were substantial corporate affiliations among many of the others. This concentration of productive capacity made concerted action far less difficult than it would otherwise have been. The belief is prevalent in the industry that, because of the standardized nature of cement, among other reasons, price competition is wholly unsuited to it. That belief is historic. It has resulted in concerted activities to devise means and measures to do away with competition in the industry. Out of those activities came the multiple basing point delivered price system. Evidence shows it to be a handy instrument to bring about elimination of any kind of price competition. The use of the multiple basing point delivered price system by the cement producers has been coincident with a situation whereby, for many years, with rare exceptions, cement has been offered for sale in every given locality at identical prices and terms by all producers. Thousands of secret sealed bids have been received by public agencies which corresponded in prices of cement down to a fractional part of a penny. [Footnote 15] chanrobles.com-red
During the depression in the 1930's, slow business prompted some producers to deviate from the prices fixed by the delivered price system. Meetings were held by other producers; an effective plan was devised to punish the recalcitrants and bring them into line. The plan was simple, but successful. Other producers made the recalcitrant's plant an involuntary base point. The base price was driven down with relatively insignificant losses to the producers who imposed the punitive basing point, but with heavy losses to the recalcitrant who had to make all its sales on this basis. In one instance, where a producer had made a low public bid, a punitive base point price was put on its plant, and cement was reduced 10¢ per barrel; further reductions quickly followed until the base price at which this recalcitrant had to sell its cement dropped to 75¢ per barrel, scarcely one-half of its former base price of $1.45. Within six weeks after the base price hit 75¢, capitulation occurred, and the recalcitrant joined a Portland cement association. Cement in that locality then bounced back to $1.15, later to $1.35, and finally to $1.75.
The foregoing are but illustrations of the practices shown to have been utilized to maintain the basing point price system. Respondents offered testimony that cement is a standardized product, that "cement is cement," that no differences existed in quality or usefulness, and that purchasers demanded delivered price quotations because chanrobles.com-red
of the high cost of transportation from mill to dealer. There was evidence, however, that the Institute and its members had, in the interest of eliminating competition, suppressed information as to the variations in quality that sometimes exist in different cements. [Footnote 16] Respondents introduced the testimony of economists to the effect that competition alone could lead to the evolution of a multiple basing point system of uniform delivered prices and terms of sale for an industry with a standardized product and with relatively high freight costs. These economists testified that, for the above reasons, no inferences of collusion, agreement, or understanding could be drawn from the admitted fact that cement prices of all United States producers had for many years almost invariably been the same in every given locality in the country. There was also considerable testimony by other economic experts that the multiple basing point system of delivered prices, as employed by respondents, contravened accepted economic principles, and could only have been maintained through collusion.
The Commission did not adopt the views of the economists produced by the respondents. It decided that, even though competition might tend to drive the price of standardized products to a uniform level, such a tendency alone could not account for the almost perfect identity in prices, discounts, and cement containers which had prevailed for so long a time in the cement industry. The Commission held that the uniformity and absence of competition in the industry were the results of understandings or agreements entered into or carried out by concert of the Institute and the other respondents. It chanrobles.com-red
may possibly be true, as respondents' economists testified, that cement producers will, without agreement, express or implied, and without understanding, explicit or tacit, always and at all times (for such has been substantially the case here) charge for their cement precisely, to the fractional part of a penny, the price their competitors charge. Certainly it runs counter to what many people have believed -- namely, that, without agreement, prices will vary -- that the desire to sell will sometimes be so strong that a seller will be willing to lower his prices and take his chances. We therefore hold that the Commission was not compelled to accept the views of respondents' economist witnesses that active competition was bound to produce uniform cement prices. The Commission was authorized to find understanding, express or implied, from evidence that the industry's Institute actively worked, in cooperation with various of its members, to maintain the multiple basing point delivered price system; that this pricing system is calculated to produce, and has produced, uniform prices and terms of sale throughout the country, and that all of the respondents have sold their cement substantially in accord with the pattern required by the multiple basing point system. [Footnote 17] chanrobles.com-red
The record does show such differences as those suggested. It is correct to say, therefore, that the sales practices of these particular respondents, and perhaps chanrobles.com-red
What these particular respondents emphasize does serve to underscore certain findings which show that some respondents were more active and influential in the combination than were others, [Footnote 18] and that some companies chanrobles.com-red
The evidence commonly applicable to these and the other respondents showed that all were members of the Institute, and that the officers of some of these particular respondents were, or had been, officers of the Institute. We have already sustained findings that the Institute was organized to maintain the multiple basing point system as one of the "customs and usages" of the industry, and that it participated in numerous activities intended to eliminate price competition through the collective efforts of the respondents. Evidence before the Commission also showed that the delivered prices of these respondents, like those of all the other respondents, were, with rare exceptions, identical with the delivered prices of all their competitors. Furthermore, there was evidence chanrobles.com-red
Unfair Methods of Competition. -- We sustain the Commission's holding that concerted maintenance of the basing point delivered price system is an unfair method of competition prohibited by the Federal Trade Commission Act. In so doing, we give great weight to the Commission's conclusion, as this Court has done in other cases. Federal Trade Commission v. R. F. Keppel & Bro., 291 U. S. 304, 291 U. S. 314; Federal Trade Commission v. Pacific States Paper Trade Assn., 273 U. S. 52, 273 U. S. 63. In the Keppel case, the Court called attention to the express intention of Congress to create an agency whose membership would at all times be experienced, so that its conclusions would be the result of an expertness coming from experience. We are persuaded that the Commission's long and close examination of the questions it here decided has provided it with precisely the experience that fits it for performance of its statutory duty. The kind of specialized knowledge Congress wanted its agency to have was an expertness that would fit it to stop at the threshold every unfair trade practice -- that kind of practice which, if left alone, "destroys competition and establishes monopoly." Federal Trade Commission v. Raladam Co., 283 U. S. 643, 283 U. S. 647, 283 U. S. 650. And see Federal Trade Commission v. Raladam Co., 316 U. S. 149, 316 U. S. 152.
We cannot say that the Commission is wrong in concluding that the delivered-price system, as here used, provides chanrobles.com-red
an effective instrument which, if left free for use of the respondents, would result in complete destruction of competition and the establishment of monopoly in the cement industry. That the basing point price system may lend itself to industrywide anticompetitive practices is illustrated in the following, among other cases: United States v. United States Gypsum Co., 333 U. S. 364; Sugar Institute v. United States, 297 U. S. 553. We uphold the Commission's conclusion that the basing point delivered price system employed by respondents is an unfair trade practice which the Trade Commission may suppress. [Footnote 19]
Section 2(b) provides that proof of discrimination in price (selling the same kind of goods cheaper to one purchaser than to another), makes out a prima facie case of violation, but permits the seller to chanrobles.com-red
The respondents contend that the differences in their net returns from sales in different localities which result from use of the multiple basing point delivered price system are not price discriminations within the meaning of § 2(a). If held that these net return differences are price discriminations prohibited by § 2(a), they contend that the discriminations were justified under § 2(b) because "made in good faith to meet an equally low price of a competitor." Practically all the arguments presented by respondents in support of their contentions were considered by this Court and rejected in 1945 in Corn Products Co. v. Federal Trade Commission, 324 U. S. 726, and in the related case of Federal Trade Commission v. A. E. Staley Mfg. Co., 324 U. S. 746. As stated in the Corn Products opinion at 324 U. S. 730, certiorari was granted in those two cases because the "questions involved" were "of importance in the administration of the Clayton Act in view of the widespread use of basing point price systems." For this reason, the questions there raised were given thorough consideration. Consequently, we see no reason for again reviewing the questions that were there decided. chanrobles.com-red
In the Corn Products case, the Court, in holding illegal a single basing point system, specifically reserved decision upon the legality under the Clayton Act of a multiple basing point price system, but only in view of the "good faith" proviso of § 2(b), and referred at that point to the companion Staley opinion. 324 U.S. at 324 U. S. 735. The latter case held that a seller could not justify the adoption of a competitor's basing point price system under § 2(b) as a good faith attempt to meet the latter's equally low price. Thus, the combined effect of the two cases was to forbid the adoption for sales purposes of any basing point pricing system. It is true that the Commission's complaint in the Corn Products and Staley cases simply charged the individual respondents with discrimination in price through use of a basing point price system, and did not, as here, allege a conspiracy or combination to use that system. But the holdings in those two cases that § 2 forbids a basing point price system are equally controlling here, where the use of such a system is found to have been the result of a combination. Respondents deny, however, that the Corn Products and Staley cases passed on the questions they here urge.
324 U.S. at 324 U. S. 729. This price system, we held, resulted in Corn Products Co.'s receiving from different purchasers different net amounts corresponding to differences in the amounts of phantom freight collected or of actual freight charges absorbed. We further held that "price discriminations are necessarily involved where chanrobles.com-red
Federal Trade Commission v. A. E. Staley Mfg. Co., supra at 324 U. S. 750-751. This was a direct holding that a pricing system involving both phantom freight and freight absorption violates § 2(a) if, under that system, prices are computed for products actually shipped from one locality on the fiction that they were shipped from another. This Court made the holding despite arguments, which are now repeated here, that, in passing the Robinson-Patman Act, Congress manifested its purpose to sanction such pricing systems; that this Court had approved the system in Maple Flooring Mfrs.' Assn. v. United States, 268 U. S. 563, and in Cement Mfrs.' Protective Assn. v. United States, 268 U. S. 588, and that there was no discrimination under this system between buyers at the same point of delivery.
Respondents attempt to distinguish their multiple basing point pricing system from those previously held unlawful by pointing out that, in some situations, their system involves neither phantom freight nor freight absorption, and that is correct; for example, sales by a base mill at its base price plus actual freight from the mill to the point of delivery involve neither phantom freight nor freight absorption. But the Corn Products pricing system which was condemned by this Court related to a base mill -- that at Chicago -- as well as to a non-base mill at Kansas City. The Court did not permit this fact to relieve the pricing system from application of § 2, or to require any modification of the Commission's order. So here, we could chanrobles.com-red
Federal Trade Commission v. A. E. Staley Mfg. Co., supra at 324 U. S. 753. Each of the respondents, whether all its mills were basing points or not, sold some cement at prices determined by the basing point formula and governed by other base mills. Thus, all respondents, to this extent, adopted a discriminatory pricing system condemned by § 2. As this, in itself, was evidence of the employment of the multiple basing point system by the respondents as a practice, rather than as a good faith effort to meet "individual competitive situations," we think the Federal Trade Commission correctly concluded that the use of this cement basing point system violated the Act. Nor can we discern under these circumstances any distinction between the "good faith" proviso as applied to a situation involving only phantom freight and one involving only freight absorption. Neither comes within its terms.
We hold that the Commission properly concluded that respondents' pricing system results in price discriminations. chanrobles.com-red
The Order. -- There are several objections to the Commission's cease and desist order. We consider the objections, having in mind that the language of its prohibitions should be clear and precise in order that they may be understood by those against whom they are directed. See Illinois Commerce Commission v. Thomson, 318 U. S. 675, 318 U. S. 685. But we also have in mind that the Commission has a wide discretion generally in the choice of remedies to cope with trade problems entrusted to it by the Commission Act. Jacob Siegel Co. v. Federal Trade Commission, 327 U. S. 608, 327 U. S. 611-613.
There is a special reason, however, why courts should not lightly modify the Commission's orders made in efforts to safeguard a competitive economy. Congress, when it passed the Trade Commission Act, felt that courts needed the assistance of men trained to combat monopolistic practices in the framing of judicial decrees in antitrust litigation. Congress envisioned a commission trained in this type of work by experience in carrying out the functions imposed upon it. [Footnote 20] To this end, it provided in § 7 of the Act, 15 U.S.C. § 47, that courts might, if it should be concluded that the Government was entitled to chanrobles.com-red
Most of the objections to the order appear to rest on the premise that its terms will bar an individual cement producer from selling cement at delivered prices such that its net return from one customer will be less than from another, even if the particular sale be made in good faith to meet the lower price of a competitor. The Commission disclaims that the order can possibly be so understood. Nor do we so understand it. As we read the order, all of its separate prohibiting paragraphs and subparagraphs, chanrobles.com-red
Then there is objection to that phrase in the preamble which would prevent respondents, or any of them, from doing the prohibited things with "others not parties hereto." We see no merit in this objection. The Commission has found that the cement producers have from time to time secured the aid of others outside the industry who are not parties to this proceeding in carrying out their program for preserving the basing point pricing system as an instrument to suppress competition. Moreover, there will very likely be changes in the present chanrobles.com-red
This paragraph, like all the others in the order, is limited by the preamble, which refers to concerted conduct in accordance with agreement or planned common course of action. The paragraph is merely designed to forbid respondents from acting in harmony to bring about national uniformity in whatever fashion they may seek by collective action to achieve that result. We think that no one would find ambiguity in this language who concluded in good faith to abandon the old practices. There is little difference in effect between paragraph 1, to which objection is here raised, and paragraph 5, which was sustained as proper in Federal Trade Comm'n v. Beech-Nut Packing Co., 257 U. S. 441, 257 U. S. 456, one of the first Trade Commission cases to come before this Court. Paragraph 5 in the Beech-Nut case read: ". . . by utilizing any other equivalent cooperative means of accomplishing the maintenance of prices fixed by the company."
Many other arguments have been presented by respondents. All have been examined, but we find them without merit. chanrobles.com-red
Federal Trade Commission v. R. F. Keppel & Bro., 291 U. S. 304, 291 U. S. 310; Federal Trade Commission v. Raladam Co., 283 U. S. 643, 283 U. S. 649-650; see also United States Alkali Export Assn. v. United States, 325 U. S. 196, and see Eugene Dietzgen Co. v. Federal Trade Commission, 142 F.2d 321, 326-327, and cases there cited, among the numerous Circuit Courts of Appeals cases on the same subject.
See Ramsay Co. v. Bill Posters Assn., 260 U. S. 501, 260 U. S. 511; Stevens Co. v. Foster & Kleiser Co., 311 U. S. 255, 311 U. S. 260-261; United States v. Frankfort Distilleries, 324 U. S. 293, 324 U. S. 297-298.
Marquette, in support of its motion to disqualify the Commission, urged that the Department of Justice and the Commission had concurrent power or jurisdiction to enforce the prohibitions of the Sherman Act. 147 F.2d 593.
"Section Five of the Federal Trade Commission Act does not provide private persons with an administrative remedy for private wrongs." The Commission is not a court. It can render no judgment, civil or criminal. Federal Trade Commission v. Klesner, 280 U. S. 19, 280 U. S. 25, and see Humphrey's Executor v. United States, 295 U. S. 602, 295 U. S. 628; Louisville & N. R. Co. v. Garrett, 231 U. S. 298, 231 U. S. 307.
"All bids subject to 10¢ per barrel discount for payment in 15 days."
(Com.Ex. 175-A.) See 157 F.2d 576.
See Sugar Institute v. United States, 297 U. S. 553, 297 U. S. 600:
It is enough to warrant a finding of a "combination" within the meaning of the Sherman Act if there is evidence that persons, with knowledge that concerted action was contemplated and invited, give adherence to and then participate in a scheme. Interstate Circuit v. United States, 306 U. S. 208, 306 U. S. 226-227; United States v. Masonite Corp., 316 U. S. 265, 316 U. S. 275; United States v. Bausch & Lomb Co., 321 U. S. 707, 321 U. S. 722-723; 333 U. S. 393-394. See United States Maltsters Assn. v. Federal Trade Commission,@ 152 F.2d 161, 164:
While we hold that the Commission's findings of combination were supported by evidence, that does not mean that existence of a "combination" is an indispensable ingredient of an "unfair method of competition" under the Trade Commission Act. See Federal Trade Commission v. Beech-Nut Packing Co., 257 U. S. 441, 257 U. S. 455.
"These powers, partly administrative and partly quasi-judicial, are of great importance, and will bring both to the Attorney General and to the court the aid of special expert experience and training in matters regarding which neither the Department of Justice nor the courts can be expected to be proficient."
"With the exception of the Knight case (United States v. E. C. Knight Co., 156 U. S. 1), the Supreme Court has never failed to condemn and to break up any organization formed in violation of the Sherman law which has been brought to its attention; but the decrees of the court, while declaring the law satisfactorily as to the dissolution of the combinations, have apparently failed in many instances in their accomplishment simply because the courts and the Department of Justice have lacked the expert knowledge and experience necessary to be applied to the dissolution of the combinations and the reassembling of the divided elements in harmony with the spirit of the law."
It is important to note that this Court has disagreed with the conclusions of the court below as to the material facts constituting the premise on which that court and this have based their respective conclusions. Accordingly, this Court has neither reversed nor directly passed upon the principal conclusion of law reached by the court below. The court below concluded that there was not sufficient evidence to support a finding by the Federal Trade Commission of the existence of that combination among the respondents to restrain the competition in price that was charged in both counts of the complaint. [Footnote 2/1] chanrobles.com-red
The court below even doubted that the Commission had clearly stated that it found such a combination existed. However, rather than send the case back to the Commission for clarification of the Commission's findings of fact, the Court of Appeals assumed that those findings did state that such a combination existed. The court then concluded that, even if the Commission had so found, there was not sufficient evidence to support the finding. [Footnote 2/2] Accordingly, the court below applied the law of the case to a set of facts that did not include such a combination. On that basis, it held that the Commission's order to cease and desist should be set aside. I agree with the court below in both of these conclusions. [Footnote 2/3] On the other hand, this Court today has held not only chanrobles.com-red
that the Commission found the existence of the combination as charged, but that such finding is sufficiently supported by evidence in the record. This Court accordingly has applied the law of the case to a set of facts which includes a combination among the respondents to restrain competition in price as alleged in the complaint. The resulting effect is that, while the court below has held that, without such a combination, there was not the alleged violation either of § 5 of the Federal Trade Commission Act [Footnote 2/4] or of § 2 of the amended Clayton Act, [Footnote 2/5] yet, on the other hand, this Court has held that, including chanrobles.com-red
such a combination, there was a violation of each of those Sections to the extent charged in the several cases. This Court therefore has not here determined the relation, if any, of either of the foregoing statutes to the absorption of freight charges by individuals when not participating in a combination of the kind charged by the Commission. [Footnote 2/6] chanrobles.com-red
The Commission based its conclusion upon its finding of the existence of the combination charged in its complaint. [Footnote 2/7] chanrobles.com-red
The court below was in a position to, and did, judicially examine the record at length, hear extended argument upon it, and pass upon the many inferences to be drawn from the evidence it contained. In the light of that court's recent experience with many cases in this particular field of the law, and of what it has described as its "long and careful study of the situation," it concluded that the evidence was not sufficient to support a finding of the combination charged. Its opinion reviewed the evidence and pointed out many weaknesses in the inferences upon which the Commission had based its chanrobles.com-red
finding of the existence of the alleged unlawful combination. [Footnote 2/8]
The absence of sufficient evidence to support the conclusions of the Commission was especially impressive in the cases concerning the central California group, the southern California group, the Washington-Oregon group, [Footnote 2/9] and the Huron Portland Cement Company. The chanrobles.com-red
decision of the Commission and of this Court even in those cases was made dependent upon the conclusion of the existence of a combination, however attenuated the basis for that conclusion might be. [Footnote 2/10] The cease and desist orders in all of these cases are therefore to be regarded as based upon the unique and extended record presented in this case, including what this Court refers to as
On the view of the evidence taken by the court below and by me, that evidence does not support the Commission's finding of the combination as charged. Unlike the Commission and the majority of this Court, the lower court and I therefore have faced the further issue presented by the Commission's charges unsupported by a finding of the alleged combination. This has led us to consider an issue quite different from that decided by this Court today. That issue lies within the long established and widespread practice by individuals of bona fide competition by freight absorption, with which practice Congress has declined to interfere, although asked chanrobles.com-red
to do so. [Footnote 2/11] This is the field where a producer, for his own purposes and without collusion, often ships his product to a customer who, in terms of freight charges, is chanrobles.com-red
located nearer to one or more of the producer's competitors than to the producer himself. In selling to such a customer, this producer is at an obvious freight disadvantage. To meet the lower delivered price of his competitor, the producer therefore reduces his delivered price in that area by a sum sufficient to absorb his freight disadvantage. He might do this for many reasons. For example, this customer might be such a large customer that the volume of his orders would yield such a return to the producer that the producer, by distributing his fixed charges over the resultingly increased volume of business, could absorb the freight differential without loss of profit to his business as a whole and without raising any charges to his other customers. The securing of this particular business might even enable the producer to reduce his own basic factory price to all his customers. It might make the difference between a profitable and a losing business, resulting in the producer's solvency or bankruptcy. If the advantage to be derived from this customer's business were not sufficient, in itself, thus completely to absorb the freight differential, the producer might absorb all or part of such differential by a reduction in his net earnings without affecting his other customers. Whether or not he would be justified in absorbing any or all of this freight differential by increasing his charges to other customers, in his own freight-advantage area, raises a separate question as to the validity of such an increase. The Commission and the majority of this Court did not reach the question of individual and independent absorptions of freight charges by one or more producers to meet lower prices of competitors in such competitors' respective areas of freight advantage. chanrobles.com-red
Id. 157 F.2d 553.
The law of the case represents a development of the law in relation to delivered-price systems. See especially Federal Trade Commission v. A. E. Staley Mfg. Co., 324 U. S. 746,; Corn Products Refining Co. v. Federal Trade Commission, 324 U. S. 726; Sugar Institute, Inc. v. United States, 297 U. S. 553; Fairmont Creamery Co. v. Minnesota, 274 U. S. 1; Cement Mfrs.' Protective Assn. v. United States, 268 U. S. 588; Maple Flooring Manufacturers Assn. v. United States, 268 U. S. 563; United States v. American Linseed Oil Co., 262 U. S. 371; Aetna Portland Cement Co. v. Federal Trade Commission, 157 F.2d 533 (this case below); Fort Howard Paper Co. v. Federal Trade Commission, 156 F.2d 899; United States Maltsters Assn. v. Federal Trade Commission, 152 F.2d 161.
"Furthermore, the basing point price system has been in use by industry for almost a half century. There has been and is a marked diversity of opinion among economists, lawmakers, and people generally as to whether it is good or bad. Numerous bills have been introduced in Congress seeking to outlaw its use. Countless time has been spent in hearings by Congressional committees, before whom it has been assailed and defended. The pages of the Congressional Record bear mute but indisputable proof of the fact that Congress has repeatedly refused to declare its use illegal. There is no occasion to relate this Congressional history. It is a matter of common and general knowledge. In the Corn Products case, the Court, in commenting upon some of this legislative history, stated 324 U.S. at 324 U. S. 737:"
"We think this legislative history indicates only that Congress was unwilling to require f.o.b. factory pricing, and thus to make all uniform delivered price systems and all basing point systems illegal per se."