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FTC v. Cement Institute :: 333 U.S. 683 (1948) :: Justia U.S. Supreme Court Center Log In
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FTC v. Cement Institute 333 U.S. 683 (1948)
U.S. Supreme CourtFTC v. Cement Institute, 333 U.S. 683 (1948)Federal Trade Commission v. Cement InstituteNo. 23Argued October 20-21, 1947Decided April 26, 1948*333 U.S. 683CERTIORARI TO THE CIRCUIT COURT OF APPEALS
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. Page 333 U. S. 684
(c) A letter written prior to the filing of the complaint by one, since deceased, who was president of a respondent company Page 333 U. S. 685 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.
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. Page 333 U. S. 687
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 Page 333 U. S. 688 are many and varied. Some contentions are urged by all respondents, and can be jointly considered. Others require separate treatment. In order to keep our opinion within reasonable limits, we must restrict our record references to the minimum consistent with an adequate consideration of the legal questions we discuss.
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 Page 333 U. S. 689 certain conditions which need not here be set out, makes it
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 Page 333 U. S. 690 a combination constitutes an offense under § 1 of the Sherman Act, which outlaws "Every . . . combination . . . in restraint of trade." 26 Stat. 209, 15 U.S.C. § 1. Section 4 of the Sherman Act provides that the attorney general shall institute suits under the Act on behalf of the United States, and that the federal district courts shall have exclusive jurisdiction of such suits. Hence, continue respondents, the Commission, whose jurisdiction is limited to "unfair methods of competition," is without power to institute proceedings or to issue an order with regard to the combination in restraint of trade charged in Count I. Marquette then argues that, since the fact allegations of Count I are the chief reliance for the charge in Count II, this latter count also must be interpreted as charging a violation of the Sherman Act. Assuming, without deciding, that the conduct charged in each count constitutes a violation of the Sherman Act, we hold that the Commission does have jurisdiction to conclude that such conduct may also be an unfair method of competition, and hence constitute a violation of § 5 of the Federal Trade Commission Act.
Id. at 257 U. S. 454. The Court, in holding that the scheme before it constituted an unfair method of competition, noted that Page 333 U. S. 691 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 Page 333 U. S. 692 that this Court has consistently approved that interpretation of the Act.
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 Page 333 U. S. 693 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, Page 333 U. S. 694 to restrain the Cement Institute, Marquette, and 88 other cement companies, including all of the present respondents, from violating § 1 of the Sherman Act. Much of the evidence before the Commission in this proceeding might also be relevant in that case, which, we are informed, has not thus far been brought to trial. Marquette urges that the Commission proceeding should now be dismissed because it is contrary to the public interest to force respondents to defend both a Commission proceeding and a Sherman Act suit based largely on the same alleged misconduct.
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 Page 333 U. S. 695 purpose not to confine each of these proceedings within narrow, mutually exclusive limits, but rather to permit the simultaneous use of both types of proceedings. Marquette's objections to the Commission's jurisdiction are overruled.
"In general, said corporate respondents Page 333 U. S. 696 have maintained, and now maintain, a constant course of trade and commerce in cement among and between the several States of the United States."
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 Page 333 U. S. 697 transportation. However, if the seller fixes a price at which he undertakes to deliver goods to the purchaser where they are to be used, the cost to the purchaser is the "delivered price." A seller who makes the "mill price" identical for all purchasers of like amount and quality simply delivers his goods at the same place (his mill) and for the same price (price at the mill). He thus receives for all f.o.b. mill sales an identical net amount of money for like goods from all customers. But a "delivered price" system creates complications which may result in a seller's receiving different net returns from the sale of like goods. The cost of transporting 500 miles is almost always more than the cost of transporting 100 miles. Consequently if customers 100 and 500 miles away pay the same "delivered price," the seller's net return is less from the more distant customer. This difference in the producer's net return from sales to customers in different localities under a "delivered price" system is an important element in the charge under Count I of the complaint, and is the crux of Count II.
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 Page 333 U. S. 698 of the system. A Chicago steel producer was not free to sell his steel at cost plus a reasonable profit. He must sell it at the Pittsburgh price plus the railroad freight rate from Pittsburgh to the point of delivery. Chicago steel customers were, by this pricing plan, thus arbitrarily required to pay for Chicago produced steel the Pittsburgh base price plus what it would have cost to ship the steel by rail from Pittsburgh to Chicago had it been shipped. The theoretical cost of this fictitious shipment became known as "phantom freight." But, had it been economically possible under this plan for a Chicago producer to ship his steel to Pittsburgh, his "delivered price" would have been merely the Pittsburgh price, although he actually would have been required to pay the freight from Chicago to Pittsburgh. Thus, the "delivered price" under these latter circumstances required a Chicago (non-basing point) producer to "absorb" freight costs. That is, such a seller's net returns became smaller and smaller as his deliveries approached closer and closer to the basing point.
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 Page 333 U. S. 699 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 Page 333 U. S. 700 as there are in matters here pertinent are therefore differences of degree only.
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. Page 333 U. S. 701
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. Page 333 U. S. 702
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 Page 333 U. S. 703 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 Page 333 U. S. 704 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.
The Commission did not make its findings of post-1929 combination, in whole or in part, on the premise that Page 333 U. S. 705 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 Page 333 U. S. 706 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.
In that case, the United States brought an action in the District Court to enjoin an alleged combination to violate Page 333 U. S. 707 § 1 of the Sherman Act. The respondents were the Cement Manufacturers Protective Association, four of its officers, and nineteen cement manufacturers. The District Court held hearings, made findings of fact, and issued an injunction against those respondents. This Court, with three justices dissenting, reversed upon a review of the evidence. It did so because the Government did not charge, and the record did not show, "any agreement or understanding between the defendants placing limitations on either prices or production," or any agreement to utilize the basing point system as a means of fixing prices. The Court said:
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. Page 333 U. S. 708
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 Page 333 U. S. 709 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 Page 333 U. S. 710 were carried on by the Cement Institute, the industry's unincorporated trade association, and that, in other instances, the activities were under the immediate control of groups of respondents. Among the collective methods used to accomplish these purposes, according to the findings, were boycotts; discharge of uncooperative employees; organized opposition to the erection of new cement plants; selling cement in a recalcitrant price-cutter's sales territory at a price so low that the recalcitrant was forced to adhere to the established basing point prices; discouraging the shipment of cement by truck or barge, and preparing and distributing freight rate books which provided respondents with similar figures to use as actual or "phantom" freight factors, thus guaranteeing that their delivered prices (base prices plus freight factors) would be identical on all sales whether made to individual purchasers under open bids or to governmental agencies under sealed bids. These are but a few of the many activities of respondents which the Commission found to have been done in combination to reduce or destroy price competition in cement. After having made these detailed findings of concerted action, the Commission followed them by a general finding that
The Commission then concluded Page 333 U. S. 711 that
Thus, we have a complaint which charged collective action by respondents designed to maintain a sales technique Page 333 U. S. 712 that restrained competition, detailed findings of collective activities by groups of respondents to achieve that end, then a general finding that respondents maintained the combination, and finally an order prohibiting the continuance of the combination. It seems impossible to conceive that anyone reading these findings in their entirety could doubt that the Commission found that respondents collectively maintained a multiple basing point delivered price system for the purpose of suppressing competition in cement sales. The findings are sufficient. The contention that they were not is without substance.
When the Commission rendered its decision, there were about 80 cement manufacturing companies in the United Page 333 U. S. 713 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] Page 333 U. S. 714
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 Page 333 U. S. 715 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 Page 333 U. S. 716 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] Page 333 U. S. 717
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 Page 333 U. S. 718 of other respondents as well, were not at all times precisely like the sales practices of all or any of the others. For example, the Commission found that, in 1929, all of the central California mills became basing points. There was evidence that the Institute's rate books did not extend to the states in which some of the California companies did business. The Commission found that, "[i]n Southern California, the basing point system of pricing is modified by an elaborate system of zone prices applicable in certain areas," that the California system does not require separate calculations to determine the delivered price at each destination, but that complete price lists were published by the companies showing delivered prices at substantially all delivery points. Northwestern and Superior assert that, among other distinctive practices of theirs, they were willing to and did bid for government contracts on a mill price, rather than a delivered price basis. Huron points out that it permitted the use of trucks to deliver cement, which practice, far from being consistent with the plan of others to maintain the basing point delivered price formulas, was frowned on by the Institute and others as endangering the success of the plan. Marquette emphasizes that it did not follow all the practices used to carry out the anti-competition plan, and urges that, although the Commission rightly found that it had, upon occasion, undercut its competitors, it erroneously found that its admitted abandonment of price-cutting was due to the combined pressure of other respondents, including the Institute.
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 Page 333 U. S. 719 probably unwillingly abandoned competitive practices and entered into the combination. But none of the distinctions mentioned, or any other differences relied on by these particular respondents, justifies a holding that there was no substantial evidence to support the Commission's findings that they cooperated with all the others to achieve the ultimate objective of all -- the elimination of price competition in the sale of cement. These respondents' special contentions only illustrate that the Commission was called upon to resolve factual issues as to each of them in the light of whatever relevant differences in their practices were shown by the evidence. For, aside from the testimony indicating the differences in their individual sales practices, there was abundant evidence as to common practices of these respondents and the others on the basis of which the Commission was justified in finding cooperative conduct among all to achieve delivered price uniformity.
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 Page 333 U. S. 720 that all of these respondents, including those who sold cement on a zone basis in sections of southern California employed the multiple basing point delivered price system on a portion of their sales.
We cannot say that the Commission is wrong in concluding that the delivered-price system, as here used, provides Page 333 U. S. 721 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 Page 333 U. S. 722 rebut "the prima facie case thus made by showing that his lower price . . . was made in good faith to meet an equally low price of a competitor. . . ."
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. Page 333 U. S. 723
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 Page 333 U. S. 724 the price basing point is distant from the point of production," because, in such situations, prices
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 Page 333 U. S. 725 not require the Commission to attempt to distinguish between sales made by a base mill involving actual freight costs and all other sales made by both base and non-base mills when all mills adhere to a common pricing system.
We hold that the Commission properly concluded that respondents' pricing system results in price discriminations. Page 333 U. S. 726 Its findings that the discriminations substantially lessened competition between respondents and that they were not made in good faith to meet a competitor's price are supported by evidence. Accordingly, the Commission was justified in issuing a cease and desist order against a continuation of the unlawful discriminatory pricing system.
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 Page 333 U. S. 727 a decree in an antitrust case, refer that case "to the commission, as a master in chancery, to ascertain and report an appropriate form of decree therein." The Court could then adopt or reject such a report.
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, Page 333 U. S. 728 which need not here be set out, are modified and limited by a preamble. This preamble directs that all of the respondents
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 Page 333 U. S. 729 ownership of cement mills, and the construction of new mills in the future may be reasonably anticipated. In view of these facts, the Commission was authorized to make its order broad enough effectively to restrain respondents from combining with others as well as among themselves.
Many other arguments have been presented by respondents. All have been examined, but we find them without merit. Page 333 U. S. 730
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] Page 333 U. S. 731 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 Page 333 U. S. 732 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 Page 333 U. S. 733 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] Page 333 U. S. 734
The Commission based its conclusion upon its finding of the existence of the combination charged in its complaint. [Footnote 2/7] Page 333 U. S. 735 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 Page 333 U. S. 736 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 Page 333 U. S. 737 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 Page 333 U. S. 738 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 Page 333 U. S. 739 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. Page 333 U. S. 740
"* * * *" 49 Stat. 1526, 15 U.S.C. § 13.