Court Opinion

ID: 9651203
Source: CourtListenerOpinion
Date Created: 2023-08-23 16:10:11.101212+00
Date Added: 2024-06-11T18:12:30.949649
License: Public Domain

MAJOR, Circuit Judge
(concurring in part and dissenting in part).
I concur in the result reached by Judge MINTON, that is, that the Commission’s petition for enforcement of its order should be denied. Neither do I take issue with the basis for his conclusion that petitioners’ price “was made in good faith to meet an equally low price of a competitor” under § 2(b). However, in my view there is no occasion to decide the merits of such defense for the reason that the Commission has failed to make a case of price discrimination under § 2(a).
I disagree with the statement, “we do not find it necessary to decide whether or not the so-called basing point system is legal or illegal.” In my view, the opinion is a holding that the price system is illegal. Notwithstanding respondent’s apparent reluctance to meet this issue head on, it is squarely presented by its cease and desist order. The sole factual situation relied upon to show a “discrimination in price between different purchasers” is, that petitioners sold at a delivered price of Chicago plus freight to the point of delivery, irrespective of whether the freight rate from Decatur (the location of petitioners’ plant) was greater or less than that from Chicago. I am unable to discern how it can be said in one breath that the legality of such a system is not at issue and in the next that its use is violative of § 2(a).
It should be kept in mind that respondent’s complaint is based solely on an alleged violation of § 2 of the Clayton Act, as amended by the Robinson-Patman Act approved June 19, 1936, and we are therefore not concerned with a case which might be predicated upon some other provision of *228the anti-trust laws. No contention is made that petitioners were in agreement with their competitors in their adoption of a delivered price system. On this ground alone, much of respondent’s argument becomes irrelevant.
The basing point system has been widely employed by industry in this country for more than fifty years (Harvard Law Review 45, page 548, footnote), and notwithstanding respondent’s assertion to the contrary, I think a court may and should take judicial notice of a system of such long and extensive use. Furthermore, we may take judicial notice of the fact that various agencies of the federal government by administrative orders and decrees have given recognition to the system. Salt Producers Ass’n v. Federal Trade Commission, 7 Cir., 134 F.2d 354, 358; Gay Union Corp., Inc., v. Wallace, 71 App.D.C. 382, 112 F.2d 192, 195; Benton Harbor-St. J. G. & F. Co. v. Middle West Coal Company, 6 Cir., 271 F. 216, 218. The Supreme Court, in Cement Mfrs’ Protective Ass’n v. United States, 268 U.S. 588, 598, 45 S.Ct. 586, 589, 69 L.Ed. 1104 (decided in 1925), said of the system:
“Their use is rather the natural result of the development of the business within certain defined geographical areas. * * * the basing point is an essential element in making a delivered price, since selling by any particular manufacturer at the lowest of the delivered prices computed from several basing points is a necessary procedure in competing in the sale of cement.”
Petitioners contend that use of the basing system is not proscribed by § 2, and rely strongly upon the legislative history made at the time of the passage of the Robinson-Patman amendment. On the other hand, respondent contends that the legislative history is irrelevant for the reason that the basing system had no legal standing at any time and the most that can be said from the legislative history is that Congress did not intend to alter its status, that if it was legal before the amendment it was legal afterward, and if illegal before it was likewise illegal afterward. It may be, as respondent contends, that the legality of the system has never been established. Assuming that such is the case, I still think that the Commission carries a heavy burden in attempting to demonstrate that the system has been outlawed, in view of its extensive use in industry over such a long period of time, its recognition by numerous agencies of the government, its limited approval by the Supreme Court, and the emphatic refusal of Congress by express language to outlaw it, although often urged so to do. Furthermore, I am of the view that the legislative history of the instant amendment, together with related proceedings before Congress, amount to an implied recognition of its legality.
I agree that the strict literal language of § 2(a) makes it appear that the system has been proscribed, but at the same time I am even more certain that it was not the intention or purpose of Congress so to do. I also agree that a superficial view of the system is calculated to lead to its condemnation. If it were within the province of this court to appraise the system, which it is not, we are in a poor position to do so from the record before us. It must be assumed, I think, that it is a two sided question; otherwise, repeated action to outlaw it would not have met with such potent, continued and successful opposition in Congress. Action with reference to a system so thoroughly embedded in the economic life of the country is a matter peculiarly within the legislative domain, and the responsibility should not be assumed by the courts unless compelled to do so by a statutory command which leaves no doubt as to the intention and purpose of Congress.
A mere recitation of the legislative history of the amendment under consideration, together with other pertinent facts relative thereto, leaves no room for doubt but that Congress did not intend to outlaw the basing system; in fact, its purpose to the contrary is clearly shown. Even though a literal reading of the Act as amended may lead to a contrary result, courts are not bound to accept such a meaning if inconsistent with the purpose and intent of its makers. In re Rector, etc., of Holy Trinity Church v. United States, 143 U.S. 457, 12 S.Ct. 511, 36 L.Ed. 226; Takao Ozawa v. United States, 260 U.S. 178, 194, 43 S.Ct. 65, 67 L.Ed. 199.
In the recent important case of United States v. South-Eastern Underwriters’ Ass’n et al., 64 S.Ct. 1162, 1175, the court held that the Sherman Anti-Trust Act was applicable to the defendant insurance companies. Surely it cannot be said that the Sherman Act is any less comprehensive or all inclusive in its terms than the language of the instant Act. Both the majority and *229minority opinions in that case, however, rely upon the legislative history of the Act. In the majority opinion it is stated:
“But neither by reports nor by statements of the bill’s sponsors or others was any purpose to exempt insurance companies revealed. * * * On the contrary, all the acceptable evidence points the other way. That Congress wanted to go to the utmost extent of its Constitutional power in restraining trust and monopoly agreements such as the indictment here charges admits of little, if any, doubt.”
If the legislative history may be looked to for a construction of the Sherman Act, I see no reason why it should not be looked to in construing the Clayton Act as amended. In the case last cited, the Supreme Court found nothing in the legislative history of. the former Act contrary to its plain unambiguous language, but the congressional history of the latter Act is clearly at variance with the construction sought by respondent.
The Robinson-Patman Act was reported by the House Judiciary Committee as H. R. 8442 of the 74th Congress, and contained the following definition of a “price”:
“(5) The word ‘price’, as used in this section 2, shall be construed to mean the amount received by the vendor for each commodity unit, after deducting actual freight or cost of other transportation, if any, allowed or defrayed by the vendor.”
The Committee report accompanying the bill expressly stated that the object of this definition was to eliminate the basing point or delivered price method of selling, and that the definition would require the use of f. o. b. method of sale (House Reports, 74th Congress, No. 2287). This definition was stricken by an amendment unanimously agreed to by the House (80 Cong.Rec. 8140, 8224). Representative Patman, one of the authors of the bill, in connection with this amendment conceded on the floor of the House that the anti-basing point provision had been eliminated from the bill and that it met with his approval. Representative Citron, a member of the House Judiciary Committee in charge of the bill, stated some of the reasons why the basing system should not be outlawed, and among other things said:
“There is an economic justification of this system, because it provides an open and above-board method for manufacturers and wholesalers to meet competition outside of their own local freight area. * * * But a more serious consequence of the inclusion of this definition of price, as previously stated, would be to compel all manufacturers to ship f. o. b. shipping point, and therefore compel the very definite localization of operations of all manufacturers and wholesalers, which would have the immediate effect of increasing costs as the result of seriously limited volume production.” (80 Cong.Rec. 8224.)
Without quoting further, it is sufficient to note that all members who participated in the House debate agreed that the inclusion of the definition of “price” as originally contained in the bill was directed at the basing point price system, and that the elimination of such definition was for the express purpose of removing the basing system from the proscriptions of the amendment. There was not a single discordant note to this view. It is true that some of the members criticized the system, but even those admitted it was a matter which should be given consideration in separate legislation. For instance, one member of the Committee stated, “I think the basing point practice indefensible and we should deal with it soon in a separate bill.” When the bill was before the Senate, Senator Borah, in response to an inquiry by Senator Davis as to the effect the proposed legislation would have on the basing point sytem, stated “My opinion would be that this does not have any effect upon that. I defer to the judgment of the.Senator in charge of the bill, but that would be my impression.” Senator Van Nuys, who was in charge of the bill, then stated, “The Senator from Idaho is correct.”
Notwithstanding this imposing legislative history, respondent argues that it is inconceivable that Congress intended to legalize this “indefensible” practice. To my mind this is a spurious contention. The legislative history leaves no room for doubt but that Congress purposely refrained from outlawing the system and by strong implication gave recognition to its existing legal status.
It is also significant that at the same session of Congress the Wheeler Anti-Basing Point Bill was rejected (80 Cong.Rec. 8102, 8223 and 8224). In 1936, hearings were held before the Senate Committee on Interstate Commerce, from March 9 to, April 10, on Senate S. 4055, which was expressly aimed at eliminating the basing point system, and again no legislation re-*230suited. Also, it may be observed that the Temporary National Economic Committee created by joint resolution of Congress on recommendation of the President to study the entire problem of monopoly recommended in its final report the legislative destruction of the basing point system as a monopolistic price fixing device. (Senate Document No. 35, 77th Congress, 1st Session, page 33.) It is also interesting to note that the Assistant Chief Counsel for the Commission who argued the instant case before this court, on January 30, 1940 urged the Committee to “consider whether legislation outlawing the basing point system would be recommended.” It was his position then that the system could be reached only under “theories of conspiracy and concerted action which are necessary to make the law applicable.” (Record of proceedings of T. N. E. C., Vol. 4, page 400.) Cf. Federal Trade Commission v. Bunte Brothers, Inc., 312 U.S. 349, 352, 61 S.Ct. 580, 85 L.Ed. 881.
All of which shows that not only has Congress refused in no uncertain terms to outlaw the system, but that the Commission has recognized its use as not unlawful except in combination or concerted action. Can it be possible that Congress in the enactment of the Robinson-Patman amendment proscribed the use of the basing system after its clearly expressed intention and purpose to the contrary ? I am unwilling to attribute to Congress such a degree of mediocrity. Is it reasonable to suppose that the Commission and its counsel would have continued to urge legislation outlawing the system if such was already an accomplished fact? The plain unvarnished truth is that respondent seeks from this court that which Congress has steadfastly denied.
Respondent relies upon another crutch which furnishes little, if any, support. In 1924, in Federal Trade Commission v. United States Steel Corp. et al., 8 F. T. C. 1, it held that the basing point system was illegal under the Clayton Act prior to the passage of the Robinson-Patman amendment. A cease and desist order was issued but, as I understand, no action has been taken by the Commission to enforce its order and the Steel Corporation continues to use this price system or one of the same principle. It is a fair inference in the light of what has since transpired that the Commission entertained no hope that such an order was enforceable under the old Clayton Act, and in view of the legislative history of the Robinson-Patman amendment and other related events, it has little, if any, basis for such hope at this time.
Another factor of some importance is the alternative price system open to petitioners. Of course, I assume it is not within the province of courts or respondent to advise petitioners or anybody else how a business should be operated so as to comply with the law. However, in the instant case, respondent’s order requires that petitioners within sixty days file with the Commission a report in writing setting forth “in detail the manner and form in which they have complied with this order.” That means, so I would think, that petitioners must advise the Commission of the price system they have adopted in lieu of that which is condemned. Respondent in its reply brief, in response to petitioners’ challenge that it describe a price system which would be nondiscriminatory, makes this pertinent suggestion, “But petitioners obviously do not want one pricing method that rather clearly would not be discriminatory, a uniform f. o. b. plant price with exceptions based only on differences in cost.” This suggestion no doubt presents the only alternative to the price system now under attack. At any rate, so far as I know, it is the only system which on principle could be distinguished from the basing point system. The f. o. b., or mill price system as it is sometimes called, is the very system which Congress has refused to impose upon industry for the reason that it would cause or tend to cause the centralization of industry in the more highly populated centers. See Representative Citron’s remarks (80 Cong.Rec. 8224).
This court in its former opinion expressed the view that there was no evidence in the record to support the finding that the discrimination shown tended substantially to lessen competition or to create a monopoly. I am not convinced that we were in error in this respect. In my view, the basing point system has the opposite effect, that is, it has a tendency to preserve competition and prevent monopoly. Especially is this so when compared with the f. o. b. system now sought to be imposed. It was stipulated in effect that the quality of syrup manufactured by petitioners and all competitors was substantially the same, that petitioners could not sell at a higher price than their competitors, and that competitors could not sell at a higher price *231than petitioners. To me this means that petitioners and their competitors must sell their product at substantially the same price. Petitioners, forced to an f. o. b. price, could not compete with their competitors in the Chicago market any more than their Chicago competitors could compete with them in the area immediately surrounding Decatur. Competition might become a thing of the past, and each manufacturer have a monopoly of the trade in its own area. Other things being equal, and there is nothing in this record to the contrary, such a price system in my judgment would be calculated to lead to a price war from which only the financially strong and those with a favorable geographical location could survive. Such is the unreasonable result which the Commission would have us produce by embracing its construction of the Clayton Act as amended.
I would refuse such construction and leave the matter in the lap of the legislative branch of the government where in my view, it properly belongs.