Court Opinion

ID: 9471888
Source: CourtListenerOpinion
Date Created: 2023-08-05 03:43:31.756104+00
Date Added: 2024-06-11T17:42:37.258151
License: Public Domain

LUMBARD, Circuit Judge,
concurring and dissenting:
In propounding a more flexible standard for § 5 violations, the FTC has imposed on itself the heightened requirement of showing that challenged practices have had a substantial adverse effect on competition. As I agree with Judge Mansfield that the record does not support the FTC’s finding of substantial effect here, I concur in denying enforcement of the FTC’s proposed order.
As this failure alone requires us to deny enforcement, it is unnecessary for us to reach the broader question raised by the FTC’s order: whether, as my colleagues hold, the FTC’s authority under § 5 is limited to conduct that is either per se pernicious (i.e., collusive, coercive, predatory or exclusionary) or could not have been adopted for other than pernicious reasons; or whether, as the FTC now argues, it extends also to conduct that may be acceptable in some situations but not in others, in light of poor industry structure and performance, substantial anticompetitive effects, and lack of offsetting procompetitive justification. I would prefer to. leave that question to another day, when the FTC has developed a record that more strongly supports the power it now seeks, and has better defined the standards for its exercise.
As Judge Mansfield acknowledges, Congress intended § 5 to give to the FTC broad and flexible powers to attack anti-competitive conduct, see FTC v. Sperry & Hutchinson Co., 405 U.S. 233, 239-42, 92 S.Ct. 898, 903-904, 31 L.Ed.2d 170 (1972); FTC v. Keppel & Bro., Inc., 291 U.S. 304, 310-12, 54 S.Ct. 423, 425, 78 L.Ed. 814 (1934), and over the years the courts have shown great deference to the FTC’s own view of the extent of those powers. See, e.g., FTC v. Brown Shoe Co., 384 U.S. 316, 320-22, 86 S.Ct. 1501, 1503, 16 L.Ed.2d 587 (1966); FTC v. Motion Picture Advertising Service Co., 344 U.S. 392, 396, 73 S.Ct. 361, 364, 97 L.Ed. 426 (1953). I see no justification for showing less deference here, unless we are convinced that the power the FTC now seeks exceeds the scope of § 5, or is so unavoidably vague as to preclude any meaningful standards for its exercise. As I am at present convinced of neither, I cannot join in this part of the court’s opinion.
On the scope of § 5, Judge Mansfield does not appear to argue that § 5 by its terms cannot be construed to extend to noneollusive practices that facilitate oligopolistic pricing. Nor do I think that such an argument has much weight, given the deliberate vagueness of the statutory language, and the generous reach of the Supreme Court’s limiting gloss that § 5 is intended to reach only that conduct which is contrary to the spirit of the Sherman and Clayton Acts. See, e.g., FTC v. Brown Shoe Co., supra, 384 U.S. at 321-22, 86 S.Ct. at 1502-1503; Fashion Originators’ Guild v. FTC, 312 U.S. 457, 463, 61 S.Ct. *143703, 706, 85 L.Ed. 949 (1941). Indeed, that limitation is particularly unlikely to prove troublesome for the FTC here, as there is substantial support for the view that the noncollusive adoption of “facilitating practices” like uniform delivered pricing systems is contrary not only to the spirit of Sherman Act § 1, but to its letter as well.1
On the problem of vagueness in the FTC’s proposed prohibition of noncollusive “facilitating practices,” I share Judge Mansfield’s concern that it will be difficult to devise standards that are certain enough to allow companies to .predict government intervention, and narrow enough not to encompass clearly desirable conduct. However, that difficulty inheres to some degree in all balancing tests, including those decisions the FTC and the courts must routinely make in applying the Rule of Reason under Sherman Act § 1, or an analogous reasonableness standard under Sherman Act § 2 and Clayton Act § 7.2 If we áre to preclude categorically the use of such a flexible approach under FTC § 5, I think it is incumbent on us to explain why that difficulty is peculiarly and necessarily fatal here but not elsewhere. I would prefer not to hazard that explanation on the basis of this one failed attempt by the FTC to articulate and apply workable standards.
Furthermore, I think it is worth noting that FTC power in this area is already broad and its scope ill-defined, due in part to the expansive list of so-called “plus factors” devised by the courts for inferring an agreement,3 and in part to that accommodating word, “tacit,” which has created a hole in the agreement requirement large enough at times to swallow it entirely. See Interstate Circuit v. United States, 306 U.S. 208, 227, 59 S.Ct. 467, 474, 83 L.Ed. 610 (1939); Ambook Enterprises v. Time, Inc., 612 F.2d 604, 613-18 (2d Cir.1979); Bogosian v. Gulf Oil Corp., 561 F.2d 434, 444-47 (3d Cir.1977), cert. denied, 434 U.S. 1086, 98 S.Ct. 1280, 55 L.Ed.2d 791 (1978); see also United States v. Paramount Pictures, Inc., 334 U.S. 131, 142, 68 S.Ct. 915, 921, 92 L.Ed. 1260 (1948). Indeed, it proved large enough in Boise Cascade Corp. v. FTC, 637 F.2d 573 (9th Cir.1980), to allow the Ninth Circuit to reach in substance, even if not in words, precisely the result the FTC seeks here, by holding there must be at least a tacit agreement to use “facilitating practices,” but that such an agreement could be shown, inter alia, by substantial adverse economic effects. Id. at 576-77. Given the liberal judicial construction of the agreement requirement in the past, I have some doubt whether dispensing with the requirement entirely to reach “facilitating practices” under § 5 would substantially broaden the FTC’s enforcement power, or make its scope any more vague than under present law.4
*144I would therefore vacate the FTC’s order, but leave open the question whether, with more clearly delineated standards and on a more compelling set of facts, the FTC could use § 5 to reach noncollusive “facilitating practices” shown to have a substantial anticompetitive effect, without any pro-competitive justification.

. See D. Turner, "The Definition of Agreement Under the Sherman Act: Conscious Parallelism and Refusals to Deal,” 75 Harv.L.Rev. 655, 657-84 (1962); P. Areeda and D. Turner, 3 Antitrust Law at 362 (1978); R. Posner, Antitrust Law: An Economic Perspective at 70-71 (1976); R. Posner, Antitrust: Cases, Economic Notes & Other Materials at 128-29, 135-36 (1974); Cf. L. Sullivan, Antitrust Law at 357 (1977).

. See, e.g., Continental T. V., Inc. v. GTE Sylvania, Inc., 433 U.S. 36, 97 S.Ct. 2549, 53 L.Ed.2d 568 (1977), on remand, 461 F.Supp. 1046, 1052 (N.D.Cal.1978); United States v. General Dynamics Corporation, 415 U.S. 486, 494-510, 94 S.Ct. 1186, 1192-1200, 39 L.Ed.2d 530 (1974); Brown Shoe Co. v. United States, 370 U.S. 294, 321-346, 82 S.Ct. 1502, 1521-1535, 8 L.Ed.2d 510 (1962); United States v. DuPont Co., 351 U.S. 377, 386-404, 76 S.Ct. 994, 1002-1012, 100 L.Ed. 1264 (1956); United States v. Columbia Steel Co., 334 U.S. 495, 527-31, 68 S.Ct. 1107, 1124-1126, 92 L.Ed. 1533 (1948); Maple Flooring Ass'n v. United States, 268 U.S. 563, 579-86, 45 S.Ct. 578, 583-586, 69 L.Ed. 1093 (1925); Harold Friedman, Inc. v. Thorofare Markets, Inc., 587 F.2d 127, 141-44 (3d Cir.1978); Eiberger v. Sony Corp. of America, 459 F.Supp. 1276, 1282-84 (S.D.N.Y.1978), aff’d 622 F.2d 1068, 1075-81 (2d Cir.1980).

. See, e.g., cases cited at n. 9, supra.

. My doubts are increased by the fact that even those courts that have required the FTC to show an agreement to adopt practices such as basing point pricing before they would find an antitrust violation have not necessarily limited remedial decrees to enjoining future agreements to adopt such schemes, but have on occasion enjoined their use as well. See, e.g., FTC v. National Lead Co., 352 U.S. 419, 77 S.Ct. 502, 1 L.Ed.2d 438 (1957). Cf. United States v. General Electric Co., 565 F.2d 208, 1977-2 Trade Cas. *144¶ 61,660 (E.D.Pa.) (modified consent decree prohibits individual public dissemination of price information and individual use of retroactive "most favored nation" clauses).
Furthermore, I note that insofar as the FTC's Rule of Reason approach to noncollusive "facilitating practices” may remain necessarily vague, § 5 may be particularly well suited as a remedial tool, as it provides only for prospective equitable relief, not for criminal penalties or treble damages. See P. Areeda and D. Turner, 2 Antitrust Law at 22-23 (1978).