California Rice Industry v. Federal Trade Commission

• Decision Date: 17 March 1939
• Docket Number: No. 8844.,8844.
• Citation: 102 F.2d 716
• Parties: CALIFORNIA RICE INDUSTRY v. FEDERAL TRADE COMMISSION.
• Court: U.S. Court of Appeals — Ninth Circuit

102 F.2d 716 (1939)

CALIFORNIA RICE INDUSTRY v. FEDERAL TRADE COMMISSION.

No. 8844.

Circuit Court of Appeals, Ninth Circuit.

March 17, 1939.

Harry M. Creech, of San Francisco, Cal., for petitioners.

W. T. Kelley, Chief Counsel, Martin A. Morrison, Asst. Chief Counsel, Daniel J. Murphy and James W. Nichol, Sp. Attys., Federal Trade Commission, all of Washington, D. C., for respondent.

Before DENMAN, MATHEWS, and HEALY, Circuit Judges.

DENMAN, Circuit Judge.

This is a petition to review and set aside an order of the Federal Trade Commission requiring petitioners to "cease and desist, in connection with offering for sale, sale and distribution of rice and rice products in commerce as defined in Section 4 of the Federal Trade Commission Act, 15 U.S.C.A. § 44, from doing and performing by agreement, combination or conspiracy between or among any two or more of said respondents petitioners here, or with others, the following acts and things:

"1. Fixing and maintaining uniform prices.

"2. Compiling, publishing and distributing any joint or uniform list or compilation of prices.

"3. Adopting any joint or uniform price list or other device which fixes prices.

"4. Discussing through the medium of meetings of the California Rice Industry or its Marketing and Crop Boards, or in any similar manner, uniform prices, terms, discounts, agreements upon prices, by resolution or otherwise, or employing any similar device which fixes or tends to fix prices, or which is designed to equalize or make uniform the selling prices, terms, discounts or policies of respondent millers.

"5. Fixing or determining the quotas or percentages of the rice crop that the miller respondents may mill or process which, thereby, unlawfully restricts or hinders the sale of rice or rice products in interstate commerce.

* * *."

The California Rice Industry is a voluntary unincorporated association. It does not have officers or directors, neither does it have articles of organization, constitution or by-laws, except the Intrastate Marketing Agreement dated August 28, 1935, which created it. Organized within the association and controlling and administering its policies and activities are the Crop Board and the Marketing Board. The Agreement provides for a Crop Board composed of members selected by Rice Growers Association of California, Paddy Rice Growers of California, Independent Rice Growers, the latter being growers unorganized except for purposes of the Intrastate Marketing Agreement, and members selected by joint action of the first and last named organizations. Some of the rice growers who are members of the Crop Board were made respondents by the Federal Trade Commission and all such respondents are petitioners here. The Marketing Board is composed of members selected by the Rice Growers Association of California, a grower and miller cooperative, and by those others signatory to the Intrastate Marketing Agreement engaged in the State of California in milling rice or marketing rice. Some of the individuals who have constituted the Marketing Board were made respondents by the Federal Trade Commission and all such respondents are petitioners here. Harry M. Creech, for many years counsel for the Rice Growers Association of California and later attorney in the drafting and execution of the Intrastate Marketing Agreement, is the neutral non-voting chairman of the Marketing Board, neutral non-voting member of the Crop Board and attorney for the California Rice Industry. The Federal Trade Commission included him as a respondent and he is a petitioner here. In addition to the above individuals, the Federal Trade Commission also included as respondents all but two of the various individuals, firms, corporations and cooperatives who signed the Intrastate Marketing Agreement. They are petitioners herein.

Substantially all of the rice produced within the State of California is of a shorter and plumper grain than the medium and longer grained rices produced in other sections of the United States. This rice, as grown and milled in California, is known as California-Japan type and the petitioners include or represent substantially everyone in California so engaged.

The petitioners' brief admits that "Substantially all of such rice after milling is sold and delivered by those among petitioners engaged cooperatively or commercially in milling rice and some part is shipped by such millers into other States and Territories." (Emphasis supplied.) About half the rice grown and milled in California is shipped to Hawaii, about a quarter of the remainder is shipped to Puerto Rico and the balance is sold in California and in various other states of the United States.

There is a long established preference for this type of rice in Hawaii, where but a relatively small amount of other rice is imported from Japan and the southern states. Also in Puerto Rico it is a preferred type, commanding a higher price than other types of rice sold there. The Commission properly may have inferred that its peculiarly plump characteristics have found consumers in other states who prefer it. It is obvious that the price of such a food, having such preferring consumers, will be affected if all competition of its suppliers is eliminated. Such evidence tends to support the Commission's finding of ultimate fact (though stated as a conclusion) that "2. As a result of the respondents entering into and making effective the agreement as above described, competition in the sale of rice and rice products in commerce as hereinabove referred to has been restricted and suppressed."

In addition to the admission of interstate shipments above italicized, the California-Japan type rice is sold by petitioners under sales contracts "fob cars" at the mill or "fob dock" at San Francisco, most of which is destined for points outside the state. The loading "on board" the cars or the car or truck movement from the rice mill to the dock, constitutes the beginning of the interstate or foreign transit. Thus there are sales contracts, in which it is found to be the practice of petitioners to charge uniform, fixed prices, which, as well as the delivery to the buyers, are "in" interstate or foreign commerce. Dahnke-Walker Milling Co. v. Bondurant, 257 U.S. 282, 290, 291, 42 S.Ct. 106, 66 L.Ed. 239; Addyston Pipe & Steel Co. v. U. S. 175 U.S. 211, 241, 20 S.Ct. 96, 44 L.Ed. 136; U. S. v. Addyston Pipe & Steel Co., 6 Cir., 85 F. 271, 298, 46 L.R.A. 122; U. S. v. United Shoe Machinery Co., D.C. E.D. Mo., 234 F. 127, 144; Santa Cruz Fruit Packing Co. v. National Labor Relations Board, 303 U.S. 453, 463, 58 S.Ct. 656, 82 L.Ed. 954; Pennsylvania R. Co. v. Clark Bros. Coal Mining Co., 238 U.S. 456, 468, 35 S.Ct. 896, 59 L.Ed. 1406. Cf. Federal Trade Comm. v. Pacific States Paper Trade Ass'n, 273 U.S. 52, 63, 47 S.Ct. 255, 71 L.Ed. 534, where intrastate price list was held a price factor in interstate transactions.

These facts establish that the acts interdicted by paragraphs "1" to "4" inclusive of the Commission's order are "in" interstate commerce and hence satisfy that requirement of the Federal Trade Commission Act.

The Commission's complaint was issued on March 26, 1937. The relevant portions of Section 5 of the Federal Trade Commission Act as it then read (Act of September 26, 1914, c. 311, 38 Stat. 717, 719-720; U.S.C.1934 ed., Title 15, § 45, 15 U.S. C.A. § 45) are:

"Sec. 5. That unfair methods of competition in interstate and foreign commerce are hereby declared unlawful.

"The commission is hereby empowered and directed to prevent persons, partnerships, or corporations, * * * from using unfair methods of competition in interstate and foreign commerce.

"Whenever the commission shall have reason to believe that any such person, partnership, or corporation has been or is using any unfair method of competition in commerce, and if it shall appear to the commission that a proceeding by it in respect thereof would be to the interest of the public, it shall issue and serve upon such person, partnership, or corporation a complaint stating its charges in that respect * * *." (Emphasis supplied.)

The questions remain whether the acts prohibited by paragraphs "1" to "4" inclusive of the Commission's order come within the class of "unfair methods of competition" in such commerce and whether their prevention "would be to the interest of the public", as these terms are used in Section 5 of the Act.

The Commission has found the sales are at a uniform fixed price, the same for each petitioner, and that the uniformity is attained by a price fixing agreement among the petitioners. It has been found that: "At meetings held on Tuesday of each week the Marketing Board from time to time, and with the concurrence of the Crop Board, fixes an industry price for extra-fancy clean rice, and from this price, by use of a formula adopted by said Marketing Board, the base price, producer's price, and trade prices for all grades of processed rice are computed."

The price fixing clauses of the Agreement provide with relation to the "industry price", from which by use of a formula the price at which rice is to be offered for sale is computed, that "by vote of either the Marketing Board or the Crop Board in the manner hereinafter provided, Industry Prices fob dock San Francisco for Extra Fancy clean rice of types produced in California shall be the simple average of the price for Extra Fancy Blue Rose rice at New Orleans for the ten preceding weeks as reported by the Federal-State Marketing News Service in its official Rice Market Review, provided that if more than one price is reported for any week then the price used in the average shall be the mid-point between the high and low so reported, plus ten cents per bag in the case of California Japan type or thirty-five cents per bag in the case of any other type, * * *."

The brief of petitioners admits the effectiveness of fixing the uniform prices above the arbitrarily set...