Aetna Portland Cement Co. v. FEDERAL TRADE COM'N

• Decision Date: 20 September 1946
• Docket Number: 8399,8409,8389,8361,No. 8360,8371-8373,8402,8386,8410.,8393,8360
• Citation: 157 F.2d 533
• Parties: AETNA PORTLAND CEMENT CO. et al. v. FEDERAL TRADE COMMISSION. CEMENT INSTITUTE et al. v. SAME and ten other cases.
• Court: U.S. Court of Appeals — Seventh Circuit

157 F.2d 533 (1946)

AETNA PORTLAND CEMENT CO. et al. v. FEDERAL TRADE COMMISSION.

CEMENT INSTITUTE et al. v. SAME and ten other cases.

Nos. 8360, 8361, 8371-8373, 8386, 8389, 8393, 8399, 8402, 8409, 8410.

Circuit Court of Appeals, Seventh Circuit.

September 20, 1946.

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Donovan Leisure Newton Lumbard & Irvine and William J. Donovan, George S. Leisure, James R. Withrow, Jr., Ira C. Werle, and Henry Herrick Bond, all of New York City, William G. Compton, of Keeseville, N. Y., and Dorr Casto and Breck P. McAllister, Thomas J. McFadden and Francis A. Brick, all of New York City, George Ragland, Jr., of Chicago, Ill., Edward K. Hanlon, of New York City (Murray T. Quigg, Joseph A. Seeley, and Francis X. Walsh, all of New York City, of counsel), for petitioners Aetna Portland Cement Co., Cement Institute and Blaine S. Smith et al.

Edward A. Zimmerman, Harold W. Norman, William R. Engelhardt, and Zimmerman and Norman, all of Chicago, Ill., and Roscoe Pound, of Cambridge, Mass., for petitioner Marquette Cement Mfg. Co.

Walter C. Fox, Jr., Marshall P. Madison, Herbert W. Clark, and Chickering & Gregory, Pillsbury, Madison & Sutro, Morrison, Hohfeld, Foerster, Shuman & Clark, all of San Francisco, Cal., A. W. Witherspoon, and Witherspoon, Witherspoon & Kelley, all of Spokane, Wash., and Chaffee E. Hall, Robert H. Gerdes, and Earl & Hall & Gerdes, all of San Francisco, Cal., and Overton, Lyman, Plumb, Prince & Vermille, and Edward D. Lyman, all of Los Angeles, Cal., for petitioner Calaveras Cement Co. et al.

Charles Wright, Jr., and Laurence A. Masselink, both of Detroit, Mich., for petitioner Huron Portland Cement Co.

Francis A. Le Sourd and Little, Leader, Le Sourd & Palmer, all of Seattle, Wash., for petitioner Superior Portland Cement, Inc.

S. Harold Shefelman and Weter, Roberts & Shefelman, all of Seattle, Wash., for petitioner Northwestern Portland Cement Co.

Louis W. Myers and Pierce Works, both of Los Angeles, Cal. (O'Melveny & Myers, and Lauren M. Wright, of Los Angeles, Cal., of counsel), for petitioner Riverside Cement Co.

John H. Hershberger, Elbridge H. Condee and Knapp, Cushing, Hershberger and Stevenson, all of Chicago, Ill., Nathan L. Miller, of New York City, and Roger M. Blough, of Pittsburgh, Pa., for petitioner Universal Atlas Cement Co.

Robert B. Murphey and Alex W. Davis, both of Los Angeles, Cal., for petitioner California Portland Cement Co.

William D. Burnett, of Los Angeles, Cal., for petitioner Monolith Portland Cement Co. et al.

William T. Kelley, Chief Counsel, and Walter B. Wooden and Everette MacIntyre, Assts. Chief Counsel, Federal Trade Commission, all of Washington, D. C., for respondent.

Before EVANS, MAJOR, and KERNER, Circuit Judges.

MAJOR, Circuit Judge.

These are petitions, joint and several, filed on behalf of the Cement Institute, 74 cement producers and 23 individuals, officers and agents of the Institute, for review of and to set aside or modify an order to cease and desist issued by the Federal Trade Commission July 17, 1943, against the petitioners (respondents before the Commission and referred to in this opinion as such).

Nine separate briefs have been filed in this court on behalf of respondents, seven singly by seven of the corporate respondents in Nos. 8371, 8373, 8386, 8389, 8393, 8399 and 8402. One brief has been filed on behalf of 59 corporate respondents, No. 8360, the Cement Institute and certain officials thereof, No. 8361, and certain other officers and agents of the Institute, No. 8410. Another brief has been filed on behalf of seven of the corporate respondents, No. 8372. In No. 8409, the corporate respondents rely upon the points made by Aetna, et al. in No. 8360. These briefs comprise a total of about 775 printed pages. In reply, the Commission has filed a brief of more than 300 pages. Reply briefs have been filed by respondents with a total of about 444 pages. In addition, respondents have filed what is designated as Appendix A, consisting of four volumes containing a voluminous digest or statement of facts. This court heard oral argument for three days, April 30, May 1 and May 2, 1946. This argument was reported, transcribed and furnished to the court in a volume which totals more than 550 pages.

Some twenty pages of the Commission's findings are devoted to the naming of the corporate respondents and a narration of certain information pertaining to each. So far as here material, such information has to do with the naming of the State of incorporation of each corporate respondent, the location of its place of business as a producer of cement, the date when each became a member of the Institute, and the period during which it continued as such. The corporate respondents are located in thirty-six different States, in fact in all portions of the United States. Eleven of such respondents are located in Pacific Coast States west of the Rocky Mountains.

The Commission's complaint consists of two counts, both charging that "for more than eight years last past, respondents have maintained and now have in effect a combination among themselves to hinder, lessen, restrict and restrain competition in price, among producing respondents * * * made effective by mutual understanding or agreement to employ, and by the actual employment of * * * what is known as a multiple basing point system of pricing," which results in the quoting of an identical delivered price by all producers who seek business at any given destination. This combination is alleged to be an unfair method of competition, in violation of Sec. 5 of the Federal Trade Commission Act, 15 U.S.C.A. § 46.

Count 1, under a heading entitled "Methods for making system effective," enumerates other practices and means used cooperatively in pursuance of and in support of the alleged combination, as follows: (1) an agreement to determine prices by using freight rates contained in freight rate books prepared and distributed by the Institute, regardless of the accuracy of such rates and with the alleged result that official tariffs are nullified; (2) an agreement to eliminate diversions of cement in transit, which allegedly result in concessions in delivered prices to the transferees; (3) an agreement to thwart the efforts of the Federal government to secure f.o.b. mill prices on cement; (4) an agreement arbitrarily to classify customers and to sell only to middlemen who fall within an "agreed and arbitrary definition of a `cement dealer'"; (5) mutual understanding and concerted action to use uniform terms of sale and discounts; (6) an agreement to prevent price competition resulting from the sale of foreign cement, and (7) the interpretation and formulation by the Institute of official policies for the industry where individual action might result in breaking down the pricing system.

Count 2 charges that delivered prices made pursuant to the combination as alleged in count 1 are not actual prices received because they include the cost of transportation; that the true prices of each seller are the amounts realized at the mill (called "mill nets") after deduction of such transportation costs; that the variations in such mill nets have resulted from the alleged combination to use the "multiple basing point system" and constitute discriminations in price by each seller among his customers; and that the effect is to injure, destroy and prevent competition in price among producing respondents in violation of Sec. 2 of the Clayton Act, as amended by the Robinson-Patman Act, 15 U.S.C.A. § 13.

It will thus be noted that the restraint on competition alleged in both counts of the complaint is between producing respondents and that the discriminations alleged in count 2 are among the customers of each seller. In other words, there is no allegation of restraint on competition between customers, and no allegation of discriminations between customers of different producing respondents.

Answers were filed by all respondents, denying all allegations of the complaint as to understanding, agreement or combination. Many of the answers also set forth various affirmative defenses predicated upon their individual practices and policies.

From December 1, 1937 until November 29, 1940, with some short intervals, evidence was taken before a trial examiner appointed by the Commission. This evidence consists of about 49,000 pages of oral testimony and over 50,000 pages of exhibits. The trial examiner filed his report on the evidence in May 1941, to which exceptions were filed by respondents. Briefs were filed and oral argument was had before the Commission in April and May 1942. On July 17, 1943, the Commission entered its findings and conclusions, which cover 171 pages of the printed record. It also entered its Order to Cease and Desist and certain ancillary orders denying motions theretofore made by the respondents. The petitions to review and set aside the Commission's order were filed in this court July 26, 1943. Pursuant to extension of time granted, respondents on March 20, 1944 filed their statement of points and a motion to adduce additional evidence. By order of this court dated July 31, 1944, the motion to adduce additional evidence was denied, without prejudice to its being renewed at the time of hearing on the merits.

The contested issues are stated by the respective parties in numerous and divers ways. They present questions both factual and legal. We think the fundamental issue under count 1 of the complaint may be divided into two parts, (1) whether the Commission has found that respondents have entered into a nation-wide conspiracy, as charged, to restrain competition in price in the sale of cement by use of the multiple basing point system of pricing, in violation of Sec. 5 of the Federal Trade Commission Act, and (2) whether such finding, if made, is substantially supported by the record and constitutes a violation of law.

Under count 2, the issue...