168 F.2d 175 (7th Cir. 1948), 8639, Triangle Conduit & Cable Co. v. Federal Trade Commission

Docket Nº:8639, 8640, 8642, 8644, 8649.
Citation:168 F.2d 175
Case Date:May 12, 1948
Court:United States Courts of Appeals, Court of Appeals for the Seventh Circuit

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168 F.2d 175 (7th Cir. 1948)




Nos. 8639, 8640, 8642, 8644, 8649.

United States Court of Appeals, Seventh Circuit.

May 12, 1948

Rehearing Denied June 14, 1948.

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Morton Peyser, of New York City, W. Denning Stewart, of Pittsburgh, Pa., Hoyt A. Moore, Albert R. Connelly and Earl J. O'Brien, all of New York City, Ferris E. Hurd, of Chicago, Ill., Thurlow M. Gordon, Robert M. Bozeman, Edward H. Green, and Roy L. Steinheimer, Jr., all of New York City, Rose, Eichenauer, Stewart & Rose, of Pittsburgh, Pa., and Cravath, Swaine & Moore, Cahill, Gordon, Zachry & Reindel, Sullivan & Cromwell, and Sullivan & Cromwell, all of New York City (Ray H. Luebbe and Neil C. Head, both of New York City, of counsel), for petitioner.

Walter B. Wooden, Everette MacIntyre, and W. T. Kelley, all of Washington, D.C., for respondent.

Before SPARKS, KERNER, and MINTON, Circuit Judges.

KERNER, Circuit Judge.

Petitioners, fourteen corporate manufacturers of rigid steel conduit, and five representatives of these corporations ask us to review and set aside a cease and desist order of the Federal Trade Commission, upon a complaint in two counts, charging that petitioners collectively have violated Sec. 5 of the Federal Trade Commission Act, 15 U.S.C.A. § 45, which declares unlawful 'unfair methods of competition in commerce.' Each of the corporate petitioners except Spang Chalfant was a member of Rigid Steel Conduit Association. That association was a respondent in the proceedings before the Commissioner, but is not a petitioner here. Each of the five individual petitioners was not only an official of one of the corporate petitioners but also served in an official capacity in directing the affairs of Rigid Steel Conduit Association.

In substance the first count alleged the existence and continuance of a conspiracy for the purpose and with the effect of substantially restricting and suppressing actual and potential competition in the distribution and sale of rigid steel conduit in commerce, effectuated by the adoption and use of a basing point method of quoting prices for rigid steel conduit. The second count did not rest upon an agreement or combination. It charged that each corporate petitioner and others violated Sec. 5 of the Federal Trade Commission Act 'through their concurrent use of a formula method of making delivered price quotations with the knowledge that each did likewise, with the result that price competition between and among them was unreasonably restrained.' It alleged that nearby customers were deprived of price advantages which they would have naturally enjoyed by reason of their proximity to points of production, and that such course of action created in said conduit sellers a monopolistic control over price in the sale and distribution of rigid steel conduit.

Petitioners answered the complaint. They denied any agreement or combination. After extensive hearings before a trial examiner, the Commission made its findings of fact and conclusions of law therefrom. It found the charges to be fully substantiated by the evidence.

Rigid steel conduit 1 is a steel pipe, used primarily in the roughing-in stage of building construction where electrical wiring is necessary in order to furnish a continuous channel or container for the wiring. It is made from standard steel pipe and is produced in two types differing only in the nature of the coating applied to it. It is a

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standard commodity. It was first manufactured in America in 1897, in or near Pittsburgh, Pennsylvania, and originally was sold at delivered prices. The reason why delivered prices were used lay in the relative importance of transportation charges in the sale of the product. Points of production include Cohoes, New York and various places in Pennsylvania, Illinois, Indiana, West Virginia and Ohio. Various means were used to facilitate the calculation of delivered prices, but Youngstown was the first manufacturer to prepare a freight rate bulletin specially applicable to conduit sales. Similar bulletins were prepared by other manufacturers and later such bulletins were procured by some manufacturers from a traffic expert.

In addition to freight rate bulletins, another aid in computing delivered prices was the use of delivery charge tables, which were designed to simplify the procedure of figuring the delivered prices, and each petitioner refrained from publishing price quotations f.o.b. point of production or shipment, but used the practice and method of quoting price sheets, which it termed 'Price Cards, ' in which it designated base prices f.o.b. Pittsburgh, Pa. and f.o.b. Chicago, Ill. About 1912 one manufacturer began announcing quotations of prices, based on Pittsburgh as a basing point, through the use of price cards which listed 'Pittsburgh Basing Discounts' under which the discount was decreased- and the net price thereby increased- in proportion to the freight rate from Pittsburgh to the point of delivery. The practice thus established was followed by other manufacturers then in existence, and since then, up to 1930, by other manufacturers as they have entered the conduit business.

In 1930, petitioner National Electric shifted from the list and discount form of delivered price quotation to a quotation which specified the net base prices, with freight to be added, and during the next year or so other manufacturers likewise changed to the quotation of net base prices plus freight. In 1924, conduit began to be sold at prices based on Gary, Indiana, as a basing point. During that year petitioner Youngstown began to manufacture conduit at Evanston, Illinois, and inaugurated the practice of quoting and selling conduit at delivered prices based on Evanston, as well as Pittsburgh, as a basing point, the base price at Evanston being $4 above the current published price at Pittsburgh. Clayton Mark, during the period (1924-1930), had quoted conduit prices upon a Chicago base. Since freight rates from Chicago and Evanston were the same, Evanston ceased to be a basing point shortly after 1934. Other manufacturers followed the practices inaugurated by Youngstown and Clayton Mark.

It also appears that instead of petitioner conduit sellers using an absolute Pittsburgh plus system for all designations in their price quotations, they collectively discussed and considered the matter of maintaining and utilizing Chicago as a basing point, with its differential over Pittsburgh, and that until 1930 they followed a method of calculating delivered price quotations which provided for discounting from the Pittsburgh or Chicago base price, depending upon which base price and accompanying discount produced the lower figure at the customer's destination, and that during 1930 representatives of petitioners at a meeting of the Rigid Steel Conduit section of the National Electric Manufacturers Association determined upon a change from that method to the one they now use. Accordingly, at the time of the hearings each of the petitioner conduit sellers quoted delivered prices for conduit based on Chicago as well as on Pittsburgh as basing points and sold at that base price.

There was testimony that the system thus used was an effective means of matching bids and price quotations, and that the quotations made by each conduit seller, irrespective of whether it had a manufacturing plant located at or near Pittsburgh or Chicago, enabled them to match their price quotations. It also appears that at times it was difficult to exactly determine the railroad tariff rate and that mistakes by some conduit sellers in the selection of a particular tariff rate to be used in a particular instance were a fruitful source of differences in the delivered prices quoted, thereby preventing a matching of such

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quotations. To prevent such errors, petitioners, acting through Rigid Steel Conduit Association, employed one Donley, who prepared a compilation of freight rate applicators containing the freight factor applicable from Pittsburgh...

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