253 U.S. 421 (1920), 492, FTC v. Gratz

Docket Nº:No. 492
Citation:253 U.S. 421, 40 S.Ct. 572, 64 L.Ed. 993
Party Name:FTC v. Gratz
Case Date:June 07, 1920
Court:United States Supreme Court
 
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Page 421

253 U.S. 421 (1920)

40 S.Ct. 572, 64 L.Ed. 993

FTC

v.

Gratz

No. 492

United States Supreme Court

June 7, 1920

Argued April 20, 21, 1920

CERTIORARI TO THE CIRCUIT COURT OF APPEALS

FOR THE SECOND CIRCUIT

Syllabus

Under the Federal Trade Commission Act (Sept. 26, 1914, c. 311, 38 Stat. 717), an order of the commission requiring parties to desist from a course of business as unfair competition must correspond with the complaint which the commission is required to issue and serve as the basis for the proceedings, and where the complaint, liberally construed, is plainly insufficient to show unfair competition, the order is without foundation and, when challenged, will be annulled by the court. P. 427.

The commission's complaint alleged that some of the respondents were engaged in selling, in interstate commerce, directly to the trade or through their co respondents, steel ties, manufactured by a certain company, made and used for binding bales of cotton, and jute bagging, manufactured by another company, used to wrap bales of cotton; that the other respondents, as their agents, sold and distributed such ties and bagging, in interstate commerce, principally to jobbers and dealers who resold the same to retailers, cotton-ginners and farmers, and that, with the purpose, intent and effect of discouraging and stifling competition, all of the respondents refused, and for more than a year had refuged, to sell any such ties unless the prospective purchaser would also buy from them the bagging to be used with the number of ties proposed to be bought. Held plainly insufficient to show an unfair method of competition. Id.

258 F. 314 affirmed.

The case is stated in the opinion.

Page 422

MCREYNOLDS, J., lead opinion

MR. JUSTICE McREYNOLDS delivered the opinion of the Court.

By an act approved September 26, 1914, c. 311, 38 Stat. 717, Congress made provision for the Federal Trade Commission and declared its powers.

Section 4 defines commerce as:

commerce among the several states or with foreign nations, or in any territory of the United States or in the District of Columbia, or between any such territory and another, or between any such territory and any state or foreign nation or between the District of Columbia and any state or territory or foreign nation.

Section 5:

That unfair methods of competition in commerce are hereby declared unlawful. The commission is hereby empowered and directed to prevent persons, partnerships, or corporations, except banks, and common carriers subject to the acts to regulate commerce, from using unfair methods of competition in 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, and containing a notice of a hearing upon a day and at a place therein fixed at least thirty days after the service of said complaint. The person, partnership, or corporation so complained of shall have the right to appear at the place and time so fixed and show cause why an order should not be entered by the commission requiring such person, partnership, or corporation to cease and desist from the violation of the law so charged in said complaint. . . . If upon such hearing the commission shall be of the opinion that the method of competition in question is prohibited

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by this act, it shall make a report in writing in which it shall state its findings as to the facts, and shall issue and cause to be served on such person, partnership, or corporation an order requiring such person, partnership, or corporation to cease and desist from using such method of competition.

Section 5 further provides that the commission may apply to the designated circuit court of appeals to enforce an order,

and shall certify and file with its application a transcript of the entire record in the proceeding, including all the testimony taken and the report and order of the commission. Upon such filing of the application and transcript, the court shall cause notice thereof to be served upon such person, partnership, or corporation and thereupon shall have jurisdiction of the proceeding and the question determined therein, and shall have power to make and enter upon the pleadings, testimony, and proceedings set forth in such transcript a decree affirming, modifying, or setting aside the order of the commission. The findings of the commission as to the facts, if supported by testimony, shall be conclusive. . . . The judgment and decree of the court shall be final, except that the same shall be subject to review by the Supreme Court upon certiorari as provided by § 240 of the Judicial Code. Any party required by such order of the commission to cease and desist from using such method of competition may obtain a review of such order in said circuit court of appeals by filing in the court a written petition praying that the order of the commission be set aside. A copy of such petition shall be forthwith served upon the commission, and thereupon the commission forthwith shall certify and file in the court a transcript of the record as hereinbefore provided. Upon the filing of the transcript, the court shall have the same jurisdiction to affirm, set aside, or modify the order of the commission as in the case of an application by the commission for an

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enforcement of its order, and the findings of the commission as to the facts, if supported by testimony, shall in like manner be conclusive.

Sections 6 and 7 empower the commission to require reports and compile information concerning corporations; to inquire concerning execution of decrees restraining violations of the antitrust acts; to investigate alleged violations of such acts; to recommend readjustments of corporate business; to publish information and make reports to Congress; to classify corporations and make rules and regulations; to investigate trade conditions; to act, under orders of the court, as a master in chancery in certain designated circumstances, etc.

Undertaking to proceed under § 5, June 4, 1917, the commission issued a complaint containing two counts against respondents. The first related to unfair methods of competition, and the second charged violation of § 3 of the Clayton Act, approved October 15, 1914, c. 323, 38 Stat. 730. Respondents denied both charges. After taking much testimony, the commission held there was no evidence to support the second count, but it ruled that respondents had practiced unfair competition, and ordered that they,

[40 S.Ct. 574]

their officers and agents, cease and desist from requiring purchasers of cotton ties to also buy or agree to buy, a proportionate amount of American Manufacturing Company's bagging, and further that the respondents cease and desist from refusing to sell cotton ties unless the purchasers buy or agree to buy from them corresponding amounts of American Manufacturing Company's bagging, or any amount of cotton bagging of any kind.

Upon respondents' petition the Circuit Court of Appeals, Second Circuit, annulled the commission's order. 258 F. 314. It said:

We think there is no evidence to support any general practice of the respondents to refuse to sell ties unless the purchaser bought at the same time the necessary amount of the American Manufacturing

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Company's bagging, and that the commission has no jurisdiction to determine the merits of specific individual grievances.

The challenged order is based solely upon the first count of the complaint which follows:

Federal Trade Commission v. Anderson Gratz and Benjamin Gratz, Copartners Doing Business under the Firm Name and Style of Warren, Jones & Gratz, p. P. Williams, W. H. Fitzhugh, and Alex. Fitzhugh, Copartners Doing Business under the Firm Name and Style of P. P. Williams & Co., and Charles O. Elmer.

The Federal Trade Commission, having reason to believe, from a preliminary investigation made by it, that Anderson Gratz and Benjamin Gratz, copartners doing business under the firm name and style of Warren, Jones & Gratz, P. P. Williams, W. H. Fitzhugh, and Alex. Fitzhugh, copartners doing business under the firm name and style of P. P. Williams & Co., and Charles O. Elmer, all of whom are hereinafter referred to as respondents, have been and are using unfair methods of competition in interstate commerce in violation of the provisions of section 5 of the act of Congress approved September 26, 1914, entitled "An act to create a Federal Trade Commission, to define its powers and duties, and for other purposes," and it appearing that a proceeding by it in respect thereof would be to the interest of the public, issues this complaint, stating its charges in that respect, on information and belief, as follows:

I.

Paragraph one: That the respondents Anderson Gratz and Benjamin Gratz are copartners doing business under the firm name and style of Warren, Jones & Gratz, having their principal office and place of business

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in the City of St. Louis and State of Missouri, and are engaged in the business of selling, in interstate commerce, either directly to the trade, or through the respondents hereinafter named, steel ties made and used for binding bales of cotton, and which steel ties are manufactured by the Carnegie Steel Company of Pittsburgh, Pennsylvania, and also selling, in the same manner, jute bagging, used to wrap bales of cotton, and which jute bagging is manufactured by the American Manufacturing Company, of St. Louis, Missouri.

Paragraph 2: That the respondents P. P. Williams, W. H. Fitzhugh, and Alex. Fitzhugh are copartners doing business under the firm name and...

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