Procter & Gamble Company v. FTC

• Decision Date: 18 March 1966
• Docket Number: No. 15769.,15769.
• Citation: 358 F.2d 74
• Parties: The PROCTER & GAMBLE COMPANY, Petitioner, v. FEDERAL TRADE COMMISSION, Respondent.
• Court: U.S. Court of Appeals — Sixth Circuit

358 F.2d 74 (1966)

The PROCTER & GAMBLE COMPANY, Petitioner, v. FEDERAL TRADE COMMISSION, Respondent.

No. 15769.

United States Court of Appeals Sixth Circuit.

March 18, 1966.

COPYRIGHT MATERIAL OMITTED

Frederick W. R. Pride, New York City, and Kenneth C. Royall, Washington, D. C. (Robert D. Larsen, New York City, on the brief; Richard W. Barrett, Dinsmore, Shohl, Barrett, Coates & Deupree, Cincinnati, Ohio, Royall, Koegel, Harris & Caskey, Washington, D. C., of counsel), for petitioner.

Gerald Harwood, Atty., F. T. C., Washington, D. C. (James McI. Henderson, Gen. Counsel, J. B. Truly, Asst. Gen. Counsel, Frederick H. Mayer, Atty., F. T. C., Washington, D. C., on the brief), for respondent.

Before WEICK, Chief Judge, PHILLIPS, Circuit Judge, and GREEN,^* District Judge.

WEICK, Chief Judge.

This is a proceeding to review an order of the Federal Trade Commission requiring The Procter & Gamble Company to divest assets of Clorox Chemical Company alleged to have been acquired by it in violation of Section 7 of the Clayton Act. 15 U.S.C. § 18.

The complaint filed by the Federal Trade Commission was served on October 7, 1957. It alleged that Procter is the leading producer in the United States of soap and detergent products, which it sells under brand names, and a major producer of other consumer products sold under brand names. The complaint further alleged that on August 1, 1957 Procter acquired Clorox Chemical Company, which was the nation's largest producer of household liquid bleach, and that Clorox sold its product nationally under the trade name of "Clorox". The complaint further alleged that Procter's acquisition of Clorox may substantially lessen competition or tend to create a monopoly in the sale of household liquid bleaches, in violation of Section 7 of the Clayton Act.

Procter filed an answer admitting its acquisition of the assets of Clorox, but denying the alleged probable anti-competitive effects of the acquisition and denying that it violated Section 7 of the Clayton Act.

Following hearings before a hearing examiner over a period of about fourteen months, the examiner issued his initial decision on June 17, 1960, finding that the acquisition violated Section 7 of the Clayton Act and ordered divestiture.

Appeals were taken to the Commission and on June 15, 1961, in a per curiam opinion, the Commission set aside the initial decision of the examiner because the record as presently constituted did not provide an adequate basis for determining the legality of the acquisition. It recognized that under such circumstance it might dismiss the complaint, but concluded that the public interest would be better served by remanding the case for the taking of additional evidence. It stated that the remand would afford a more complete post acquisition picture and allow "the Commission an informed hindsight upon which it can act rather than placing too strong a reliance upon treacherous conjecture."

The hearing examiner was directed to receive evidence relating to the competitive situation as it presently exists in the liquid bleach industry and was instructed that the evidence should relate to events occurring since November, 1958, and should include market share data in geographical regions, as well as information directed to more clearly delineating the production and merchandising facilities and teechniques utilized by Clorox under the control of Procter.

Prior to the hearing on the remand Procter filed a complaint in the United States District Court for the District of Columbia, to enjoin the Commission from proceeding with the remand. Its motion for a temporary restraining order was denied on the Commission's representation that the remand proceeding would take no more than two days. The action was later dismissed. The remand hearing was held and completed in two days. The hearing examiner rendered his second initial decision on February 28, 1962, which, like his first initial decision, found against Procter and ordered divestiture.

On the second appeal to the Commission, it ordered reargument on all contested issues of fact and law presented by the entire record and not merely by the record on the remand. The Commission in a 74 page opinion decided against Procter, adopting substantially the hearing examiner's findings and recommendations, except that it permitted Procter to divest the acquired assets by means of a spin-off.

Procter presents two questions here, namely, (1) whether the Commission's conduct of the proceeding and its reliance on matters dehors the record violated the Clayton and Administrative Procedure Acts and denied Procter due process of law; and (2) whether there was substantial evidence that the acquisition violated Section 7 of the Clayton Act. We will discuss these questions in the order presented.

The Commission's Conduct of the Proceeding

As has been noted, the Commission rendered two decisions in this case. In the interim between the decisions the personnel of the Commission changed, so that only one Commissioner participated in both decisions.

Procter argues that since the Commission found in its first decision that the record did not form an adequate basis for determining the legality of the acquisition, it should have dismissed the complaint instead of remanding the case to the hearing examiner for further hearings.

Although it is true that the Commission could have dismissed the complaint, in our opinion it was not required to do so. It had the power, in its discretion, to order a remand and to permit the introduction of additional evidence. The Commission's first decision was not a final decision. The case was still pending before the Commission. At best, its first decision was interlocutory in nature and was subject to reconsideration and change. Kirk v. Olson, 245 U.S. 225, 38 S.Ct. 114, 62 L.Ed. 256 (1917); Cia Mexicana De Gas, S.A., v. F. P. C., 167 F.2d 804 (5th Cir., 1964); 2 Am.Jur.2d, Administrative Law, § 522.

Procter relies on Texaco, Inc. v. F. T. C., 118 U.S.App.D.C. 366, 336 F.2d 754 (1964), where the Commission was criticized on this and on another ground. The Supreme Court, however, vacated the order of the Court of Appeals directing that the complaint be dismissed and remanded the case for further proceedings. In any event, it does not appear to us that the Court of Appeals set aside the order because of the Commission's conduct alone. 381 U.S. 739, 85 S.Ct. 1798, 14 L.Ed.2d 714 (1965). The Supreme Court's treatment of Texaco does not support Procter.

The Commission's Alleged Reliance on Matters Dehors the Record

Procter asserts that the Commission's decision was based upon economic theories drawn from extra-record writings and was therefore violative of due process. It states that the decision was premised and critically based upon 85 citations of 43 extra-record writings which purport to deal with economic, political and social concepts.

These cited writings were general in nature. None of them dealt with the facts in the present case. At no place in its opinion did the Commission regard the citations as evidence. There was no citation of any economic writings by the hearing examiner in his second initial decision, which adopted findings of fact and comprises about 88 pages of the record. The hearing examiner's first initial decision cites no such authority. The Commission apparently cited these writings to demonstrate that its decision comported with economic authority. The Supreme Court has cited and relied on economic writings in its consideration of Section 7 cases. F.T.C. v. Consolidated Foods, 380 U.S. 592, 85 S.Ct. 1220, 14 L.Ed.2d 95 (1965); United States v. Penn-Olin Chem. Co., 378 U.S. 158, 84 S.Ct. 1710, 12 L.Ed.2d 775 (1964); United States v. Philadelphia Nat'l Bank, 374 U.S. 321, 83 S.Ct. 1715, 10 L.Ed.2d 915 (1963); Brown Shoe Co. v. United States, 370 U.S. 294, 82 S.Ct. 1502, 8 L.Ed.2d 510 (1962). See also Ekco Products Co. v. F. T. C., 347 F.2d 745 (7th Cir., 1965); Crown Zellerbach Corp. v. F. T. C., 296 F.2d 800 (9th Cir., 1961).

We find no error in this respect.

Was There Substantial Evidence That the Acquisition of Clorox by Procter Was Reasonably Likely to Result in A Substantial Lessening of Competition in Violation of Section 7 of the Clayton Act?

It is difficult for us to harmonize the two decisions of the Commission in this case.

The decision of the first Commission set aside the first initial decision of the hearing examiner because the record as then constituted did not provide an adequate basis for determination of the legality of the acquisition. This is another way of saying that the evidence was insufficient to support a finding of illegality. The remand was for the sole purpose of taking post-acquisition evidence from which the Commission could rely on "informed hindsight" rather than "upon treacherous conjecture." The only evidence taken on the remand related to post-acquisition conditions.

The second Commission, contrary to the ruling of the first Commission, was of the view that the post-acquisition evidence was of little value and was admissible only in an unusual case (not the present case). It did discuss a portion of the post-acquisition evidence and stated that if it was considered it might furnish support for the findings which it made on the basis of other factors. It also mentioned that none of the phenomena (post-acquisition evidence) proved that the merger was unlawful. It stated that there had been no "dramatic" change in market structure or behavior in the years since the merger and that there was no basis for according the post-acquisition evidence particular weight since it "found its way, needlessly, into the record". The post-acquisition evidence will be discussed more in detail later.

The second Commission's decision was based entirely on the record submitted to the first Commission, which that body had ruled to be insufficient to support a finding of illegality.

We must...