Luria Brothers and Company v. FTC

• Decision Date: 08 January 1968
• Docket Number: 14411-14421,No. 14402,14470-14472.,14402
• Parties: LURIA BROTHERS AND COMPANY, Inc., et al., Petitioners, v. FEDERAL TRADE COMMISSION, Respondent.
• Court: U.S. Court of Appeals — Third Circuit

389 F.2d 847 (1968)

LURIA BROTHERS AND COMPANY, Inc., et al., Petitioners, v. FEDERAL TRADE COMMISSION, Respondent.

Nos. 14402, 14411-14421, 14470-14472.

United States Court of Appeals Third Circuit.

Argued January 21, 1966.

Decided January 8, 1968.

Rehearing Denied February 27, 1968.

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Morris Wolf, Wolf, Block, Schorr & Solis-Cohen, Philadelphia, Pa. (Nathan Silberstein, Burton Caine, Philadelphia, Pa., on the brief), for Luria Brothers and Co., Inc., petitioner in No. 14402.

Albert R. Connelly, Cravath, Swaine & Moore, New York City (Edward C. Perkins, Daniel I. Davidson, New York City, on the brief), for Bethlehem Steel Corp. et al., petitioners in No. 14414.

Howard M. Holtzmann, Holtzmann, Wise & Shepard, New York City (Mark J. Maged, New York City, on the brief), for Colorado Fuel & Iron Corp. et al., petitioners in No. 14421.

James A. Bell, Thorp, Reed & Armstrong, Pittsburgh, Pa. (C. M. Thorp, Jr., Charles Weiss, Pittsburgh, Pa., Lewis Franklin Powell, Jr., Hunton, Williams, Gay, Powell & Gibson, Richmond, Va., on the brief), for National Steel Corp., petitioner in No. 14415, Edgewater Steel Co., petitioner in No. 14416 and for Weirton Sell Co., petitioner in No. 14472.

William H. Buchanan, General Atty., United States Steel Corporation Pittsburgh, Pa. (L. L. Lewis, Merrill Russell, Pittsburgh, Pa., on the brief), for U. S. Steel Corp., petitioner in No. 14417.

Joseph A. Vieson, W. Robert Chandler, Cross, Wrock, Miller, Vieson & Kelley, Detroit, Mich., for petitioner Detroit Steel Corp.

R. H. McRoberts, Edwin S. Taylor, Bryan, Cave, McPheeters & McRoberts, St. Louis, Mo., for petitioner Granite City Steel Co.

Robert C. McAdoo, Morgan, Lewis & Bockius, Philadelphia, Pa., for petitioner Baldwin-Lima-Hamilton Corp.

Gilbert W. Oswald, Samuel D. Slade, Schnader, Harrison, Segal & Lewis, Philadelphia, Pa., for petitioner Lukens Steel Co.

Arnold F. Shaw, Donohue, Kaufmann & Shaw, Washington, D. C., for petitioner Phoenix Steel Corp., successor by merger to Phoenix Iron and Steel Co. and Central Iron and Steel Co.

Lester S. Clemons, William K. McKibbage, Quarles, Herriott & Clemons, Milwaukee, Wis., for petitioner Bucyrus-Erie Co.

Ralph M. Barley, Barley, Snyder, Cooper & Mueller, Lancaster, Pa., for petitioner Grinnell Corp., successor by merger to Columbia Malleable Castings Corp.

Dickinson, Wright, McKean & Cudlip, William B. Cudlip, T. Donald Wade, W. Gerald Warren, Detroit, Mich., for petitioner McLouth Steel Corp.

Frederick H. Mayer, Federal Trade Commission, Washington, D. C. (James McI. Henderson, General Counsel, J. B. Truly, Asst. General Counsel, David B. Morris, Attorney, Attorneys for Federal

Trade Commission, Washington, D. C., on the brief), for respondent in all cases.

OPINION OF THE COURT

Before McLAUGHLIN, KALODNER and GANEY, Circuit Judges.

GERALD McLAUGHLIN, Circuit Judge.

Our decision in this appeal has been delayed because of litigation pending in the United States Supreme Court concerning the power of the Federal Trade Commission (Commission) to pass upon the merits of controversies before it during the period when the Commission was composed of only three of its five members and one of those three dissented. The Supreme Court has validated the hearing and decisional status of the Commission as constituted when it heard and decided that case. Federal Trade Commission v. Flotill Products, Inc., 389 U.S. 179, 88 S.Ct. 401, 19 L.Ed.2d 398 (December 4, 1967). We have therefore considered and determined the matter before us on its merits.

The Federal Trade Commission issued its original complaint in this proceeding on January 19, 1954. This was amended and supplemented by a subsequent complaint issued on July 13, 1954. Hearings were commenced on January 12, 1955, and continued periodically until May 14, 1958. During the course of the hearings which took 113 days, the testimony of more than 250 witnesses was taken.¹ Counsel for the Commission filed proposed findings of fact and conclusions of law on November 10, 1958. The various respondents (petitioners herein)² filed their separate counter-findings of fact, conclusions of law and orders from January 5, 1959 to January 13, 1959. The hearing examiner's initial decision was filed on March 29, 1961. Oral argument before the Commission was heard on November 21, 1961, and the Commission's opinion, which basically adopted the hearing examiner's initial decision, was announced on November 15, 1962. On April 11, 1963, Luria Brothers and Company, Inc. petitioned this Court, pursuant to Section 5(c) of the Federal Trade Commission Act, 38 Stat. 719 (1914), as amended 15 U.S.C. § 45(c) (1958), and to Section 11 of the Clayton Act, 38 Stat. 734 (1914), as amended 15 U.S.C. § 21(c), to review and set aside the order of the Commission dated February 13, 1963.

I. THE COMPLAINT

The complaint, as finally amended and supplemented, was in two counts. Count I in substance charged that Luria and the other petitioning mills entered into a series of agreements whereby Luria was to act as the exclusive or substantially exclusive broker for the petitioning mills. It charged that these agreements led to a restraint of trade and tended to create a monopoly in the scrap metal market in violation of Section 5 of the Federal Trade Commission Act, 15 U.S. C. § 45(a) (1).³ Count I also charged that the petitioning mills conspired to effect a monopoly in Luria, that Luria and others restrained trade in export scrap, that petitioners engaged in coercive tactics, and that Luria acquired various competing companies — all in violation of Section 5.

Count II specifically charged Luria with violation of Section 7 of the Clayton Act, 15 U.S.C. § 18⁴ by the acquisition of the stock of Southwest Steel Company, a competing broker, and the stock of six other companies.

Several charges were dismissed by the hearing examiner and the Commission. Those sustained were a finding that petitioners violated Section 5 of the Federal Trade Commission Act by separate agreements whereby each mill made Luria its exclusive or substantially exclusive broker; that Luria's participation in the sale of scrap to the purchasing agent, Office Commun des Consommateurs de Ferraille (OCCF), for the Coal and Iron Community of Western Europe was illegal; and that Luria's ownership of the stock of Southwest violated Section 7 of the Clayton Act.

The Commission's order prohibited Luria from contracting or agreeing to act as the exclusive or substantially exclusive broker for any plant of any respondent mill or any other buyer of scrap iron and steel; forbad the respondent mills without limit as to time to buy all or substantially all their scrap from or through Luria, and forbad them for five years to buy more than 50 percent of their scrap from Luria except to the extent that scrap, adequate in quantity and quality, is not available from other suppliers on terms which are substantially similar and competitive; forbad Luria, directly or indirectly, to agree to act as the exclusive or substantially exclusive broker in the export of scrap; forbad Luria for five years from acquiring the business of any scrap broker or dealer without the permission of the Commission and ordered Luria to divest itself of its interest in Southwest.

It is from these findings and the foregoing order that petitioners seek review by this Court.

II. INDUSTRIAL FACTS

At least 98 percent of the iron and steel scrap consumed in the United States is purchased by the producers of iron and steel. Scrap and pig iron are the principal metallics used in making iron and steel. Part of the scrap used in the production process is generated as a waste product of the mills' own activities and is referred to as "home scrap." This constitutes about one-half of the scrap consumed by producers. The remainder must be purchased from outside sources and is referred to as "purchased scrap." Sources of purchased scrap include railroads, industrial materials, ships, automobiles, discarded household appliances, etc.

Much scrap is collected by a vast army of junk dealers and peddlers who make regular rounds for this purpose. These junkmen usually sell their scrap to larger dealers who in turn sell directly to the consumer or to brokers. Approximately 90 percent of all scrap used is purchased either from dealers or brokers. Scrap brokers, as that term is used in the industry, has reference to persons who purchase and sell scrap for their own account, taking title to it and assuming all the risks incident to ownership. In effect they are wholesale dealers, but do not take physical possession of the material. Scrap dealers, on the other hand, operate yards where they take possession of the scrap, sort and process it. There is no hard and fast line differentiating brokers from dealers since in many instances, a dealer may act as a broker and some brokers also own yards where they operate as dealers.

Brokers derive their profit from the difference between what they pay for the scrap and what they can get for it. In general, they aim at a differential of $1.00 a gross ton, but because of market fluctuations and varying competitive conditions, the brokerage business is highly speculative.

III. HISTORY OF LURIA

The Luria business began about 1889 when the grandfather and greatgrandfather of the present generation of Lurias began to collect scrap. A small office was opened in Reading, Pennsylvania, and the business was incorporated in 1918. By 1930, Luria had opened offices in New York, Pittsburgh, Boston and Philadelphia and set up two yards in Pennsylvania. By 1946, Luria had become a substantial supplier to eleven of the petitioning mills. At the same time Luria expanded westward opening offices in Detroit, Chicago, Cleveland, Houston and St. Louis. Later Luria opened offices in Colorado, Alabama, Utah, California and Oregon. Domestically Luria is the largest scrap broker with 16...