Beech-Nut Packing Co. v. Federal Trade Commission

• Decision Date: 26 February 1920
• Docket Number: 92.
• Citation: 264 F. 885
• Parties: BEECH-NUT PACKING CO. v. FEDERAL TRADE COMMISSION. [1]
• Court: U.S. Court of Appeals — Second Circuit

264 F. 885

BEECH-NUT PACKING CO. v. FEDERAL TRADE COMMISSION. ^[1]

No. 92.

United States Court of Appeals, Second Circuit.

February 26, 1920

Charles Wesley Dunn, of New York City (Charles E. Hughes, of New York City, of counsel), for petitioner.

Edward L. Smith, of Washington, D.C. (Claude R. Porter and Marshall B. Clarke, both of Washington, D.C., and Joseph A. Burdeau of New York City, of counsel), for respondent.

Before WARD, HOUGH, and MANTON, Circuit Judges.

WARD Circuit Judge.

April 15, 1918, the Federal Trade Commission issued a complaint against the Beech-Nut Packing Company under section 5 of the Act of Congress of September 26, 1914 (Comp. St. Sec. 8836e) entitled 'An act to create a Federal Trade Commission, to define its powers and duties, and for other purposes,' charging the company with using an unfair method of competition in interstate commerce, viz. in selling its products to such purchasers, principally wholesalers and jobbers, as do not resell at a price lower than that fixed by the company and in refusing to sell to such as do, with the purpose of eliminating competition in the sale of the company's products and that a proceeding by the commission in respect to this method would be to the interest of the public.

The company appeared and answered, admitting these facts, but denying that it had entered into any agreement with purchasers requiring them to maintain its prices, or in any way qualifying their title to the articles purchased, or restricting their freedom to sell to any one and charge any price they choose.

An agreed statement of facts was filed. June 30, 1919, the commission filed its report and findings.

The respondent is engaged in interstate commerce in selling divers food products, such as sliced bacon, sliced beef peanut butter, candies, chewing gum, etc., under the trade-name 'Beech-Nut Brand.' The commission's findings of fact are very long, and it will be sufficient for the purposes of our decision to state the following:

'Paragraph Four. That respondent customarily markets its products principally through jobbers and wholesalers in the grocery, drug, candy, and tobacco lines, who in turn resell to retailers in these lines, all of which wholesale and retail dealers are selected as desirable customers, for the reason that they are known or believed to be (a) of good credit standing; (b) willing to resell at the resale prices suggested by respondent and who do resell at such prices, as hereinafter set forth; (c) willing to refuse to sell and who do refuse to sell to jobbers, wholesalers and retailers who do not resell at the resale prices suggested by respondent, and who do not sell to such jobbers, wholesalers and retailers as also hereinafter set forth; (d) good and satisfactory merchandisers in other respects. Such jobbers, wholesalers, and retailers are designated by the respondent as 'selected' or 'desirable' dealers. Respondent also sells 'direct' in a few instances to certain large retailers, who are selected on the same basis as the aforesaid jobbers, wholesalers, and retailers. The total number of such dealers handling the products of respondent includes the greater proportion of the jobbers, wholesalers, and retailers, respectively, in the grocery trades and a large proportion of the jobbers, wholesalers, and retailers in the drug, candy, and tobacco trades, respectively, throughout the United States.

'Paragraph Five. That respondent, in the sale and distribution of its products, has adopted and maintained, and still maintains, policy known as the 'Beech-Nut Policy,' and requests the co-operation therein of all dealers selling the products manufactured by it, dealing with each customer separately.'

'Paragraph Seven. In order to carry out said Beech-Nut policy and to secure such co-operation, respondent

'(a) Issues circulars, price lists and letters to the trade generally showing suggested uniform resale prices, both wholesale and retail, to be charged for Beech-Nut products.

'(b) Requests and insists that the aforesaid selected jobbers, wholesalers, and retailers resell only at the suggested resale prices.

'(c) Requests and insists that the aforesaid selected jobbers, wholesalers, and retailers sell only to such other jobbers, wholesalers, and retailers as have been and are willing to resell and do resell at the prices so suggested by the respondent, and requests and insists that such jobbers, wholesalers, and retailers discontinue selling to other jobbers, wholesalers, and retailers who fail to resell at the prices so suggested by respondent.

'(d) Makes it known broadcast to such selected jobbers, wholesalers and retailers, whether sold 'direct' or not, that if they, or any of them, fail to sell at the resale prices suggested by the respondent as aforesaid, respondent will absolutely refuse to sell further supplies of its products to them, or any of them, and will also absolutely refuse to sell any jobbers, wholesalers, and retailers whatsoever who sell to other jobbers, wholesalers, or retailers failing to resell at the prices suggested by respondent.

'Paragraph Eight. That respondent, in the carrying out of said policy

'(a) Has within the time aforementioned refused and does refuse to sell its products to practically all such jobbers, wholesalers, and retailers as do not resell at the prices so suggested by the respondent.

'(b) Has within the time aforementioned refused and does refuse to sell to practically all such jobbers, wholesalers, and retailers reselling to other jobbers, wholesalers, and retailers who have failed to resell at the prices so suggested by the respondent.

'(c) Has within the time aforementioned refused and does refuse to sell to practically all so-called mail-order houses engaged in interstate commerce, on the ground that such mail-order houses frequently sell at cut prices, and has within the time aforementioned refused and does refuse to sell to practically all jobbers, wholesalers, and retailers who sell its products to such mail-order houses.

'(d) Has within the time aforementioned refused and does refuse to sell to practically all so-called price cutters.

'(e) Has maintained within the time aforementioned and does maintain a large force of so-called specialty salesmen or representatives who call upon the retail trade and solicit orders therefrom to be filled through jobbers and wholesalers, which orders are commonly known in the trade as 'turnover orders'; that respondent's salesmen, under its instructions, have within the time aforementioned refused and do refuse to accept any such turnover orders to be filled through jobbers and wholesalers who themselves sell or have sold at less than the suggested resale prices, or sell or have sold to jobbers, wholesalers, and retailers who sell or have sold at less than such suggested resale prices, and in such cases have requested such retailers to name other jobbers.

'(f) Has within the time aforementioned reinstated and does reinstate as distributors of its products, jobbers, wholesalers, and retailers previously cut off or withdrawn from the list of selected jobbers, wholesalers, and retailers for failure to resell at the prices suggested by the respondent and/or for selling to distributors who do not maintain such suggested resale prices, upon the basis of declarations, assurances, statements, promises, and similar expressions, as the case may be, by said distributors, respectively, which satisfy the respondent that such distributors will thereafter resell at the prices suggested by the respondent and/or will refuse to sell to distributors who do not maintain such suggested resale prices.

'(g) Has within the time aforementioned added and does add to its list of new distributors concerns reported by its representatives as declaring that they intend to and will resell at the prices suggested by the respondent, and/or will refuse to sell to distributors who do not maintain such suggested resale prices.

'(h) Has within the time aforementioned utilized a system of key numbers or symbols stamped or marked upon the cases containing 'Beech-Nut Brand' products, thus enabling the respondent, for any purpose whatsoever, to ascertain the identity of the distributors from whom such products were purchased, and that repeatedly, within the time aforementioned, when instances of price cutting have been reported to respondent by the selected wholesalers and retailers, or ascertained in other ways, its salesmen and representatives have been instructed by respondent to investigate, and that in pursuance of these instructions salesmen and representatives of respondent have by means of these key numbers or symbols traced the price cutters from whom the goods have been obtained, and have thus ascertained the identity of such price cutters, and have also thus traced and ascertained the identity of distributors from whom price cutters have purchased 'Beech-Nut Brand' products, and have thereafter refused to supply all such dealers with its products, whether such dealers were themselves cutting the suggested resale prices or were selling to dealers cutting the suggested resale prices.

'(i) Has within the time aforementioned maintained and does maintain card records containing the names of thousands of jobbing, wholesale, and retail distributors, including the aforesaid selected distributors, and in furtherance of its refusals to sell goods either to distributors selling at less than the suggested resale price, or to distributors selling to other distributors selling at less than the suggested resale prices, has listed upon those cards bearing the names of such distributors, the words 'Undesirable-- Price Cutters,' 'Do Not Sell,' or 'D.N.S.,' the abbreviation for 'Do Not...