Borden Company v. FTC
| Decision Date | 28 December 1964 |
| Docket Number | No. 14622.,14622. |
| Citation | 339 F.2d 953 |
| Parties | The BORDEN COMPANY, Petitioner, v. FEDERAL TRADE COMMISSION, Respondent. |
| Court | U.S. Court of Appeals — Seventh Circuit |
Stuart S. Ball, H. Blair White, and Thomas E. Kauper, Chicago, Ill., Cecil I. Crouse, Edwin Clark Davis, New York City, Joseph A. Greaves and Sidley, Austin, Burgess & Smith, Chicago, Ill., of counsel, for petitioner.
J. B. Truly, Asst. Gen. Counsel, Gerald J. Thain, Attorney, Federal Trade Commission, Washington, D. C., for respondent.
Before DUFFY and KILEY, Circuit Judges, and MAJOR, Senior Judge.
In April 1959, the Federal Trade Commission (Commission) issued a complaint alleging petitioner, The Borden Company (Borden), violated Section 2(a) of the Clayton Act as amended by the Robinson-Patman Act, 15 U.S.C. § 13(a), by selling fluid milk in interstate commerce at different prices in eleven different communities (area price discrimination), and at different prices within ten communities (local price discrimination).
Borden produces, manufactures, processes and markets a wide range of products including dairy products. In 1958, Borden had milk businesses in twenty-nine states. As of September 1, 1959, Borden operated eighty-one milk processing plants and milk routes in more than five hundred counties. The operation of the eighty-one plants was under the general jurisdiction of ten supervisory units each headed by a district chairman. Due to the highly localized nature of the milk business, the district chairmen, in most cases, delegated "broad managerial responsibility" to local plant managers including responsibility for determining prices.
At the various hearings before the Commission, evidence was received with respect to varying prices for milk in sixty-five communities in eight states. A specification of charges was filed to narrow the issues. Area price discrimination charges were confined to seventeen communities in Texas, New Mexico, Arkansas, Louisiana, Indiana, Michigan, Ohio and Kentucky. The local price discrimination charges were confined to "sales to grocery store consumers in Portsmouth and New Boston, Ohio, by its Portsmouth, Ohio plant." The charges were further limited to sales to grocers of milk in half-gallon and gallon containers.
To avoid extensive hearings to present Borden's defenses, eight lengthy stipulations were filed on March 9, 1962, at a hearing in Washington, D. C.
On October 8, 1962, the Trial Examiner filed his Initial Decision. He found Borden's prices in Portsmouth and New Boston did not violate the Act since all milk involved "was produced, processed and sold in Ohio" and that none of the purchases involved were "in commerce" as is required by the Act. The Examiner found, however, that Borden had unlawfully discriminated between non-competing grocer customers located in Elkhart, South Bend, and Walkerton, Indiana, and Sturgis, Michigan.
Borden petitioned for a review of the Initial Decision relating to area price discrimination charges. Commission counsel petitioned for review relating to local price discrimination charges. Thus, the issues were narrowed to the charges of area price discrimination involving South Bend, Elkhart, Walkerton, and Sturgis, and local price discrimination in Portsmouth and New Boston, Ohio, being a total of six of the approximately sixty-five communities named in the evidence.
The Federal Trade Commission has five members. Only three took any part in the Commission's decision and order in this case. Commissioner Dixon wrote the opinion.1 Commissioner Elman vigorously dissented. Commissioner Anderson "concurred in the result," without any statement of reasons.
It is obvious that Commissioner Anderson did not agree with all that was said in the opinion written by Commissioner Dixon, yet, it is "the findings and conclusions" embodied in the Dixon opinion which are necessary to support the final order.
The only finding of a local price discrimination violation relates to Borden's prices in Portsmouth, Ohio. The Examiner found that Borden's sales to customers in Portsmouth were made from Borden's Portsmouth plant and that the milk sold was processed by the Portsmouth plant from raw milk produced and purchased in Ohio. These findings are not disputed.
Section 2(a) of the Act forbids the seller "to discriminate in price between different purchasers of commodities of like grade and quality, where either or any of the purchases involved in such discrimination are in commerce." The words "in commerce" mean in interstate commerce. The Supreme Court, in Standard Oil Company v. Federal Trade Commission, 340 U.S. 231, 236-237, 71 S.Ct. 240, 243, 95 L.Ed. 239, said: "In order for the sales here involved to come under the Clayton Act, as amended by the Robinson-Patman Act, they must have been made in interstate commerce."
The Court, in Willard Dairy Corp. v. National Dairy Products Corp., 6 Cir., 309 F.2d 943, 946, said: "* * * It is not enough under the Clayton Act, as amended by the Robinson-Patman Act, that the defendant be engaged in interstate commerce but it must also be shown that the sale complained of was one occurring in interstate commerce."
Commissioner Dixon placed great stress on the fact that Borden is engaged in interstate commerce. He described Borden as "an interstate corporation"; that its operations constitute an "interstate complex" and that its practices and policies have an "interstate homogeneity."
The view of Commissioner Dixon on this point is summed up in his opinion when he said: "Since it is impossible to divorce The Borden Company and its products, if The Borden Company is in commerce, so must be all its products." We disagree.
We find ourselves in complete accord with Commissioner Elman where he discusses what we may designate as the "Portsmouth charge." He said: Commissioner Elman cites the decision of this Court in Central Ice Cream Co. v. Golden Rod Ice Cream Co., 7 Cir., 287 F.2d 265.
Commissioner Elman continued — "However, unless the third commerce requirement of Section 2(a) is to be given no effect whatever, the Commission's burden of establishing jurisdiction cannot be discharged merely by a showing that respondent is an interstate concern or that it makes interstate sales not involved in the challenged discrimination."
Commissioner Elman also stated — "The language and scheme of Section 2 (a) make plain that not all transactions by interstate businesses are subject to the statute, and what legislative history there is on the question supports this view."
As Commissioner Elman points out, the alleged discriminatory sales from Borden's Portsmouth plant seem clearly local in nature and without significant interstate incidents.
It is undisputed that the sales of milk were negotiated in Ohio, the milk was produced, processed and delivered in Ohio for resale in Ohio.
Insofar as the order of the Commission may be based upon the sales of milk at Portsmouth, Ohio, the order cannot be sustained.
In 1958, Walkerton, Indiana, had a population of about 2500. It had four grocery stores and one dairy store. Borden's sole grocer customer in Walkerton was an A & P store. Another grocery, Nick's Supermarket, had five times the sales volume of the A & P store, and was the dominant grocery in Walkerton.
James Burger's creamery and dairy stores processed milk at New Paris, Indiana, and sold it under the label "Burger" through thirty-five Burger stores. Burger opened a dairy store in Walkerton in November 1957, and featured gallon jugs of milk at prices substantially below the prevailing out-of-store price for two half-gallons of milk.
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