Eastman Kodak Co. v. Federal Trade Commission

• Citation: 7 F.2d 994
• Decision Date: 18 May 1925
• Docket Number: No. 147.,147.
• Parties: EASTMAN KODAK CO. et al. v. FEDERAL TRADE COMMISSION.
• Court: United States Courts of Appeals. United States Court of Appeals (2nd Circuit)

7 F.2d 994 (1925)

EASTMAN KODAK CO. et al. v. FEDERAL TRADE COMMISSION.

No. 147.

Circuit Court of Appeals, Second Circuit.

May 18, 1925.

Hubbell, Taylor, Goodwin & Moser, of Rochester, N. Y. (John W. Davis and Frank L. Crawford, both of New York City, and Clarence P. Moser, of Rochester, N. Y., of counsel), for petitioner Eastman Kodak Co.

Geoffrey Konta, of New York City, for Brulatour.

M. H. Lavenstein, of New York City, for certain of the Allied Laboratories.

W. H. Fuller and Wm. A. Sweet, both of Washington, D. C., for the Trade Commission.

Before ROGERS, HOUGH, and MANTON, Circuit Judges.

HOUGH, Circuit Judge (after stating the facts as above).

Making fact findings is often an invidious task; but, where the facts are agreed upon, the difficulties would seem to be removed by consent. The Commission's findings in this case, often confound a finding (i. e., a statement of some proved fact) with a conclusion (i. e., an inference drawn from the facts proved); but the matter is not here important, because a reference to the agreed facts at once enables one to separate the Commission's color for the facts from the dry facts themselves.

The fact, or inference from facts (it makes no difference what it is called), deemed of most importance by the Commission is that Eastman Kodak Company in 1921 had a "substantially complete monopoly of the sale of positive and negative cinematography film in the United States." This is true, but the reasons are just as true, viz., that the company was the first American manufacturer, had pushed its trade with skill, and made what is still regarded as the best raw film anywhere obtainable.

The Commission then proceeds to take what it calls "judicial notice" of United States v. Eastman Co. (D. C.) 226 F. 62, and declares that the company's action in holding the factories or laboratories acquired from Brulatour ready for action, should the other and defendant laboratories dare to use foreign film, is "analogous" to what the courts condemned in the case "judicially" noticed. Whether any analogy exists is a matter about which opinion may differ, but the matter is unimportant, unless the fact that a company has violated the Sherman Act (Comp. St. §§ 8820-8823, 8827-8830) is evidence that it has also violated the Federal Trade Commission statute, which is not true.

Next, the Commission, having established a monopoly and suggested a motive, infers a purpose to continue the monopoly, and declares that defendants' acts as recited constitute a combination in restraint of trade having results which are frustrated by the order as above set forth.

It is first to be noted that what the Commission has done must be justified under the Trade Commission Act, if at all. The Clayton Act cannot be appealed to; the complaint, findings, and order all rest solely on the fifth section of the act creating the Commission — i. e., what petitioning defendants have admittedly done amounts to an unfair method of competition.

Next, the inquiry is vital: In what trade or commerce is an unfair method of competition encountered? Here the Commission's "conclusions of fact" are plain; it is "the sale of positive cinematography film in interstate and foreign commerce," although additional sin is found in that the acts prescribed also "tend materially to sustain the monopoly already existing in the Eastman Kodak Company."

Having thus delimited the law chosen by the Commission to apply to the facts found, it is plain that what it all amounts to is this: One who, by early arrival in the field, excellence of product, and marketing skill, makes and sells over 90 per cent. of the native raw material, has no legal right to embark on the new business of finishing his own raw material. This is the first half of what has been done, and half of the proposition laid down by the Commission. The other half is this: If two sets of men are equipped to make pictures and one of them is equipped also to make raw film, it is unlawful for them to agree to divide the field of business, so that the raw film maker shall make all the film, and the other men shall make all the pictures.

With the first proposition we do not agree, and hold that, since corporate power exists, it was not and is not unlawful for Eastman Kodak Company to equip itself for or to enter upon the business of making pictures; but it was and is unlawful for the Commission to order that company to divest itself of the factories or laboratories so lawfully acquired.

The Commission is not a court; it exercises administrative, not judicial, power (National Harness, etc., Ass'n v. Federal Trade Commission C. C. A. 268 F. 705; Chamber of Commerce v. Federal Trade Commission C. C. A. 280 F. 45), and no statutory grant can be found justifying the order that a citizen sell property acquired in the course of business.

But, even if the Commission had the powers of a court, as exercised in the cases relied on (Standard Oil v. United States, 221 U. S. 1, 31 S. Ct. 502, 55 L. Ed. 619, 34 L. R. A. N. S. 834, Ann. Cas. 1912D, 734; United States v. American Tobacco Co., 221 U. S. 106, 31 S. Ct. 632, 55 L. Ed. 663), there was no basis for exercise of power. The sole object of Commission action was to prevent unfair competition, but there was nothing unfair in the Kodak Company going into the business of making pictures; on the contrary, it is fundamental just now in this country that competition is holy; the more we have, the better presumably are we off; wherefore the act of getting ready to compete in the picture-making art was under our statutes positively meritorious, and no court could have prevented what was done.

But quite different was the act of agreeing with existing picture makers to abstain from actual competition, if the latter would continue to buy American film. This was a combination directly intended to keep foreign film out of the country, and the Federal Trade Commission was authorized to do what it has done, and take up the cudgels for the foreigner. If the agreement had been that Kodak Company would refrain from competition in the picture-making field, if existing picture makers would refrain from purchasing raw film from Kodak's American rivals, the matter would have been plainer; but we are of opinion that the Commission, if it deemed its action for the public interest, could promote the interests of foreign raw film makers, as has been done. The Commission's field of action is foreign as well as interstate commerce.

Result is that the order under review is reversed, in so far as it calls upon Eastman Kodak Company to cease and desist from owning the factories obtained by it from Brulatour, but upheld so far as it requires all parties to cease and desist from acting in agreement to refrain from operating the Brulatour factories as long as foreign film is not purchased by existing defendant factories.

Settle exact form of modified order on notice, and in the first instance before the judge writing this opinion.

MANTON, Circuit Judge (dissenting in part).

I agree with the conclusion of Judge HOUGH'S opinion which results in affirming that part of the order requiring the Eastman Kodak Company to cease and desist from acting in or carrying out the agreement with the operators to refrain from operating the laboratories known as the Paragon, the G. M., and the Sen Jacq Laboratories, as long as foreign films are not purchased by the existing defendant laboratories. The order to cease and desist provides against the use by the Eastman Kodak Company or the ownership and possession of said Paragon, G. M., and Sen Jacq Laboratories and their equipment and capacity for producing positive prints of cinematography films from exposed and developed...