Fed. Trade Comm'n v. Church & Dwight Co.

• Decision Date: 13 December 2011
• Docket Number: Nos. 10–5383,11–5008.,s. 10–5383
• Citation: 665 F.3d 1312,2011 Trade Cases P 77721,398 U.S.App.D.C. 449
• Parties: FEDERAL TRADE COMMISSION, Appellee v. CHURCH & DWIGHT CO., INC., Appellant.
• Court: U.S. Court of Appeals — District of Columbia Circuit

2011-2 Trade Cases P 77,721

398 U.S.App.D.C. 449

665 F.3d 1312

FEDERAL TRADE COMMISSION, Appellee

v.CHURCH & DWIGHT CO., INC., Appellant.

Nos. 10–5383

11–5008.

United States Court of Appeals, District of Columbia Circuit.

Argued Oct. 11, 2011.Decided Dec. 13, 2011.

Appeals from the United States District Court for the District of Columbia (No. 1:10–mc–00149).Carl W. Hittinger argued the cause for appellant. With him on the briefs was Earl J. Silbert.

Mark S. Hegedus, Attorney, Federal Trade Commission, argued the cause for appellee. With him on the brief were Willard K. Tom, General Counsel, David C. Shonka, Principal Deputy General Counsel, John F. Daly, Deputy General Counsel, and Leslie Rice Melman, Assistant General Counsel. R. Craig Lawrence, Assistant U.S. Attorney, entered an appearance.

Before: SENTELLE, Chief Judge, GINSBURG,^* Circuit Judge, and WILLIAMS, Senior Circuit Judge.

Opinion for the Court filed by Circuit Judge GINSBURG.

GINSBURG, Circuit Judge:

Church and Dwight Co., Inc., the leading manufacturer of condoms in the United States, appeals an order of the district court enforcing a subpoena and an accompanying civil investigative demand (CID) issued by the Federal Trade Commission insofar as the FTC would require it to produce information related to its sales of products other than condoms. Church & Dwight contends such information is not reasonably relevant to the Commission's investigation into its potentially monopolistic practices in the market for condoms. Because the Commission's inquiry lawfully extends to the possibility Church & Dwight is engaged in the exclusionary bundling of rebates to retailers that sell condoms and other Church & Dwight products, we hold the district court did not err in finding that the information on products other than condoms was reasonably relevant to the Commission's investigation. Accordingly, we affirm the order enforcing the subpoena and the CID against Church & Dwight as issued.

I. Background

Church & Dwight sells condoms primarily under its Trojan brand name. According to the Commission, the Company accounts for “at least 70%” of the latex condoms sold in the United States.^* In order to market its condoms, Church & Dwight offers retailers a discount based upon the amount of shelf space they devote to its condoms. Church & Dwight also sells a variety of other products, including such consumer products as cat litter and toothpaste.

In June 2009 the Commission issued a “Resolution Authorizing Use of Compulsory Process in a Nonpublic Investigation” in order to determine whether Church & Dwight

has attempted to acquire, acquired, or maintained a monopoly in the distribution or sale of condoms in the United States, or in any part of that commerce, through potentially exclusionary practices including, but not limited to, conditioning discounts or rebates to retailers on the percentage of shelf or display space dedicated to Trojan brand condoms and other products distributed or sold by Church & Dwight, in violation of Section 5 of the Federal Trade Commission Act....

Pursuant to the Resolution, the Commission issued a subpoena duces tecum seeking, among other things, production of documents related to Church & Dwight's sales and distribution of condoms in the United States and Canada. At the same time the Commission issued a CID seeking information about cost, pricing, production, and sales of the Company's condoms in the United States and Canada. Although the Commission did not explicitly request information on products other than condoms, Specification R of the subpoena provides: “All Documents responsive to this request ... shall be produced in complete form, unredacted unless privileged....”

Church & Dwight turned over to the Commission documents and data sets relating to its condom business with the information on other products redacted. Church & Dwight petitioned the Commission either to limit or to quash the subpoena and the CID. The Commission denied that request and petitioned the district court to enforce the subpoena and the CID.

In the district court, Church & Dwight argued, “Properly read, the FTC's Resolution's language concerning ‘Trojan brand condoms and other products distributed or sold by Church & Dwight’ does not include irrelevant non-condom products such as toothpaste, cat litter, baking soda and detergents.” The district court, finding the information on products other than condoms in documents with information pertaining to condoms was “reasonably relevant” to the Commission's investigation and the request was not “unduly burdensome,” granted the petition for enforcement.

II. Analysis

Church & Dwight appeals the district court's order insofar as the subpoena and the CID relate to its products other than condoms. The Company first contends the district court departed from the legal standard prescribed in precedent because it (1) did not interpret the scope of the Resolution, (2) did not identify the materials sought in the subpoena and the CID, and (3) required that the materials sought in the subpoena and the CID be only plausibly, rather than reasonably, relevant to the Commission's investigation. It also argues that, even if the district court applied the correct legal standard, the court clearly erred when it found the disputed materials were in fact reasonably relevant to the investigation.

A. Standards of Review

Whether the district court applied the correct standard in deciding an investigative subpoena should be enforced is a question of law, which we decide de novo. See U.S. Int'l Trade Comm'n v. ASAT, Inc., 411 F.3d 245, 253 (D.C.Cir.2005); FTC v. Texaco, 555 F.2d 862, 876 n. 29 (D.C.Cir.1977) (en banc). We review the district court's determination of relevance, a question of fact, only for clear error. See FTC v. Invention Submission Corp., 965 F.2d 1086, 1089 (D.C.Cir.1992).

In the last-cited case we explained “a district court must enforce a federal agency's investigative subpoena if the information sought is ‘reasonably relevant’—or, put differently, ‘not plainly incompetent or irrelevant to any lawful purpose of the [agency]’—and not ‘unduly burdensome’ to produce.” 965 F.2d at 1089 (brackets in original) (internal citations omitted) (quoting Texaco, 555 F.2d at 872, 873 n. 23, 881). We also reiterated a long-established point quite pertinent to the dispute here: “[T]he validity of Commission subpoenas is to be measured against the purposes stated in the resolution....” 965 F.2d at 1092 (quoting FTC v. Carter, 636 F.2d 781, 789 (D.C.Cir.1980)).

B. Scope of the Resolution

The main dispute in this case is whether the Commission's inquiry, as defined by the Resolution, extends to Church & Dwight's products other than condoms. The Resolution indicates the Commission is investigating various of Church & Dwight's practices, including its “conditioning [of] discounts or rebates to retailers on the percentage of shelf or display space dedicated to Trojan brand condoms and other products....” Despite the seemingly unqualified reach of the phrase “and other products,” the Company argues we should interpret it narrowly to mean “and other [condom] products.” For its part, the Commission maintains the Resolution comprehends an investigation into Church & Dwight's possible bundling of rebates based upon the retailer's sales of both its condoms and its other products. Under the Commission's interpretation, the information concerning products other than condoms is unquestionably relevant to its investigation, and the district court was correct to enforce the subpoena and the CID.

As an initial matter, Church & Dwight is incorrect in claiming the district court “failed to interpret” the Resolution; the district court simply interpreted the Resolution as being more broad than Church & Dwight had argued. The question properly before us is whether the district court correctly interpreted the Resolution to include an inquiry that implicated Church & Dwight products other than condoms.

Contrary to the Company's urging, we defer to the Commission's interpretation of its own Resolution. Cf. FTC v. Ken Roberts Co., 276 F.3d 583, 586 (D.C.Cir.2001) (“courts of appeals have consistently deferred to agency determinations of their own investigative authority”); EEOC v. Lutheran Social Servs., 186 F.3d 959, 965 (D.C.Cir.1999) (“agency's interpretation of relevance of subpoena deserves deference because the scope of the investigation is very much dependent on the agency's interpretation and administration of its authorizing substantive legislation” (internal quotation marks, alterations, and citation omitted)). So long as the material the Commission seeks is “relevant to the investigation—the boundary of which may be defined quite generally,” Invention Submission, 965 F.2d at 1090, see also Texaco, 555 F.2d at 874 n. 26 (“resolutions of [a broad] sort are not uncommon in the investigative process”), the district court must enforce the agency's demand.

The Commission maintains its Resolution contemplates an investigation into the possibility Church & Dwight is engaged in exclusionary practices in which products other than condoms may play a role. Such practices include bundling discounts, as in LePage's Inc. v. 3M, 324 F.3d 141 (3d Cir.2003) (en banc), and tying sales, as in Eastman Kodak Co. v. Image Technical Services, Inc., 504 U.S. 451, 112 S.Ct. 2072, 119 L.Ed.2d 265 (1992). Church & Dwight replies that, because the initial clause of the Resolution authorizes an investigation into illegal monopolization “in the distribution or sale of condoms ... through potentially exclusionary practices including, but not limited to, [shelf-space discounts] on Trojan brand condoms and other products,” the last two words must refer only to Church & Dwight's condom brands other than Trojan. There is, however, a reasonable interpretation of the Resolution that is less narrow than the one Church & Dwight favors. Although we will not interpret the...