Federal Trade Commission v. Packing Co v. 10 14, 1921

Citation257 U.S. 441,66 L.Ed. 307,42 S.Ct. 150
Decision Date03 January 1922
Docket NumberBEECH-NUT,No. 47,47
PartiesFEDERAL TRADE COMMISSION v. PACKING CO. Argued Nov. 10-14, 1921
CourtUnited States Supreme Court

Mr. Solicitor General Beck, of Washington, D. C., for petitioner.

Mr. Charles W. Dunn, of New York City, for respondent.

[Argument of Counsel from page 442-443 intentionally omitted] Mr. Justice DAY delivered the opinion of the Court.

This case is here upon a writ of certiorari to the United States Circuit Court of Appeals for the Second Circuit, which court set aside an order of the Federal Trade Commission requiring the Beech-Nut Packing Company, a corporation engaged in the manufacture and sale of food and other products throughout the United States, to cease and desist from carrying out a plan of resale of its products.1 Beech-Nut Packing Co. v. Federal Trade Commission, 264 Fed. 885.

The Commission condemned the plan as an unfair method of competition within the meaning of section 5 of the Federal Trade Commission Act. 38 Stat. 719 (Comp. St. § 8836e).

In the original complaint it was charged that in order to accomplish the illegal purpose intended the Beech-Nut Company required its purchasers to agree to maintain or resell such products at standard selling prices, and that for the purpose of maintaining such standard resale prices and for the purpose of inducing and compelling its customers to maintain and keep such standard prices the company refused to sell its products to customers and dealers who would not agree to maintain such specified standard resale prices, and who did not resell such products at the specified standard selling prices fixed and determined by the company. By stipulation before trial the complaint was amended so as to charge: That the Beech-Nut Company, has adopted and enforced a system of fixing and maintaining certain specified standard prices at which its chewing gum and food products shall be resold by purchasers thereof, including jobbers, wholesalers, and retailers, with the purpose and effect of securing the trade of such jobbers, wholesalers, and retailers and of enlisting their active support and cooperation in enlarging the sale of respondent's products, to the prejudice of its competitors who do not require and enforce the maintenance of resale prices for their products; and with the purpose and effect of eliminating competition in prices among all jobbers, wholesalers, and retailers, respectively, engaged in handling the products manufactured by the company, thereby depriving such distributors of their right to sell, and preventing them from selling its products at such prices as they may deem to be, and as are, adequate and warranted by their respective selling costs and efficiency, and with various other effects, and that the company as a means of making effective its system of resale prices and of inducing and compelling its customers and the dealer customers of its customers to maintain such resale prices, has for more than two years last past: Made it generally known to jobbers, wholesalers, and retailers, respectively, that it required and insisted that they should sell its products at the resale prices so fixed by it, and refused to sell to jobbers, wholesalers, or retailers not maintaining such prices; that the company threatened to and did refuse to sell to all jobbers, wholesalers, and retailers who failed to maintain the resale prices so fixed by it, or who sold to other distributors who failed to maintain such prices; induced or compelled the jobbers, wholesalers, and retailers, by divers other means, not only to maintain its resale prices so fixed, but also to discontinue selling its products to other jobbers, wholesalers, and retailers who did not maintain such resale prices; that the company caused the diversion of retailer's orders away from jobbers and wholesalers who did not maintain such resale prices so fixed by it, or who had resold its products to other jobbers, wholesalers, or retailers who had failed to maintain such resale prices, and caused such orders to be given to other jobbers and wholesalers who had maintained such resale prices and/or had refused to suppy other jobbers, wholesalers, and retailers failing to maintain such prices; that the company solicited and secured the co-operation of wholesalers, jobbers, and retailers in reporting price cutters, all in pursuance of its efforts to ascertain the names of all distributors of its products who had failed to maintain the resale prices fixed by it, and/or who had resold to other jobbers, wholesalers, and retailers failing to maintain such prices; that it entered in card records kept by it the names of all dealers reported to it, either in this or other ways, as not maintaining its resale prices or as selling to other distributors not maintaining such prices, and has taken various measures to prevent all such dealers from obtaining further shipments of its products from any source until it has received from them declarations, promises, assurances, statements, or other similar expressions, to the effect that in the future such dealers intend to and will sell such products at the resale prices fixed by the company and will refrain from selling the same to other jobbers, wholesalers, and retailers failing to maintain such prices; that respondent employed various other means and methods for the enforcement of its system of maintaining resale prices.

The case was heard before the Commission upon an agreed statement of facts, from which, among other things, it found:

The Beech-Nut Packing Company 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. Such wholesale and retail dealers are selected as desirable customers because they are known or believed to be of good credit standing who are willing to resell at the resale prices suggested by the company and who do resell at such prices; are 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 the company, and who do not sell to such jobbers, wholesalers, and retailers, who in other respects are good and satisfactory merchandisers. Such jobbers, wholesalers and retailers are designated by the company as 'selected' or 'desirable' dealers. In a few instances the company also sells 'direct' to certain large retailers who are selected as the jobbers, wholesalers and retailers. The total number of such dealers, handling the products of the company, includes the greater portion 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.

The company has adopted and maintained, and still maintained at the time complaint was filed by the Commission, in the sale and distribution of its products a 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.

In order to secure such co-operation and to carry out the Beech-Nut policy the company:

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.

Requests and insists that the 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 company, 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 the company.

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 company, it will absolutely refuse to sell further supplies of its product to them, or any of them, and will also absolutely refuse to sell to any jobbers, wholesalers, and retailers whatsoever who sell to other jobbers, wholesalers, and retailers failing to resell at the prices suggested by the company.

The company, in the carrying out of its policy has refused and does refuse to sell its products to practically all such jobbers, wholesalers, and retailers as do not sell at the prices so suggested by it. It has 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 it. It has 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 refused and does refuse to sell to practically all jobbers, wholesalers, and retailers who sell its products to such mail-order houses. It has maintained and does refuse to sell to practically all so-called price cutters. It has maintained 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'; its salesmen, under respondent's instructions, have 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 has requested such retailers to name other jobbers.

The company has reinstated and does reinstate as distributors of its products jobbers,...

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