Federal Trade Commission v. Claire Furnace Co.

• Decision Date: 02 January 1923
• Docket Number: 3798.
• Citation: 285 F. 936
• Parties: FEDERAL TRADE COMMISSION et al. v. CLAIRE FURNACE CO. et al.
• Court: U.S. Court of Appeals — District of Columbia Circuit

285 F. 936

FEDERAL TRADE COMMISSION et al. v. CLAIRE FURNACE CO. et al.

No. 3798.

United States Court of Appeals, District of Columbia.

January 2, 1923

Submitted May 22, 1922.

Appeal from the Supreme Court of the District of Columbia.

J Wallace Nichol, W. H. Fuller, and William T. Chantland, all of Washington, D.C., for appellants.

Levi Cooke and George R. Beneman, both of Washington, D.C., A. Leo Weil, of Pittsburgh, Pa., and William Wallace, Jr., of New York City, for appellees.

Before SMYTH, Chief Justice, and ROBB and VAN ORSDEL, Associate justices.

VAN ORSDEL, Associate Justice.

Appellee corporations filed a bill in the Supreme Court of the District of Columbia for an injunction to restrain appellant Federal Trade Commission from enforcing or attempting to enforce an order issued by the Commission against the complainant companies, requiring them to furnish monthly reports of the cost of production, balance sheets, and other information in detail, upon a large variety of subjects relative to the business in which complainant corporations are engaged.

The authority under which the Commission assumes to act is expressed in a resolution, wherein it is stated that, at a hearing held by a committee of the House of Representatives the Commission was requested to suggest what might be done to reduce the high cost of living. In response the Commission recommended to the committee:

'That it would be desirable to obtain and publish from time to time, current information with respect to the 'production, ownership, manufacture, storage and distribution of foodstuffs, or other necessaries, and the products or by-products arising from or in connection with the preparation and manufacture thereof, together with figures of cost and wholesale and retail prices,' and particularly with respect to various basic industries, including coal and steel.'

An appropriation of $150,000 was made available, and the Commission resolved to--

'proceed to the collection and publication of such information with respect to such basic industries as the said appropriation and other funds at its command will permit, and that such action be started as soon as possible with respect to the coal industry and the steel industry, including in the latter closely related industries, such as iron ore, coke, and pig-iron industries.'

The alleged purpose of this report was to compile in combined or consolidated form the data received from individual companies, and to issue currently in such form accurate and comprehensive information regarding changes in the conditions of the industry, both for the benefit of the industry and of the public. At the same time, orders were issued to the complainant coal and coke companies requiring them to report the--

'monthly costs of production for the several products designated and other data as specified, in the form prescribed.'

Accordingly the Commission issued to each of the complainant companies forms of reports, schedules, and questionnaires, calling for detailed information regarding the amount of products produced by the several complainants respectively, the sales and contract prices thereof, and orders booked by them, the amounts allocated by them to depreciation, and administrative and selling expenses, and also to file with the Commission quarterly income statements and balance sheets. In addition the Commission required complainants to submit their accounts and books for inspection, to enable it to check the reports which complainants were required to furnish from time to time. Complainants were warned that upon failure to comply with the orders of the Commission the penalties prescribed by section 10 of the Trade Commission Act (Comp. St. Sec. 8836j) would be imposed upon them.

Complainants allege, and it is not denied in the answer, that they--

'are engaged in producing, manufacturing, and making sales, in the states wherein their producing and manufacturing operations are conducted, and all of them are conducting mining operations, or manufacturing plants, or both.' The location of the manufacturing and mining plants is given and it appears that the companies are engaged in producing pig iron, tin plate, strip steel, billets, slabs, ingots, blooms, and other products of iron and steel, finished and unfinished. It further appears that some of the companies are engaged in coal mining, manufacturing coke, and mining of ore. Defendant Commission avers in its answer that with the exception of three companies named--

'sixty-five per cent. or more of the sales made by each of complainants is in interstate or foreign commerce, and that the greater portion of the principal raw materials of each concern is purchased and transported in interstate commerce to their converting plants.'

The right of the Commission to make the inquiry here involved is based upon the power of Congress to secure information concerning any subject-matter in regard to which it has been given the power to legislate, and upon the further proposition that, when one phase of a subject-matter is within the jurisdiction of Congress, it possesses the power to secure information as to the whole of the subject-matter as a guide to further legislation. It is also urged that power to obtain information is not limited to interstate commerce, but includes intrastate commerce as well, when the two phases are a part of one subject; that the orders and report forms issued to complainants and others are for the purpose of inquiring into the whole of the steel industry of the United States, which industry, it is averred, includes both interstate and intrastate commerce. The Commission then seeks to justify its proposed inquiry into complainants' business, both interstate and intrastate, upon the hypothesis that the publication and dissemination of the information obtained will benefit the public and furnish a guide for future legislation.

Complainants having failed and refused to make the reports, the Commission by written notice threatened the imposition of penalties for delay or failure to make due report as required. It is to restrain the Commission from carrying the threats into effect that the present injunction is sought.

The Commission answered the bill, and complainants moved to strike out certain parts of the amended answer, and to strike the entire amended answer from the files. The court ordered:

'First. That the motion to strike out certain parts of the amended answer be overruled without prejudice to the right of the plaintiffs on any further hearings in said suit to raise objections to matters not properly pleaded.

'Second. That the second motion to strike the entire amended answer from the files be and the same is hereby denied, except as to the ground that the said amended answer set forth no defense to the bill of complaint.'

Defendants refusing to further plead or amend their answer, and expressing their willingness to stand upon their answer as a sufficient and complete defense, the court, treating the motion to strike as in the nature of a demurrer, entered a judgment making the temporary injunction final, from which decree this appeal was taken.

The extensive arguments set out in the answer, relative to the powers delegated by Congress to the Commission, the power of Congress under the commerce clause of the Constitution, the authority of the Commission to investigate the business affairs of a shipper in interstate commerce, the delegated power to inquire into the production of any commodity in nation-wide use, and the constitutional power of the Commission to compel disclosure of the business methods employed by manufacturers and producers, are mere legal conclusions, not admitted by the motion to strike.

The statutory authority under which the Commission in this instance presumes to act is found in section 6 of the Federal Trade Commission Act (38 Stat. 717 (Comp. St. Sec. 8836f)), which provides:

'That the Commission shall also have power--

'(a) To gather and compile information concerning, and to investigate from time to time the organization, business conduct, practices and management of any corporation engaged in commerce, excepting banks and common carriers subject to the act to regulate commerce, and its relation to other corporations and to individuals, associations, and partnerships.

'(b) To require, by general or special orders, corporations engaged in commerce, excepting banks, and common carriers subject to the act to regulate commerce, or any class of them, or any of them, respectively, to file with the Commission in such form as the Commission may prescribe annual or special, or both annual and special, reports or answers in writing to specific questions, furnishing to the Commission such information as it may require as to the organization, business, conduct, practices, management, and relation to other corporations, partnerships, and individuals of the respective corporations filing such reports or answers in writing. Such reports and answers shall be made under oath, or otherwise, as the Commission may prescribe, and shall be filed with the Commission within such reasonable period as the Commission may prescribe, unless additional time be granted in any case by the Commission.'

The act further authorizes the Commission--

'to make public from time to time such portions of the information obtained by it hereunder, except trade secrets and names of customers, as it shall deem expedient in the public interest; and to make annual and special reports to the Congress and to submit therewith recommendations for additional legislation; and to provide for the publication of its reports and decisions in such form and manner as may be best adapted for public information and use.'...