Federal Trade Commission v. P. Lorillard Co.

• Decision Date: 03 October 1922
• Citation: 283 F. 999
• Parties: FEDERAL TRADE COMMISSION v. P. LORILLARD CO. SAME v. AMERICAN TOBACCO CO., Inc.
• Court: U.S. District Court — Southern District of New York

283 F. 999

FEDERAL TRADE COMMISSION v. P. LORILLARD CO.

SAME v. AMERICAN TOBACCO CO., Inc.

United States District Court, S.D. New York.

October 3, 1922

William Hayward, U.S. Atty., of New York City, and W. H. Fuller Chief Counsel for Federal Trade Commission, of Washington D.C. (A. S. Barnes, of New York City, of counsel), for petitioner.

William D. Guthrie and William B. Bell, both of New York City (Bernard Hershkopf, of New York City, of counsel), for respondent P. Lorillard Co.

John Walsh, of Washington, D.C., and Junius Parker, of New York City (Jonathan H. Holmes, of New York City, of counsel), for respondent American Tobacco Co., Inc.

MANTON Circuit Judge.

These cases were argued together and will be considered in one opinion.

The petitioner in each of the above-named proceedings was granted an alternative writ of mandamus commanding the respondent to show cause why a peremptory writ should not issue directing that immediately it forthwith deliver into the possession of the Federal Trade Commission the accounts, books, records documents, memoranda, papers, and correspondence of the respondent for inspection and examination and for the purpose of making copies thereof. The petition upon which the alternative writ was granted sets forth that on the 16th of September, 1921, a complaint was filed with the Federal Trade Commission against the respondent. The complaint alleged that the respondent in the conduct of its interstate commerce was indulging in practices which were in violation of the provisions of the Act of Congress of September 26, 1914 (38 Stat. 717 (Comp. St. Secs. 8836a-8836k)), in that the respondent was using certain methods of business practices resulting in unfair competition, in that it was regulating and fixing or attempting to regulate and fix the prices at which the commodities sold by it should be resold by those to whom it had sold them, and was co-operating, aiding, and abetting others to successfully formulate and carry out a scheme or combination pursuant to which the resale prices of respondent's commodities should be fixed and maintained by those to whom respondent had previously sold its products or commodities. Further, that the Senate of the Congress of the United States by a resolution directed the Federal Trade Commission to investigate the tobacco situation in the United States as to the domestic and export trade, with particular reference as to the market price to producers of tobacco and the market price for manufacturing tobacco and the price of leaf tobacco exported, and to report to the Senate as soon as possible the result of such investigation. Petitioner then sets forth that at various times between September 29, 1921, and November 5, 1921, authorized agents of the petitioner, in its behalf, demanded of the respondent to produce and furnish to them at respondent's offices certain specified documentary evidence or written data, correspondence, and other paper writings which were then and there in the possession, custody, and control of the respondent so that copies thereof or parts thereof might be made. And the respondent, complying with the demands and pursuant to its duty, under the provisions of the Federal Trade Act, did produce for inspection and examination of petitioner's agents certain of the data commanded; but, in violation of provisions of the Federal Trade Act, it refused to produce for inspection and examination 'certain documentary evidence, records, correspondence, and writings herein specified which were then and there in respondent's possession, custody, and control, and it refused to permit copies thereof to be made by petitioner. ' And it sets forth that it is necessary in the prosecution of its duty that such inspection and examination be granted to the petitioner's agents and that it is hindered in the performance of its duty and in the exercise of its power by the refusal of the respondent to grant such examination and inspection. Its prayer for relief is that 'all papers and telegrams received by the American Tobacco Company (or P. Lorillard Company) from all of its jobber customers located at different points throughout the United States and also copies of all letters and telegrams sent by the American Tobacco Company (or P. Lorillard Company) to such jobbers during the period of January 1, 1921, to December 31, 1921, inclusive,' be turned over for examination and inspection. Each respondent resists the application for a peremptory writ contending that the Federal Trade Commission is asserting authority which it does not possess in seeking to make an unlimited and unrestricted inspection with the right to copy all of the correspondence with its jobber customers, and that the Senate resolution directing the Federal Trade Commission to make the investigation referred to grants no authority for unlimited and unrestricted search with the right to copy the correspondence. It further contends that sections 5, 6, and 9 of the Federal Trade Commission Act (Comp. St. Secs. 8836e, 8836f, 8836i) give no such authority of unlimited and unrestricted search and examination, and it is said that any such construction or interpretation of the Federal Trade Commission Act would be in contravention of the Fourth Amendment of the Constitution guaranteeing the right of the people to be secure in their papers and effects against unreasonable searches and seizures, and that no warrant shall issue but upon probable cause supported by oath or affirmation. Thus the question is presented whether Congress can delegate visitorial powers under the commerce clause of the Constitution over private corporations engaged in interstate commerce to the extent of granting unlimited and unrestricted examination and inspection with the right to copy.

By the Act of Congress of September 26, 1914, the Federal Trade Commission was created a body corporate. Its purposes were defined by the statute creating it, and its duties and powers and administration are referred to in sections 5, 6, and 9. It is provided by section 9 of the act (Comp. St. Sec. 8836i) that--

'For the purposes of this act, the Commission, or its duly authorized agent or agents, shall at all reasonable times have access to, for the purpose of examination, and the right to copy any documentary evidence of any corporation being investigated or proceeded against.'

And section 6 of the act (section 8836f) 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.'

The Constitution provides (article 1, Sec. 8, cl. 3) that Congress shall have power to regulate commerce with foreign nations and among the several states.

Each respondent is conceded to be a private corporation engaged in selling tobacco and its products and is engaged in interstate and intrastate commerce. This investigation was commenced 'for the purpose of ascertaining the facts relating to respondent's business. ' The business of each of the respondents is very extensive; its letters, papers, and other documents making it a business of thousands of letters per month. The affidavits submitted by the respondents set forth a mass of correspondence and other documentary evidence which, if the petitioner prevails in its alleged right to 'full and complete access to any and all documentary evidence in the possession and control of the respondent,' would, it is alleged, handicap the respondent in its business and entail considerable expense and difficulties. Much of the correspondence relates to transactions bearing upon intrastate commerce only. As to such of the correspondence as bears upon intrastate commerce the petitioner is not entitled to examination, inspection, or copying any part thereof. The commerce clause of the Constitution granting power to the Congress to legislate as to the commerce permits only of legislation which has to do with interstate commerce. The Federal Trade Act forbids unfair practices in reference to the commerce of an interstate character only. Ward Baking Co. v. Federal Trade Comm. (C.C.A.) 264 F. 330. The commerce clause of the Constitution vested in the Congress 'a full and complete power to regulate commerce among the several states, for the strong arm of the national government may be put forth to brush away all obstacles to interstate commerce. ' In re Debs, 158 U.S. 564, 15 Sup.Ct. 900, 39 L.Ed. 1092. And 'constitutional privileges do not change but their operation extends to new matters as modes of business and the habits of life of the peoples vary with each succeeding generation. The power is the same but it operates to-day upon modes of interstate commerce unknown to the fathers and will operate with equal force upon any new modes of such commerce which the future may develop. ' Gibbons v. Ogden, 9 Wheat. (22 U.S.) 1, 6 L.Ed. 23. The power of Congress to legislate embraces power not only to regulate and control that which is wholly interstate, but also that which even though intrastate affects the free flow of interstate commerce. Minn. Rate Cases, 230 U.S. 352, 33 Sup.Ct. 729, 57 L.Ed. 1511, 48 L.R.A. (N.S.) 1151, Ann. Cas. 1916A, 18. To regulate is the power to enact legislation directly affecting interstate commerce. United States v. Adair (D.C.) 152 F. 737. The Constitution having granted to the Congress plenary power to regulate or control commerce among the states, Congress may delegate such duties to investigate and learn conditions to a permanent...