Federal Trade Commission v. Menzies

• Decision Date: 30 August 1956
• Docket Number: 37,No. 36,38.,36
• Parties: FEDERAL TRADE COMMISSION, Petitioner, v. John T. MENZIES, President, Crosse & Blackwell Company, Defendant. FEDERAL TRADE COMMISSION, Petitioner, v. Charles P. McCORMICK, President, McCormick & Company, Inc., Defendant. FEDERAL TRADE COMMISSION, Petitioner, v. Samuel H. HOFFBERGER, President, Pompeian Olive Oil Corporation, Defendant.
• Court: U.S. District Court — District of Maryland

145 F. Supp. 164

FEDERAL TRADE COMMISSION, Petitioner, v. John T. MENZIES, President, Crosse & Blackwell Company, Defendant.

FEDERAL TRADE COMMISSION, Petitioner, v. Charles P. McCORMICK, President, McCormick & Company, Inc., Defendant.

FEDERAL TRADE COMMISSION, Petitioner, v. Samuel H. HOFFBERGER, President, Pompeian Olive Oil Corporation, Defendant.

Nos. 36, 37, 38.

United States District Court D. Maryland.

August 30, 1956.

Andrew C. Goodhope, Atty., Federal Trade Commission, Washington, D. C., and Walter E. Black, Jr., U. S. Atty., Baltimore, Md., for petitioners.

James W. Cassedy, Washington, D. C., A. Adgate Duer and Niles, Barton, Yost & Dankmeyer, Baltimore, Md., for John T. Menzies, President of the Crosse & Blackwell Co., and the Crosse & Blackwell Co.

G. C. A. Anderson, Baltimore, Md., and James W. Cassedy, Washington, D. C., for Charles P. McCormick, President, McCormick & Co., Inc.

James W. Cassedy, Washington, D. C., and Morton J. Hollander, Baltimore, Md., for Samuel H. Hoffberger, President, Pompeian Olive Oil Corp., and Pompeian Olive Oil Corp.

THOMSEN, Chief Judge.

The principal question involved in these three cases is whether the Federal Trade Commission has the power to issue subpoenas duces tecum in proceedings before the Commission based upon alleged violations of subsection (d) of sec. 2 of the Clayton Act, 38 Stat. 730, as amended by the Robinson-Patman Act, 49 Stat. 1526, 15 U.S.C.A. § 13.

The Proceedings.

In November, 1955, the Commission issued three complaints, against Crosse & Blackwell Company, McCormick & Company, Inc., and Pompeian Olive Oil Corporation, respectively, each of which charged the respondent with price discrimination in violation of subsection 2 (d) of the Clayton Act, as amended, and alleged, as an example, that during 1955 the respondent contracted to pay and did pay certain sums of money to the Food Fair Stores, Inc., of Philadelphia, Pennsylvania, as compensation or as an allowance for advertising or other services or facilities furnished by or through such customer in connection with its offering for sale or sale of products sold it by the respondent, and that such compensation or allowances were not offered or otherwise made available by such respondent on proportionately equal terms to all other customers competing with Food Fair Stores, Inc., in the sale and distribution of the respondent's products. Each respondent was notified of a hearing to be held before a hearing examiner of the Commission on the charges set forth in the complaint, at which time the respondent would have the right to appear and show cause why an order should not be entered requiring it to cease and desist from the violations of law charged in the complaint. Each respondent filed an answer denying that it had violated the Clayton Act, as charged.

Before the answers were filed, in each case, a subpoena was served upon the president of the respondent corporation, as such president, directing him to appear and testify before a hearing examiner and to produce certain books, records, accounts, invoices and other documents described in the subpoena. These records dealt with sales to customers in the Philadelphia, Baltimore, and Washington sales areas during an 18-month period. Each respondent corporation moved the examiner to quash the subpoena; the motions were denied by the examiner; each respondent then appealed to the Commission from the examiner's ruling; and these appeals were denied. Thereafter, in March, 1956, hearings were held in Baltimore, Maryland, by an examiner. The several presidents failed to appear, but in each case an officer of the respondent, having custody of the documentary data called for by the subpoena, appeared and declined to produce the records demanded by the respective subpoenas.

On March 29, 1956, the Federal Trade Commission, through its duly authorized attorney, filed in this court three applications for orders requiring the presidents of the respective corporations to appear before a hearing examiner, to produce the documentary evidence described in the subpoenas and to answer all questions relative and material to and necessary and proper to the conduct of the aforesaid proceeding before the Commission, or to show cause why they should not be so ordered.

Each president has filed an answer setting up various reasons why the relief prayed should not be granted. Their counsel have briefed and argued the question whether the Commission has the power to issue subpoenas in proceedings based upon alleged violations of sec. 2 of the Clayton Act, as distinguished from proceedings based upon violations of sec. 5 of the Federal Trade Commission Act, 15 U.S.C.A. § 41 et seq., or investigations conducted under sec. 6 of that Act. The Commission takes the position that it has the power to issue subpoenas under sec. 9 of its organic act, 38 Stat. 722, 15 U.S.C.A. § 49, and that this power is recognized by sec. 11 of the Clayton Act, 38 Stat. 734, as amended, 15 U.S. C.A. § 21.

The answers also raised the question whether the subpoenas were too broad and whether they deprived respondents of their rights under the Fourth Amendment to the Constitution of the United States. The answer of Charles P. McCormick, president of McCormick & Company, Inc., also raised the point that the corporation as such is a necessary party defendant in this court proceeding, and has not been made a party.

The Statutes.

"An Act To create a Federal Trade Commission, to define its powers and duties, and for other purposes", Sept. 26, 1914, c. 311, 38 Stat. 717, and "An Act To supplement existing laws against unlawful restraints and monopolies, and for other purposes", commonly known as the Clayton Act, Oct. 15, 1914, c. 323, 38 Stat. 730, were passed by the 63d Congress as parts of a plan to strengthen the laws against unfair trade practices. They are in pari materia, and should be construed together; Sutherland, Statutory Construction, 3d ed., sec. 5205; United States v. Sweet, 245 U.S. 563, 38 S.Ct. 193, 62 L.Ed. 473; United States v. Fixico, 10 Cir., 115 F.2d 389. Aside from the provisions of the acts themselves, this close relationship appears clearly from the debates in Congress at the time the two acts were under discussion. See note 3, below.

Secs. 1-4 of the Federal Trade Commission Act, 15 U.S.C.A. §§ 41-44, established the Commission. Sec. 5(a) declared unlawful "Unfair methods of competition in commerce, and unfair or deceptive acts or practices in commerce," empowered and directed the Commission to prevent persons, firms or corporations, with certain exceptions, from using such unfair or deceptive methods, acts or practices; sec. 5(b) provided for administrative proceedings by the Commission leading to an order requiring offenders to cease and desist from using such methods, acts or practices; secs. 5(c-e) provided for court review of such orders; sec. 5(f) provided several methods by which complaints, orders and other processes of the Commission under that section may be served; sec. 5(g-k) stated when an order of the Commission to cease and desist shall become final; sec. 5(l) provided a civil penalty for violation of such orders.

Sec. 6 granted power to the Commission, inter alia, to investigate from time to time the organization, business conduct, practices and management of corporations engaged in commerce, sec. 6 (a); and upon the direction of the President or Congress to investigate and report the facts relating to any alleged violations of the anti-trust Acts by any corporation, sec. 6(d), as modified by 48 Stat. 291, 15 U.S.C.A. § 46a. Secs. 7 and 8 are immaterial here.

Sec. 9 provided: "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 the commission shall have power to require by subpoena the attendance and testimony of witnesses and the production of all such documentary evidence relating to any matter under investigation. * * * Any of the district courts of the United States within the jurisdiction of which such inquiry is carried on may, in case of contumacy or refusal to obey a subpoena issued to any corporation or other person, issue an order requiring such corporation or other person to appear before the commission, or to produce documentary evidence if so ordered, or to give evidence touching the matter in question; and any failure to obey such order of the court may be punished by such court as a contempt thereof."¹

Sec. 10 provided for offenses and penalties; and sec. 11 stated: "Nothing contained in this Act² shall be construed to prevent or interfere with the enforcement of the provisions of the anti-trust Acts or the Acts to regulate commerce, nor shall anything contained in the Act be construed to alter, modify, or repeal the said antitrust Acts or the Acts to regulate commerce or any part or parts thereof." Secs. 12 to 18 dealt with court proceedings to prevent the dissemination of false advertising.

The Clayton Act, as originally enacted, Oct. 15, 1914, c. 323, 38 Stat. 730, contained 26 sections. Sec. 2 prohibits price discriminations, such as those alleged in the complaints filed by the Federal Trade Commission against Crosse & Blackwell, McCormick & Company, and Pompeian. As amended, June 19, 1936, c. 592, 49 Stat. 1526, the Robinson-Patman Act, sec. 2 is codified as 15 U.S.C.A. § 13. Secs. 3, 7 and 8 prohibit other specific trade practices and corporate acts. Sec. 11, 15 U.S.C.A. § 21, vests authority to enforce compliance with secs. 2, 3, 7 and 8 in the Interstate Commerce Commission with respect to one class of corporations, in the Federal Communications Commission, the Civil Aeronautics Board, and the Federal Reserve Board with respect to certain other classes, and in the Federal Trade Commission with respect...