Federal Trade Commission v. Standard Brands
| Decision Date | 30 March 1951 |
| Docket Number | No. 73,Docket 21742.,73 |
| Citation | 189 F.2d 510 |
| Parties | FEDERAL TRADE COMMISSION v. STANDARD BRANDS, Inc. |
| Court | U.S. Court of Appeals — Second Circuit |
W. T. Kelley, John W. Carter, Jr., Washington, D. C. (James W. Cassedy, Washington, D. C., of counsel), for petitioner.
W. Crosby Roper, Jr., Charles F. Barber, Washington, D. C. (Newell W. Ellison, Washington, D. C., of counsel), for respondent, Henry Weigl, New York City, Covington, Burling, Rublee, O'Brian & Shorb, Washington, D. C., of counsel.
Before L. HAND, Chief Judge and SWAN and FRANK, Circuit Judges.
Respondent makes no substantial argument against affirmance except as to clause (4). That clause does not contain the minimum qualifying language required by the statute, i. e., "where the effect of such discrimination may be substantially to lessen competition or tend to create a monopoly in any line of commerce in which any of respondent's customers are engaged, or to injure, destroy or prevent competition with any of its customers." The omission seems to have been inadvertent. The Commission's findings, sufficiently supported by the evidence, sustain that clause of the order if read to include that qualification. The Commission's complaint is broad enough to cover that clause so qualified. Standard Brands, in the long interval between the entry of the order and the present proceedings in this court, did not seek to have the order judicially reviewed. In the circumstances, we direct that clause (4) be modified to include the omitted language; and, in that revised form, we affirm that clause, and, accordingly, the entire order.
The Commission, without first obtaining a court affirmance of the order, held a hearing to determine whether respondent had violated the order. At this hearing, respondent had full opportunity, of which it availed itself, to offer evidence and in all respects to be fully heard. On the basis of this hearing, the Commission made findings to the effect that respondent had violated clauses (2), (3) and (4) of the order; and the Commission, on the basis of the hearing record and its findings, asks this court, if it affirms the order, to enforce those clauses.
Standard Brands argues that this procedure for enforcement is fatally defective because an affirmance of the Commission's order must precede any effort to determine whether it has been violated. We think the cases cited by respondent1 do not so hold. True, it has been customary for a court, upon affirming such an order, to appoint a master to make an inquiry as to violation, and, usually, to name the Commission as master. But there is no reason why, now that we have affirmed the order, we may not, in the exercise of our discretion, treat the Commission's findings as if the Commission had been appointed our master, since, in the Commission hearings, respondent was accorded all its procedural privileges. (If, in future cases, a respondent, believing the Commission's order invalid, wishes to avoid what it may consider the needless expense of such a hearing if the order is invalid, such a respondent can promptly test the order's validity by a petition to review the order.) We turn, then, to the question whether Standard Brands has violated the order.
Standard Brands on May 1, 1940, in compliance with the order, filed report showing a scale of prices with stated prices of stated quantities. The Commission promptly accepted this report as compliance. Subsequently, in 1945, Standard Brands adopted a new scale.
We think that the new scale included new brackets of quantities and prices which involved new relations between customers; that Standard Brands therefore had the burden of proving that the new differentials were (responsive to changed conditions or otherwise) based on "due allowances for differences in the cost of manufacture, sale or delivery resulting from the differing methods or quantities" in which Standard Brands bakers' yeast was sold to purchasers; that no such proof was made; and that the evidence sustains the Commission's findings of substantial lessening of competition between Standard Brands and some of its competitors.
However, we think that all this did not prove a violation of the Commission's order. That order was issued after a proceeding in which the Commission's complaint charged that Standard Brands' sales unlawfully affected competition among Standard Brands' customers. The complaint did not charge, nor did the Commission (in connection with its order) find, that Standard Brands' activities had had any unlawful effects upon its own competitors.
Had the evidence in the initial proceedings shown injury to such competitors, perhaps — in line with current doctrines concerning variance in civil and criminal cases — the Commission might properly have amended its complaint to conform to the proof, giving respondent an adjournment (if one was requested and there was surprise) to offer further evidence. This liberal doctrine has of recent years been applied to proceedings of several administrative agencies;2 but the older cases seem not to have applied it to proceedings of the Federal Trade Commission.3 Whether it should be applied to this Commission's proceedings, we need not here consider, although in another context, we have recently held that doctrines applicable to other agencies should apply to this Commission.4 For the Commission did not amend the complaint, nor, in the initial proceedings, did it make any findings concerning injury to Standard Brands' competitors. The order, therefore, must be read in the light of the complaint and the findings accompanying the order. Consequently, the findings made, in connection with the violation hearings, of reduction of competition with Standard Brands' competitors do not show a violation of clause (2) of the order.
Perhaps this conclusion may seem somewhat formalistic. For the Commission may at once begin a new proceeding pursuant to a complaint charging violations of the Act as to Standard Brands' competitors, and, in such a proceeding, the Commission may properly consider the evidence heretofore taken in the violation hearing. Nevertheless, this seeming formalism is desirable in fairness to respondent since, in such a new proceeding, it may be able to offer evidence proving that its actions were not unlawful vis a vis its own competitors.
The Commission found, on the basis of ample evidence, that for some seven months in 1945 Standard Brands violated this clause. This violation ceased, and thereafter no such violation occurred. Nevertheless, the finding justifies enforcement.5
Standard Brands argues that Section 2 of the Clayton Act6 permits sales at prices below its scale where those sales were made "in good faith to meet an equally low price of a competitor." What Standard Brands did may be described in general terms as follows: A competitor of Standard Brands was selling to a customer a given quantity at a stated price which was less than Standard Brands' price for that same quantity. In order to obtain some of this customer's business, Standard Brands would sell that customer a smaller quantity at a price below its competitor's price for that smaller quantity and also below its own scale price for that smaller quantity (but not below its competitor's or its own scale price for the larger quantity sold to that customer by the competitor).7
We think that the argument advanced to justify this practice answers itself. An "equally low price of a competitor" means an equally low price for a given quantity.8
Clause (4) is modified. We affirm the order as thus modified. Enforcement of clause (2) is denied. We grant enforcement of clause (3) and of clause (4) as modified.
Respondent's petition is denied. The Commission's petition is partly granted for the following reason: In Moss, Inc., v. Federal Trade Commission, 2 Cir., 148 F.2d 378, 379, we held that, under 15 U.S.C.A. § 13(b), when the Commission proves discrimination without more, it makes out a prima facie case, and that the respondent then has the burden of rebutting this prima facie case by showing justification. This ruling, together with its approval in Federal Trade Commission v. Morton Salt Co., 334 U.S. 37, 45, 68 S.Ct. 822, 92 L.Ed. 1196, leads us to believe that we erred in our original opinion in the instant case in requiring clause (4) of the order to be modified. Accordingly, we affirm the order without such modification, and grant enforcement thereof except Clause 2.
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