Federal Trade Commission v. Cement Institute

Decision Date26 April 1948
Docket NumberNos. 23-34,s. 23-34
Citation92 L.Ed. 1010,333 U.S. 683,68 S.Ct. 793
PartiesFEDERAL TRADE COMMISSION v. CEMENT INSTITUTE et al. and eleven other cases
CourtU.S. Supreme Court

[Syllabus from pages 683-685 intentionally omitted] Charles H. Weston and Walter B. Wooden, both of Washington, D.C., for petitioner.

William J. Donovan, of New York City, for respondents Cement Institute and others.

Edward A. Zimmerman, of Chicago, Ill., for respondent Marquette Cement Mfg. Co.

Charles Wright, Jr., of Detroit, Mich., for respondent Huron Portland Cement Co.

Herbert S. Little, of Seattle, Wash., for respondents Superior Portland Cement, Inc.

S. Harold Shefelman, of Seattle, Wash., for respondent Northwestern Portland Cement Co.

Herbert W. Clark of San Francisco, Cal., for respondents Calaveras Cement Co. and another.

Pierce Works, of Los Angeles, Cal., for respondent Riverside Cement Co. Nathan L. Miller, of New York City, for respondent Universal Atlas cement co.

Alex W. Davis, of Los Angeles, Cal., for respondent California Portland Cement Co.

No appearance for Monolith Portland Cement Co. and others.

Mr. Justice BLACK delivered the opinion of the Court.

We granted certiorari to review the decree of the Circuit Court of Appeals which, with one judge dissenting, vacated and set aside a cease and desist order issued by the Federal Trade Commission against the respondents. 7 Cir., 157 F.2d 533. Those respondents are: The Cement Institute, an unincorporated trade association composed of 74 corporations1 which manufacture, sell and distribute cement; the 74 corporate members of the Institute;2 and 21 individuals who are associated with the Institute. It took three years for a trial examiner to hear the evidence which consists of about 49,000 pages of oral testimony and 50,000 pages of exhibits. Even the findings and conclusions of the Commission cover 176 pages. The briefs with accompanying p pendixes submitted by the parties contain more than 4,000 pages. The legal questions raised by the Commission and by the different re- spondents are many and varied. Some contentions are urged by all respondents and can be jointly considered. Others require separate treatment. In order to keep our opinion within reasonable limits, we must restrict our record references to the minimum consistent with an adequate consideration of the legal questions we discuss.

The proceedings were begun by a Commission complaint of two counts. The first charged that certain alleged conduct set out at length constituted an unfair method of competition in violation of § 5 of the Federal Trade Commission Act. 38 Stat. 719, 15 U.S.C. § 45, 15 U.S.C.A. § 45. The core of the charge was that the respondents had restrained and hindered competition in the sale and distribution of cement by means of a combination among themselves made effective through mutual understanding or agreement to employ a multiple basing point system of pricing. It was alleged that this system resulted in the quotation of identical terms of sale and identical prices for cement by the respondents at any given point in the United States. This system had worked so successfully, it was further charged, that for many years prior to the filing of the complaint, all cement buyers throughout the nation, with rare exceptions, had been unable to purchase cement for delivery in any given locality from any one of the respondents at a lower price or on more favorable terms than from any of the other respondents.

The second count of the complaint, resting chiefly on the same allegations of fact set out in Count I, charged that the multiple basing point system of sales resulted in systematic price discriminations between the customers of each respondent. These discriminations were made, it was alleged, with the purpose of destroying competition in price between the various respondents in violation of § 2 of the Clayton Act, 38 Stat. 730, as amended by the Robinson-Patman Act, 49 Stat. 1526. That section, with certain conditions which need not here be set out, makes it 'unlawful for any person engaged in commerce, * * * either directly or indirectly, to discriminate in price between different purchasers of commodities of like grade and quality. * * *' 15 U.S.C. § 13, 15 U.S.C.A. § 13.

Resting upon its findings, the Commission ordered that respondents cease and desist from 'carrying out any planned common course of action, understanding, agreement, combination, or conspiracy' to do a number of things, 37 F.T.C. 97, 258—262, all of which things, the Commission argues, had to be restrained in order effectively to restore individual freedom of action among the separate units in the cement industry. Certain contentions with reference to the order will later require a more detailed discussion of its terms. For the present it is sufficient to say that, if the order stands, its terms are broad enough to bar respondents from acting in concert to sell cement on a basing point delivered price plan which so eliminates competition that respondents' prices are always identical at any given point in the United States.

We shall not now detail the numerous contentions urged against the order's validity. A statement of these contentions can best await the separate consideration we give them.

Jurisdiction.—At the very beginning we are met with a challenge to the Commission's jurisdiction to entertain the complaint and to act on it. This contention is pressed by respondent Marquette Cement Manufacturing Co. and is relied upon by other respondents. Count I of the complaint is drawn under the provision in § 5 of the Federal Trade Commission Act which declares that 'Unfair methods of competii on * * * are hereby declared unlawful.' Marquette contends that the facts alleged in Count I do not constitute an 'unfair method of competition' within the meaning of *s 5. Its argument runs this way: Count I in reality charges a combination to restrain trade. Such a combination constitutes an offense under § 1 of the Sherman Act which outlaws 'Every * * * combination * * * in restraint of trade.' 26 Stat. 209, 15 U.S.C. § 1, 15 U.S.C.A. § 1. Section 4 of the Sherman Act provides that the attorney general shall institute suits under the Act on behalf of the United States, and that the federal district courts shall have exclusive jurisdiction of such suits. Hence, continue respondents, the Commission, whose jurisdiction is limited to 'unfair methods of competition,' is without power to institute proceedings or to issue an order with regard to the combination in restraint of trade charged in Count I. Marquette then argues that since the fact allegations of Count I are the chief reliance for the charge in Count II, this latter count also must be interpreted as charging a violation of the Sherman Act. Assuming, without deciding, that the conduct charged in each count constitutes a violation of the Sherman Act, we hold that the Commission does have jurisdiction to conclude that such conduct may also be an unfair method of competition and hence constitute a violation of § 5 of the Federal Trade Commission Act.

As early as 1920 this Court considered it an 'unfair method of competition' to engage in practices 'against public policy because of their dangerous tendency unduly to hinder competition or create monopoly.' Federal Trade Commission v. Gratz, 253 U.S. 421, 427, 40 S.Ct. 572, 575, 64 L.Ed. 993. In 1921, the Court in Federal Trade Commission v. Beech Nut Packing Co., 257 U.S. 441, 42 S.Ct. 150, 66 L.Ed. 307, 19 A.L.R. 882, sustained a cease and desist order against a resale price maintenance plan because such a plan 'necessarily constitutes a scheme which restrains the natural flow of commerce and the freedom of competition in the channels of interstate trade which it has been the purpose of all the Anti-Trust Acts to maintain.' Id., 257 U.S. at page 454, 42 S.Ct. at page 154, 66 L.Ed. 307, 19 A.L.R. 882. The Court, in holding that the scheme before it constituted an unfair method of competition, noted that the conduct in question was practically identical with that previously declared unlawful in Dr. Miles Medical Co. v. John D. Park & Sons Co., 220 U.S. 373, 31 S.Ct. 376, 55 L.Ed. 502, and United States v. Schrader's Son, Inc., 252 U.S. 85, 40 S.Ct. 251, 64 L.Ed. 471, the latter a suit brought under § 1 of the Sherman Act. Again in 1926 this Court sustained a Commission unfair-method-of-competition order against defendants who had engaged in a price-fixing combination, a plain violation of § 1 of the Sherman Act. Federal Trade Commission v. Pacific States Paper Trade Ass'n, 273 U.S. 52, 47 S.Ct. 255, 71 L.Ed. 534. In 1941 we reiterated that certain conduct of a combination found to conflict with the policy of the Sherman Act could be suppressed by the Commission as an unfair method of competition. Fashion Originators' Guild v. Federal Trade Commission, 312 U.S. 457, 465, 61 S.Ct. 703, 707, 85 L.Ed. 949. The Commission's order was sustained in the Fashion Originators' case not only because the prohibited conduct violated the Clayton Act but also because the Commission's findings brought the 'combination in its entirety well within the inhibition of the policies declared by the Sherman Act itself.' In other cases this Court has pointed out many reasons which support interpretation of the language 'unfair methods of competition' in § 5 of the Federal Trade Commission Act as including violations of the Sherman Act.3 Thus it appears that soon after its creation the Commission began to interpret the prohibitions of § 5 as including those restraints of trade which also were outlawed by the Sherman Act,4 and that this Court has consistently approved that interpretatin of the Act.

Despite this long and consistent administrative and judicial construction of § 5, we are urged to hold that these prior interpretations were wrong and that the term 'unfair methods of competition' should not...

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