Federal Trade Commission v. Eastman Kodak Co

• Decision Date: 31 May 1927
• Docket Number: No. 215,215
• Citation: 71 L.Ed. 1238,47 S.Ct. 688,274 U.S. 619
• Parties: FEDERAL TRADE COMMISSION v. EASTMAN KODAK CO. et al
• Court: U.S. Supreme Court

274 U.S. 619

47 S.Ct. 688

71 L.Ed. 1238

FEDERAL TRADE COMMISSION

v EASTMAN KODAK CO. et al.

No. 215.

Argued March 10, 11, 1927.

Decided May 31, 1927.

The Attorney General and Adrien F. Busick, of Washington, D. C., for petitioner.

Messrs. John W. Davis, of New York City, and Clarence P. Moser, of Rochester, N. Y., for respondents.

Mr. Justice SANFORD delivered the opinion of the Court.

This writ brings up for review a decree of the Circuit Court of Appeals setting aside in part an order of the Federal Trade Commission, entered after a due hearing in a proceeding instituted by it under section 5 of the Federal Trade Commission Act,¹ by which the Eastman Kodak Company, the Allied Laboratories Association, Inc., and others were required to desist from acts held by the Commission to constitute unfair methods of competition in the manufacture and sale of positive cinematograph films in interstate and foreign commerce.

These positive films are raw materials used by film laboratories in making positive prints of motion pictures that are thrown upon the screen. The Eastman Company originated the commercial manufacture of such films many years ago. In 1920 it manufactured and sold 94 per cent. of those used in the United States; but in 1921, owing to competition by importers of films manufactured in foreign countries, its sales decreased to 81 per cent. Upon an agreed statement of facts, and the inferences which it drew therefrom, the Commission found, in effect, that thereafter the Eastman Company, with the Purpose and intent of maintaining its monopoly and lessening competition in the sale of such films, acquired three laboratories used in making motion picture prints, whose combined capacity exceeded that of all the other laboratories east of Chicago, and announced its intention of entering upon the manufacture of such prints; that this constituted an effective threat of overpowering competitive force which compelled the members of the Allied Laboratories-an association of manufacturers of such prints-to enter into an agreement or understanding with the Eastman Company that the members of the Allied Laboratories would use American-made films only, to the exclusion of foreign-made films, so long as the Company did not compete with them in manufacturing prints, and that the Company-which continued to maintain its laboratories in readiness for operation-would not manufacture prints in competition with them so long as they used American-made films exclusively; that this agreement or understanding had the effect of lessening competition in the sale of the films in interstate and foreign commerce and sustaining the monopoly of the Company therein; and that its ownership of the three laboratories and their maintenance in condition for operation, continued to have the effect of inducing and compelling the manufacturers of prints to use only the films made by the Company.

On these and subsidiary findings, the Commission entered an order requiring the defendants to cease and desist from combining and cooperating in restraining competition in the manufacture and sale of positive films and maintaining the monopoly of the Eastman Company in their sale in interstate and foreign commerce, by the agreement and understanding that the members of the Allied Laboratories would use American-made films exclusively, provided the Company would not operate its laboratories in competition with them, and that the Company would not operate its laboratories for the manufacture of prints in competition with them, provided they used and continued to use American-made films exclusively; and by other incidental means. And the Com- mission further ordered that for the purpose of preventing the maintenance of the monopoly of the Eastman Company in the manufacture and sale of positive films and restoring competitive freedom in their distribution and sale, the Company should with due diligence sell and convey its three laboratories to parties not directly connected, or indirectly interested, with it.

On a petition by the Eastman Company and the Allied Laboratories for a review of this order, the Circuit Court of Appeals-without referring specifically to the purpose for which the Eastman Company acquired and maintained the three laboratories-held, in substance, that the reciprocal agreement or understanding between the Eastman Company and the Allied Laboratories that their members would use only American-made films in the manufacture of prints, and the Company would not operate its laboratories for the manufacture of prints, was an unfair method of competition which the Commission had authority to prevent; but that-one judge dissenting-it was not unlawful for the Eastman Company to equip itself to enter upon the business of manufacturing prints, there being nothing unfair in its going into this business, and the Commission had no authority to order the Company to divest itself of the laboratories which it had lawfully acquired. Eastman Kodak Co. v. Federal Trade Commission, 7 F.(2d) 994. A decree was accordingly entered affirming the order of the Commission in so far as it required the Eastman Company and the Allied Laboratories to desist from their agreement or understanding in reference to the use of American-made films and the operation of the Eastman Company's laboratories, but setting aside the order in so far as it required the Eastman Company to sell its laboratories, and in other incidental respects.

This writ of certiorari was then granted on a petition by the Commission which challenged the correctness of the decree of the Court of Appeals only in respect to the setting aside of so much of the order as required the Eastman Company to dispose of its laboratories. 269 U. S. 546, 46 S. Ct. 102, 70 L. Ed. 404.

For present purposes we do not find it necessary to determine the questions whether the finding of the Commission as to the purpose for which the Eastman Company acquired the three laboratories-based in part at least upon inferences from the agreed statement of facts-was correct, and whether, in any event, it was conclusive upon the Court of Appeals; but, in the absence of any specific reference to this matter by the Court of Appeals, we shall assume the correctness of the Commission's finding, and proceed, on that assumption, to the consideration of the only other question presented in the petition for the writ of certiorari and pressed in this Court, namely, whether the Commission had authority to order the Eastman Company to sell and convey its laboratories to other parties.

The proceeding before the Commission was instituted under section 5 of the Federal Trade Commission Act, and its authority did not go beyond the provisions of that section. By these the Commission is empowered to prevent the using of 'unfair methods of competition' in interstate and foreign commerce, and, if it finds that 'any unfair method of competition' is being used, to issue an other requiring the offender 'to cease and desist from using such method of competition.' The Commission exercises only the administrative functions delegated to it by the Act, not judicial powers. National Harness, etc., Association v. Federal Trade Commission (C. C. A.) 268 F. 705, 707; Chamber of Commerce v. Federal Trade Commission (C. C. A.) 280 F. 45, 48. It has not been delegated the authority of a court of equity. And a Circuit Court of Appeals on a petition to review its order is limited to the question whether or not it has properly exercised the administrative authority given it by the Act, and may not sustain or award relief beyond the authority of the Commission; such review being appellate and revisory merely, and not an exercise of original jurisdiction by the court itself.

The question here presented is in effect ruled by Federal Trade Commission v. Western Meat Co., 272 U. S. 554, 561, 563, 47 S. Ct. 175, 71 L. Ed. 405, in which the decisions in Federal Trade Commission v. Thatcher Mfg. Co. (C. C. A.) 5 F.(2d) 615, and Swift & Co. v. Federal Trade Commission (C. C. A.) 8 F.(2d) 595, that were relied upon by the Commission in its petition for the writ of certiorari, were reversed by this Court. In that case it was held that-although the Commission, having been granted specific authority by section 11 of the Clayton Act² to require a corporation that had acquired the stock of a competitive corporation in violation of law 'to cease and desist from such violations, and divest itself of the stock held,' might require the corporation to divest itself of such stock in a manner preventing its use for the purpose of securing the competitor's property-it could not, after the corporation by the use of such stock had acquired the property of the competitor, require it to divest itself of the property thus acquired so as to restore the prior lawful condition. As to this we said:

'The Act has no application to ownership of a competitor's property and business obtained prior to any action by the Commission, even though this was brought about through stock unlawfully held. The purpose of the Act was to prevent continued holding of stock and the peculiar evils incident thereto. If purchase of property has produced an unlawful status a remedy is provided through the courts.'

And they 'must administer whatever remedy there may be in such situation.' Distinct reference was there made (page 561 (47 S. Ct. 178)) to section 15 of the Clayton Act (Comp. St. § 8835n), where express provision is made for the invocation of judicial remedies as need therefor may arise.

So here, the Commission had no authority to require that the Company divest itself of the ownership of the laboratories which it had acquired prior to any action by the Commission. If the ownership or maintenance of...