Fort Howard Paper Co. v. Federal Trade Com'n
| Decision Date | 12 July 1946 |
| Docket Number | 8606,No. 8601,8604,8610.,8601 |
| Citation | 156 F.2d 899 |
| Parties | FORT HOWARD PAPER CO. et al. v. FEDERAL TRADE COMMISSION. |
| Court | U.S. Court of Appeals — Seventh Circuit |
John H. Hershberger, Richard C. Stevenson, William W. Fullagar and Knapp, Cushing, Hershberger & Stevenson, all of Chicago, Ill., for Fort Howard Paper Co.
Wm. H. Leahy, of Framingham, Mass., and Robert J. Keating, of Boston, Mass., for Dennison Mfg. Co.
Joseph J. Brown, of Philadelphia, Pa., for Nat. Crepe Paper Ass'n and others.
Bernard Eskin, Abraham L. Freedman, and Wolf, Block, Schorr & Solis-Cohen, all of Philadelphia, Pa., for Reyburn Mfg. Co.
Wm. T. Kelley, Chief Counsel, Reuben J. Martin, Sp. Atty., and Walter B. Wooden, Asst. Chief Counsel, F. T. C., all of Washington, D. C., for respondent.
Before KERNER and MINTON, Circuit Judges, and BRIGGLE, District Judge.
Petitioners ask us to review and set aside a cease and desist order of the Federal Trade Commission, upon a complaint charging that petitioners have engaged in unfair methods of competition in violation of the Federal Trade Commission Act, 15 U.S.C.A. § 45.
The substance of the charges is that the petitioners were engaged in a "conspiracy, combination, agreement and understanding for the purpose and with the effect of restricting, restraining, suppressing and eliminating price competition" among petitioners who manufacture and sell crepe paper in interstate commerce.
Petitioners answered the complaint, and after the matters involved in the charges had been heard upon the complaint and answers, the testimony of witnesses and supporting documentary evidence, the Commission found the charges to be fully substantiated by the evidence. Summarized, its findings are set forth in the margin.1
In essence the findings were that there was an agreement to fix prices, zones, and trade practices, which existed under the National Industrial Recovery Act and which continued unabated and unprotected between the various manufacturers and resulted in practically identical delivered prices in the respective zones, to prearranged classifications of customers, for the various standard crepe paper products. The Association was the chief instrumentality to effectuate the agreement, it being the repository and dispenser of price lists, zone maps, trade practice information, volume of business statistics, etc.
All of the crepe paper manufacturers in the United States (the eight accused manufacturers) belonged to the Association, which was an outgrowth of the NRA. In November, 1939, Reyburn and Dennison withdrew from membership. Dues in the Association were based on a percentage of the volume of business.
The Commission laid heavy reliance on the minutes of the Association and on correspondence, particularly between accused manufacturers, not here petitioning for review, and the Association.
Upon these findings of fact the Commission directed the petitioners and five other paper companies to cease and desist from continuing a combination to establish uniform prices for crepe paper and related trade practices.
There was a consensus of opinion among the petitioners that crepe paper is a standard product — no one could obtain a greater price for it than another inasmuch as quality does not vary. All use similar tissue paper, which is "creped" or crinkled on similar creping machines so that the resultant product is identical irrespective of the manufacturer. The industry has found that the "creping ratio" — which means the ratio of the length of the paper before, and after, creping — should vary according to the use for which it is to be put — draping crepe requires a denser creping ratio than flooring crepe, and that the NRA served to standardize the resultant product, as to permissible length of crepe paper in a packet, etc.
The important issue is the existence of evidentary support in the record to sustain the findings. Petitioners contend the only basis is the possible inference to be drawn from similarity of prices and trade practices. They contend that inference is completely dispelled when it is recognized that crepe paper is a standard product which must be offered at the lowest price quoted by any competitor, or the sale is lost. The uniformity in price therefore is solely the result of competition — not agreement.
The record discloses meagre oral testimony indicative of an affirmative agreement (after the NRA period) on the part of the companies, or any of them, as to prices charged, zones adopted for similar delivered prices, identical price differentials between the zones, interchange of price lists, or agreement as to color, creping ratio, size of packets, etc.
Rather, the officers of the companies and of the Association testified that identity of such trade practices grew out of the practices of the NRA period, or were ancient custom, or were the inevitable result of meeting competition. They testified that the most important factor in the fixing of a sales price was the competitor's price — a lowering of price had to be met (and they were generally agreeable to a raising of a price if the trade could be induced to stand it).
They assert the zone system which divided the United States into three zones for the sale of "bulk" crepe paper and two zones for the packaged crepe paper was for convenience of the industry and public, so that nation-wide syndicates could purchase the product for the same price irrespective of where the user was located within the zones. The use of zones obliterated the necessity for the use of cumbersome railroad freight books.
Each of the petitioners denied that any agreement inter partes predicated any of the uniform trade practices which the Commission charged and found to exist. For a while, they had filed prices with the Association but ceased to do so shortly after the Schechter decision. A.L.A. Schechter Poultry Corp. v. United States, 295 U.S. 495, 55 S.Ct. 837, 79 L.Ed. 1570, 97 A.L.R. 947. They had also filed with the Association statistics on the volume of their individual sales. The Association compiled this data and informed its members of the total number of sales in the industry so that each member could tell where it stood in the industry.
They testified they found out their competitors' prices through their customers, or their salesmen, and immediately took action to conform thereto in order to retain their business. When they made a price change they notified their customers accordingly, through their salesmen or by direct notification.
Price for the crepe paper product is generally determined by mill price F. O. B. with "freight allowed" which results in an identical delivered price to purchasers in each respective zone.
Fort Howard Paper Company. This petitioner is a Wisconsin corporation with its plant and principal place of business at Green Bay, Wisconsin. It concedes that the published prices of all manufacturers are generally identical, but there is not that uniformity in other terms and conditions of sale, such as the number of days for which a 2% discount is allowed. It denies any participation in the alleged agreement. It points out that but approximately 1% of its business concerns crepe paper, which 1% is principally bulk pack display paper sold to large advertisers. It states that before the NRA it charged mill price Green Bay, Wisconsin, plus freight (with no allowance for freight), but that "this was clumsy, confusing and generally unsatisfactory because it necessitated accumulating a vast bulk of tables of freight rates so that the company could equalize charges, that is, make the total cost to a customer at a given destination as low as that of a competitor in order to be able to compete with him for the business." It says its selling prices are often lower than the published prices. It points out that sending out of price lists after NRA by the Association was sporadic and in response to a request by a member therefor, and that there had been a considerable price fluctuation in bulk crepe paper from time to time. Fort Howard's prices changed March 16 and May 25, 1938, January 6, 1940, January 2, and April 2, 1941. It cites changes of other companies. It uses the zoning system because it is convenient and satisfactory and there has been no reason to change. Its use of the zoning system differs from the Association map in that it includes in Zone 1 all cities on the Missouri River northwest of St. Louis (i.e., Kansas City, Omaha, Sioux City, and parts of eastern South Dakota and North Dakota). When it entered the business it adopted the standard size of package of crepe paper then being sold. It states its...
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