FTC v. Hunt Foods and Industries, Inc., 732-59.

• Decision Date: 27 October 1959
• Docket Number: No. 732-59.,732-59.
• Citation: 178 F. Supp. 448
• Court: U.S. District Court — Southern District of California
• Parties: FEDERAL TRADE COMMISSION, Petitioner, v. HUNT FOODS AND INDUSTRIES, INC., Respondent.

178 F. Supp. 448

FEDERAL TRADE COMMISSION, Petitioner, v. HUNT FOODS AND INDUSTRIES, INC., Respondent.

No. 732-59.

United States District Court S. D. California, Central Division.

October 27, 1959.

COPYRIGHT MATERIAL OMITTED

Alan B. Hobbes, and Carleton A. Harkrader, Washington, D. C., Gary B. Lovell, Los Angeles, Cal., for petitioner.

Cushing, Cullinan, Duniway & Gorrill, by Ben C. Duniway, Vincent Cullinan, and Eustace Cullinan, San Francisco, Cal., Herbert S. Herlands, Fullerton, Cal., for respondent.

YANKWICH, District Judge.

The Federal Trade Commission,¹ petitioner herein, to be referred to as "The Commission", has been investigating certain practices in interstate commerce of the respondent, Hunt Foods and Industries, Inc., to be referred to as "Hunt", a California corporation with offices at Fullerton, Orange County, California, within this district, and engaged in interstate commerce. The object of the investigation is to determine whether Hunt or its predecessors,

"in connection with the offering for sale, sale and distribution of processed tomato products, by selling such products at unreasonably low prices with the purpose or intent of eliminating competition, have violated Section 5 of the Federal Trade Commission Act 15 U.S.C.A. § 45, or by selling such products to different customers at discriminatory prices and by affording customers payments or compensations for facilities or services rendered in connection with the sale of such products not afforded competing purchasers on proportionally equal terms, have violated Section 2(a) and 2(d) of the Clayton Act 15 U.S.C.A. § 13(a, d)."

In the course of its investigation and pursuant to the congressional authority of the Commission² it issued its subpoena duces tecum, directed to Hunt and signed by Sigurd Anderson, one of the Commissioners, on April 28, 1959, informing Hunt of the matter and scope of the investigation and directing Hunt to appear on June 16, 1959, at 10 o'clock A.M., at 1747 West Commonwealth Avenue, Fullerton, California, before George W. Elliott or Ralph C. Wilmot, Jr., Attorney-Examiners of the Federal Trade Commission, and produce certain documentary evidence in connection with the investigation described in the subpoena.

The subpoena specifically set forth the scope of the investigation as given above. The documents to be produced were described in certain specifications numbered one to four attached to the subpoena, which are reproduced in the margin.³

The subpoena was served by registered mail and was received by Hunt on May 5, 1959. On June 16, 1959, George W. Elliott, Attorney-Examiner of the Commission, convened a hearing for the purpose of receiving the testimony and documentary evidence called for by the subpoena. A reporter's transcript of the brief proceedings shows that, after the Examiner opened the proceedings, Mr. Joseph R. Harmon, the secretary of Hunt, was introduced, as was also Herbert S. Herlands, attorney for Hunt.

Mr. Harmon, in answer to a question by the Examiner, stated that he was authorized by Hunt to respond to the requests contained in the subpoena. The following colloquy then occurred:

"Mr. Elliott: Mr. Harmon, what books, papers or documents or other material are you producing at this time and place in response to such request?

"Mr. Harmon: On behalf of Hunt Foods, an Industry, Inc., you are hereby advised that that company upon advice of counsel, declines to comply with the subpoena issued by the Federal Trade Commission under date of April 28, 1959, and addressed to Hunt Foods, an Industry, Inc.

"Mr. Elliott: Mr. Harmon, Have you anything further to say or produce in response to the subpoena?

"Mr. Harmon: Nothing further." (Emphasis added)

The Examiner then adjourned the proceedings. Later the Commission instituted this action to enforce the subpoena⁴ by the filing, in this Court, of a petition, the substance of which has been summarized above.

Although at the time of the hearing Hunt did not raise any specific objections, in their answer they challenge the power of the Commission to issue the subpoena, attack the constitutionality of Section 3 of the Robinson-Patman Act,⁵ which they claim the Commission is seeking to enforce, and allege invalidity of the subpoena and of the action of the Commission on other grounds to be referred to hereafter.

A lengthy affidavit also sets forth why compliance with the subpoena would impose an unnecessary burden upon Hunt.

I The Scope of the Subpoena

We dispose of the question of burdensomeness of the subpoena by adverting to the fact that, at the hearing of the matter, the Commission indicated that the scope of the subpoena is not so broad as Hunt thought. It was then suggested by the Court that the Commission file a statement with the Court indicating the limited scope of the inquiry they proposed to conduct so as to allay, as it were, Hunt's fears. Such a statement was filed and counsel for the Commission state in the final memorandum filed in the case that the Commission

"is willing to accept (it) as a binding limitation on it."

In substance, they agree to return to the place where the records are kept during ordinary business hours, limit the number of Commission representatives to three and agree that the Commission representatives will perform the physical work of removing the documents from the files and making copies thereof or notes about them. They will "sample" the documents specified rather than examine all. Hunt will be permitted to observe the Commission representatives at every stage, requiring their only assistance in locating the files containing the specific documents. Photostatic reproductions will be made at the Commission's expense. The stipulation also limits to 760 man hours the time which the Commission representatives will remain at the respondent's place of business.

In brief, the Commission, by this method, gives assurance to the Court that it will observe the protective restraints which, at times, are imposed by courts in the conduct of depositions,⁶ interrogatories,⁷ and inspection of documents.⁸ This being so we need not consider the abstract question raised by Hunt whether the Commission's statement is, or is not, a modification of the subpoena. For, concededly, it is an assurance given to the Court by counsel for the Commission, who instituted the action on its behalf, that the restraint and limitation expressed in the statement will be observed in the investigation.

As the Court retains jurisdiction of this matter and will be available to determine any dispute as to any order of compliance to be issued, Hunt will be protected against any oppressive or illegal use of the subpoena power, should any be attempted.

II The Validity of the Subpoena

In truth, it is quite evident that Hunt believes that the entire investigatory proceeding of the Commission lacks validity and would have us so limit this power of inquiry as to do violence to the letter and spirit of the Federal Trade Commission Act under which this action is instituted and the decisions which have interpreted it. At this late date there can be no serious question as to the power of the Federal Trade Commission (and other regulatory commissions) to precede their complaints by an investigation to determine whether the facts exist warranting the issuance of a complaint. Indeed, the public is protected when a complaint is preceded by an investigation aimed to determine whether there is "reason to believe" that acts have been committed in violation of law, and, if so, whether they are of a character which is within the jurisdiction of a particular commission. And the courts have uniformly sustained the reasonable exercise of such investigatory powers.⁹

The reason is well stated in one of the cases involving the Federal Trade Commission:

"The only power that is involved here is the power to get information from those who best can give it and who are most interested in not doing so."¹⁰

Such an investigation does not involve any question or unreasonable search and seizure, as is argued in the present case. When a similar contention was made in a National Labor Relations case, the answer given by the Supreme Court through Mr. Justice Rutledge was emphatic:

"What petitioners seek is not to prevent an unlawful search and seizure. It is rather a total immunity to the Act's provisions, applicable to all others similarly situated, requiring them to submit their pertinent records for the Administrator's inspection under every judicial safeguard, after and only after an order of court made pursuant to and in exact compliance with authority granted by Congress."¹¹ (Emphasis added.)

In the case before us the statute grants to the Commission the power to prevent unfair methods of competition and to prohibit them by order to desist.¹² In pursuit of these objectives, full investigatory powers are given as to individuals and corporations engaged in commerce.¹³

III Constitutionality of the Robinson-Patman Act

There is no merit to the contention that under the guise of investigating alleged violation of the antitrust laws an attempt is being made by the Commission to enforce Section 3 of the Robinson-Patman Act.¹⁴ I am aware of the limitations which the Supreme Court last year placed upon this Act.¹⁵ But its decision merely limited the scope of the Act by denying the right to institute, under it, a private treble damage action. It did not intend to limit the scope of the Act as to its public enforcement or that of Section 3 as a regulatory penal statute. Indeed, the Court, while not passing on the constitutionality of the provision of the Act relating to violations of the "unreasonably low price" provision of Section 3, expressed no doubts about the validity of the regulatory and penal phases of that provision.¹⁶ That case and a subsequent decision of the Supreme Court condemned price discrimination against one person as violative of the antitrust law.¹⁷ Other...