Hastings Mfg. Co. v. Federal Trade Commission

• Decision Date: 04 February 1946
• Docket Number: No. 9963.,9963.
• Citation: 153 F.2d 253
• Parties: HASTINGS MFG. CO. v. FEDERAL TRADE COMMISSION.
• Court: U.S. Court of Appeals — Sixth Circuit

153 F.2d 253 (1946)

HASTINGS MFG. CO. v. FEDERAL TRADE COMMISSION.

No. 9963.

Circuit Court of Appeals, Sixth Circuit.

February 4, 1946.

Alfred E. Lindbloom and Joseph A. Vance, Jr., both of Detroit, Mich. (Joseph

A. Vance, Jr., Alfred E. Lindbloom, and Beaumont, Smith & Harris, all of Detroit, Mich., on the brief), for petitioner.

Everett F. Haycraft, of Washington, D. C. (W. T. Kelley and Everett F. Haycraft, both of Washington, D. C., on the brief), for respondent.

Before HICKS and SIMONS, Circuit Judges, and PICARD, District Judge.

SIMONS, Circuit Judge.

The petitioner seeks to review and set aside an order of the Federal Trade Commission which directs it to cease and desist from engaging in unfair methods of competition and practices in commerce in violation of § 5 of the Federal Trade Commission Act, 15 U.S.C.A. § 45. The practices found to be unfair consisted of the purchase from distributors of the competitive products of other manufacturers, making loans to the distributors and guaranteeing to them increased profits as compared with profits previously obtained in the handling of competitive products, when done as an inducement to the distributor to discontinue handling competitive products and to handle the petitioner's products exclusively or preferentially.

Before reaching the meritorious issues involved, it becomes necessary to dispose of petitioner's contention that the complaint, hearing and order were all invalid by reason of the rule of res judicata. It appears that prior to the filing of the complaint that led to the findings upon which the presently challenged order was based, the Commission had filed an identical complaint against the petitioner upon which a hearing was held, testimony taken and briefs filed. On December 27, 1940, this complaint was dismissed by the Commission "without prejudice," and on the same day the complaint in the present case was filed, alleging in count 1 facts substantially similar to those alleged in the earlier complaint, and in count 2 a violation of § 2(a) of the Clayton Act, 15 U.S.C.A. § 13(a). For reasons that do not appear, count 2 was later dismissed by the Commission and has disappeared from the case.

The petitioner contends that the Commission exercises only administrative acts, and that its rules and regulations do not authorize a dismissal without prejudice as that is a judicial act. It is difficult to follow the argument. It is true that the Federal Trade Commission has, as have other administrative agencies, the power to itself initiate an inquiry. When so initiated it is compelled to conduct a hearing at which it functions judicially as a body required to express "a reasoned conclusion." Federal Communications Commission v. Pottsville Broadcasting Co., 309 U.S. 134, 60 S.Ct. 437, 84 L.Ed. 656. So, to import into the procedural functions of the Commission a doctrine developed in the judicial process exercised by courts, while at the same time denying to the administrative tribunal judicial functions as distinguished from those purely administrative, would seem to be a contradiction in terms. Assuming, however, without deciding, that the Commission is subject to the rule of res judicata, the rule may not in good reason be applied to its proceedings freed from the limitations which govern its application by courts.

Whether or not the Commission is precluded from again complaining of trade practices after an unequivocal and unqualified dismissal of an earlier complaint in respect to identical practices, we have no need to determine. There has been argument pro and con with respect to the application to administrative tribunals generally, of the doctrine of res judicata. It may be that in the developing expertness of administrative agencies, and through broadened experience with the impact of questioned practices upon the national economy, what may at one period be considered without substantial effect upon competition, and without injury to traders or public, may at a later period be more clearly perceived to affect either or both. It may also be that in the succession of "Marmola" cases, Raladam Co. v. F.T.C., 6 Cir., 42 F.2d 430; F.T.C. v. Raladam Co., 283 U.S. 643, 51 S.Ct. 587, 75 L.Ed. 1324, 79 A.L.R. 1191; Raladam Co. v. F.T.C., 6 Cir., 123 F.2d 34; and F.T.C. v. Raladam Co., 316 U.S. 149, 62 S.Ct. 966, 86 L.Ed. 1336, there is implicit a concept that a later proceeding is not barred by an earlier judgment even though the factual issues are identical, if a period of time has elapsed, the later proceeding is more completely supported by evidence, and the order is based upon findings of "meticulous particularity."

We need not, however, pursue the inquiry further because the hearing upon the first complaint did not proceed to a decision upon the merits, and the order of dismissal was not unqualified. As was said in C. G. Conn, Ltd., v. N. L. R. B., 7 Cir., 108 F.2d 390, 393, "judicial, as well as quasi-judicial tribunals do not lose jurisdiction of a cause by its dismissal with a proviso authorizing its reinstatement." The cases are legion wherein a dismissal without prejudice has been construed as a reservation of a right to reinstate the proceeding. Vandalia R. Co. v. Schnull, 255 U.S. 113, 123, 41 S.Ct. 324, 65 L.Ed. 539; Lincoln Gas & Electric Light Co. v. Lincoln, 250 U.S. 256, 268, 39 S.Ct. 454, 63 L.Ed. 968; Gray v. City of Santa Fe, 10 Cir., 89 F.2d 406, 412; Hineline v. Minneapolis Honeywell Regulator Co., 8 Cir., 78 F.2d 854, 858; Columbia Casualty Co. v. Thomas, 5 Cir., 101 F.2d 151, 153; Krauthoff v. Kansas City Joint-Stock Land Bank, 8 Cir., 31 F.2d 75, 77; Morse v. Bragg, 71 App.D.C. 1, 107 F.2d 648, 649; In re McDermott, 7 Cir., 115 F.2d 582, 584. Additional precedents are given in the last cited case wherein it was said, "ordinarily a judgment or decree without prejudice never works an estoppel nor acts as a former adjudication."

The Commission found that Hastings had been engaged in the manufacture, sale and distribution of piston rings in interstate commerce in substantial competition with other manufacturers. It had begun the making of piston rings for the replacement trade in 1923, and late in 1935 had introduced a new type of ring under the name "steel-vent," for which great advantages were claimed. At the time it had about 600 jobbers throughout the United States through whom its piston rings were distributed to garages engaged in repair and servicing of motor cars. Its relative position in the industry, measured by volume of sales, was sixth or seventh. It had been the practice in the industry, for manufacturers to place with jobbers stock of rings on consignment, but it was not unusual for jobbers to have on hand substantial quantities of rings in excess of consigned stock which, owned by the jobbers, were commonly known as "overage." Most jobbers handled two or three competing lines.

In 1936 Hastings began an aggressive campaign to acquire new and, if possible, exclusive channels of distribution. Its general practice was to persuade jobbers to discontinue the lines of competitive piston rings handled by them and to stock Hastings rings exclusively. The policy in this respect was not rigid, and if unable to induce a jobber to become exclusively a Hastings distributor, it sought to induce the jobber to handle its rings preferentially. The inducements offered to the jobber to replace competing rings by Hastings rings, were used either singularly or in combination, as circumstances required. They consisted of the purchase from jobbers of their "overage" stock, making loans to them and guaranteeing to them increased profits from the sale of Hastings rings.

When complete substitution was effected it was usually with an understanding that Hastings rings would be handled exclusively; when substitution was partial the understanding was that Hastings rings would receive preferential sales effort. When a purchase of competing stock was made, the consigned stock of a competitor was returned to the consignor. In making purchases, Hastings paid the jobber the actual cost to him of the rings regardless of age, condition or value. The competitive rings were then shipped to its factory and, in most cases, destroyed. The quantities of competitive rings purchased from jobbers varied widely, the record showing purchases ranging from $100 to more than $15,000. Substantial portions of the lifted stock were still in good condition and salable.

From time to time Hastings made loans to its jobbers for the purpose of inducing them to become or continue to be exclusive distributors of Hastings rings or to concentrate their efforts on the Hastings line. During the years 1937 to 1940 exclusive, loans were made to 29 jobbers in an aggregate amount of approximately $151,000. Guarantees were given jobbers that if they undertook distribution of Hastings rings, their gross profit during the following year would be a specified percentage, (usually 50 percent) greater than their gross profits from the sale of competing rings during the preceding year, though there was evidence that in no instance was Hastings required to make good its guarantees. During the period 1923 to 1935, before these practices were inaugurated, Hastings had approximately 600 distributors, but thereafter, during the period 1936 to 1940, it secured about 900 new distributors and grew from one of the smallest ring manufacturers with national distribution, to become the second largest national distributor in the trade. In securing this large number of new jobbing accounts after 1935, including some of the larger distributors upon an exclusive or preferential basis, the Commission found that Hastings relied upon the practices described and that they represented its deliberate policy executed on a large scale. It therefore concluded that its practices constituted unfair methods of competition in commerce, and entered its order directing Hastings to cease and desist from...