Moir v. Federal Trade Commission

• Decision Date: 29 March 1926
• Docket Number: No. 1863.,1863.
• Parties: MOIR et al. v. FEDERAL TRADE COMMISSION.
• Court: U.S. Court of Appeals — First Circuit

12 F.2d 22 (1926)

MOIR et al. v. FEDERAL TRADE COMMISSION.

No. 1863.

Circuit Court of Appeals, First Circuit.

March 29, 1926.

Edmund A. Whitman, of Boston, Mass. (Elder, Whitman, Weyburn & Crocker, of Boston, Mass., on the brief), for petitioners.

Alfred M. Craven, of Washington, D. C. (Bayard T. Hainer, of Washington, D. C., on the brief), for respondents.

Before BINGHAM, JOHNSON, and ANDERSON, Circuit Judges.

JOHNSON, Circuit Judge.

This is a petition to review an order of the Federal Trade Commission upon a complaint issued by it, dated April 2, 1924, against the respondents, eight in number, copartners under the firm name and style of Chase & Sanborn, with their principal office and place of business in Boston and a branch office in the city of Chicago, in the state of Illinois, under the provisions of chapter 311, § 5, of the Federal Trade Commission Act, approved September 26, 1914 (U. S. Comp. Stat. § 8836e).

The complaint charged that they were engaged in the sale of coffees and teas to wholesale and retail dealers located in various states of the United States, and caused these commodities to be transported to them at their respective places of business; that in the course and conduct of their said business the respondents are in competition with other individuals, partnerships, and corporations similarly engaged in the sale of coffees and teas in interstate commerce and with the trade generally; that in the conduct of their aforesaid business the respondents have enforced and still enforce a system of merchandising whereby they fix and maintain certain specified uniform prices at which the commodities sold by them to their customers shall be resold; that they enlist and secure the support and co-operation of wholesale and retail dealers and of their officers, and of respondents' officers, agents, and employees, in enforcing their said system; that among the means employed by them to accomplish the purpose of preventing retail dealers handling their products from selling the same at prices less than the resale prices established by respondents, they have adopted the following:

"(a) Respondents fix uniform minimum prices at which retail dealers handling respondents' said products shall resell same to the purchasing public, and issue and send to dealers handling said products price lists in which said uniform minimum prices are set forth.

"(b) Respondents make it generally known to the trade, by letters, circulars, salesmen's interviews, and by other means, that they expect and require retail dealers handling said products to maintain and enforce said minimum resale prices, and that respondents will refuse to further sell and supply said products to dealers failing to maintain and enforce said prices.

"(c) Respondents enter into agreements, understandings, and arrangements with dealers for the maintenance by them of said resale prices as a condition of opening accounts with such dealers, or of continuing their supply of said products.

"(d) Respondents procure from dealers handling said products reports of the failure of other dealers handling same to observe and maintain said resale prices, and reports of sales by dealers to other dealers who fail to maintain said prices.

"(e) Respondents employ their salesmen and other agents and employees to ascertain, investigate, and secure information as to the failure of any dealer to observe and maintain said resale prices, and as to the sale of said product by dealers to other dealers who fail to maintain said prices.

"(f) Respondents seek and secure the co-operation of dealers handling their said products, and of respondents' agents and employees, in preventing dealers who fail to maintain said process from obtaining said products from other dealers, and to that end have traced, and have caused said persons co-operating with them to trace, and identify, through information secured from freight-station agents, draymen, and others engaged in transporting said products, and in other ways, dealers from whom other dealers who fail to maintain said prices secure respondents' said products.

"(g) Respondents use the information received through the means set out in specifications (d), (e), and (f), or by any means, to induce and coerce dealers who fail to observe said prices, or who sell to others who fail to observe said prices to maintain said prices in the future, or to refrain in the future from selling said products to dealers who do not maintain said prices, by exacting promises and assurances from said dealers that they will in future maintain said prices or refrain from so selling, and by threatening said dealers that, if they do not maintain said prices or refrain from so selling respondents will refuse to further supply them with said products.

"(h) Respondents refuse to further supply with said products dealers who offend in either of the particulars set out in the specification, unless and until such offending dealers have given satisfactory assurances or undertakings that they will in future observe and maintain said prices, or will refrain from selling said products to dealers who do not observe and maintain said prices.

"(i) Respondents use other equivalent co-operative means and methods for the enforcement of said system of resale prices."

The complaint further alleges that the direct effect and result of the acts and practices of the respondents have been to suppress competition among retail dealers in the distribution and sale of respondents' products, and to prevent them from selling said products at such prices as they may desire, and thus to deprive ultimate purchasers of said products "of the advantages in prices, and otherwise, which they would obtain from the natural and unobstructed flow of commerce in said commodities under conditions of free competition"; that said acts "constitute unfair methods of competition in comerce, within the intent and meaning of section 5 of an act of Congress entitled `An act to create a Federal Trade Commission, to define its powers and duties and for other purposes,'" approved September 26, 1914.

In their answer the respondents set forth that, in their general business of marketing teas and coffees, they manufacture a special blend of coffee, which they have marketed for many years under the trade-mark "Seal Brand," and have expended large sums of money in advertising this brand and introducing it, not only to the trade, but more especially to consumers of coffee; that, as a result of such advertising, this brand is well and favorably known to coffee drinkers throughout the country; that a large trade and valuable good will have in consequence been built up in this brand; that they claim the right to sell to whom they please, on such terms as they may determine, and to refuse to deal with persons who are unwilling to comply with such terms; that they have the right to obtain information by all legitimate means as to dealers who, having accepted their goods, understanding the terms on which they have been sold to them, refuse to comply therewith; that they have the right to refuse to make further sales to those who do not conform to the terms under which respondents have sold them their products, or for any other reason; that, through their long experience and knowledge of the cost of doing retail business, they have adopted the practice of selling the Seal Brand coffee only to dealers of reputation for fair dealing and who strive to make a legitimate and living profit; that they have found it to be against their interest to sell to dealers who make a practice of cutting prices; that they, from their knowledge, have determined what yields a fair margin of profit below the cost of doing business; that "they have on some occasions and in some parts of the United States notified dealers who have been charged with price cutting that they would not sell them unless a minimum price, sufficient to secure a legitimate and living profit, was charged on resale"; that no attempt has ever been made by them to establish a uniform sales price by retailers in any community; that when "a complaint comes to them from a dealer that a competitor is cutting prices, and selling Seal Brand coffee below a living profit, they request their district representatives to investigate the complaint, in order not to do injustice to any dealer by refusing to make further sales to him."

The answer denies specifically the allegations in which the acts and practices of the respondents are set forth in the complaint, as well as the allegations in regard to the effect and result of their practices.

The Federal Trade Commission has made the following findings of facts which, by the act, are made conclusive, if supported by the evidence. These are in substance:

That the respondents do not circulate any price lists specifying prices for resale, but do "from time to time, with the changes in the coffee market, furnish their customers with prices at which their products, and especially the Seal Brand coffee, should be sold, and insist that these prices shall be maintained, and such prices do generally prevail"; that, in order that their suggested retail prices shall be maintained, they "have entered into written contracts with a large number of their dealers for the maintenance of same, and have secured from their dealers quite generally agreements, promises, and assurances to observe the retail prices, many of which were given as the condition of a further supply of coffee by the respondents to such dealers"; that in April, 1921, the respondents entered into an active campaign to secure uniform retail prices in the state of Michigan, where their agent had made an unsuccessful effort to obtain uniformity of retail prices by means of oral arguments or promises and the co-operation on the part of the dealers by reporting names of dealers cutting prices; that, as a result of this campaign, they secured from all their customers in...