National Lead Company v. Federal Trade Commission

• Decision Date: 01 December 1955
• Docket Number: No. 10839-10842.,10839-10842.
• Citation: 227 F.2d 825
• Parties: NATIONAL LEAD COMPANY, Petitioner, v. FEDERAL TRADE COMMISSION, Respondent. The SHERWIN-WILLIAMS COMPANY, Petitioner, v. FEDERAL TRADE COMMISSION, Respondent. The EAGLE-PICHER COMPANY et al., Petitioners, v. FEDERAL TRADE COMMISSION, Respondent. ANACONDA COPPER MINING COMPANY et al., Petitioners, v. FEDERAL TRADE COMMISSION, Respondent.
• Court: U.S. Court of Appeals — Seventh Circuit

227 F.2d 825 (1955)

NATIONAL LEAD COMPANY, Petitioner, v. FEDERAL TRADE COMMISSION, Respondent.

The SHERWIN-WILLIAMS COMPANY, Petitioner, v. FEDERAL TRADE COMMISSION, Respondent.

The EAGLE-PICHER COMPANY et al., Petitioners, v. FEDERAL TRADE COMMISSION, Respondent.

ANACONDA COPPER MINING COMPANY et al., Petitioners, v. FEDERAL TRADE COMMISSION, Respondent.

Nos. 10839-10842.

United States Court of Appeals Seventh Circuit.

December 1, 1955.

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Eugene Z. Du Bose, New York City, James D. Ewing, J. Kenneth Campbell, New York City, Mayer, Friedlich, Spiess, Tierney, Brown & Platt, Chicago, Ill., Alexander & Green, New York City, of counsel, for petitioner National Lead Co.

Thomas J. McDowell, Cleveland, Ohio, Miles G. Seeley, Chicago, Ill., J. T. Van Keuls, Cleveland, Ohio, Roger W. Barrett, Chicago, Ill., Mayer, Friedlich, Spiess, Tierney, Brown & Platt, Chicago, Ill., of counsel, for Sherwin-Williams Co.

Edmund P. Wood, Cincinnati, Ohio, Nathan S. Blumberg, Chicago, Ill., Richard Serviss, Cincinnati, Ohio, Jacob Logan Fox, Wallace R. Sollo, James A. Blumberg, Chicago, Ill., Wood, Herron & Evans, Cincinnati, Ohio, Brown, Fox, Blumberg & Markheim, Chicago, Ill., of counsel, for Eagle-Picher Co. and Eagle-Picher Sales Co.

Harlan L. Hackbert, Chicago, Ill., Horace G. Hitchcock, New York City, Stevenson, Conaghan, Velde & Hackbert, Chicago, Ill., Chadbourne, Parke, Whiteside, Wolff & Brophy, New York City, Melvin D. Goodman, Alan S. Kuller, New York City, of counsel, for petitioners Anaconda Copper Min. Co. and International Smelting & Refining Co.

Robert B. Dawkins, Asst. Gen. Counsel, Federal Trade Commission, Earl W. Kintner, James E. Corkey, J. J. Gercke, Washington, D. C., for Federal Trade Commission.

Before LINDLEY, SWAIM and SCHNACKENBERG, Circuit Judges.

LINDLEY, Circuit Judge.

Petitioners seek to set aside a cease and desist order entered by the Federal Trade Commission on an amended complaint charging them and the Glidden Company with violation of Section 5 of the Trade Commission Act, 15 U.S.C.A. § 45(a), and Section 2(a) of the Clayton Act, as amended by the Robinson-Patman Price Discrimination Act, 15 U.S.C.A. § 13. Count I of the complaint, filed April 12, 1946, charged that petitioner, National Lead Company, had violated and was violating "Section 5 * * * by monopolizing, attempting to monopolize and acting to control the sale of lead pigments and the prices thereof in commerce", and that all named parties were violating the Act by combining and conspiring "among themselves and with each other" for the purpose and with the effect of eliminating competition in prices and terms of sale of lead pigments in commerce. Count II charged all parties with discrimination in prices by means of various zone pricing methods and quantity and functional discounts.

Various attacks are made upon the validity of the order, or portions thereof, addressed to the alleged insufficiency of the evidence to support the findings and to the scope of the order. Some of the questions posed apply only to a single petitioner, while others are applicable to all.

I. Propriety of The Order Against Anaconda Copper.

We shall first dispose of the contention of petitioner Anaconda Copper Mining Company that the order cannot stand as to it, based on its assertion that it has never engaged in the industry as a producer, distributor or otherwise. In 1919, Anaconda Lead Products Company, a wholly owned subsidiary of Anaconda Copper, began production of lead pigments. International Smelting & Refining Company, another wholly owned subsidiary, acquired all the assets of Anaconda Lead in 1936 and thereafter, until 1946, engaged in production of certain lead pigments which were sold by it and by Anaconda Sales Company, a third subsidiary of Anaconda Copper. International was a respondent in the proceeding and is one of the petitioners here. Anaconda Lead (dissolved in 1936) and Anaconda Sales are not parties.

At the conclusion of the evidence in support of the complaint, Anaconda moved to dismiss as to it, urging that the evidence failed to show that it had ever engaged in manufacture or sale of the products. The Commission denied the motion, holding that Anaconda had been engaged in the pigments field "through its wholly owned subsidiaries." The Commission found that International and Anaconda Lead "were in fact mere operating divisions of respondent Anaconda, with no substantial separate identity of their own", and that all their acts and those of Anaconda Sales were those of Anaconda. On this basis, the cease and desist order was directed against Anaconda Copper.

We have searched in vain for evidence of a substantial character to support the findings on this phase of the case. Though the record shows that International, Anaconda Lead and Anaconda Sales are wholly owned subsidiaries of petitioner and in September 1947, at a date after International had withdrawn from the field, Anaconda, Anaconda Sales and International were controlled by interlocking boards of directors and officers, there is no evidence which militates against the existence and activity of these subsidiaries as separate entities at any time pertinent to this inquiry. Thus, though the evidence tends to prove the incidents of a parent-subsidiary relationship, a fact which has never been in dispute, the closely correlated operation of International and Anaconda Sales reflects no sinister connotation of domination by their common parent, keeping in mind that the only function for which Anaconda Sales was organized was to sell products produced by International in certain western states in which the latter was not licensed to do business.

These sparse gleanings from the record fail to support the Commission's finding of substantial identity. To come within the applicable rule, there must be evidence of such complete control of the subsidiary by the parent as to render the former a mere tool of the latter, and to compel the conclusion that the corporate identity of the subsidiary is a mere fiction. Press Co. v. N. L. R. B., 73 App.D.C. 103, 118 F.2d 937, at pages 946-947, certiorari denied 313 U.S. 595, 61 S.Ct. 1118, 85 L.Ed. 1548; Owl Fumigating Corp. v. California Cyanide Co., Inc., 3 Cir., 30 F.2d 812. Such a finding has no substantial support in this record. The complaint should have been dismissed as to this petitioner.

II. The Conspiracy Findings.

The principal question raised by the remaining petitioners is whether the Commission's findings that the parties conspired to fix and control the prices and bases for sale of lead pigments is supported by substantial evidence. The parties are National Lead Company, Eagle-Picher Lead Company, together with its affiliate Eagle-Picher Sales Company, The Sherwin-Williams Company and International Smelting & Refining Company. The Glidden Company, though not a petitioner, was also charged as a coconspirator. All are engaged in the production, sale and distribution of lead pigments. National is the leader and produces some 50% or more of the domestic production. Its nearest competitor, Eagle-Picher, accounts for a substantial part of the remaining 50%, while each of the other companies occupies a relatively minor position in the industry.

The three principal products included in the lead pigments category are dry white lead, white lead-in-oil¹ and the lead oxides, red lead and litharge. White lead is used principally as a base in paints and its chief market lies in the demands of manufacturers of mixed paints. White lead-in-oil is a semi-mixed paint consumed principally by the individual painter or painting contractor who prefers to mix his own paints. The oxides are used mostly by the battery industry as the basic constituent in the manufacture of plates.

Throughout the record, a clear distinction is drawn between the several parties' respective actions in sales of each of the three kinds of pigments. Although the evidence as to practices in each of these fields differs, there are, nevertheless, certain threads of similarity in the methods employed by the various petitioners which render it practical to treat the conspiracy question as a unit, pointing out, wherever necessary, the applicability or inapplicability of a particular evidentiary segment to one or more of the several petitioners. Each engages in the production of white leads and oxides, except that International confines its activities to white leads and has never produced oxides.² Unless otherwise noted, all facts narrated and all statements pertinent thereto apply to all petitioners alike, except that factual statements and discussion which relate solely to the oxides apply to all petitioners except International.

The facts as found by the Commission follow. Prior to 1933 no standard pricing system was employed in the industry. Each producer established its own practices as to prices and conditions of sale. For the most part, with respect to delivered sales prices, each employed its own system of pricing, based on shipping differentials from centrally located warehousing points. For example, National's lists from 1920, until 1933, include some 589 different cities in 40 states, which it, from time to time, used as free delivery or equalization points. The practices of other petitioners differed quite widely.

In 1933, however, each petitioner participated in discussions looking to the adoption of a code of fair competition under the provisions of the National Industrial Recovery Act. These discussions occurred in two committees set up by the Lead Industries Association, one to draft a code for white lead-in-oil marketing and the other a code for the dry pigments, including dry white lead. Discussion within each group dealt with a wide range of subjects relating to prices, freight, quantity and quality differentials and terms and conditions of sales. Tentative agreements, at least, were reached as to...