Pillsbury Company v. FTC

• Decision Date: 07 January 1966
• Docket Number: No. 18825.,18825.
• Citation: 354 F.2d 952
• Parties: The PILLSBURY COMPANY, Petitioner, v. FEDERAL TRADE COMMISSION, Respondent.
• Court: U.S. Court of Appeals — Fifth Circuit

354 F.2d 952 (1966)

The PILLSBURY COMPANY, Petitioner, v. FEDERAL TRADE COMMISSION, Respondent.

No. 18825.

United States Court of Appeals Fifth Circuit.

January 7, 1966.

E. Barrett Prettyman, Jr., Joseph J. Smith, Jr., Washington, D. C., William J. Powell, Minneapolis, Minn., Philip F. Sherman, Gen. Counsel, Pillsbury Co., Minneapolis, Minn., on the brief, Hogan & Hartson, Washington, D. C., of counsel, for petitioner.

J. B. Truly, Asst. Gen. Counsel, Gerald Harwood, Frederick H. Mayer, Attys., F. T. C., Washington, D. C., James McI. Henderson, Gen. Counsel, for respondent.

Before TUTTLE, Chief Judge, JONES and ANDERSON,^* Circuit Judges.

TUTTLE, Chief Judge.

This is a petition by the Pillsbury Company to review and set aside an order of the Federal Trade Commission requiring Pillsbury to divest itself of the assets of Ballard & Ballard Company and of Duff's Baking Mix Division of American Home Products Corporation which the Federal Trade Commission found it had acquired in violation of § 7 of the Clayton Act, as amended, and further requiring Pillsbury to restore the acquired companies to the status of "effective competitors." Alternatively, Pillsbury seeks leave to adduce additional evidence pursuant to § 11(c) of the Clayton Act.

After the adoption by Congress of the Celler-Kefauver Antimerger Act of 1950, § 7 of the Clayton Act reads as follows:

"No corporation engaged in commerce shall acquire, directly or indirectly, the whole or any part of the stock or other share capital and no corporation subject to the jurisdiction of the Federal Trade Commission shall acquire the whole or any part of the assets of another corporation engaged also in commerce, where in any line of commerce in any section of the country, the effect of such acquisition may be substantially to lessen competition, or to tend to create a monopoly."

The Supreme Court has construed the words "may be substantially to lessen competition" in Brown Shoe Co. v. United States, 370 U.S. 294, 82 S.Ct. 1502, 8 L.Ed.2d 510, in the following language:

"* * * Congress used the words `may be substantially to lessen competition\' to indicate that its concern was with probabilities, not certainties. (Footnote omitted) Statutes existed for dealing with clear-cut menaces to competition; no statute was sought for dealing with ephemeral possibilities. Mergers with a probable anticompetitive effect were to be proscribed by this Act."

The Commission found the following facts relating to the alleged violations:

On June 12, 1951, Pillsbury purchased the assets of Ballard & Ballard Company for around $5,177,000 and began operating Ballard's business as part of its own organization. On March 7, 1952, Pillsbury acquired Duff's assets, including a 5-year-old baking mix plant at Hamilton, Ohio.

Both Pillsbury and Ballard milled, manufactured, and sold a full line of wheat flour products. Specifically, both companies produced "family flour" (sold for home use), "bakery flour" (sold for use by bakeries), "flour-base mixes" (labor-saving preparations such as cake mixes, pancake mixes, etc.), and "formula feed" (for animal consumption). Duff was only in the flour-base mix business, having been one of the pioneers in this field. Although the complaint alleged competitive injury in each of the specific product fields mentioned, the Commission's decision dealt with only three "lines of commerce:" "family flour," "flour-base mixes," and a general category which the Commission found appropriate to include encompassing all of the products of Pillsbury and Ballard which it called "the wheat flour milling products industry." So much for the products involved.

As to the geographic market, both Pillsbury and Duff did business on a nationwide basis; therefore, it was charged that injury to competition in the flour-base mix industry throughout the United States occurred as a result of Pillsbury's acquisition of Duff. Ballard, although its business was more diversified than Duff's, as indicated, substantially restricted its operations to the southeast. The Commission therefore charged that Pillsbury's acquisition of Ballard resulted in unlawful injury to competition in (1) the family flour industry in the southeast and (2) the wheat flour milling products industry in the southeast. Additionally, it charged that Pillsbury's acquisition of both Ballard and Duff resulted in unlawful injury to competition in the flour-base mix industry in the southeast. For purposes of this case, the "southeast" is defined as "that part of the United States generally lying east of the Mississippi River and south of the Ohio and Potomac Rivers."

Because of the disposition we make of this petition no statement need be made of the specific findings of the Commission. These may be found in the published report, 15 FTC 1274. Suffice it to say that the Commission found that the acquisitions violated the Act, since the probable effect would be "substantially to lessen competition" in the described fields of industry. It further ordered divestiture of the acquired businesses.

This appeal raises several questions. The first is: Assuming the Commission's findings of fact are sustained, did Pillsbury violate § 7 of the Clayton Act, as amended, in (a) acquiring Ballard? (b) in acquiring Duff? The second question is whether some of the evidence which the Commissioner relied on, notably the Mintener Letters and the Commission surveys, was either so lacking in reliability or obtained in such a manner, violating procedural due process requirements, as to make it improper for the Commission to have based its conclusions even partially on such testimony. The third question is whether there were other violations of procedural due process of such a nature as to seriously infect the proceedings in such a manner as to require a reversal of the Commission's order. A fourth question is whether assuming none of the foregoing grounds of error require a reversal, should the Court grant Pillsbury's motion to adduce additional evidence? Finally, is the Commission's order of divestiture legal?

Since a resolution of one of the attacks made under the procedural due process heading, if decided favorably to Pillsbury, would make unnecessary our consideration of any of the other matters, we shall deal with that first. It is the alleged improper interference by committees of Congress with the decisional process of the Federal Trade Commission while the Pillsbury case was pending before it. The alleged interference, we hasten to add, was not alleged improper influence behind closed doors but was rather interference in the nature of questions and statements made by members of two Senate and House subcommittees having responsibility for legislation dealing with antitrust matters, all clearly spread upon the record.

Briefly stated, the criticism of the conduct of the members of the House and Senate arises in this manner: following the filing of the complaint against Pillsbury on June 16, 1952, the Government undertook to make out its case in chief. On April 22, 1953, the hearing examiner granted Pillsbury's motion to dismiss, taking the position that the record lacked figures showing the sales volume of the various Pillsbury products after the challenged acquisitions had taken place and that there were no "authentic or reliable" figures showing the sales and production of competing companies in the industry. On appeal, the Commission reversed by an order dated December 21, 1953. Thereafter, the Pillsbury Company undertook to introduce its evidence, and evidence for both parties continued to be received for the next several years.

During the months of May and June, 1955, hearings were held before the subcommittee on antitrust and monopoly of the Committee of the Judiciary of the United States Senate, and before the antitrust subcommittee of the Committee on Judiciary of the House of Representatives. At these hearings, Mr. Howrey, the then Chairman of the Commission, and several of the members of his staff, appeared including Mr. Kintner, the then General Counsel and later Chairman of the Commission, who wrote the final opinion from which this appeal is prosecuted.

It is to be noted that these hearings were held after the Commission had issued its interlocutory order, but long before the examiner made his Initial Decision on the merits, and, of course, before the Commission made its final Decision in 1960.

In this interlocutory opinion of the Commission, reversing the dismissal of the Pillsbury case by the examiner, the Commission rejected an argument made by the Government (counsel supporting the complaint) to the effect that where a showing that a company in the field having a substantial share of the business of the industry acquires the assets of competitors so that the resulting merged entity would meet the "substantiality" test of Standard Oil Co. of California v. United States, 337 U.S. 293, 69 S.Ct. 1051, 93 L.Ed. 1371, no further proof need be introduced in support of the complaint. This is what will be hereafter spoken of as the "per se" doctrine. The Commission in its order reversing the order of dismissal rejected this contention and expressly held that the per se doctrine did not apply under § 7, as amended.

The posture of the case at the time of Mr. Howrey's appearance before the Senate Committee, therefore, was that the Commission had found sufficient evidence to make a prima facie case of acquisition of competitors by a company having a substantial share of the business in the specified fields of industry, and a prima facie case of other conditions in the industry to make out an affirmative case of a "substantial lessening of competition." The Commission had, thus, given Pillsbury an opportunity to introduce countervailing evidence. Some had already been introduced and the prospects were that this would continue for a considerable period of time.¹

When Chairman Howrey appeared before the Senate...