Salt Producers Ass'n v. Federal Trade Commission, 7909.

Decision Date08 March 1943
Docket NumberNo. 7909.,7909.
Citation134 F.2d 354
PartiesSALT PRODUCERS ASS'N et al. v. FEDERAL TRADE COMMISSION.
CourtU.S. Court of Appeals — Seventh Circuit

James B. Wescott and L. M. McBride, both of Chicago, Ill., Frederic R. Sanborn, of New York City, W. H. Mandeville, of Elmira, N. Y., Frank J. Madden, of Chicago, Ill., J. Porter Henry, of St. Louis, Mo., Lester E. Waterbury, of New York City, Thomas A. Ballantine, of Louisville, Ky., Wm. D. P. Carey, of Hutchinson, Kan., Louis H. Hall, of New York City, and Henry E. McElwain, Jr., of Louisville, Ky., for petitioners.

Jos. J. Smith, Jr., Walter B. Wooden, W. T. Kelley, Chief Counsel, Floyd O. Collins, and James W. Nichol, Attys. for Federal Trade Commission, all of Washington, D. C., for respondent.

Before EVANS, SPARKS, and KERNER, Circuit Judges.

EVANS, Circuit Judge.

This petition, to review a Federal Trade Commission cease and desist order, challenges simply the phraseology of the order and not the issuance of the order.

The petitioners are eighteen salt companies and the Salt Producers Association.

A complaint filed against petitioners and others (some since dissolved), in September, 1940, charged a combination, formed in October, 1935, to monopolize, and to suppress competition in, the sale of salt, to fix uniform prices, to establish zones to aid in fixing of prices, to curtail production of salt, to exchange price lists through the Association in order to establish the prices at which salt is sold, and to exchange information relative to conditions of sales.

The petitioners, after filing individual answers wherein each denied the allegations of the complaint, withdrew them and filed similar and very brief, individual substitute answers.1 Therein "they admit (ted) all of the material allegations of fact set forth in said complaint and waive (d) all intervening procedure and further hearing as to the said facts."

Thereupon the Federal Trade Commission made detailed findings of fact and a conclusion, and entered the cease and desist order, the form and substance of which are here assailed. The provisions of said order are here stated, in excerpt form, and the italicized portions are the parts contested:

"* * * (petitioners) * * * in connection with the offering for sale, sale, and distribution of salt in commerce, * * do forthwith cease and desist from entering into, continuing, or carrying out, or directing, instigating, or cooperating in, any common course of action, mutual agreement, combination, or conspiracy, to fix or maintain the prices of salt or curtail, restrict, or regulate the production or sale thereof, and from doing any of the following acts or things pursuant thereto:

"* * * * * *

"(3) Establishing or maintaining delivered price zones, or making quotations and sales of salt upon a delivered price basis under a zone system whereby the cost of salt delivered to buyers within each respective zone is made identical at all destinations within such zone;

"(4) Exchanging, directly or through the Salt Producers Association, or any other agency or clearing house, price lists, invoices, and other records of sale showing the quantity, current prices and terms and conditions of sale allowed by respondent corporations to dealers and distributors; provided, however, that nothing herein shall prevent the respondent association from collecting and disseminating to the respective respondent manufacturers figures showing the total volume of sales of salt without disclosing the sales volume of individual producers;

"(5) Exchanging, directly or through the medium of the Salt Producers Association, or any other agency, the names of distributors or dealers who receive special discounts;

"(6) Curtailing, restricting, or regulating the quantity of salt to be produced and sold by any respondent corporation by any method or means during any given period of time; * * *."

I. "Common Course of Action." The first complaint is as to the phrase "common course of action," appearing in the preamble, directing that petitioners desist from "any common course of action, mutual agreement, combination, or conspiracy, to fix or maintain the prices of salt or curtail, restrict, or regulate the production or sale thereof, * * *" Petitioners assert a common course of action is thus prohibited whether or not it be connected with a conspiracy. And the facts of the complaint, of the Federal Trade Commission, admitted by the petitioners, only covered conspiracies per se, and so would not support an order such as this, which could prohibit action to foster fair competition, and which might cover accidental and coincidental identical action by all.

They urge that "Where a common course of action occurs as the natural result of competition and is not connected with or related to a `mutual agreement, combination or conspiracy,' the continuance of such common course of action is not prohibited by law."

Since the complaint does not cover the prohibition against a common course of action, and F. T. C. orders may comprehend only matters covered by the complaint,2 such a prohibition would be invalid, so they argue.

They also assert that the prohibition against a "common course of action" is novel in this case. True, it was used once before, but only in conjunction with the phrase "pursuant to conspiracy."

The F. T. C. insists on the inclusion of this phrase "common course of action." Petitioners are uncompromisingly opposed to it. The parties seem to be pretty much agreed as to the acts which are sought to be condemned by the order, but they fail, or refuse, to agree upon the precise language which embodies the thought upon which they are agreed.

More accurately, respondent says its language conveys the precise thought involved. In essence, petitioners contend "common course of action" connotes, and includes, common action by the parties, occurring through pure happenstance. Respondent says it does not mean similar action, undertaken independently without previous agreement therefor. The words used in apposition to the phrase "common course of action" ("agreement, combination or conspiracy") all contain the element of mutually planned action, which fact would tend to support respondent's construction of the language it uses.

But, since petitioners contend they may legally only be barred from "planned" mutual action,3 and the F. T. C. says that is all its order is intended to accomplish,4 it would seem advisable and fair to modify and amend that phrase of the order by adding the word "planned" before the phrase "common course of action" so that only illegal contractual arrangements will be subject to contempt proceedings. The word "planned" as here used is intended to cover any "cooperative" or "concerted" action by petitioners to fix prices and curtail production.

II. "Establishing delivered price zones." Par. "(3)" of the order prohibits the establishment of uniform prices for specified zone areas. Petitioners asked that this paragraph be eliminated from the order, or at least modified to permit quotation of prices on "delivered price basis."

It is argued the zone system of prices has many advantages to industry — it equalizes prices to various customers and thus prevents discrimination; it facilitates quotation of "delivered" prices.

Respondent construes its paragraph "(3)" in this way:

"It does not unqualifiedly prohibit quotations on a delivered price basis and for delivered price zones. * * * In other words it is only when the result is to make identical the delivered prices of the respective producers that such quotations are forbidden. There is nothing in the order to prohibit any producer from quoting a delivered price, provided he does not make it identical with his competitors' prices under a zone system which was admittedly set up for that purpose."

It points out that the complaint and findings reveal an agreed system of zones and cooperation in maintenance of prices within the zones. It says:

"It was specifically alleged and admitted that these delivered price zones were established by agreement and in order `to aid in the establishment and fixing of prices of salt.' It was specifically alleged and admitted that the producers had `agreed to co-operate, and have cooperated, in the maintainance of the various prices determined for particular zones.' If, under these circumstances, the Commission has not the power to prevent the continued use of such zones and the quotation of delivered prices uniform within such zones, then it can not outlaw the very device which created the `uniform prices' of the admitted combination and which device was admittedly created by agreement for that purpose."

Respondent would not only prohibit agreements of petitioners as to identical zones and prices, but challenges the legality of the establishment of any zone-price schedule, individually by the petitioners as wrongfully abolishing "natural factors" (distance of purchaser from point of production) in determination of prices.

Petitioners concede they may be barred from establishing agreed zones delivered price rates, but ask for the right to have zone prices.

The complaint, paragraph 24, charges combinations and agreements to fix uniform prices in the United States and in aid thereof have agreed to, and have, established zones and have cooperated in the maintenance of various prices determined for the particular zones. The Commission's findings found as a fact that the agreed zone system was for the purpose of establishing fixed delivered prices in zones.

We are convinced that petitioners should not be denied all right to the use of the "zone" delivered price basis. The Commission is, however, within its authority when it condemns and prohibits the establishment, through a combination or contract, express or implied, of a similar, nationwide zone system for the respective petitioners. The complaint discloses the Commission's aim to eradicate and prohibit all concert of...

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