Signode Steel Strapping Co. v. Federal Trade Commission

• Decision Date: 20 November 1942
• Docket Number: No. 4896.,4896.
• Parties: SIGNODE STEEL STRAPPING CO. v. FEDERAL TRADE COMMISSION.
• Court: U.S. Court of Appeals — Fourth Circuit

132 F.2d 48 (1942)

SIGNODE STEEL STRAPPING CO. v. FEDERAL TRADE COMMISSION.

No. 4896.

Circuit Court of Appeals, Fourth Circuit.

November 20, 1942.

Adrien F. Busick, of Washington, D. C., and Charles M. Price, of Chicago, Ill. (Davies, Richberg, Beebe, Busick & Richardson, of Washington, D. C., and Scott, MacLeish & Falk, of Chicago, Ill., on the brief), for petitioner.

Joseph J. Smith, Jr., Asst. Chief Counsel, Federal Trade Commission, of Washington, D. C. (W. T. Kelley, Chief Counsel, and George W. Williams, J. B. Truly, and James W. Nichol, Sp. Attys., Federal Trade Commission, all of Washington, D. C., on the brief), for respondent.

Before PARKER, SOPER, and NORTHCOTT, Circuit Judges.

PARKER, Circuit Judge.

This is a petition to set aside an order of the Federal Trade Commission directing the Signode Steel Strapping Company to cease and desist from incorporating in any contract for the lease or sale of its machinery, tools or appliances, or enforcing or continuing in operation or effect, any condition, agreement or understanding to the effect that the lessee or purchaser thereof shall not use with same any wire or strapping not acquired from the company. The Commission has filed answer asking the enforcement of the order. Similar orders were made by the Commission against the Acme Steel Company and the Gerrard Company, which together with the Signode Company control from two thirds to three fourths of the type of tool leasing business in which the Signode Company is engaged; but these orders are not before the court in this proceeding.

The Signode Company's principal business is the sale of steel strapping and wire suitable for use in making packages or shipping units. Its sales of these commodities in the years 1936, 1937 and 1938 amounted to $2,197,346.95, $2,623,271.24 and $1,759,085.42, respectively. It is also engaged in renting to its customers machines, tools and appliances for stretching and fastening this strapping and wire in the making of the packages or shipping units. For the smaller tools it requires a deposit of $25 per tool, which is refunded when the tool is returned, less 10% for each quarterly period that the tool is used. For the larger tools and appliances it collects an annual service charge of from $5 to $50. Automatic electric wire tying machines are leased at from $100 to $1,500 per year. Its income from the rentals of these machines, tools and appliances, other than wire tying mediums, for the years 1936, 1937 and 1938 was $63,862.02, $94,672.22 and $86,640.01, respectively; and its income for the same years from rentals and deposits on automatic wire tying machines was $25,235, $87,575 and $55,300, respectively. The lease agreements contain the condition or stipulation that the lessee will not use the machines, tools or appliances leased except with strapping or wire acquired from the company.

It is not disputed that the company is engaged in interstate commerce. It is one of about one hundred companies selling wire and strapping for the purpose of making packages and does from 5% to 7% of the business in this field. It is one of twelve companies engaged in the sale or leasing of tying machines or appliances; and the gross volume of business done by these companies, including the sale of wire and strapping, amounts to approximately nine million dollars annually. Two thirds to three fourths of this business, however, as above indicated, is done by the company here and the Acme Steel Company and the Gerrard Company. The company does from twenty to thirty per cent of the total volume of the business done by these twelve companies. The line of commerce here pertinent, however, as the Commission admits in its brief, is the sale of wire and strapping for the purposes of binding packages, and not the sale or leasing of tools or machines; for the lessening of competition complained of relates not to the sale or leasing of tools or machines, but to the sale of wire and strapping for use therein.

The Commission made the following findings with respect to the lessening of competition which results from the incorporation of the condition or stipulation with respect to the use of wire and strapping acquired from the company, viz.:

"Paragraph three: There are in the United States other corporations, and individuals, firms and partnerships, who have been and are engaged in the sale, in commerce among and between the various states of the United States and in the District of Columbia, of steel strapping and wire suitable for use in and with respondent's machines, appliances and tools. But for the restrictive conditions in respondent's lease contracts, as hereinafter set forth, respondent would have been and would now be in active and substantial competition with such corporations, individuals, firms and partnerships in the sale of steel strapping and wire to the lessees of respondent's machines, appliances and tools.

"Paragraph nine: There is on the market an ample supply of steel strapping and wire suitable for use in or with respondent's machines and appliances, such strapping and wire being for sale both by concerns which sell or lease tying machines and by concerns which do not sell or lease such machines. These concerns are prepared to and have attempted to sell such strapping and wire to lessees of respondent's machines and appliances, but have found themselves precluded from such sale by reason of the restrictive conditions in respondent's lease contracts.

"Paragraph ten: The commission finds that the practice of respondent in requiring that the lessee of its machines and appliances use in or with such machines and appliances no wire or strapping other than that supplied by respondent, results in the exclusion from the market of numerous parties who, in the absence of such restrictions, would be prospective and potential purchasers of tying wire and strapping from respondent's competitors. Competition in the tying wire and strapping market is restricted and contracted in direct proportion to the extent to which respondent is successful in leasing its machines and appliances under agreements containing such restrictive conditions."

These findings are supported by paragraph one of part two of the stipulation of facts, which is as follows: "Paragraph one: There are in the United States, and have been during the time respondent has been in business, a substantial number of other corporations, firms, partnerships and individuals who have been and are engaged in the sale of steel strapping and wire in commerce among and between the several states and territories thereof and the District of Columbia, and who are unable to sell steel wire and strapping to lessees of respondent's tools, appliances and machines in cases where respondent's lease limits the use of the tool, appliance or machine to the strapping or wire of the respondent."

One of the contentions of the company before the Commission as well as here was that, since there were so many ways of preparing packages and since the use of wire and strapping with tools constituted so small a part of the general tying field, the practices of the company could have no substantial effect upon competition therein. The Commission rejected this contention, holding that the use of wire and strapping with tying machines constituted a distinct line of commerce within the meaning of the Clayton Act and that the effect of the restrictive conditions inserted by the company in its leases was "to substantially lessen" competition in that line of commerce. The pertinent paragraphs of the findings are as follows:

"Paragraph thirteen: The Commission is of the opinion from the evidence, and finds, that the tying machine industry constitutes a field distinct from the general tying field, and that it is a line of commerce within the meaning of the Clayton Act.

"Paragraph fourteen: While the restrictive conditions in respondent's contracts do not expressly provide that the lessees of respondent's machines, appliances and tools shall not use the wire and strapping of respondent's competitors, the practical effect of such conditions is to preclude such lessees from using such wire and strapping. The Commission further finds that the effect of such restrictive conditions, under the circumstances set forth herein, has been, is, and may be, to substantially lessen competition in the aforesaid line of commerce. Such effect is materially increased by reason of the fact that it forms a part of the cumulative effect of the practices of the three leading companies in the tying machine industry upon competition in said line of commerce."

The company argues that the findings last quoted relate to the sale or lease of machines, or at least to the sale of wire and strapping by companies that sell or lease machines, and not to the sale of wire and strapping suitable for use therein, and that consequently the Commission has failed to make the essential finding of substantiality in the lessening of competition in the line of commerce involved. The Commission in its brief says that it did not intend to make any such finding as suggested by the company, and agrees that the line of commerce involved is the sale of wire and strapping for making packages or shipping units. We think that this is the reasonable interpretation of the findings. The words "tying...