Southern Hardware Jobbers' Ass'n v. Federal Trade Commission

• Decision Date: 13 June 1923
• Docket Number: 3887.
• Citation: 290 F. 773
• Court: U.S. Court of Appeals — Fifth Circuit
• Parties: SOUTHERN HARDWARE JOBBERS' ASS'N et al. v. FEDERAL TRADE COMMISSION.

290 F. 773

SOUTHERN HARDWARE JOBBERS' ASS'N et al. v. FEDERAL TRADE COMMISSION.

No. 3887.

United States Court of Appeals, Fifth Circuit.

June 13, 1923

Peter O. Knight, of Tampa, Fla. (C. Fred Thompson and A. G. Turner both of Tampa, Fla., on the brief), for petitioners.

W. H Fuller, Chief Counsel, of McAlester, Okl., and Adrien F Busick and Charles Melvin Neff, both of Washington, D.C., for respondent.

Before WALKER, BRYAN, and KING, Circuit Judges.

WALKER Circuit Judge.

The Southern Hardware Jobbers' Association, a voluntary unincorporated association (herein called the Jobbers' Association), four business corporations, and two individuals, George E. King and John Donnan, filed their petition in this court, praying the review and setting aside of an order to cease and desist, made against them by the respondent, the Federal Trade Commission. The proceeding which resulted in that order was commenced by a complaint made against the petitioners by the respondent. That complaint contained allegations to the following effect:

The members of the Jobbers' Association, about 350 in number, are persons, partnerships, and corporations engaged in the business of buying and selling hardware in wholesale quantities throughout certain Southern states of the United States; said King being its president, said Donnan its secretary, and said business corporations being members thereof and engaged in the business of buying and selling hardware in wholesale quantities in Atlanta, Ga. They buy hardware in various states of the United States, and cause same to be transported in interstate commerce, and are fairly representative of the entire membership. Within a year prior to the filing of the complaint certain retail dealers in hardware in Georgia and adjacent states organized under the laws of Delaware a corporation called the Merchants' Co-operative Association (herein referred to as the Co-operative Association), for the purpose of purchasing in wholesale quantities through the instrumentality of that corporation all hardware and supplies dealt in by such retail dealers. The profits arising from the business of that corporation were to be distributed between its stockholders and other retailers for whom it purchased-- a retailer to get the whole or a part of the profit made on each sale to it by that corporation. At the outset that corporation undertook to purchase supplies for the retailers, for whom it was to purchase through W. A. Ray Hardware Company, of Pensacola, Fla., a member of the Jobbers' Association, under an arrangement which provided for that company receiving as compensation 5 per cent. of the cost price of supplies so purchased. Another corporation, the American Purchasing Company, was organized under the laws of Delaware for the purpose of acting as purchasing agent for the Co-operative Association and other domestic and foreign purchasers.

The parties named as defendants in the complaint mentioned have conspired and confederated together with themselves and with other persons, and particularly with other members of the Jobbers' Association, to prevent the Co-operative Association and American Purchasing Company from obtaining from manufacturers and other usual sources from which purchasers of hardware in wholesale quantities must obtain supplies, either directly or through the assistance of said W. A. Ray Hardware Company, and have, by boycott and threats of boycott and other unlawful means, induced manufacturers and others to refuse to sell their products to the Co-operative Association and the American Purchasing Company, and such manufacturers and their brokers were informed by petitioners herein that, if they sold their products to the Co-operative Association and the American Purchasing Company, the members of the Jobbers' Association would not thereafter buy the products of such manufacturers, by means whereof manufacturers of hardware generally were intimidated to the extent that they thereafter refused to sell their products to the Co-operative Association and the American Purchasing Company. The machinery of the Jobbers' Association was employed by its officers and members in bringing about and making effective said boycott.

After petitioners herein had answered that complaint, and after the introduction of evidence and a hearing by the commission, it made its findings as to the facts and stated its conclusion. It made findings in accord with the allegations of the complaint as to the nature and composition of the Jobbers' Association, as to the relations to it of the defendant individuals and corporations, as to the nature of the business engaged in by the latter, as to the organization and purpose of the Co-operative Association and the American Purchasing Company, and as to purchases made through the W. A. Ray Hardware Company. The commission found, among other things, to the following effect:

When the complaint was filed, and when the findings were made, the Jobbers' Association comprised about 90 per cent. of all those doing a jobbing or a wholesale business in hardware in that portion of the United States bounded by the Potomac river on the north, the Rio Grande on the south, the Atlantic Ocean on the east, and the western boundary of Oklahoma on the west. About 90 per cent. of its members were and are engaged in selling hardware at retail, as well as at wholesale, and are competitors of exclusively retail dealers in hardware in the territory mentioned, including their own customers who are retailers. For a firm or corporation to be eligible to membership in the Jobbers' Association a by-law provides that its sales to merchants shall be not less than 75 per cent. of its gross sales of not less than $250,000 a year, that it has not less than three salesmen constantly on the road, and that it has capital, or capital and surplus, of not less than $75,000. The membership of the Jobbers' Association is further restricted to those wholesalers whose policy it is to distribute goods through so-called regular channels of trade; that is, from manufacturer to jobber or wholesaler, from jobber or wholesaler to retailer, and from retailer to consumer, it being contrary to that policy for a hardware manufacturer to sell direct to a retailer on the same terms and conditions that it sells like goods and quantities to so-called legitimate jobbers and wholesalers, and such policy requiring that, in the case of a sale by a manufacturer to a retailer, price differentials be charged to protect the so-called legitimate jobber or wholesaler in his method of distribution.

The purpose of the Jobbers' Association and its members is to dominate the wholesale and jobbing trade in hardware in the territory mentioned, and to hinder competition in such trade arising from the operations of jobbers or wholesalers who do not conform to the plan of distribution approved by the Jobbers' Association. It is the policy of members of the Jobbers' Association to refuse to buy from hardware manufacturers who sell to customers who do not conform to the distribution policy approved by the Jobbers' Association. To promote that policy said association conducts a system of espionage upon the business of the wholesale and jobbing trade in said territory. In many instances the members and officers of the Jobbers' Association, including petitioners, have notified hardware manufacturers that named jobbers or wholesalers, including the Co-operative Association and the American Purchasing Company, do not conform to the method of distribution approved by the Jobbers' Association, whereby the manufacturers so notified are made to understand that they have the choice between getting the custom of the members of the Jobbers' Association or selling to jobbers or wholesalers who do not conform to the practice approved by the Jobbers' Association. Close relations have been and are maintained between the officers and members of the Jobbers' Association and the officers and members of the American Hardware Manufacturers' Association, which includes the principal manufacturers of hardware in the United States.

The officers and members of the Jobbers' Association made known to the officers and members of the Hardware Manufacturers' Association that the former disapproved of sales of hardware to jobbers or wholesalers who do not conform to the policy approved by the Jobbers' Association on the same terms and conditions as are accorded to jobbers and wholesalers who conform to that policy. The Jobbers' Association furnished to the Hardware Manufacturers' Association and its members lists of so-called regular jobbers and wholesalers in the territory mentioned, and notified them that named jobbers or wholesalers in that territory, including the Co-operative Association and the American Purchasing Company, did not conform to the policy approved by the Jobbers' Association. By such means manufacturers of hardware were warned by petitioners not to trade or deal with objectionable wholesalers or jobbers on the same terms accorded to so-called regular jobbers or wholesalers on pain of...