Southgate Brokerage Co. v. Federal Trade Commission

• Decision Date: 19 July 1945
• Docket Number: No. 5331.,5331.
• Citation: 150 F.2d 607
• Parties: SOUTHGATE BROKERAGE CO., Inc., v. FEDERAL TRADE COMMISSION.
• Court: U.S. Court of Appeals — Fourth Circuit

150 F.2d 607 (1945)

SOUTHGATE BROKERAGE CO., Inc., v. FEDERAL TRADE COMMISSION.

No. 5331.

Circuit Court of Appeals, Fourth Circuit.

July 19, 1945.

Charles L. Kaufman, of Norfolk, Va., and William P. Smith, of Washington, D. C., for petitioner.

Joseph J. Smith, Jr., Asst. Chief Counsel, of Washington, D. C. (W. T. Kelley, Chief Counsel, Federal Trade Commission, of Washington, D. C., on the brief), for respondent.

Before PARKER, SOPER, and DOBIE, Circuit Judges.

PARKER, Circuit Judge.

This is a petition by the Southgate Brokerage Company to review and set aside an order of the Federal Trade Commission directing that company to cease and desist from accepting brokerage, or any commission, compensation, allowance or discount in lieu thereof, on purchases made for its own account. The company petitions also that it be allowed to adduce evidence, rejected by the Commission, to the effect that it has rendered services to the sellers in connection with such purchases for which it claims to be entitled to compensation. The Commission has filed a cross petition asking that its order be enforced.

There is no dispute as to the facts. The brokerage company, which has its principal office in Norfolk, Va., does a large commission and brokerage business in Virginia and the Carolinas to which the order of the Commission admittedly has no application. In addition, it does a large business as distributor of products which it buys from processors and subsequently sells to its customers. It is with respect to this business that the order of the Commission applies; and the facts bearing thereon are covered by the fourth and fifth paragraphs of the Commission's findings, which are fully supported by the evidence and are as follows:

"Paragraph four: The purchases made by respondent in its own name and behalf and for its own account constitute approximately sixty per cent of its total volume of business. The merchandise so purchased is stored by respondent in its own warehouses, and is in all respects its own property to deal with as it sees fit. Respondent insures the merchandise in its own name and at its own expense, pays such taxes as may be levied on the merchandise, and resells it to such purchasers and at such prices and upon such terms as its judgment may dictate, reaping a profit or sustaining a loss thereon, as the case may be. If the merchandise is lost or damaged while in transit from the seller to respondent, respondent files claims against the carrier for such loss or damage in its own name and for its own benefit. In short, respondent's title to the merchandise is absolute. Respondent frequently enters into contracts of purchase with packers and canners of food products calling for the future delivery of large quantities of goods to respondent at fixed prices. In such cases, respondent's profit or loss on the transaction usually depends, of course, upon whether the market advances or declines after the contract is executed. Some of the canned food products purchased and resold by respondent bear respondent's own private trade-marks or brands, which are registered in the United States Patent Office. The labels for such goods are supplied by respondent to the packer or canner, who affixes them to the cans or other containers in which the goods are packaged.

"Paragraph five: In connection with the purchase in interstate commerce of such food products and other merchandise in its own behalf and for its own account, respondent in many instances receives and accepts and for a number of years last past has received and accepted from the sellers of such merchandise, brokerage or allowances and discounts, in lieu of brokerage. The brokerage is usually received by respondent in one of two ways. In some cases, the seller remits the amount of the brokerage to respondent by check. In other cases, respondent in remitting to the seller the purchase price of the merchandise deducts the brokerage, or a discount or allowance in lieu thereof, from the seller's invoice. The amount of brokerage thus received and accepted by respondent is substantial. For example, the amount received on purchases made by respondent between July 1, 1941, and December 31, 1941, was $25,873.68."

The evidence which the Commission excluded as irrelevant, and which the company asks that it be allowed to produce, is evidence of various witnesses to the effect that, in connection with the goods purchased and sold as distributor and covered by the foregoing findings of fact, it renders services consisting of "promoting, offering for sale, selling, ordering, receiving, adjusting shortage or damage claims, handling, warehousing, distributing, invoicing, collecting, assumption of credit risks". We entertain no doubt that the evidence was properly excluded and that on the undisputed facts the cease and desist order was properly entered.

Section 2(c) of the Robinson-Patman Act, 15 U.S.C.A. § 13(c), is as follows: "It shall be unlawful for any person engaged in commerce, in the course of such commerce, to pay or grant, or to receive or accept, anything of value as a commission, brokerage, or other compensation, or any allowance or discount in lieu thereof, except for services rendered in connection with the sale or purchase of goods, wares, or merchandise, either to the other party to such transaction or to an agent, representative, or other intermediary therein where such intermediary is acting in fact for or in behalf, or is subject to the direct or indirect control, of any party to such transaction other than the person by whom such compensation is so granted or paid."

It is perfectly clear that this provision forbids the payment of brokerage on a sale or purchase of goods to the other party to the transaction. The seller may not pay the buyer brokerage on the latter's purchases for his own account. As said in the Report of the House and Senate Conference Committee with reference to this subsection (House Rep. 2951, 74th Cong. 2nd Sess.): "This subsection permits the payment of compensation by a seller to his broker or agent for services actually rendered in his behalf; likewise by a buyer to his broker or agent for services in connection with the purchase of goods actually rendered in his behalf; but it prohibits the direct or indirect payment of brokerage except for such services rendered. It prohibits its allowance by the buyer direct to the seller, or by the seller direct to the buyer; and it prohibits its payment by either to an agent or intermediary acting in fact for or in behalf, or subject to the direct or indirect control, of the other."

The section has been so construed in all of the cases in which it has been considered. Biddle Purchasing Co. v. Federal Trade Commission, 2 Cir., 96 F.2d 687; Oliver Bros. v. Federal Trade Commission, 4 Cir. 102 F.2d 763; Great Atlantic & Pacific Tea Co. v. Federal Trade Commission, 3 Cir. 106 F.2d 667; Webb Crawford Co. v. Federal Trade Commission, 5 Cir. 109 F.2d 268; Quality Bakers of America v. Federal Trade Commission, 1 Cir. 114 F.2d 393; Jarrett v. Pittsburgh Plate Glass Co. 5 Cir. 131 F.2d 674; Fitch v. Kentucky-Tennessee Light & Power Co. 6 Cir. 136 F.2d 12, 149 A.L.R. 650 and note at page 662 et seq. and cases there cited; Modern Marketing v. Federal Trade Com. 7 Cir., 149 F.2d 970. As said in Quality Bakers of America v. Federal Trade Commission, supra, 114 F.2d 393 at page 398: "It is plain enough that the paragraph, taken as a whole, is framed to prohibit the payment of brokerage in any guise by one party to the other or the other's agent, at the same time expressly recognizing and saving the right of either party to pay his own agent for services rendered in connection with the sale or purchase."

It is argued that the section is not applicable here because the receipt by the company of brokerage from the sellers results in no discrimination against buyers, since the company sells only to wholesalers, who pay the prices that they would otherwise pay if the sales were made to them through brokers. It is said that a distributor, such as the company, renders to the wholesale trade the service that a broker ordinarily performs, and that no discrimination...