Toledo Pipe-Threading Mach. Co. v. Federal Trade Com'n

• Decision Date: 13 March 1926
• Docket Number: No. 4355.,4355.
• Citation: 11 F.2d 337
• Parties: TOLEDO PIPE-THREADING MACH. CO. v. FEDERAL TRADE COMMISSION.
• Court: U.S. Court of Appeals — Sixth Circuit

11 F.2d 337 (1926)

TOLEDO PIPE-THREADING MACH. CO. v. FEDERAL TRADE COMMISSION.

No. 4355.

Circuit Court of Appeals, Sixth Circuit.

March 13, 1926.

George P. Hahn, of Toledo, Ohio (Brown, Hahn & Sanger, of Toledo, Ohio, on the brief), for petitioner.

Alfred M. Craven, of Washington, D. C. (Adrien F. Busick, of Washington, D. C., on the brief), for respondent.

Before DENISON, DONAHUE, and MOORMAN, Circuit Judges.

DENISON, Circuit Judge.

This is a petition to vacate the respondent's order to cease and desist from carrying on a system of price maintenance. From the record we summarize what we think are the relevant facts:

Petitioner is a long-established manufacturer of tools and appliances for pipe threading. The ultimate users of these products are largely plumbers and pipe fitters. It sells these articles to retail dealers, who thereby become its distributors. There is no general class of wholesalers or jobbers coming between the manufacturer and the retailer, but a slightly less price is made to dealers who carry the tools in stock to a specified amount. Its tools have a high reputation and an established market among users, and are known as "Toledo tools." It makes sales through general advertising, circularizing, and by traveling salesmen.

In 1902 it adopted a scale of retail prices which it thought proper for its distributors to charge, and a scale of discounts which it would allow to its distributors for their profit. This was evidenced by a price list, showing, not actual prices, but an arbitrary list, so that current variations could be made by changing only the discount; for example, a tool was listed as $50, less a discount of 40 and 20 to the stock-carrying dealer, 40 and 10 to the smaller dealer, and 40 to the user. Petitioner's business is substantial, although not of great volume as compared with many national products. The annual sales are about $1,000,000, and the number of retailers from 1,000 to 1,200.

The Commission made, as its findings, certain extracts from or recitals of the undisputed testimony, and then "arrived at the following conclusions of fact in which the present petitioner is termed the respondent:

"(1) The selling policy of the respondent is based upon the use of a base list price, with discounts therefrom, by which are fixed the prices to the jobbers, and through the jobbers to the consumers.

"(2) That the respondent divides the territory of the United States into two selling districts, in which different resale discounts to the consumer are established, for the purpose of assisting to equalize freight differences favoring the eastern territory.

"(3) That the respondent established this line as the Mississippi river in 1920, and moved it west to the Colorado line in 1922, making the readjustment for the purpose of eliminating, so far as possible, a variation in resale discounts in the western territory.

"(4) That in locating this line for this purpose the respondent sought and received advice from dealers in the territory affected.

"(5) That it was the policy of the respondent to take notice of every report from a jobber or dealer of variations from the resale discounts, to make the reporting jobbers or dealers understand that the respondent welcomed such reports, and would enforce its resale price schedule by refusing further sales to the offending dealer, if he could be located. That the respondent urged dealers or jobbers making indefinite reports of price cutting to conduct investigations to determine the identity of the price cutter, and to report such price cutter to the respondent, so that the dealers of the respondent well understood that it was the policy of the respondent to receive reports from its dealers, and to refuse further sales to confirmed price cutters. That the respondent, becoming aware of the identity of a price cutter, refused further relations with such price cutter unless it appeared that the price variation was due to an excusable error, or the respondent received from the offending dealer a definite and positive assurance in writing, applicable both to sales already made and such sales as might be consummated in the future, that the respondent's resale discount schedule would be absolutely maintained. That upon a number of occasions the respondent had insisted upon and received such assurances from dealers or jobbers who had varied from the resale discount schedule.

"(6) That whenever, in the opinion of the respondent, it was necessary so to do, either because of the appearance of a considerable departure from the use of the resale discount schedule or because the price cutters could not be identified, the respondent, both for the purpose of ascertaining the identity of the price cutters and for the purpose of receiving renewed assurances from its dealers in the affected territory as to resale price maintenance, issued a circular bulletin or form letter to all of its dealers in the affected territory, calling attention to the policy of the respondent for the maintenance of its resale discount schedules, and in effect calling upon each dealer to acknowledge the receipt of the bulletin, circular, or letter in question, and to give in writing assurances, operative both as to sales already consummated and applicable to stock in the dealer's hands, as well as to sales not yet consummated, that the dealer would adhere strictly to the respondent's schedule to resale discounts, upon the penalty stated that the respondent would refuse business relations with any jobber or dealer who failed to maintain the respondent's suggested resale prices.

"(7) That this practice was followed with reference to all dealers in the western territory on one occasion, and another time with reference to all dealers in the Pittsburgh territory, again with reference to all dealers in the Los Angeles territory, and again with reference to all dealers in the Baltimore territory.

"(8) That in each instance of individual price cutting reported to the respondent, where the respondent could learn the identity of the price cutter, if the price variation was not satisfactorily explained to the respondent as a mistake, and the dealer in question refused to give assurances in writing, applicable both to his stock in hand representing consummated sales and to future sales as well, that he would be governed by the respondent's suggested resale price, the respondent refused further sales to such dealer.

"(9) That the respondent sought and secured the co-operation of its dealers in dividing its territory for the purpose of a variation in resale discounts, in order that the location of the dividing line might be a practical means of eliminating variations from the resale discounts operative in each territory. That the respondent sought the cooperation of its dealers in making reports of price cutters, thereby enabling the respondent to eliminate willful price cutters from its list of dealers. That the respondent, whenever it deemed necessary, exacted from its dealers a written assurance that such dealers would, both with reference to consummated sales and sales not yet consummated, co-operate with the respondent in the maintenance of its resale prices."

These conclusions, in general and in many particulars, are not criticized; but the statements, in conclusion 6 that respondent issued certain letters or bulletins "in effect calling upon," etc., and in conclusion 9 that respondent "exacted from its dealers a written assurance," have no basis in the testimony, except as such inference is justified by letters of which typical specimens are given in the margin.¹

To these conclusions there should be added certain negative facts, which may be of importance and which are according to the undisputed proofs. They are:

Petitioner has no system of express contracts with its dealers to maintain prices or to report price cutting, and no such contracts at all, except in those instances where the petitioner's complaint of price cutting has brought assurances like the sample letter. Petitioner employs no travelers to hunt down price cutting, and has no system of identifying marks by which it can be told what dealer sold a particular tool; but traveling salesmen naturally and commonly report instances of which they are informed. There is no system by which price-maintaining dealers co-operate with petitioner and with each other to exercise any kind of pressure upon the price-cutting dealer, save only as it is common in such cases to complain to petitioner, and to expect it to carry out its announced plan of refusing to sell to those who continue to cut. Petitioner has no system of taking orders from the consumers and turning these orders over to the price-maintaining dealers. Petitioner does absolutely refuse to make further sales to an unrepentant price-cutting dealer; but there is no system of co-operation or of effort to prevent that dealer from buying the tools from other dealers, nor any entry of that dealer's name upon a "do not sell" list and publication of such list among petitioner's trade.

In a letter from the petitioner to the Commission, the petitioner states its past and present policy upon this subject, in part as follows:

"(3) From the very inception of our business, some 20 years ago, three fundamental lines of action were determined upon: First, the establishing of definite prices for our products to the consumer; second, to market the product through the well-established jobbers and dealers of the country; third, to see to it that the jobbers and dealers uniformly used the prices established by us for the consumer. The organizers of the business were men of mature experience, and the policy above outlined was decided upon, because a reasonable price effective to all alike in any given community was fair and equitable, and the widest possible distribution could be obtained at the lowest sales or overhead expense by utilizing the well-established dealer organizations...