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FEDERAL TRADE COMMISSION v.
CERTIORARI TO THE UNITED STATES COURT OF
* APPEALS FOR THE SECOND CIRCUIT.
Argued March 31 and April 1, 1952.-Decided May 26, 1952.
A company which was engaged in the manufacture of roofing mate
rials was found by the Federal Trade Commission to have discriminated among customers in the prices charged for its products. The Commission held that the discriminations violated § 2 (a) of the Clayton Act, as amended, and ordered the company to cease and desist from selling "products of like grade and quality to any purchaser at prices lower than those granted other purchasers who in fact compete with the favored purchaser in the resale or distribution of such products." Upon the company's petition for review, the Court of Appeals affirmed, but refused an order of enforcement. Held:
1. Congress has vested in the Federal Trade Commission the primary responsibility for fashioning orders dealing with Clayton Act violations, and the courts will not interfere except where the remedy selected has no reasonable relation to the unlawful practices found to exist. P. 473.
2. Although in the company's price discriminations between competing purchasers the Commission found only differentials of 5% or more, the order was not too broad in prohibiting all price differentials between competing purchasers, in view of the Commission's finding that even very small differences in price were important factors in competition among the company's customers. Pp. 473–474.
3. Although the price discriminations found were in sales to retailers and applicators, not in sales to wholesalers, the extension of the order to “purchasers who in fact compete” was not unreasonable, in view of the evidence that the company's classification of its customers—as wholesalers, retailers, and applicators-did not follow real functional differences. Pp. 474-475.
*Together with No. 504, Ruberoid Co. v. Federal Trade Commission, also on certiorari to the same court.
4. The order does not enjoin lawful acts by reason of the Commission's failure to except from its prohibitions differentials permitted by the terms of the Act (making allowance for differences in cost of manufacture, sale or delivery, or made in good faith to meet an equally low price of a competitor), since these exceptions are necessarily implicit in every order issued under authority of the Act. Pp. 475-476.
(a) However, in contesting enforcement or contempt proceedings, the seller may plead only those facts constituting statutory justification which it has not previously had an opportunity to present. Pp. 476–477.
5. The Commission is not entitled to a decree directing enforcement of an order issued under the Clayton Act in the absence of a showing that a violation of the order has occurred or is imminent. Pp. 477–480.
(a) The provision of the Act authorizing the Commission to apply for enforcement “if such person fails or neglects to obey such order" prescribes a prerequisite to the court's granting enforcement. Pp. 478–479.
(b) Disobedience or threatened disobedience of the order is a condition to the granting of enforcement, even where the order comes before the court upon petition for review by the affected
party. Pp. 479-480. 191 F.2d 294, affirmed.
Upon a petition for review of a cease-and-desist order of the Federal Trade Commission, 46 F. T. C. 379, the Court of Appeals affirmed and granted enforcement of the order. 189 F. 2d 893. On rehearing, it struck from its decision that part granting enforcement. 191 F. 2d 294. This Court granted certiorari. 342 U. S. 917. Affirmed, p. 480.
Cyrus Austin argued the cause and filed a brief for the Ruberoid Company.
James W. Cassedy argued the cause for the Federal Trade Commission. With him on the brief were Solicitor General Perlman, Assistant Attorney General Morison, Daniel M. Friedman, Ralph S. Spritzer and W'. T. Kelley.
Opinion of the Court.
MR. JUSTICE CLARK delivered the opinion of the Court.
In this case we granted cross-petitions for certiorari to review the decree of the Court of Appeals affirming, but refusing to enforce, a cease and desist order issued by the Federal Trade Commission to the Ruberoid Co.
Ruberoid is one of the nation's largest manufacturers of asphalt and asbestos roofing materials and allied products. The Commission found that Ruberoid, in a number of specific instances, had discriminated among customers in the prices charged them for roofing materials. Further
ding that the effect of those discriminations “may be substantially to lessen competition in the line of commerce in which [those customers] are engaged, and to injure, destroy, or prevent competition between [those customers]," I the Commission held that the discriminations were violations of $ 2 (a) of the Clayton Act, as amended by the Robinson-Patman Act. 46 F. T. C. 379. Ruberoid was ordered to:
“[C]ease and desist from discriminating in price:
“By selling such products of like grade and quality to any purchaser at prices lower than those granted other purchasers who in fact compete with the favored purchaser in the resale or distribution of such
products.” 3 Upon Ruberoid's petition for review, the Court of Appeals affirmed and granted enforcement of the order. 189 F. 2d 893. However, on rehearing, the Court of Appeals amended its mandate to strike that part which directed enforcement. 191 F. 2d 294. We granted certiorari to review questions, important in the administration of the Clayton Act, as to the scope and enforcement of Federal Trade Commission orders. 342 U. S. 917.
1 46 F. T. C. 379, 386. 238 Stat. 730, as amended, 49 Stat. 1526, 15 U.S.C. $ 13. 3 46 F. T. C. 379, 387.
Opinion of the Court.
We first consider the contentions of Ruberoid, which are mainly attacks upon the breadth of the order. Orders of the Federal Trade Commission are not intended to impose criminal punishment or exact compensatory damages for past acts, but to prevent illegal practices in the future. In carrying out this function the Commission is not limited to prohibiting the illegal practice in the precise form in which it is found to have existed in the past. If the Commission is to attain the objectives Congress envisioned, it cannot be required to confine its road block to the narrow lane the transgressor has traveled; it must be allowed effectively to close all roads to the prohibited goal, so that its order may not be by-passed with impunity. Moreover, "[t]he Commission has wide discretion in its choice of a remedy deemed adequate to cope with the unlawful practices” disclosed. Jacob Siegel Co. v. Federal Trade Comm'n, 327 U. S. 608, 611 (1946). Congress placed the primary responsibility for fashioning such orders upon the Commission, and Congress expected the Commission to exercise a special competence in formulating remedies to deal with problems in the general sphere of competitive practices. Therefore we have said that "the courts will not interfere except where the remedy selected has no reasonable relation to the unlawful practices found to exist." Id., at 613.
In the light of these principles, we examine the specific objections of Ruberoid to the order in this case. First, it is argued that the order went too far in prohibiting all price differentials between competing purchasers,
although only differentials of 5% or more were found. But the Commission found that very small differences in price
4 Federal Trade Comm'n v. Morton Salt Co., 334 U. S. 37, 51-52 (1948); cf. International Salt Co. v. United States, 332 U. S. 392, 398–400 (1947).
5 Federal Trade Comm'n v. Cement Institute, 333 U. S. 683, 726727 (1948); 38 Stat. 722, 15 U. S. C. $ 47.
Opinion of the Court.
were material factors in competition among Ruberoid's customers, and Ruberoid offered no evidence to the contrary. In this state of the record the Commission was not required to limit its prohibition to the specific differential shown to have been adopted in past violations of the statute. In the absence of any indication that a lesser discrimination might not affect competition there was no need to afford an escape clause through which the seller might frustrate the whole purpose of the proceedings and the order by limiting future discrimination to something less than 5%.?
The roofing material customers of Ruberoid may be classified as wholesalers, retailers, and roofing contractors or applicators. The discriminations found by the Commission were in sales to retailers and applicators. The
6 Federal Trade Comm'n v. Morton Salt Co., 334 U. S. 37, 51-52 (1948); cf. Labor Board v. Express Publishing Co., 312 U. S. 426, 436-437 (1941).
“True, the Commission did not merely prohibit future discounts, rebates, and allowances in the exact mathematical percentages previously utilized by respondent. Had the order done no more than that, respondent could have continued substantially the same unlawful practices despite the order by simply altering the discount percentages and the quantities of salt to which the percentages applied.” Federal Trade Comm'n v. Morton Salt Co., 334 U. S. 37, 52–53 (1948). The discussion following these words in the Morton Salt case, of certain aspects of the order in question there, manifestly affords no support to Ruberoid's contention here. Id., at 53–54.
8 Ruberoid suggests a fourth category of purchasers-manufacturers--and contends that the order is too broad in that it prohibits discrimination in sales to that group, e. g., in sales of shingles to competing manufacturers of prefabricated houses. We need not consider whether such an order would be too broad because we do not think the order here applies to such sales. By its terms, the order covers only sales to those competitively engaged “in the resale or distribution of such products [i. e., 'asbestos or asphalt roofing materials'],” and not sales to those who use roofing materials in the fabrication of wholly new and different products.