# Brief for the Federal Trade Commission in Opposition — Chain Institute, Inc. v. Federal Trade Commission (No. 554) > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386418_1590%3A4 ## Record - **Collection:** Supreme Court brief - **Document type:** Brief for the Federal Trade Commission in Opposition - **Published:** January 1, 1957 ## Text INDEX F jae ec cncdhwanaknhihiuc ada Gasenmeneke 1 EE ST IEE AIR eee aee aN apa Se POS en ay eR Ae tS I cin ssc ancdececmachacades hese nana 2 ERE ERR eye ear pee EIEN Apr lee Oye 2 ei ca eedh Reet abee nada kee es - 3 i ikah dns a 6s sawn haa ehian each ccacheemenatese 8 eel. oe ha ee eee oe kena 16 CITATIONS Cases: Allied Paper Mills v. Federal Trade Commission, 168 F. 2d 600, certiorari denied, 336 U.S. 918______-- 9 Bond Crown & Cork Co. v. Federal Trade Commission, Se cs Coun had wide d «Wud e 9,11 Ethy! Gasoline € ‘orporation v. v. Fr ‘nited States, 309 U. ES hs sens na ee sii each vilae de eaae ie endal Aah sk 0 11 Federal Trade C ommission Vv. C ement Institute, 333 Ose Meee oer ares . 9,10 Federal Trade Commission v. National Lead Co 0., act id vice week daca ce 6,7, 11, 12, 14, 15, 16 Fort Howard Paper Co. v. Federal Trade Commission, 156 F. 2d 899, certiorari denied, 329 U.S. 795__- -- 9 General Talking Pictures Corp. v. Western Electric Co., Te en a cn cecbhenaeenes g Afilk and Ice Cream Can Institute v. Federal Trade (omn ixsston, 152 F. 2d 478- eee con ee National Lead Company v. Fede ral Trade Commission, 227 F. 2d 825, cross petition for certiorari denied, ee | Sa Se a re aad aS 9 Salt Producers Ass'n v. Fede oat Trade Commission, 134 F. 2d 354- a agit ene ea et 8) Trianale ( rer a Cable Co. v. Federal Trade Com- miseon, 16S Fo 2d 175, affirmed sub nom. Clayton Mark & Co. v. Federal Trade Commission, 336 U.S. TR RG eee eye Reap on een ee a NE ap 9 United States Maltsters Ass'n. v. Federal Trade Come ts SE Ue San a ona ks cna nadtnens siete 9 440255 o1-—-1 (1) r Statutes: Clayton Act, 38 Stat. 730, as amended, 15 U.S. C. 12 et seq.: Page Section 2 (a)... ~.--~~---=--=-+---52-8+--5"" 4 Section 3 (bh)... ...--- ------ Vsteni: Nalt Producers Assn. vv. Federal Typical Commission, ISA FL 2d Sob OC. ALT) Bort Howard, Paper Co. f Fedeval Trine CO MINsion, 15 F. 2d Soo { Be A. Gis opr torart denied, 329 UL S. T9532 Aid Paper Milly vo Federal Prade Commission, 16S F.2d 6000 (CL OAL 7). certiorari denied 336 ae, S. O1s: National Lead Com pany Be Fy te ral Tr q/. Coan mission, 220 BL 2d 825 (CL ALT). cross: petition for certiorar denied, 551 U.S. 964: multiple basing point delivered price system: Federal Trade Conumission vo Cement Fnxtrteut.. AI . S&S. 6R3> Triangle Conduit & Cable Co. ve Federal Trad Comission, WS F.2d 105 (CL ALT). affirmed sub nom. Clhiyton Vark del ov. Federal Trade Con mission, X36 VS. O56. 10 ! conscious parallel action but on voluminous evidence of agreement. The Commission found that there wes substantial evidence that “‘present and future prices * * * were discussed antl agreed upon”? on the occasion of meetings of petitioner Chain Institute, Ine, the trade association (CR. 609-617); that pursuant to agreement published mill prices were identical at all times (R. 639-641) 7 that a evstem of cheeking on the maintenance of delivered prices wes fostered and earvied out by the Postitute CR. 61s HYS): that correspondence between petitioners showed the existence of an agreement to fix delivered prices OR. 628-632): that successful efforts to standardize anid simplify: products, which aided pree fixing, were continuously carried on through the Tnstionte OR, H32-O37): that freight rates on welded cham from Pittsburgh te destinations througheut the United States were cooperatively compiled and used by peti tioners and that the compilation Was “het intended to serve any need for feeight rate. for shippime pur- poses but was designed for use un computing ile- livered prices * * "OR. 687-639): that delivered prices on all types of chain have been. “'wenerally un form OR. 4D) ds a result of “'the use of idéntieal pricitig sVstenis or Jnethods * * "°° CR. 641-042). The Commissiott plainly Was entitled to find on this record, where the delivered price systems maifitain Hnifermity of price, that the svstems were used pur- ‘siant te agreement. As the Court of Appeals held, eiting Federal Trade Commission vo Cement Tnsti- fate, SOQ TLS. O83, the evidence supports the Com- Hiission’s finding “that the delivered pricing methous 11 used by petitioners in connection with and in further- ance of their cooperative and collusive efforts to fix or stabilize prices for chain were necessarily an in- herent and indispensable part of the conspiracy”’ (Pet. 38).- And the fact that the systems had been used historically in the industry since its inception is inconclusive because it is clear that they were used by agreement and understanding for the purpose and with the effect of eliminating price competition. As the Commission found, the purpose of arriving at identical delivered prices sould not have been accom- plished without the use of these systems (R. 650) .° The Commission did not exceed its authority, there- fore, by ordering petitioners to discontinue the use pursuant to conspiracy of the methods of pricing and selling chain that in the past have been the means by which the unlawful restraints upon trade were accomplished.” 2. The Commission's authority in a conspiracy case to limit the individual use of a delivered price system, Where necessary to destroy the impetus of the conspiracy, was settled by the Court's decision i Fv eral Toade Commission vo National Lead Co., 352 Two Courts of Appesls have said that “it. taxes our credulity. to bebewe. as argued. that) petitioners employed this [freight equalizaty a] svsten: without any agreement or plan among themselves.” Wik and Lee Cream Can Institute vy. Fed- eral Trade Commission, We F. vd 47s, 481-482 (CL ALT): Bond Crown & Cork Co. v. Federal Trade Commission, 176 F. vd OTH WNO CCL AL A), | *The Court held in Fithy? Gasoline Corporation vy. United States, 300 TLS. 436, 461. that the lower cenrt: “properly suppressed the means by which the unlawful restraint was “achieved.” See also Federal Trade Conmission vy. National Lead Ca. 392 US. 419, 450. v 12 U. S. 419. Petitioners acknowledge this, but argue that for various reasons the decision in National Lead is not controlling here." It is asserted that since the third ordering para- graph here limits the use of three delivered price systems, as opposed to the limitation of the use of one such system in National Lead, it is too broad (Pet. 12-15). It is apparent that the National Lead order related only to the zone delivered price system because that was the only system used pursuant to conspiracy in the sale of lead pigments. The order here appHes to the three systems because in the sale of chain petitioners pursuant to conspiracy have used ail three systems. The Court of Appeals, in holding that the Commission made an allowable judgment in its choice of the remedy necessary in order effectively to bring to an end the past unlawful practices, reeog- nized that the order properly guarded against inter- changing, as among the three types of chain, the systems previously used, thus perpetuating the re- straints of trade at which the order is directed (Pet. _¢ 39)." * Petitioners’ argument that) the pricing systems anteceded the conspiracy and agreement and therefore have an inde- pendent legitimate economic basis (Pet. 1 12) Is discussed at page TL. sapere, “The posstble interchange of preoimy systems used / may already have occurred as to welded chain. Petitioners say they believe that “the normal and lawful purpose and ‘eétlect of any delivered pricing method” is systematically to mateh delivered prices of competitors (Pet. 13). They advise that the Pittsburgh plus system “is generally regarded as out- moded,” and that “counsel are informed that the Pittsburgh Plus method is no longer used by any of the petitioners” (Pet. 11, n. 36). They do not inform the Court as te the method . : . : : : ; by which welded chain is currently priced, ; f { | ad i" 13 Contrary to petitioners’ contention (Pet. 19-21), the Commission did consider the necessity for the remedy selected.” Commissioner Mead, in’ his con- curring opinion on the motion for rehearing, said that the Commission had fully considered the neces- sity for the third ordering paragraph (R. 668-674). He said that “we considered a number of factors” in determining the necessity of providing a remedy “to suppress and insure against a revival of the trade- restraining conspiracy” CR. 669). He also said that “A majority of the Commission was of the opinion that an effeetive order” must prohibit the individual use of the three delivered price systetus “for the purpose or with the effect of svstematically jiateh- ing”’ delivered prices of other sellers of chain CR. 669-670). There is no basis, therefore, for petitianers’ contention that the Conmimission gave no consideration to the necessity of the remedy. *The petitions ss specifically argue against the order as it applies to the sone m\steta used oan the sale of tire claon ¢Pet. 1 160. Under this svstem: the petitioners” published mulb prices are, pursiiant to agreement, identieal and the cham i sold at ail delivery Point: rao the Uonated States at these published prices, the seller paying the frerht. Clon. uidike chewing: gum and erarettes (Pret, IQyoiss heavs commodity, The uVerige cost of delivery of tire chain te all destinations in the United States Isabout Ste porcent of the published price (Pet. dey fn ary. As in tho eases erted in footnote de page Yo sion the Federal Trade Cosmisston found that this system was part of the un- lawfal practice. The court below: found that the Commission had a basis intthe record for such a finding and had not abused its discretion in forbidding future use of the system. Under these cireumestanees there is no ground for review by thi: Court, ' Petitioners also argue that the Conmunission gave no con- sideration to the economic effects of the order, having contended throughout this proceeding that the order requires them to sell 14 Except that it applies to more than one delivered price system, the order here is to be interpreted in exactly the manner this Court interpreted the Na- tional Lead order. The order does not require fo. b. mill selling and “delivered pricing per se is not banned by the order” (352 U.S. at 425)." 0 As the Court said in National Lead, “delivered zone pricing violates the order only when two conditions: are present: (1) identical prices with competitors (2) resulting from zone delivered pricing’? (352 U.S. at 426). So, here, the order will be violated only if) “systematically matching’ prices result) from oa single basing point, freight equalization, or zone delivered) price system. Petitioners can comply with the order by competing instead of agreeing upon base prices, Tt will remain lawful to meet in good faith the lower prices of a competitor, no matter what system of delivered pric- Ing is used. Here. as in National Tead, 3 Section 2 Cb) of the Clayton Aet is fully applicable. As this Court foo. bo milk In this connection the record shows that under the conspiraey eons of the comphunt they requested the Tlear- ing Evniiiner to tind that an order requiring foo. bo mall selling would be economically disastrous Qpar. Tac} ) af petitioners’ proposed tinedings, RooOods. waned excepted to the examiner's re- fusal to tauke the finding cexeeption TS. Ro Soe). “Phe Com- Hiission ~pecitionlly ruled pon ane denied the eXception (PR ST4STS. je | : The Court of Appeals-eecognized that the order «oes not pers ergy the use of any delivered: price svstent saving (Pet, 38: “Tf this paragr: aph of the order of the € omimils- sion were to ro given the effect of depriving each of the peti. tioners of every luwfnl and practical method of independently and honestly selling its products at delivered prices, and thus preventing it) from engaging in nationwide competition, we would consider the paragraph invalid.” 15 stated (352 U.S. 419, at 426-427, 431), it is read into every Commission order and the particular type of order, like the order here in question, ‘“‘was not in- tended to and does not: proliibit or interfere with independent delivered * * * pricing per se. Nor does it prohibit the practice of the absorption of actual freight as such in order to foster competition.” As to the duration of the third ordering paragraph, the order here is temporary in the same sense the order in National Lead was temporary. There the Court said: “When and if competition is restored and the individual prohibition is no longer necessary, the Commission expressed its intention, upon application, to vacate the * * * provision of its erder’ (225 U.S. at 424-425). So, here, Commissioner Mead said in his opinion on the motien for rehearing (R. 671-672) : If, after competition Is restored in the indius- try, any of the respondents can make a proper showing that this prohibition or anycother pro- hibition in the ‘order is no longer necessary or desirable, the Commission, of Mrse, will at that time take such action as may be, appro- priate in the light of the tacts and the law. Petitioners also eontend, as was contended in Na- tional Lead, that due process Was denied beeause they had te opportunity. to argue before the Commission the validity. of the third ordering paragraph (Pet. 22-25). Heres as there, the insertion of the paragraph “was nothing more than a mode of implementation, selected by the Commission, to enforce its findings of Vielatrons of the Net (352 UL S. at-427). The Com- Srnisston ds charged by the Federal Trade Comunission 16 Act with fashioning the remedy. Since the reason- ableness of the remedy depends upon the nature of the violation and the means adopted to accomplish it, the entire proceeding with respect to the violation is in substance a hearing on the remedy. Due process does not require a compartmentalization of the pro- ceedings. The Court of Appeals heid that the Commission did not act arbitrarily or abuse its discretion by including the third ordering paragraph in the order (Pet. 40- 41). Since this Court held in National Lead that the Commission’s selection of an identical remedy had a ‘*reasonable relation to the unlawful practices found to exist”? (352 U. S. at 428), the petition presents no question of importance that has not been settled by the Court. | CONCLUSION The petition for a writ of certiorari should be denied. Respectfully submitted, J. LEE RANKIN, Solicitor General. Victor R. HANSEN, Assistant Attorney General. CHarLes H. Weston,” Attorney. EarL W. KINTNER, General Counsel, JAMES E. CorkKFy, Assistant General Counsel, J. B. TRuiy, Attorney, Federal Trade Commission. NOVEMBER 1957. U S GOVERNMENT PRINTING OFFic Eg. 1987 --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386418_1590%3A4. Public record. Not legal advice.