Brief for the Federal Trade Commission in Opposition — American Motor Specialties Co. v. Federal Trade Commission (No. 368)

pire JAMES ® BROWNING. C

No, 368

a ee ee —— ee

gn the Supreme Court of the Waited States

Ocroper Term, 1960)

\areRicaN Morork SPECIALTIES Co... Ive. ker At,

PETITION E Ks

v.

Feperat Trapge CoM Mission

—_——-

tN PARTITION FOR A WRIT OF CERTIORARI TO THE PNT E

STATES COURT OF APPEALS Full THE SPOON DOO RET |

SRIEF FOR THE FEDERAL TRADE COMMISSION IN OPPOSITION

J. LEE RANKIN.

Me-deestur Cie we

ROBERT A. BICKS.

Adseisfaut Attorney Ge uera

CHARLES H. WESTON.

4tfurr ty

_ De partment of ductive, Woehingt)

\NIEL J. MCAULEY, JR...

Feneral Counsel,

AN B. HOBBSS.

‘enatant General Counsel,

Federal Trade Commiatwn.

Washington 25, D.C

Gn the Supreme Court of the Gnited States

OcTOBER TERM, 1960

.

os

AMERICAN MoTorR SPECIALTIES Co.. Inc. E14

PETITIONERS

v.

FepeRAL TRADE COMMISSION

ON PETITION FOR A WRIT OF CERTIORARI TO THE UNITED

STATES COURT OF APPEALS FOR THE SFCOND °IRECI7

BRIEF FOR THE FEDERAL TRADE COMMISSION IN OPPOSITION

OPINIONS BELOW

*

~>4 >

The opinion of the court of appeals (Pet. 24-32

}

|

is reported at 278 F. 2d 225. The opmion arid order

of the Federal Trade Comuinission (R. 26a—35a)* are

not yet, reported.

JURISDICTION

The judgment of the court of appeals was entered

}

on June 6, 1960 (Pet. 31-32). The petition for

writ pf certiorar! was filed om August 20. 1960. The

jurisdiction of this Court is invuked under 28 U S.C.

- 1254(1).

+P —a ref: re ty pet it rs" pe dix 1) th Aire

appeals: “R. —b,” to the Commission's

565173—s6u 1

2

QUESTIONS PRESENTED

Petitioners are 17 jobbers of automotive -replace-

ment parts and a corporation whigh they organized

for the purpose of channeling their purchases

through it in order to obtain, upon the basis of the

aggregate purchases made through the corporation,

discounts granted by sellers on annual purehase vol.

ume. The Commission found that petitioners theréhy

knowingly received prohibited price diseriminations.

in violation of §2(f) of the Clayton Act. The five

“questions presented’? which the petition sets forth

(pp. 2-5) appear to present only the following issues:

1. Whether the Commission had Jurisdiction to

issue a cease and desist order against the earpora-

tion through which the jobber members pur thased

2. Whether the Commission's findings are sup

ported by substantial admissible evidence.

3. Whether petitioners’ conduct is given exemy})

tion by. §4 of the -Robinson-Patman Act.

STATUTES INVOLVED |

Sections 2(a) and 2(f) of the Clayton Act. 15

J,8.C. 13(a), 13(f), and § 4 of the Robinson-Patma:

Act, 15 U.S.C. 13b, are set forth in Appendix B to

the petition for certiorari ( Pet. 33-35).

STATEMENT

The jobber petitioners sell automotive. parts te

garages, service stations, car dealers, Heet owners aud

other jobbers, in competition with other jobbers and

wholesalers (R. 2b, 21b, 47b, 48b, 82b-53b, TOb, 71).

74b). Many manufacturers from whom the jobbers

purchase have allowed rebates from their {js1

3

prices, the rebate being based upon the customer's

total purchases during a year’s time (R. l4a). The

jobber petitioners set up a system of group buying,

utilizing a corporation organized under the New York

Cooperatite Corporation Law, so as to obtain from

the seller-manufacturers rebates calculated on the

aggregate purchases of the corporate members (tbrd.)

The group undertook to negotiate with sellers a satis-

factory price arrangement, and if negotiations were

successful the jobber members, although ordering in-

dividually, placed their orders in the name of the

corporate buying agent (Pet. 26). The seller. de-

livered goods: so purchased direct to the actual pur-

chaser (R. 16a), but the buying agent paid for the

goods delivered, remitting monthly for the aggregate

purehases of its members and collecting in turn from

the purchasing members (R. 1a). Periodically the

huving corporation distributed among its members

the net amount received as rebates (1... the gross

rehates received Jess the expenses of the group-

buvirig operation}, in proportion to the amount of.the

individual member's purchases (thrd.).

The Commission, found that there was no difference

of substance between purchases thus aggregated for

the purpose of obtaining rebates nct otherwise avail-

able and purchases made by the iobbers acting indi-

vidually and independently (R. 16a,, and that the

group buving was, in reality,.a bookkeeping device .

for the collection of rebates and discounts (R. 15a).

It found that the price differentials which the peti-

tioners obtained were substantial, and that the result-

ing diseriminatory prices lowered their purchasing

4

costs and gave them a material competitive advantage

over other jobbers (R. 19a, 20a). It further found

that petitioners knew that the rebates which they

obtained did not reflect cost saving to the seller re-

sulting from differing methods of delive ry or differ-

ing sales volume, and that they-accordingly knowingly

indaced and received prohibited price discriminations

in, violation of (2(f) of the € lavton Act (R. 2la,.

23a) 7

ARGUMENT

. Petitioners contend that: the eorplaint failed to

oa: that the buying. corporation utilized to procure

price discriminations, petitioner Metropolitan Aute

motive Wholesalers Cooperative, Ine., was “engaged

in’’ interstate commerce so as to be within § 2; f),.

which makes it unlawful for any person “engaged

in’’ interstate commerce knowingly to induce or re-

_ ceive a prohibited price discrimination. ‘That argu-

“;sment was not presented to the court below (R. &a-

“Oa), and accordingly affords no basis for certiorar.

See Helvering v. Minnesota Tea Co., 296 U.S. 378;

Burnet v. Commonwealth Improvement. Co., 287 US.

415; Federal Trade Commisston v. Travelers Health

Assn,, 362 U.S. 293. tn. 4 at 298-299. In any event,.

the contention is without merit. A corporation

clearly is engaged in interstate activity sufficient te

bring it within $2(f) when, as alleged and proved

here, it is re; gularly engaged, as an agent for others,

in the purehase of goods for shipment and delivery

across state lines, and in making remittances ) say-

>The findings r-ferred to, in tially made by the Examiner.

were adopted by the C ommission (R. 35a).

.

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o

ment for goods so shipped. United States v. South-

Fastern Underwriters Assn., 322 U.S. 533, 547, 553,

Quality Bakers of America v. Federal Trade Com-

misston, 114 F. 2d 393, 399 (C.A. 1).

2 Petitioners contend that there Is Tie competent

evidence adequate to support the Commission's find~

‘ings, because the supporting evidence consisted pri

marily of charts of mamufacturers’ sales to petitioners,

and these charts were improperly admitted in evidence

(Pet. 12-17). The charts, which were prepared by

Commission accountants to summarize information

disclosed by their investigation of certain corporate

records (see Pet. 30), were objected to on the ground

that they did not meet the tests of 28 U.S.C. 1732(a)

governing admissibility of records made im the regular

burse of business.” But §1732(a) applies only te

“court” proceedings, and petitioners” objection hased

on that section plainly was not well taken. Moreover,

it is settled, by statute * and by judicial decision, that

administrative agencies are not bound to adhere te

common law exclusionary rules of evidence. And the

apparent objection that the charts are of low proba-

tive value (Pet. 15) raises a qnestron of the weight of

the evidence, which is committed te the Commission,

not a reviewing court.

>See Examiner's ruling quoted by petitioners (Pet. 15).

‘Section 5 of the Administrative Procedure Act provides that

in administrative proceedings “any oral or documentary ev)

dence. may be received,” * * *. 5 USC. 1006(e).

*Willapaint. Oysters. Tne yo Foerng. VA KF. 2d 6768, 00-697 |

(CLA, 9), certiorari denied, Sos ELS. S60, See alsa Jon iteed.

Nhttes v. Kelley, 105 F, 2d O12 4A. 2): lnited Ntates v.

Recker. 62 F. 2d WOOT (CLA. 2): Donited States vi Cotter, 60 FF.

vd 689 (CLA. 2), certionari: denied. 287 TUS. 666.

6

A further question raised as to the sufficiency of the

evidence relates to whether the Commission satisiied

the burden of proof resting on it ina § 2(f) proceed-

ing to show that a buyer charged with violation knew

that the law prices which he had -received were price

discriminations legal under the provisions of § 2(a)

(Pet. 17- 19). In Automatic Canteen Co. v. Federai

Trade Commission, 346 U.S. 61, this Court held that

in a §2(f) proceeding the Commission has in this

réspeet the burden of going forward with the ev

dence, but the opinion also pointed to circumstances

which, if established, would satisfy that burden. :}44

U.S. at 79-81. In the instant case the court. below

observed tuat the very circumstances thus referged’

fo mm Automatic Canteen had been established (Pet.

28-291. Petitioners fail te show error in the court's .

reasoning or conclusion.

3. Petitioners’ final point (Pet. 19-20) is that their

conduct is given exemption by §4 of the Robinson-

Vatman Act, 15 U.S.C. 13b, which provides that noth-

ing contaimed in the Aet (whieh inter alia amended

§2 of the Clayton Act) shall prevent a cooperative

association from returning to its members its net earn-

ings In proportion to their purchases or sales from. to,

or through the association. - The same elaim of exemp-

fon, in a ease involving violation of €2(¢) of the

( layton Act, was made and rejected in ¢ Cuality Bakers

America v. Federal Trade Pomona. 114 F. 2d

393, 400. (CAL 1). The eourt belay dealt with the

contention aptly and decisively as follows (Pet. 30):

—Seetion 4 does. not confer Npen cooperative

associations any blanket exemption from. the.

7

Robinson-Patman Act. It only protects a co-

operative association from charges of violating

the Act premised upon the association's method

of distributing earnings. Sée Farmers Coa per-

ative Co. v. Birmingham, 86 [F.] Supp. 2Ol,

230 (NLD. Towa 1949). The fuet that earnings

which result from illegal activity may be dis-

tributed to the association’s members does not

insulate the association from prosecution for

the illegal activity. Clearly Section 4 does not

permit a cooperative to violate Section 2¢)-

even though ifs savings through receipt of dis-

eriminatory prices are passed on to its members.

= | _= CONCLUSION

The petition for a writ of certiorart. should be

dented. -

Respectfully submitted,

J. Lee RANKIN,

Solicitor General,

Roserr A. Bicks,

Assistant Attorney General.

CHARLES H, Weston,

2 Attorney

Danien J. MceCaurry, IR.,

(r¢ die ral Course ie

Anan B. Hoppes,

Assistant General Counsel,

Federal, Trade Commission.

SEPTEMBER, 1960.

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