Federal Trade Commission v. Henry Broch & Company

PETITIONER:Federal Trade Commission
RESPONDENT:Henry Broch & Company
LOCATION:Allen-Bradley Clock Tower

DECIDED BY: Warren Court (1958-1962)
LOWER COURT: United States Court of Appeals for the Seventh Circuit

CITATION: 368 US 360 (1962)
ARGUED: Nov 16, 1961
DECIDED: Jan 15, 1962

Facts of the case


  • Oral Argument – November 16, 1961 (Part 1)
  • Audio Transcription for Oral Argument – November 16, 1961 (Part 1) in Federal Trade Commission v. Henry Broch & Company

    Audio Transcription for Oral Argument – November 16, 1961 (Part 2) in Federal Trade Commission v. Henry Broch & Company

    Archibald Cox:

    Mr. Chief Justice, before the recess, I had pointed out that the respondent did not raise the subjection to the scope of the order when it was before the Federal Trade Commission upon the initial decision or the Hearing Examiner’s proposed order.

    Having failed to raise the question there, we submit, that he could not raise it in the Court of Appeals and that the Court of Appeals therefore erred not only in permitting him to raise it indirectly, but in modifying the order on its own motion.

    As I pointed out in answer to a question by Mr. Justice Harlan, the Federal Trade Commission Act and therefore this case defer from the National Labor Relations Act in preceding case.

    And the Federal Trade Commission Act and the Clayton Act do not contain any express provision declaring that the reviewing court shall not consider a question which was not called to the attention of the administrative agency.

    As a matter of history and language, I would think that no significance could possibly be attributed to the distinction because the fact is that the Federal Trade Commission Act and the Clayton Act were both enacted back 50 years — not quite 50 years, 45 or so years ago before our present notions of administrative law had thoroughly evolved.

    This Court has held on many occasions that the same substantive rule of law governs those agencies like the government cases coming from those agencies like the Interstate Commerce Commission and the Federal Trade Commission even though their basic statutes do not contain the same words.

    I suppose that the most complete and authoritative discussion of that point was in the Tucker Freight Lines case — Tucker Truck Lines case in 344 U.S., where again the statute did not contain this language.

    The Court said, “We recognized in more than a few decisions that Congress has recognized in more than a few statutes that orderly procedure and good administration require that objections to the proceedings of an administrative agency be made while it has opportunity for correction in order to raise issues reviewable by the courts.

    And that doctrine has been specifically applied to orders and objections to the form or scope of orders of the Federal Trade Commission in the Moog Industries case where the question was whether the effect — what should be the effective date of an order in order to avoid alleged unfair substantive advantages and the Court squarely held that since the point respecting the date of the order had not been raised before the Commission, it could not be presented to a reviewing court.

    I think I also pointed out in the Ochoa case that there are other decisions holding that it makes no difference whether the Court considers this kind of question on the request of a party or on its own motion and of course the absurdity of such a distinction is brought out in this case where the party raised it.

    The Court dismissed his motion and then on its own motion changed the order.

    One can’t believe that what really happened wasn’t that party raised a question and the court heeded its motion.

    Charles E. Whittaker:

    Is there a basis for saying that one does challenge the breadth of the order when he challenges the whole order and said you had no authority to make it at all?

    Archibald Cox:

    I would think — I would think not.

    Now, as said to Justice Frankfurter before the recess, I would think a challenge to findings or rulings with the respect to what was a substantive violation of the statute would necessarily imply a challenge to the parts of the order that were based upon the agency’s interpretation of the statute.

    And then let’s suppose for example that the argument in this case had been, that although Section 2 (c) applies to seller’s brokers and forbids the broker himself to pass on the brokerage to the buyer, actually hand the money to it that it does not apply where the broker simply reduces his brokerage fee and what is passed on to the buyer is left in the discretion of the seller.

    Now, I would think that if Mr. Rowe had raised that argument before the Commission that it would not — I don’t think it had any merits, but assume that it were held to have merit, I do not think it would lie in the Commission’s mouth to come before the Court and say, “Well, you raised that substantively but you didn’t object to an order that covered the second as well as the first,” but here you see, as I suggested to Justice Frankfurter before the recess, no one raised the question — no one raised before the Commission the factual question upon which the issue now before this Court depends if it gets to the merit.

    Whether the order should include references to other sellers or other buyers, depends before the Commission and here forgot the merit, on whether passing on this brokerage fee indicates that this is a fellow who is likely to pass on brokerage fees or indicates that this is a fellow who is likely to pass on brokerage fees in transactions between Canada and Smucker.

    In other words nothing to suggest, there was no objection raised that would suggest there’s something peculiar about the transaction between Canada and Smucker that couldn’t repeat itself in transactions between other sellers and buyers.

    And therefore, there was no objection raised that would direct the Board’s attention to that question which was the — one underlying I think, the basic scope for the order.

    So I would think that a blanket objection to the order based on entirely different grounds that would not suggest then and went only to matters of substance, it couldn’t in any sense be said to include an objection of this kind.

    John M. Harlan II:

    Could I ask you one question.

    This maybe entirely wrong, but I have dim recollection that at some stage along the line the Federal Trade Commission Act unlike the Labor Act provided not for enforcement of the order, but in effect for a — of the Commission’s order but in effect, the entry of a new order, an independent order by the Court.

    Archibald Cox:

    Your — there is a difference between the Clayton Act which is the one we’re dealing with —

    John M. Harlan II:


    Archibald Cox:

    — and the National Labor Relations Act.

    When the Federal Trade Commission makes it cease-and-desist order then the respondent may take it to the Court and secure review.

    No order of enforcement which is punishable by contempt could be made under the original Clayton Act at that stage.

    Therefore, in order — and that statute incidentally applies to this case so that in order to proceed for a violation of an order under the Clayton Act, the Commission must have a new independent proceeding finding that the order had been violated.

    Now that if there was no petition for review then of course that will be a second administrative proceeding.

    Archibald Cox:

    Having found that the order had been violated, it then could go to the Court for the enforcement of that order.

    And so here, regardless of the outcome of these cases as I understand it, respondent would not immediately be subject to citation for contempt if he violated this order.

    It would have to be a new violation proved before the Federal Trade Commission and then it could go to the Court getting an order of enforcement.

    John M. Harlan II:

    Well, I was just wondering whether that made any difference in the scope of the authority of the court to modify the order as it.

    Archibald Cox:

    I wouldn’t think it should because I would think that the underlying reasons were basically the same.

    As I see it, there are several reasons for this rule which I submit it’s a rule of administrative law applicable to all agencies as well as one embodied in some statutes.

    Certainly one reason is that it’s — it’s only fair to the other people concerned that you give the agency as was pointed out from the Tucker Truck Lines case that you give the agency an opportunity to consider the point before you go to court and attempt to undo everything that was done below.

    Now, the second reason I think as we’ve pointed out on several occasions is that the question on which the scope of the ordered depends is essentially a question of fact.

    If the question is raised before the agency so that it knows there’s some controversy about the scope of the order then it may either make its order on the record before it or it might order the proceedings reopened to take new testimony on this point, but if the respondent can lie back and not present it and then raise it in court, it may say the opportunity to build a record on the point has been lost unless, of course, the case gotten — go back with further delays and various motions.

    Then there’s another part which ties in with an observation that Justice Frankfurter made during the last case.

    If the point is raised before the agency, then the agency has an occasion to explicate its reasons.

    It has some — the case had been argued, it has some reason to spell out why it did what it did, but if there’s no indication that the issue was in controversy, it’s all too easy and unfortunately the agency do have to grind out a great volume of work, it’s all too easy not to bother to set it down because apparently, nobody is arguing about it and under the normal rule, having failed to raise the question for the agency, it wouldn’t come up in court.

    Now, I submit this is really important to judicial administration as well as agency administration because if as Justice Frankfurter has suggested, the reasoning of the agency is fully explicated, it gives the court an opportunity to pass a far wiser judgment upon the question on review and the thing which invokes the explication is raising the point below and if you don’t raise it below, there is no reason to use unnecessary ink and paper giving reasons for things that are requested.

    Then there’s still fourth reason I think that if the party is able to lie back and not raise the question before the agency, then if the order is too broad, it’s going to be rewritten in the Court.

    And that means that the framing of the final order will not be done by the expert body, the body that’s familiar with the theory, that has the specialized knowledge which this Court is often said was important to take in to account in writing an order but instead will be done, I fear too often in a somewhat verbal fashion as occurred in the First Circuit in the Ochoa instance without adequate appreciation of the differences between different kinds of violations of relations between parties who have different institutional arrangements and the like.

    Charles E. Whittaker:

    I wonder if Congress didn’t make that a function of the Court of Appeals, however, when it said it might modify the order.

    Archibald Cox:

    But I think it contemplated that the modification would be made on a record dealing with this and after the benefit of the judgment of the agency.

    Now, surely Congress didn’t remove this function entirely from the Courts, I don’t think that the thrust of my argument is that the Court couldn’t ever modify an order and neither do I mean to imply that it was bad — so bad that it couldn’t be done in any instance to have the Court modify it.

    All I’ve been saying is that it’s desirable in the greatest number of cases to have the modification of too broad an order made by the agency and that in order to gain that advantage, it is sound to require the parties to present the question to the agency.

    Now of course, if the order is too broad, not in the sense that it’s broader than it ought to be but it is too broad in the sense that it has no reason — could not reasonably be thought to have a relation to the threatened violations.

    Then of course, the Court must do the cutting down and the disadvantage I would mention would come about, but the rule of administrative law I suggest would at least reduce the number of those occasions and would seem to me to be sound administration from the standpoint of the courts as well as the agency.

    I’d like to pass on now and spend a few minutes discussing the case on the assumption which I hope to prove unfounded if the Court does conclude that the court below had the power in a loose end to reach the underlying question because we think that the Federal Trade Commission order, even if the questions were opened should be held proper here that it was certainly within the scope of the Commission discretion.

    I take that it’s common ground that the purpose of such an order is to prevent violations, the threat of which in the future is indicated because of their similarity or relation to those unlawful acts which occurred in the past.

    I’ve taken the language from Mr. Justice Stone’s opinion in the Express Publishing case and it seems to me a task which has been applied over and over again.

    In asking this, we should remind ourselves that the Commission is not limited to prohibiting the illegal practice in the exact form in which it was found to exist in the past, that it maybe somewhat broader.

    That the Commission has wide discretion that it may as the Court has often said, “Drawn its expert knowledge or generalize experience.”

    And the question is whether the order that was entered has no reasonable relation to what the purpose of the order should be to the — preventing the reputation of the kinds of conduct which one has reason to fear because of what occurred before.

    Now, in the instant case as a practical matter, the Federal Trade Commission on the issue now before the Court had only this choice. It could issue the order that it did issue forbidding the unlawful passing on of the brokerage in relation to sales on behalf of any seller, to any buyer or it could have made an order which said don’t unlawfully pass on brokerage when you’re acting as a broker for Canada Foods in selling to Smucker.

    There was no, virtually no practical in between ground and the order would, in this respect, have to be one or the other.

    Now, I submit first that this order conforms very closely to what the statute tells the Commission to do.

    Archibald Cox:

    It says that where the Commission finds that there have been violations of the act and so issue would caused to be served on such person an order requiring such person to cease-and-desist from such violations.

    Of course, the violations weren’t in any sense personal.

    There were violations regardless of the identity of Smucker, regardless of the identity of Canada Foods.

    The violation was unlawfully passing on brokerage and what the order entered by the Commission is, “Don’t pass on brokerage.”

    So that I think that it corresponds very closely to just what the statute told the Commission to do and it’s very close to what Justice Stone said in the Express Publishing case with respect to an order cease-and-desist from refusing to bargain collectively.

    There was an objection to that and the Court said, “The unfair labor practice was refusing to bargain collectively” and the statute said, “You shall enter an order requiring the respondent to cease-and-desist from the unfair practice.”

    I point out further that this is the kind of violation which is just as likely to be performed in relation to one buyer or in behalf of one seller as any other.

    There was nothing in the relations as I said before between Canada Foods and the broker that would suggest that he was more likely to do it with Canada Foods or in the relations between Smucker and the broker.

    Smucker was simply a big buyer.

    And if the broker was going to yield to this temptation for one big buyer, it was just as likely to be yield to the temptation for another big buyer in the future as that he would yield to it for this big buyer in the future.

    The record showed that’s — that respondent dealt in food on behalf of other sellers and on behalf — and in sales to other buyers.

    There have been cases where the Commission’s orders were narrower because the broker acted only for a particular buyer.

    In that event, it would be wrong to enter a broad order arguably at least just as in the case of the union which represents only the employee’s one employer, you don’t enter a broad general order.

    Here, the violation was certainly delivered in the sense that not that he necessarily that he knew it would violate the statute but it wasn’t the sort of thing you do negligently or accidentally.

    Neither was it the sort of saying which might happen in the labor case where you have a lot of foreman or straw bosses, who may do acts that you ultimately are held responsible for.

    This was a topside type of decision and was made conscious of what he was doing with a good deal of talk back and forth.

    That being true, we think that this case is entirely different from the Communications Workers case and that it is far more like the situation that was presented in the Mandell case where the Court said that the order the cease-and-desist by cover not only the failure — the misrepresentations that the respondents had made but also certain similar misrepresentations.

    It is like the Gypsum case where also the violations had occurred in one geographical area.

    The order covered other geographical areas or like the Cement case where the order — where the violation was a conspiracy between certain parties and the order also forbade them to conspire not only among themselves again but with other parties to engage in the same unlawful practices and for either reason independently, we submit that decision below was wrong and should be reversed.

    Earl Warren:

    Mr. Rowe.

    Frederick M. Rowe:

    Mr. Chief Justice, may it please the Court.

    I would like to, if I may, place the issue in the controversy in somewhat broader perspective than the presentation just included by the Solicitor General.

    First, let me say it is important to realize that we are not dealing with a penalty but rather a cease-and-desist order by an administrative agency which mirrors and reflects the words of the statute.

    It is highly synthetic, we submit, to put to one side the order, put the statute to the other side and say, “You’ve only attacked the statute.

    You never said anything about the order” and then to proceed, as if this proceeding had been conducted before the Commission and before the Court in a legal vacuum.

    The fact of the matter is that the cease-and-desist order as entered by the Commission is the exact reflection of the statute itself and that every contention that was previously raised by the respondent against the liability that was adjudged by the Commission was precisely applicable to the terms of the order as well because the order is the reflection of the statutory theory which the Commission promulgated in this case and which was at issue in the previous proceedings on the merits at the commission level and before every level of the judicial review.

    Let me say at the onset —

    Potter Stewart:

    Where is that — isn’t that argument gets you into a bit of trouble because the — you say that the order was an exact reflection of the statutory theory which the Commission followed and that theory was affirmed by this Court and therefore it would affirm the reflection of the theory.

    Frederick M. Rowe:

    The order was a reflection of the theory sir, but it went beyond what this Court’s very narrow majority opinion sanctioned and precisely the trouble that arose upon the remand as actuated by this Court’s very narrow decision on the merits was whether the order actually respected those limitations which the Court and its majority opinion wrote into Section 2 (c) or went beyond.

    Now, the situation was complicated by the fact that the Court of Appeals did not accept this attack on the order for going beyond the majority opinion of the Court, but instead took another attack and limited the order in another respect.

    Frederick M. Rowe:

    I might say if the Court please that the subject and the controversy over Federal Trade Commission orders and their meaning or their scope is not a new issue before this Court.

    It is a recurrent problem that has played judicial review in this Court, a Federal Trade Commission orders not less than six times in the last 12 years.

    The problem with these orders by the Federal Trade Commission that have been before this Court has been compounded that in most instances they have arisen out off and have reflected the prohibitions of the Robinson-Patman Act and have inscribed within their restrictive injunctive terms, the words of the statute itself which have been complexed and notoriously obscure and animated interpretations and conflicts such as the one which divided this Court’s decision in the Broch case by five to four judgment.

    These orders as symptomized by the order in the instant case in effect present two major facets of difficulty.

    First of course is the problem of the fairness to the respondent who is forced by the cease-and-desist order which merely reflect the terms of the statute to fathom the meaning of the order and to ascertain what it is really that he is prohibited from doing by the terms of the order — for the orders as the order in the instant case in – in essential part merely reflects the words of the statute itself and does not explicate and go on to detail precisely what conduct is prohibited apart from the vague and difficult proscription of the statute itself.

    And the second problem which is generated by an order of this kind as was noted Mr. Justice Black’s opinion in the Morton Salt case in 1948 which was the first time one of these orders created a controversy before this Court.

    The very vagueness and the obscurity of the prohibitions in the order in effect cast on the courts the responsibility which Congress invested in the Commission, namely of explicating what the statute means and of telling a respondent what it is that he may or may not do under the terms of the cease-and-desist order entered by the Commission.

    Now, with respect to the Ochoa case which preceded the Court’s consideration of this case, may I say just two things?

    The distinction between the Ochoa case, where the respondent in effect was happy with the order that was issued by his stipulation and the instant case which has been in litigation for four years as manifest, in that case, there was complete consent between the administrative agency and the labor union as well as the employer that the terms of the order which was being entered was satisfactory to both and so that there can be no issue in relation to the Ochoa case as to whether any dictato fairness to the respondent was over stepped by the action of the Labor Board in entering the order that it did.

    The only issue in the Ochoa case as we see it from the argument which has been presented the Solicitor General is the proper role of the courts in relation to the Labor Board’s responsibility in effectuating the national labor policy, the question being whether the Court may in effect [Inaudible] itself into the issue where the Board has made its peace with the respondents.

    In that case too, I understood from the Solicitor General’s brief that the Labor Board, at least recently, has adopted the policy of entering broad orders only in particular factual situations where a broad cease-and-desist order is warranted by the record.

    There is no comparable policy disclosed so far as the Federal Trade Commission is concerned as we have pointed out in our brief.

    As a matter of fact, in one day last year, the Commission under the very provisions of the statute here at stake issued more than 40 orders in the broad language of Section 2 (c), the brokerage clause of the Act and addressed to trade practices by the affected parties with all the world.

    And this is a type of order which we have here addressed to the respondent that Henry Broch and Company namely that in effect, in the words of Section 2 (c), in the words of the brokerage clause, he cease-and-desist for the future from violating Section 2 (c).

    The first part of the order gives one interpretation of what the Commission conceives the brokerage clause to command and that was the factual controversy before this Court namely that Broch, not accept a lower rate of commission at the same time as the seller reduces his price to a buyer.

    The second part of the order is a general injunction, which declares and commands the respondent to desist from violating the brokerage clause in any other manner against anybody else at any time in the future.

    We respectfully submit, if the Court please, that in view of the facts and the history of this case as reflected in the administrative proceedings and particularly as reflected in the review proceedings which culminated in this Court’s five-to-four decision on the merits that the Commission’s order goes far beyond the necessities of the case and reflects a blanket prohibition which leaves the respondent to compete forever at his peril and in effect shifts to the Court the Commission’s own responsibility of explicating just what it is that the respondent is prohibited from doing by the terms of the order which has couched in the vague and difficult statutory language of Section 2 (c).

    Felix Frankfurter:

    Mr. Rowe, I suppose when you say a five-to-four decision, you’re stating a historic fact and not any relevant element bearing on what was really decided.

    Frederick M. Rowe:

    No sir, I am stating a status, the hard fact from my view point but it has bearing insofar as the scope of the majority opinion defined the law as applied by the Court of Appeal on remand.

    So far as the facts are concerned which gave rise to this proceeding and there is a no controversy about them at this stage, they related to an isolated transaction by the respondent, Broch, relating to his dealings on behalf of one seller in relation to one buyer, Canada Foods.

    I don’t know what inferences were suggested in the argument of the Solicitor General as flowing from the record or from this conduct as we read the record and the record is perfectly clear, the respondent’s books and records were investigated at great length by the Federal Trade Commission.

    He cooperated in the investigation.

    As a result of this investigation, the Commission and the — and it so testified on the record of this case decided that one transaction affecting one seller and one buyer out of the multitude of business transactions reflected in the respondent’s books raised a legal question under the Act.

    The Commission representative who checked respondent’s books testified on the record in this case that no other transaction raised any question under the act in his mind.

    He further —

    John M. Harlan II:

    Where — where is that sir?

    Frederick M. Rowe:

    On old record sir, beginning at 19 and running over to 21.

    The specific reference Mr. Justice Harlan is on page 21 in the middle paragraph where the witness testifying is Mr. Carmichael who is the Assistant Chief of the Federal Trade Commission office in Chicago.

    This is on page 21 of the fact record.

    And in — and Mr. Carmichael stated in observing the different invoices etcetera, it appeared that throughout the year there was no violation that I could observe in the case of the different suppliers I examined.

    Frederick M. Rowe:

    And Mr. Carmichael, the Commission representative, also testified that he was shown by the respondent everything that he wanted to see in the course of his investigation.

    And Mr. Carmichael, the Commission representative further testified that he had interviewed respondent at the time the respondent’s books were thrown open to the Commission and that he was told by the respondent that he felt there was no violation of the Act.

    He conceded that a violation of the Section until a broker’s splitting his commission with a customer or passing something on directly to the customer and the Commission representative then argued with the respondent and told them that there was a violation also if there wasn’t any payment directly by the broker, but merely the broker had received a smaller commission and the Commission representative testified that Mr. Broch volunteered that he saw the merit of this argument but that it had been his understanding previously that to violate Section 2 (c), there had to be a direct passing on and he was violently against such a practice etcetera, etcetera.

    And the Commission representative went to testify on page 20 and said, “I do not believe Mr. Broch felt he was morally or legally guilty at all in this particular transaction with Smucker.

    I believe he thought he was acting entirely within the so-called Robinson-Patman Act.”

    The point of my reference to this Commission testimony Your Honor is to make perfectly clear that there is no controversy in this case about any scheme or any longstanding device or anything course of conduct of brazen violation of the statute but that what we have in the record at bar is a unique and isolated transaction on the part of this respondent who in good faith believed as he certainly had reason to believe in view of what previously had been a prevailing understanding of what the Commission was enforcing in this provision that he was not violating the Act by the single transaction which subsequently became the basis of the Commission’s charges.

    What is more, apart from in effect the exoneration of the respondent of other violations by the Commission’s representative as reflected in this record, the Commission in its complaint limited itself expressly to the one arrangement as between the respondent here and the particular seller and the particular buyer.

    The Commission’s complaint spelled out the respondent’s business that he represented 25 or more principals, but expressly confined itself in its charges to the respondent’s representation of Canada Foods and sales to Smucker and the particular commission arrangements which existed at that time, which the Commission challenged as violating Section 2 (c).

    The fear that might exist in some other case on another record, on the basis of the conduct charge and adjudicated of future violations, we submit that it’s non-existent in this case and is affirmatively refuted by the evidence as reflected in the record.

    What is more, again, as to bearing on the good faith or the proclivity for violations on the part of this respondent, his belief that he was acting within the law was certainly temporarily validated when the Court of Appeals set aside the finding of violation and which was ultimately reversed by a five to four decision by this Court.

    I might say when the case was before this Court on the merits, it was subsequently disclosed by one of the Federal Trade Commissioners that the Department of Justice or the antitrust division of the Department of Justice had recommended that no review be sought here because it considered the Federal Trade Commission theory erroneous and that the case nevertheless was taken before this Court by the Solicitor General who as the Court may recall, declined to take a position on the merits before this Court and in effect merely stated that he was presenting the Commission’s arguments.

    William O. Douglas:

    What is the relevance of that namely?

    Frederick M. Rowe:

    The relevant —

    William O. Douglas:

    You start counting judges, you had more judges on your side than the Government did.

    Frederick M. Rowe:

    The relevance of that Your Honor is not in terms of what positions the Government intramurally took but rather this that when the case was finally decided by this Court on the merits, the majority opinion by Mr. Justice Douglas was a very carefully, narrowly framed majority opinion which limited Section 2 (c) very carefully to the particular facts at bar and to the particular issue at controversy with express reservations of other theories of Section 2 (c) interpretation which this Court in its majority opinion declined to reach and declined to condemn.

    Felix Frankfurter:

    Are you arguing that the — that the order that is sought here to be sustained travels beyond what the Court decided in that case?

    Frederick M. Rowe:

    Precisely sir which is the reason, the basic reason for the challenge by the respondent before the Court of Appeals on remand in order to have the Court of Appeals confine the order within —

    William O. Douglas:

    I don’t understand the argument, but I don’t understand the argument that Department Justice had trouble making up his mind whether to take review or to seek review.

    Frederick M. Rowe:

    Perhaps the reason for stating that is once again to indicate the closeness of the case, the difficulty of ascertaining whether there was or was not a violation involved in relation to the respondent’s alleged proclivity for misconduct on the one hand and also as responsible perhaps, and we can only speculate, responsible for the very narrow compass of the majority opinion which was issued on the basis of the decision on the merits by this Court as subsequently reflected in the order.

    Felix Frankfurter:

    What you’re really arguing is that the Court below conformed to the mandate of this Court?

    Frederick M. Rowe:

    We certainly arguing Mr. Justice Frankfurter before the Court of Appeals that on remand, the order be conformed with this Court’s decision on the merit and mandate.

    The Court of Appeals did not accept our number one argument.

    The Court of Appeals went off on another point.

    Felix Frankfurter:

    Your argument gets down to that that what they did was to carefully read, it’s carefully framed in the Court opinion and then accommodate itself to its requirements.

    Frederick M. Rowe:

    That was our contention before the Court and I believe the Court’s judgement —

    Felix Frankfurter:

    Is it not your contention now?

    Frederick M. Rowe:

    Yes, it is.

    It is and that was the point we raised before the Court of Appeals in relation to the majority opinion and the law of the case in effect as declared by this Court.

    To be specific, in several places, the majority opinion of the Court laid great stress on the necessity of having a discrimination in favor of particular buyers in order to constitute a violation of Section 2 (c) within the meaning of the majority opinion.

    The Court twice pointed out that the vice of the transaction in effect was the reduction of the Commission by this broker to commit the seller and the broker to get a particular order from a buyer out of a discriminatory price.

    Frederick M. Rowe:

    Secondly, the majority opinion very carefully reserved and pointed out the fact that in this case the buyer was not shown who have rendered any services or engaged in any business methods which were deserving of recognition in the form of a lower price by the seller.

    And after the decision by this Court and upon the remand to the Court of Appeals, it was these two points which the respondent expressed before the Court of Appeals as being in effect defeated by the Commission’s blanket prohibition couched in the language of Section 2 (c) which did not require any presence of discrimination which in effect would prohibit conduct not discriminatory.

    William J. Brennan, Jr.:

    Mr. Rowe, do I get this — our remand was of course that further proceedings consistent with our opinion.

    Frederick M. Rowe:

    Yes sir.

    William J. Brennan, Jr.:

    And are you now suggesting that the — that in effect opened up the order without regard to any attention you may have given to the form of a — when it was before the Commission so that what was done by Court of Appeals to be tested here without reference to the prior history before this but only in respect of whether what we’ve done was consistent with our opinion.

    Is that it?

    Frederick M. Rowe:

    That is part of it Mr. Justice Brennan because as we will go on to detail, there were challenges to the premises of the order and there will be of course some question about whether the challenge was specific on our part before the Court of Appeals the first time around and before the Commission the first time around.

    However, we do say that even apart from how precisely or specifically our challenge was the first time around, the majority decision of this Court declared the law of the case at that time —

    William J. Brennan, Jr.:

    This is what I want to get cleared.

    At least, you’re arguing alternatively that we may set aside, ignore if you please, the whole history of the order up to the time we finally dealt with it here and then remand it for further proceedings.

    That what was then before the Court of Appeals on our remand by virtue of the remand —

    Frederick M. Rowe:

    Oh but the —

    William J. Brennan, Jr.:

    — was in effect an open order now that we treat it consistent with our opinion.

    Frederick M. Rowe:

    With the opinion of the Court.

    William J. Brennan, Jr.:

    That’s one of your grounds?

    Frederick M. Rowe:

    Yes sir.

    That is correct.

    William J. Brennan, Jr.:

    And now you’re going on — to argue that in the event.

    Frederick M. Rowe:

    Yes sir, that there were challenges a —

    William J. Brennan, Jr.:

    That satisfied the requirements.

    Frederick M. Rowe:

    — a prior requirement.

    That satisfied the requirements at least in the context of the overall proceeding as it developed.

    As I have stated, when the respondent upon the remand from this Court addressed himself to the Court of Appeals and sought action by the Court in light of the decision pursuant to the remand, the respondent pointed out that withstanding the careful limitations of the majority opinion of this Court, the order was a blanket prohibition which in effect penalized conduct by the respondent which was carefully carved out by the limitations of the majority opinion and hence in effect defeated the narrow limitations and the assurances which the petitioner drew from the majority opinion as it was finally framed and handed down.

    As a matter of fact, I pointed out that the majority opinion stated that there was nothing at bar at the time which indicated that the buyer rendered any services for which he might be complicated in a form of a lower price.

    This very reservation of a situation where services were rendered was defeated by the terms of the order which cut out, which excised from the language of the statute which the order in effect mirrored which cut out from that the reservation of payments made for services rendered and so, so far as the text of the order is concerned, even though services were rendered which according to the majority opinion might justify a lower price to the buyer, that would not, according to the terms of the order, be a justification for the price reduction.

    Let me state the impact of that order on the business of the respondent in its present form.

    So far as the order is concerned, this respondent cannot lower his commission fees in order to permit a seller to make a sale to a buyer at a lower price which is forwarded simultaneously with his fee deduction.

    In a situation of this kind where the respondent represents 25 seller principals, this means that the seller principal can lower his price and lower a broker’s commission by simply going to someone else.

    He can make such an arrangement with another broker so long as the basic price is justifiable under the statute.

    And yet, this respondent, subject to the terms of the order as drafted by the Commission cannot reduce his own commission in order to accommodate himself to such a situation and in effect must give up that business in a circumstance of that time.

    Charles E. Whittaker:

    That is, he may not do so under the order?

    Frederick M. Rowe:

    He may not do so under the order.

    Charles E. Whittaker:

    But may he do so under the Court’s judgment?

    Frederick M. Rowe:

    As we read the Court’s judgment Mr. Justice Whittaker of the majority opinion —

    Charles E. Whittaker:


    Frederick M. Rowe:

    — we stopped at the reservation that the particular price reduction by the seller was made in order to get a particular contract to favor a buyer who was not shown by services or otherwise to have deserved the lower price.

    In the situation which I posit, I have assumed that the buyer was deserving of a lower price and that such as a lower price was available to him under the statute and yet under the order, the respondent is barred from accepting a lower commission in that situation.

    Charles E. Whittaker:

    I’m looking at this language on page 175 of 363 U.S.

    This is not to say that every reduction in price coupled with a reduction in brokerage automatically compels the conclusion that an allowance to a new brokerage has been granted.

    As the Commission itself has made clear for this — such of reduction is tantamount to a discriminate — discriminatory payment of brokerage depends on the circumstances of each case, etcetera, and there is — I’ll read you more on that page 176.

    Frederick M. Rowe:

    Yes sir.

    Charles E. Whittaker:

    Now, therefore I’m wondering if you’re arguing that the order is broader than our judgment (Voice Overlap) —

    Frederick M. Rowe:

    Precisely Your Honor because under the opinion, the broker may well do this legitimately and yet, those assurances of the majority opinion are defeated by the order which says, “Without qualification and without regard to particular facts and circumstances that the broker may not accept a smaller commission when the seller lowers its price to the buyer.”

    And to that extent, among other points, the order goes beyond what this Court approved in the majority opinion as being a boundary upon the liability established by Section 2 (c).

    What is more as I — to illustrate another aspect where the order goes beyond what the Court approved as we read it, we do not see in the majority opinion any disapproval of the practice whereby the broker makes a permanent arrangement to accept, like stock brokers do, a lower commission rate on larger transactions because the majority opinion carefully points out that it is a discrimination made to get a particular order which is the vice of the transaction.

    Yet so far as the cease-and-desist order is concerned, the respondent is foreclosed and is prohibited from entering into a permanent arrangement whereby he would, like stock brokers do, accept a smaller rate of commission on more economical larger transactions.

    And I have pointed out where the Court’s majority opinion stressed the element of services rendered which were absent in the case when it was here on the merits, and yet so far as the order is concerned, the presence of these services would not nevertheless leave the respondent in violation of the blanket prohibition.

    In short, because the order goes beyond the law as declared by the majority opinion of this Court, the respondent at that stage felt, at least justified that the issue before the Court of Appeals and before the Commission upon remand of this Court’s decision which after all was the first interpretation in the history of Section 2 (c) by this Court was an issue which the Court of Appeals could consider and would certainly the Federal Trade Commission could consider at that stage since the law of Section 2 (c) as declared by this Court in its majority opinion of 1960 was certainly not precisely the law as it was understood prior to that majority decision in 1960.

    I think what we have pointed out about the orders being in an excess of a judgment of this Court which codified the majority opinion is borne out and corroborated by the fact that the Commission’s brief before this Court now, in effect gives belated assurances that the order doesn’t really mean what it says in so many words.

    For example at page 30 of the Commission’s brief in a footnote, the Commission takes on these points which petitioner has raised with respect to the order and the footnote goes on to say well, “The order must be read in relation to the circumstances of this case and hence, it’s not a blanket prohibition” and the footnote goes on to explain when we say that notwithstanding services rendered by the buyer, the broker would still be violating the order.

    To that we brief in the footnote response, there is nothing in the order that such circumstances would not be considered if the proper case and if the proper occasion arose.

    We respectfully submit, if the Court please, that now or when the case was before the Court of Appeals was a proper occasion to state what the order meant and not in a footnote to the Commission’s brief which gives assurances to the respondent that in effect he shouldn’t really worry about what the order says because when the proper time comes, it might not really be so prohibited and so blanket in its prohibition as the text of the order promulgates.

    Indeed the very assurances in the footnote of the Commission’s brief that the order doesn’t really constitute this kind of blanker prohibition, these very assurances are refuted by current precedence of the Federal Trade Commission which take the position, notwithstanding the majority opinion of this Court, in this case, on the merit that you really don’t have to have any discrimination in order to have a violation of Section 2 (c).

    And which also takes the position that services performed by a buyer are irrelevant and immaterial as a matter of law in a proceeding alleging a violation of Section 2 (c), the so-called brokerage clause.

    And in view of this current Commission precedence, which in effect dispelled the footnote assurances in the footnote of the Commission’s brief before this Court, we feel justified in taking the position that not only does the order literally go beyond the judgment of this Court, if the judgment reflects the majority opinion and its limitations, but that — these limitations and that this blanket prohibition in the order is not qualified by any extraneous consideration or any extraneous assurances which the Commission now tenders in a footnote to its brief before this Court to the effect that the order does not really mean what it says.

    Felix Frankfurter:

    Mr. Rowe, these — the Commission acted, would say were inconsistent with the Court decision in Broch?

    Frederick M. Rowe:

    Yes sir.

    Felix Frankfurter:

    Is that right?

    And this has been taken since Broch?

    Frederick M. Rowe:

    This has been taken —

    Felix Frankfurter:

    Where are they — are they referred in your brief?

    Frederick M. Rowe:

    Yes sir.

    Felix Frankfurter:

    Did the Commission deal with Broch?

    Frederick M. Rowe:

    The Commission deals with Broch as I see it in a rather equivocal way.

    The Commission cites Broch in a situation, which approximate the factual pattern of Broch.

    Felix Frankfurter:

    Discusses Broch?

    Frederick M. Rowe:

    But does not apply the rationale of — when it takes the position as it did, for example in the Venus Foods case which we have —

    Felix Frankfurter:

    Where are these requisites, Mr. Rowe?

    Frederick M. Rowe:

    On page 15, we have cited the Venus Foods case, page 15 of our brief.

    In that case, the Commission took the position that discrimination was irrelevant to the existence of a violation of Section 2 (c) of the brokerage clause.

    I believe, although I’m not sure that the case is pending in the channels of judicial review but I could not say that for a fact.

    However, that was the rationale of the Venus Foods case that discrimination is irrelevant and so once again, the assurances that are contained in the footnote of the Commission’s brief that perhaps services if properly rendered would be considered, although it doesn’t say that much.

    It just said there’s nothing in the order that says it wouldn’t be considered, we believe that are vitiated by the current course of Commission precedence which do not regard and do not give it — include considerations which were carved out by the majority opinion of this Court.

    I might say that the very necessity for the ad hoc interpretation in effect by the Commission of its order and its brief before this Court points out the vice of this kind of bifocal order where the Commission in effect throws the statute at the respondent and says, “Do not violate the statute anymore” and at that point, the matter is left up to the Court in review proceedings to really fathom what the terms of the prohibition are.

    This was the issue before this Court in 1948 in the Morton Salt case where at the end of the opinion and Mr. Justice Black pointed out in respect to one aspect of the order that the order was conditional.

    It wasn’t open-ended order and Mr. Justice Black’s majority opinion pointed out that this type of thing where the Commission leaves an order open in effect shifts to the Courts the responsibility in subsequent proceedings to explicate the law which actually is the responsibility of the agency itself.

    And I might say the Morton Salt decision has been followed within the recent few months by the Court of Appeals for the Second Circuit which also modified a Federal Trade Commission cease-and-desist order similar to the Broch case.

    In that case, the unanimous ruling by the Court of Appeals for the Second Circuit, the Swanee Paper decision which we have cited in our brief, the Court of Appeals in effect said, “We disapprove of the practice where the Commission in effect throws the statute at the respondent and at the Court and leave — leaves them to figure out what meaning is.”

    And by reference to this Court’s Morton Salt decision, the Court of Appeals for the Second Circuit in the Swanee Paper case also modified a Federal Trade Commission order, in that case, not by cutting it down to effect particular parties only but rather cutting it down, you might say horizontally by reducing its scope so as to reach only the particular type of trade practice which had been adjudicated before the Commission on the merits rather than the whole statutory prohibition which can include a multitude of different types of conduct.

    John M. Harlan II:

    I’m not sure whether you answered or met the Solicitor General’s basic argument here that — by comparing the rate as before the Commission, you’re out of Court.

    I realize what you said before that you can’t fragmentize to two things, but that doesn’t seem to be a very persuasive argument, right?

    Frederick M. Rowe:

    I’m coming to that sir and I would like to explicate that in some detail also.

    Felix Frankfurter:

    Well, when you say also, that’s the heart of the business, isn’t it?

    Frederick M. Rowe:

    It is the heart of the business Your Honor but I feel I should outline the history of the proceedings before exposing what the nub of the case is from the jurisdictional point of view. Perhaps related to the question and I will come to the jurisdictional question of the —

    Felix Frankfurter:

    Only requiring a few more words on the part of counsel.

    Frederick M. Rowe:

    Very well sir.

    In relation to the relationship of the Courts and the agency and that is the jurisdictional issue, namely what is the proper role of the agency and what is the proper role of the reviewing court on review of an administrative cease-and-desist order?

    That is the jurisdictional issue.

    Collateral to that is the question really of whether the Commission by issuing blanket or boilerplate orders in effect shifts to the Court its own responsibility of expertise of framing orders based on its expert administration of the statute and based on its expert assessment of the competitive practices reflected by the record.

    We think, and again, I shall go on to detail that — that it ill behooves the Commission to lay such exclusive stress on its right and on its power and on its prerogative to issue these orders on the basis of its expertise when in effect the order is no more than a boilerplate version of the statute that shifts up to the Court of Appeals the meaning of the prohibition which the order incorporates.

    Frederick M. Rowe:

    Now as to the more specific jurisdictional point which has been described in the Commission’s brief by reference to the principle of the exhaustion of administrative remedy, the point that the petitioner or the respondent on this case in effect didn’t exhaust his administrative remedies and more or less comes in here as an afterthought, after midnight with their point which no one every dreamed really existed in this case.

    In regard to that, as I started out by saying, it must realized that we are not dealing with a situation where we can separate the liability from the judgment.

    It’s not a matter of saying, “Well, we might have been liable, but the penalty is too high, $50,000 is too much” and whereby then someone could say, “Well, you should have thought of that sooner.”

    The order in this case is virtually in paragraph 2, a verbatim copy of the statutory provision.

    Right from the outset, from the fact — from the time that the complaint was filed, the respondent resisted that allegation and resisted that theory which culminated in the Commission’s judgment as reflected in its order.

    The respondent contested liability when the issue was in hearing before the trial examiner of the Commission.

    The respondent stated that as a matter law, the acceptance of a lower rate of Commission by a broker at the time the seller got a lower price was not an offense against Section 2 (c).

    Precisely that is what the order says. Perhaps the respondent could’ve drawn a picture before the examiner and said, “We are attacking this theory of the Commission, not only as respects the liability but we’re attacking the same thing as respects the order.”

    Perhaps in retrospect that would have been the more cautious thing to do.

    The fact of the matter is, however, that my contesting the liability before the examiner and before the Commission as reflected in the order, the respondent in effect contested — he reflects on that liability in the cease-and-desist order.

    What is more again in relation to the principle of exhaustion of administrative remedies which is a sound principle and there is controversy about that here.

    We understand that principle to be not a boggy or a quibble but a reasonable instrument for ensuring that the agency gets a first crack at the issue which ultimately goes before the Court so that the agency can apply its expertise to the problem and can avert errors before there is any necessity for the Court to get in to the picture.

    There is no controversy about that aim of the principle and we have no quarrel with it here.

    We think the counterpart of that principle is that a respondent should not lay back or hold back and wait till midnight before he comes up with a legal argument which defeats all of the previous administrative proceedings if he thinks of it for the first time before the Court.

    Felix Frankfurter:

    Mr. Rowe, that’s [Inaudible] this question, but I’m puzzled of the number of cases to which this is one in which solid interest as I assume the respondent here is, the Swanee Paper Company was that sizeable interest, interest of substantive law in substance represented presumably by competent counsel to lead that counsel to be parsimonious in the objection they raised that they don’t use a second arrow and the content of self of a single arrow.

    How do you account for that?

    Frederick M. Rowe:

    Mr. Justice Frankfurter, in the context of this case, first of all, when we came before the Court of Appeal the first time around, the respondent did —

    Felix Frankfurter:

    I’m talking about what transpired before the Commission?

    There are all these serious num — quite a number of cases of this sort, aren’t they?

    And it seems to be almost — what shall I say — a habit, if you forgive me for repeating, a habit of parsimonious objection.

    Now that isn’t usual tendency of the merit and counsel.

    Frederick M. Rowe:

    One answer and I don’t know whether it is a god or an adequate answer sir is that before the Commission, the practice of exceptions did not exist at the time this case was before the Commission.

    All that the Commission required was a statement of questions involved and to be argued on the appeal.

    It wasn’t a matter of detailing point per point where the care and caution of the responsible counsel could then — could come into play to be complete.

    It wasn’t that kind of thing at all but rather a statement of the questions involved and to be argued.

    Felix Frankfurter:

    But you saw the order when they framed it against your client, didn’t you?

    Frederick M. Rowe:

    We saw the order and we attacked the premises of the order and each ramification.

    We said that this is an isolated transaction of [Inaudible].

    It does not warrant a commission proceeding in the public interest to single out a particular transaction on the part of this respondent.

    We also said that there’s no violation for a respondent broker who accepts a lower rate of commission to facilitate the reduction in price by the seller to the buyer.

    Felix Frankfurter:

    But you didn’t go on and say, furthermore this is so isolated in instance — an incident in our view that the Commission does wrong in buck shooting this — in making a comprehensive universal of prohibition.

    Frederick M. Rowe:

    The Commission Your Honor had been buck shooting in this area for some years.

    Perhaps in retrospect, it might have been more imaginative, more cautious, more prudent to have added on to the list but certainly at the time and certainly before this Court’s decision on the merits in this case, it would have been a — in our view, a feudal gesture.

    It is when this Court decided this case on the merits, when Section 2 (c) was interpreted by this Court for the first time and the fashion that it was interpreted that it was not a matter of the Commission being completely wrong on liability which we certainly thought and in retrospect, we are sorry that we thought was an evident only then when the law was narrowed by the majority opinion.

    It became clear that apart from what the statute now meant, the order went beyond the judgment of the Court because of the Court in its first interpretation of Section 2 (c) had construed the statute to be of a narrower import than the Commission’s order.

    Before that, the order was the same as the statute, only then was the order larger than the statute.

    Earl Warren:

    Would you have raised — raised this question before the Commission and had it decided against you and then had gone to the Court of Appeals on it the first time, couldn’t you have had the final decision on this matter the first time it was up in this Court?

    Frederick M. Rowe:

    Well, Mr. Justice, before the Court of Appeals, we did refer to the fact that the Commission’s order was vague, exceeded the language of Section 2 (c) and controvert — and it was in conflict with the Sherman Act.

    We stated that in our bill of exceptions in effect before the Court of Appeals, but certainly the brunt of the attack is and was that the Commission at that time had interpreted the statute in excess of the congressional language and purpose.

    And the order merely doing the same thing, we certainly felt was not a separate ground of challenge except as we did list it in our list of exceptions, but rather that the arguments so far as the order was concerned was included and was subsumed within the argument addressed to liability which at that time was the same as the order.

    Earl Warren:

    Was there anything in the record to indicate why the Court of Appeals in this latest proceeding denied you modification of the order and thereafter on its own responsibility did exactly what you asked them to do?

    Frederick M. Rowe:

    I can only speculate as the Solicitor General did but perhaps I can speculate a little better because the Court of Appeals in this case did not give petitioner the relief which the petitioner had asked for.

    We asked for a complete setting aside of the Commission’s order and then went on to argue that apart from that the judgment of the Court as giving effect to its majority opinion was an independent reason for limiting the order and so perhaps since the Court didn’t want to give us complete relief, it gave us what relief it did give on its own motion.

    I have no other explanation than this.

    Earl Warren:

    Suppose the — suppose the Court had granted you — you the relief —

    Frederick M. Rowe:

    That’s what he’s saying.

    Earl Warren:

    — instead of doing it on its own motion, would the case be in any different posture for us?

    Frederick M. Rowe:

    No sir.

    I treat the fact of the Court’s acting sua sponte to not create any significant difference for purposes of this Court.

    It could have done it by granting in part the respondent’s relief rather than denying it in its entirety and then coming up with some relief of its own.

    William O. Douglas:

    I will suppose that the only issue left open by our decision with the scope of the decree.

    Did you reargue the merits down there on remand?

    Frederick M. Rowe:

    We didn’t reargue the merits.

    We did say, and Mr. Justice Douglas, that there was evidence in the record which met some of the qualifications expressed in this Court’s majority opinion.

    We were — the Commission said we were rearguing the merits but I think that’s argument.

    The scope of the order was the principle thing.

    We requested that the order be set aside or limited in relation to the majority opinion.

    I might also say this coming back to Mr. Justice Frankfurter’s point, whether the principle of exhaustion of administrative remedies was in this case satisfied or flouted.

    As I understand the principle, it is that the agency had a fair chance to pass on the issue before it gets to the Court.

    Now what we have in this case is not only an admission, an express admission by the Commission in its brief that it did consider the scope of its order, which I should think would be satisfying the point that it didn’t have a chance, but in addition, the Commission declined on two occasions, further opportunities before the Court of Appeals on the remand to reconsider its order.

    Frederick M. Rowe:

    And so if the point of the principle is that the agency not to be ambushed by a surprising legal development which it did not have a chance to consider, certainly in this case, the point is met by the fact that the Commission admittedly did consider the scope of its order in light of the evidence and number two, when it again was given opportunities before the Court of Appeals to consider the order, it declined these opportunities.

    And I would like to refer briefly to our motion before the Court of Appeals because I believe the Solicitor General in his argument might not had done complete justice to what the opportunity was that the Commission had.

    We stated before the Court of Appeals, and this is at the page 49 of the new record, the small record, if the Court should conclude that the issues tendered by petitioner were non-sufficiently explored by the Commission at the administrative level, the proper course would be to remand to the Commission for further appropriate consideration rather than to foreclose all opportunity for a ruling on the merits.

    The reason we said that Your Honor was that when it was suggested that one alternative way to proceed was to remand for further Commission consideration.

    The Commission came in to the Court of Appeals and said, “The Court has no power to consider this issue.

    It is all closed because the petitioner didn’t raise it the first time around at the administrative level” and it was in response to that argument by the Commission namely that the Court of Appeals had no power to look at the order at this stage that we came forth and suggested, “Well, if this is so, if the Commission itself wants to consider the orders or more in light of the majority decision here, it should do so.”

    John M. Harlan II:

    Did the Commission also argue alternatively that there was power in the Court of Appeals to consider that the order should not be modified.

    Frederick M. Rowe:

    No sir.

    The Commission had no time before the Court of Appeals defended the order on the merits.

    John M. Harlan II:

    It stood simply on the so-called jurisdictional —

    Frederick M. Rowe:

    They stood on the jurisdictional ground, yes sir and so actually, the Court of Appeals had no views of the Commission as to the merit before it at the time he’d made his modification.

    And one additional point I would like to mention in that connection, the Commission at no point petitioned the Court of Appeals for reconsideration that its order was modified.

    To be sure, the order of the Court is rather naked and Delphic, it doesn’t have any opinion attached to it and we are left to speculate as to the whys and wherefores.

    But unlike the Labor Board which in the Ochoa case went back to the Court of Appeals and secured from the Court of Appeals an elucidation and an explication of its action, the Federal Trade Commission in this case stood fast for the second time.

    And so what is before this Court is necessarily a ruling by the Court of Appeals which did not have the benefit of a Federal Trade Commission explication as to its order.

    As a matter of fact, the first explication by the Commission for its order is in the footnote of the brief filed by the Solicitor General for the Commission before this Court in which we are sure that the order isn’t really as broad as the text that might dictate because some of these other considerations might be taken into account at a later date.

    Felix Frankfurter:

    Mr. Rowe, will you — please give me some pleading information about the power of the Commission to review its order in relation to the petition for review.

    As I read 15, the 59 Amendment, 21 (b), as I read it and therefore I ask you if I’m right about that, the Board asked the — the Commission section as you deal generally with Commissions and the Board, but the Commission has power from its motion to reconsider, do I suppose to reconsider it’s order prior to the finding of a review in the Court of Appeals?

    Once a petition for review is filed, I should think the Commission can’t inject itself in the situation, can’t it?

    Frederick M. Rowe:

    I believe I have an answer to that Mr. Justice Frankfurter in that, the new amendment of the Clayton Act in 1959 —

    Felix Frankfurter:

    That’s what I’m reading from.

    Frederick M. Rowe:

    — makes that Act synonymous with what the Federal Trade Commission Act was previously and that Act has been construed by the Court of Appeals for the Fourth Circuit to the effect that the Commission upon remand —

    Felix Frankfurter:

    On remand, yes.

    Frederick M. Rowe:

    — upon a conclusion of — of a review proceeding may modify its order.

    Felix Frankfurter:

    On remand, but if there is a — but may it — may it take any action after there is a petition for review filed during the statutory theories.

    Do you say yes?

    Frederick M. Rowe:

    It may and it has —

    Felix Frankfurter:

    Let me read it to you.

    After the expiration at the time allowed for filling a petition for review, if no such petition has been duly filed within such time, the Commission may [Inaudible].

    Frederick M. Rowe:

    The Commission in several cases during the pendency of judicial review voluntarily before the Court of Appeals and even before this Court modified its order by, you might say voluntary consent, before the Court, during the pendency of the case.

    Felix Frankfurter:

    The Solicitor General so indicated but I — alright, if that’s what the statute — to be construed.

    Judge Moore in the Swanee case says, Swanee did object to that and at the time this was filed, the Commission could have modified.

    Swanee did object to the order, however in its petition to review and at the time this was filed, the Commission could’ve modified its order if it had so wished and if [Inaudible] 15 U.S.C.A., 21 (b).

    So I went to 15 U.S.C. 21 (b) but that isn’t the way I read it.

    In reading, I’ll be wrong with it.

    You tell me the practice says — practically says the opposite wasn’t what the statute said, I’ll accept your word for it.

    Frederick M. Rowe:

    If Your Honor please, without having the exact word of the statute before me, the Commission before the Courts of Appeals and before this Court —

    Felix Frankfurter:

    I’ve read (Voice Overlap) if that the word — the exact words were, after the expiration at the time allowed for filling a petition for review, after the expiration of that time.

    If no such petition has been duly filed within such time, now do they read out the “if” clause?

    Frederick M. Rowe:

    Perhaps the solution lies in what the word modify means.

    Perhaps when the Commission comes before the Court of Appeals and says, “We drop this part of this order.”

    That isn’t the modification and perhaps that maybe the answer to the riddle because in a number of cases, we have cited some in our footnote the Commission before the Court of Appeals, and as the matter of fact, before this Court only three years ago in the Standard Oil case by virtue of the brief of the Solicitor General said, “We don’t want this part of the order anymore.

    We abandon it” and in effect, that works the modification without being so and (Inaudible).

    Felix Frankfurter:

    I suppose speaking for one if I saw something like that.

    I take his words first and I wouldn’t go to the statute, but then you’ve taken this or rather Judge Moore has taken me to the statute, I might say I’m (Inaudible) by having it get some more doctrines upon it.

    Frederick M. Rowe:

    After this stage Mr. Justice Frankfurter and related to (Voice Overlap) —

    Felix Frankfurter:

    Any how that wouldn’t — doesn’t turn — determine this case one way or the other.

    Frederick M. Rowe:

    No sir, it does not but I believe it points out that the Commission even at this stage, at this very moment, before this Court as in other cases if it were inclined to do so could modify its order and could concede that part of its order was not valid in reference to the facts of this case and on this record.

    Felix Frankfurter:

    And in all events, you’re not like the Swanee case because according to my reading of it, in the Swanee, there’s an objection to the order upon filing of the petition for review.

    Frederick M. Rowe:

    As in — in our case if Your Honor please.

    Felix Frankfurter:

    [Inaudible] isn’t it?

    Frederick M. Rowe:

    Upon our case in the Court of Appeals even on the first petition, the respondent pointed out and this is at page 14 of the record, the order of the Commission is defective —

    Felix Frankfurter:

    (Voice Overlap)

    Frederick M. Rowe:

    The fact record sir, page 214 of the fact at the very bottom, Number 7.

    The order of the Commission is defective and that it is vague, exceeds the statutory limits of Section 2 (c) and is applied with conflict with the Sherman Act.

    Felix Frankfurter:

    So your objection, isn’t that it’s vague, that it’s too clear.

    Frederick M. Rowe:

    Our points are before the Court of Appeals was that it exceeded the limits of Section 2 (c) and certainly when this Court’s majority opinion confined the limit of Section 2 (c).

    At that point, the breadth of the order which went beyond what the majority opinion construed Section 2 (c) to be was the principal basis for our challenge before the Court of Appeals.

    In conclusion, I would like to say this and this is perhaps a very general statement but — of applicability to cases as symptomized by the instant case.

    The Federal Trade Commission has been invested with tremendous responsibilities by the Congress to regulate the area of competitive practices and has belonged in the application of these statutes best in the expertise which has been conceded to it by the Courts.

    Frederick M. Rowe:

    We respectfully submit that it does no honor to the Commission’s expertise to issue boilerplate orders in the words of the statute and leave the respondent in the dark as to their meaning and in effect shift to the reviewing courts the task of fathoming the meaning of the order in the context of review and enforcement proceedings.

    Earl Warren:

    Mr. Solicitor General.

    Felix Frankfurter:

    Mr. Solicitor, may I put you to my problems and then I’ll leave you alone.

    One, would you care to comment on the repeated suggestion by Mr. Rowe that these orders are boilerplate, namely that they’re automatic, mechanical things, secondly, I invite your comments on his comment on your footnote on page 31, namely that this order put them to jeopardy in finding out what is right to (Inaudible) —

    Archibald Cox:


    Felix Frankfurter:

    — and by careful conscientious businessmen pursue restriction from doing business which proceedings may show are not within the contemplation (Voice Overlap).

    Archibald Cox:

    May I — may I comment on that first and in a slightly larger context because that — I will deal with it specifically but that was the part which I rose to deal with anyway.

    There’s been a suggestion or at least a question raised as to whether the modification made by the Court of Appeals was an attempt to conform the order to the opinion of this Court and I must respectfully submit that that clearly is not what the Court of Appeals did and would equally say that the effort to change the order was in no sense an effort to clarify any of the points as to which Mr. Rowe says it was uncertain.

    Now, let me be specific.

    In the opinion of this Court, there are three points on which Mr. Rowe sees this.

    One, in the course of his opinion, Mr. Justice Douglas called attention to the fact that this was an ad hoc passing on of brokerage in an effort to get a single big sale.

    And Mr. Rowe says, “Well, then maybe we ought to be able to pass on brokerage in connection with big — all big sales.”

    And that’s a point which the Supreme Court did not adjudicate and the order should be modified to clarify that issue.

    Second, he says that with respect to cases where the buyer may render some services, that if that — the Court held that situation to open and did not say whether brokerage could be passed on in that situation, I would most effectively disagree with him.

    I think the — no, in that case, the Court did hold that situation open.

    It’s the third one where I would disagree with him.

    Third, he says there maybe situations where their economies in connection with the sale to a particular buyer and that those savings and costs might justify passing on of brokerage.

    It seems to me that the Court clearly did say no to that point.

    In any event, when Mr. Rowe went to the Court of Appeals, I think he had — we’ve — would’ve disagreed but possibly had a plausible argument that the language of Section, paragraph 1 or paragraph 2 of the order was broad enough to forbid passing on brokerage under those three circumstances which were perhaps held — which were held open in two cases, perhaps by the opinion of this Court, but those are modifications that the Court of Appeals refused to make and the order — the mandatory — the parts of the order dealing with what kind of practices you can follow were left in turn by the Court of Appeals.

    It didn’t change those.

    If it had been deforming to the order of this Court so as to leave it open whether those practices were permitted or forbidden, it would have changed the part of the order that deals with what it is that Broch is forbidden to do.

    Felix Frankfurter:

    What if you cut down the incidents of the applicability of what this Court had forbidden and what the Court of Appeals carried out then you necessarily cut down the area of applicability.

    Archibald Cox:

    But not as far as you would have cut it down if that had been your theory.

    It is true that if it is too broad in these respects then he has heard somebody order it is now issued but not as much as he would have been.

    But the point that — the point of the Court of Appeals dealt with is the point that was never raised in any stage before was simply the inclusion of the words to any other buyer.

    Now, second with the respect to the — whether this — the order is uncertain in these respects, what we were trying to say in our brief is this, add a little preference.

    First, it is quite clear under the prior decisions cited in Mr. Justice Douglas’ opinion and under the Commission’s ruling that the fact that the buyer has rendered some services is not a defense in a case under Section 2 (c).

    It’s true that Justice Douglas did not pass on that but it’s been passed on plenty of time by Courts of Appeals.

    Similarly, it’s quite clearly the Commission’s view that the fact that there are some alleged economies in connection with the sale is not a defense under Section 2 (c).

    There’s no question about what the order means and what it forbids in the Commission’s view.

    Archibald Cox:

    What we were seeking to say was that if later this question comes up and it turns out that the Commission is wrong, the statute has some exceptions that the Commission didn’t foresee, then as stated by Mr. Justice Clark in the Ruberiod case, the order can be read to be cut down and that it won’t interpreted to cover everything conceivably within its terms.

    Potter Stewart:

    But in the meantime, in the meantime, this petitioner will be in contempt for actions which (Voice Overlap) the legality of (Voice Overlap) —

    Archibald Cox:

    But he won’t — in this case, he would not be (Voice Overlap) —

    Potter Stewart:

    (Voice Overlap) —

    Archibald Cox:

    In this case, he would not be in contempt because this order, a violation of this order cannot result in contempt.

    Felix Frankfurter:

    Or at least it will cut down (Voice Overlap) —

    Archibald Cox:

    You see this is under the old statute.

    Potter Stewart:

    Oh, yes, yes.

    Felix Frankfurter:

    But at least, it will cut down his freedom of business action, so what may turn out then in a law of freedom of action under the law —

    Archibald Cox:

    Well, if —

    Felix Frankfurter:

    Now, if he is doubtful, he will — a careful businessman or a conscientious businessman might (Inaudible) take a chance or —

    Archibald Cox:

    Well, he knows perfectly well that what the Commission’s view of the law is and —

    Felix Frankfurter:

    So that that’s wrong somewhere then?

    Archibald Cox:

    But —

    Felix Frankfurter:

    They can (Voice Overlap) —

    Archibald Cox:

    Oh alright, these points, what the Commission’s view is, it’s perfectly clear Your Honor.

    There’s no uncertainty about the Commission’s view.

    There’s no uncertainty about the view of the Court of Appeals.

    I see my time has expired.

    Felix Frankfurter:

    Well, would you —

    Archibald Cox:

    Oh excuse me.

    I think that it is not fair to say that the Commission’s orders are boilerplate.

    The Commission — the suggestion that’s made, in Mr. Rowe’s brief, this is a recent habit of issuing much broader orders.

    It is true that the Commission feels generally speaking that the inference from a violation of Section 2 (c) is that the likelihood of other violations of Section 2 (c) is so great, but unless something special appears, the prohibition should be as broad as that provision.

    I point out that it is itself a comparatively specific restriction.

    Felix Frankfurter:

    Is there (Voice Overlap) —

    Archibald Cox:

    On the other hand —

    Felix Frankfurter:

    — the argument if I may, that is, if the argument that you made in reference to an employer’s anti-union buyer to be analogized to this situation?

    Archibald Cox:

    Well, I would — I would think that fairly could be.

    I speak with less conviction on that.

    Archibald Cox:

    In one case I feel that I can speak with something approaching the expertness of the Board.

    In this case, I feel that I don’t have the knowledge, but it seems to me that the same argument would be a rational and reasonable one.

    Now, as I understand the Commission’s view that although it’s a normal case, it would feel that a violation of 2(a) should result in the kind of order — 2 (c) should result in the kind of order entered here that if there were some special circumstances, it would consider them and it might issue a narrower order.

    Suppose for example that Broch were buying only for a particular firm then the order would not be general in relation to these purchases and there are cases that indicate that.

    Equally if he were selling only for a particular firm, it would not be general and one can imagine other cases where there were special facts.

    So I don’t think that it is quite true to say that they are invariably boilerplate, although I would not want the Court to go away thinking that the Commission held a review other than that a violation of 2 (c) normally should result in an order of that scope.

    John M. Harlan II:

    Could I raise one more question?

    Assuming that the view should be taken that the Court was not barred in considering (Inaudible) — would you care to comment on the questions for whether there’s any practical use in sending this back to the Commission?

    Archibald Cox:

    Well, I think that assuming that it were not barred, that — I hesitate to comment because I can’t — I would like — I don’t like to say yes —

    John M. Harlan II:

    Well —

    Archibald Cox:

    — when I am not able to think of the circumstances —

    John M. Harlan II:

    Well, could I —

    Archibald Cox:

    — that might be developed under this theory.

    John M. Harlan II:

    Can I — can I make this comment and then see whether you would think this was unreasonable comment.

    The Commission has been defending its order across the board here, to use a colloquialism.

    It’s done in it in the Court of Appeals, it stood on the question of power, it’s taking the same position up here through you because you argued as an alternative proposition that if there was power, the order was alright.

    Therefore, what practicable reason would there be assuming that one would disagree with you on the question of power in sending with Com — in sending the order back, sending it both back?

    Archibald Cox:

    Well, I — I can’t in good conscience say that there are other circumstances that might be developed.

    There may well, I don’t feel as I — I’m well enough advised to — advice the Court on that.

    There is another reason Mr. Justice Harlan that does suggest to me that that would be a thoroughly appropriate course.

    Looking at this problem, a problem of excessively broad orders in somewhat broader perspective, I am persuaded at least that if there is a problem in this area and the communications were this case several terms goes suggested there may have sometime to be that the place to correct it is before the agencies and that the one — and that is partly the responsible of counsel who appeared before the agency because what you are to do is to get the agencies to direct their minds to this problem.

    And then one of the first ways to do that is to make sure that the rule that the agency must have an opportunity to consider is enforced.

    Now, sending this back would at least go part way to make sure that the agency got the opportunity.

    Then if the agency is issued boilerplate, well of course it’s an opportunity for the Courts to step in.

    But the thing has been brought back to the critical point and I would think as a matter of general judicial administration quite apart from the peculiarity of this case that that would be a way of emphasizing, that the things must be raised for the agency rather than encouraging counsel to drag out, especially a trade regulation proceeding by picking it up piecemeal at various stages as they think of objection.

    John M. Harlan II:

    Of course, the other side as a dragging out is if there’d be considerable dragging out of that conclusion.

    That of course is — fall in this case.

    Archibald Cox:

    Yes, but I think the total dragging out overall that — would be less and if Broch is as good as Mr. Rowe says, he is — isn’t ever going to violate again, there’d be no great harm.

    Hugo L. Black:

    Must we constitute — continue to say raise before the [Inaudible] the rule required should be raised at the time the appeal is taken to the full Commission.

    Would you be making this argument that this had to be a rigid application as a rule if they had raised it before the agency itself?

    Archibald Cox:

    You mean by a petition for rehearing?

    Hugo L. Black:


    Well, the agency, the agency – [Inaudible] they forget — didn’t for some reason didn’t raise it on that appeal from the hearing officer to the Commission.

    Archibald Cox:

    Well, I would think my case will be quite — quite different then the question would be whether it was unreasonable for the agency to stand out of proposition that you must raise such a point the first time, but it would give the agency all the opportunities to consider it.

    Felix Frankfurter:

    Well — go on.

    Archibald Cox:

    That — that really ended the sentence.

    Felix Frankfurter:

    Well, you wouldn’t — I didn’t gather through your argument that you thought that it must be raised, how could it be raised before the hearing officer?

    I mean timing up, therefore his report comes to the Commission.

    Archibald Cox:

    As I understood Mr. Justice Black, maybe I misunderstood him, he asked me to consider a case in which the respondent did not object to the scope of the order at the time the hearing officer made his report.

    Hugo L. Black:

    Which is the time the rule required.

    Archibald Cox:

    That’s correct.

    But asked me to consider, asked me whether I would be making the same arguments here, if the fact were that Broch had raised this question before the Commission in a petition for rehearing and I said that then I thought that many of the arguments that I made here would not be applicable that then would be — I still make the argument that the interest of orderly administrative process required him to conform to the Commission’s rule and the Commission adopted unfair and enforcing its rules, but the argument would have to be somewhat different.