Federal Trade Commission v. National Lead Company

PETITIONER: Federal Trade Commission
RESPONDENT: National Lead Company
LOCATION: California State Capitol

DOCKET NO.: 63
DECIDED BY:
LOWER COURT: United States Court of Appeals for the Seventh Circuit

CITATION: 352 US 419 (1957)
ARGUED: Dec 12, 1956
DECIDED: Feb 25, 1957

Facts of the case

Question

Media for Federal Trade Commission v. National Lead Company

Audio Transcription for Oral Argument - December 12, 1956 in Federal Trade Commission v. National Lead Company

Earl Warren:

Number 63, Federal Trade Commission versus National Lead Company.

Mr. Kintner.

Earl W. Kintner:

May it please Your Honors.

This case concerns the validity of a cease and desist order issued by the Federal Trade Commission which order the Commission feels is necessary to terminate a price fixing conspiracy that existed in the lead pigments industry for nearly a quarter of a century.

The complaint charged that suppression of price competition was accomplished by dividing the country into geographic zones and that the respondents charged the same delivered prices to all buyers within a particular zone, irregardless of the location of the buyer.

The Commission alleged and found that the respondents' use of this system permitted the respondents to exactly match the prices of their competitors at every single point in the country, in every single zone, which was drawn by the response.

And that there was no price competition among the purchasers of this product as a result of the alleged price fixing conspiracy.

The order prohibited --

Earl Warren:

Mr. Kitner, did they break it down within the zones so that there could be a great many different prices within this zone depending upon what each other charged or -- or was it blocked out zone by zone where there must be one price?

Earl W. Kintner:

It was blocked out, Your Honor, zone by zone.

There -- and here again, the pricing structure buried with the three principal products in the industry.

There were varying zones allocated to each product.

In general, there was a par zone and then additional zones to which differentials were added and the respondent sold at the same price to all buyers within each zone.

That was the crux, a difference per portion of the price fixing agreement.

The order prohibited a conspiracy or agreement to sell at prices determined according to the zone delivered price system, or any system resulting in identical prices at the points of sale.

And additionally, the order prohibited the respondents from individually quoting and selling pursuant to a zone delivered pricing system, for the purpose or with the effect of systematically matching the delivered prices of other sellers of lead pigments, thereby, depriving purchasers all the benefits of price competition in the industry.

I think it is essential and it is this portion of the order that I have just mentioned that is at issue here.

I think it is essential to refer to the findings of fact in this case because it is in the context of those findings that the Commission feels that it has exercised an allowable judgment in drafting this particular portion of the order in question in requiring the respondents to individually to each cease and desist from the use of a system of zone delivered prices with the purpose and with the effect of systematically matching the prices of their competitors in this industry.

John M. Harlan:

Is the crucial part of the order in issue here what you've got quoted at page 6 of your brief?

Earl W. Kintner:

It is sir.

John M. Harlan:

That it --

Earl W. Kintner:

The court below sustained the Commission's portion of the order as to conspiracy and that is not at issue here.

The respondent, National, according to the findings, is the dominant factor in the lead pigments industry, controlling an excess of 50% of the products manufactured by that industry.

Eagle-Picher controls a substantial portion of the remainder of the industry's products which are white lead in oil used principally as a -- as a partly mixed paint and sold to the dealers, to the painters and to consumers.

A dry white lead, the second product which is primarily sold to manufacturers of paint and lead oxides which are including red lead and litharge which are sold primarily or the -- as a principle constituent in the manufacturer of battery place but also sold as -- in the instance of red lead as a constituent of red lead paint.

The picture in the industry prior to 1933 is an -- is a picture of an industry dominated by few manufacturers and by a dwindling number of manufacturers.

Although the industry had a dwindling number of factors prior to that time, it was also characterized by at least some vestiges of localized price competition, for instance, the National, the largest factory in the industry and the dominant factor in the industry add 589 points in 40 space where the prices were either equalized or where the points were free delivery points.

A somewhat somewhere but a different situation existed with respect to the pricing structure of Eagle-Picher.

(Inaudible), one of the respondents which also sells paint in its own company own stores said, through one of its representatives in the trial of this case, that's difficulty was in attempting to locate the equalization of points of its larger competitors in order to follow the price so that there was indeed a considerable amount of price competition prior to 1933.

This was also, as has been pointed out by the Commission in its findings, a -- a relatively complicated pricing system in which one competitor can never be sure unless he knew in advance of his -- of competitors pricing structure, unless, he knew in advance of the exact equalization points and also if he had advanced knowledge of the exact freightage used.