Moog Industries, Inc. v. Federal Trade Commission

PETITIONER:Moog Industries, Inc.
RESPONDENT:Federal Trade Commission
LOCATION:Philadelphia Board of Public Education

DOCKET NO.: 77
DECIDED BY: Warren Court (1957-1958)
LOWER COURT: United States Court of Appeals for the Eighth Circuit

CITATION: 355 US 411 (1958)
ARGUED: Jan 14, 1958
DECIDED: Jan 27, 1958

Facts of the case

Question

  • Oral Argument, Part 2: Moog Industries, Inc. v. FTC – January 14, 1958 (77)
  • Oral Argument, FTC v. C. E. Niehoff & Co. – January 14, 1958 (110)
  • Audio Transcription for Oral Argument, Part 2: Moog Industries, Inc. v. FTC – January 14, 1958 (77) in Moog Industries, Inc. v. Federal Trade Commission
    Audio Transcription for Oral Argument, FTC v. C. E. Niehoff & Co. – January 14, 1958 (110) in Moog Industries, Inc. v. Federal Trade Commission

    Audio Transcription for Oral Argument, Part 1: Moog Industries, Inc. v. FTC – January 14, 1958 (77) in Moog Industries, Inc. v. Federal Trade Commission

    Earl Warren:

    Number 77, Moog Industries, Incorporated, Petitioner, versus Federal Trade Commission.

    Mr. Frank.

    Malcolm I. Frank:

    May it please the Court.

    This is the case on review from the Eighth Circuit to review the refusal of an order in a motion requested by the petitioner for the Court to exercise its equitable jurisdiction to stay in order to cease and desist issued by the Federal Trade Commission.

    That’s the sole issue in this case.

    In 1949, the Federal Trade Commission filed a complaint against the petitioner alleging that it had discriminated in prices along it’s purchasers in violation of Section 2 (a) of the Robinson-Patman Act.

    That discrimination consisted of offering volume discounts to all of its customers.

    That discount being in the form of an annual discount based on the volume of purchases, 2000 to 3000, 3000 to 4000, 4000 to 6000 and so on.

    It’s set out in the record, each amount being a larger discount.

    The record shows that that discount in some form or other, that volume discount is more or less standard practice in the Automotive Replacement Parts Industry.

    The Automotive Replacement Parts Industry consists of many different things.

    In the case of Moog Industries for the sake of convenience, they have leaf springs, chassis part, coil actions and piston rings.

    They have three classifications.

    Several thousand parts intervene the lowest various classifications adoptable to cars going back as far as 1937, the various types of car.

    There’s no question that these volume discounts were offered to all their customers.

    There is no question that it is standard practice in the industry to offer those discounts.

    The record shows that by testimony as we have referred to it in our brief in various places.

    In addition to that, there are exhibits attached to the record which show contracts for volume discounts, McQUay Norris, Regal Tool and Manufacturing, Thompson Products as typical contract showing those exhibits.

    Is this proof before the Commission?

    Malcolm I. Frank:

    All before the Commission.

    William O. Douglas:

    But we must assume there was a violation here.

    We don’t have a question of the merits.

    Malcolm I. Frank:

    The merits of this case and not before the Court.

    William O. Douglas:

    So we assume there’s a violation.

    Malcolm I. Frank:

    The Circuit Court of Appeals sue Justice Whittaker on the Eighth Circuit at that time, affirmed the decision of the Federal Trade Commission that there had been a violation.

    And in addition to that, notwithstanding the fact that the Commission has not sought an enforcement of the order, when they affirmed the decision, they ordered the petitioner to file its certificate of compliance within 60 days after the receipt of the order by the Federal Trade Commission.

    When that order was entered, we filed our motion to state that order and for the Court to exercise its equitable jurisdiction and hold it in the bench until our competitors in that industry were subjected to like orders.

    Otherwise, we would be placed at a severe competitive disadvantage.

    William O. Douglas:

    Were those competitors have been preceded against by the Commission at that time?

    Malcolm I. Frank:

    Out of the 18 or 20 that are named in the record, Justice Douglas.

    Malcolm I. Frank:

    I think two of them were being preceded against at that time.

    In the nine years since this litigation has started, the Federal Trade Commission, according to its brief, has filed 14 to a proceedings against members of the Automotive Replacement Parts Industry.

    Out of those 14 complaints, only three of them are competitors of petitioner.

    William O. Douglas:

    Would it take another nine years to get it presented in this case?

    Malcolm I. Frank:

    It might take longer than that Justice Douglas.

    Hugo L. Black:

    18 (Inaudible)

    Malcolm I. Frank:

    Well, we named in the record there some 18 or 20 of them named.

    Hugo L. Black:

    That has taken nine years (Inaudible)

    Malcolm I. Frank:

    So far, there has been nine years of litigation as I construe this record from what the Federal Trade Commission brief says to proceed in nine cases.

    To date, they have filed nine cases but all together — now, wait a minute, I’m wrong on that.

    They have filed 14 cases but all of them have not proceeded to a conclusion.

    For instance one against our largest competitor Thompson Products which had been going on for several years has not been brought to a decision to an initial decision by the hearing commissioner.

    There is no question in the record documentarily and from testimony that its standard practice in the industry.

    And the question arises what is the jurisdiction of the appellate court in a motion of that sort.

    It is my understanding, Your Honors that a motion of that sort is more or less ancillary to the proceeding for this reason.

    The Federal Trade Commission is not a judicial body, these (Inaudible) states.

    Therefore, it has no equitable jurisdiction.

    It can’t decide questions of equity.

    So let us start first (Voice Overlap) to the jurisdiction of an appellate court by looking at what the statute says.

    Felix Frankfurter:

    May I ask you whether that means, has no equity jurisdiction?Does that mean that the Commission would itself be powerless to enter or to qualify a order of finding illegality with such a qualification?

    Malcolm I. Frank:

    Well, Justice Frankfurter that is a good question and I’ll say this in reply.

    A little bit further in my argument if I — my time last that long.

    In the cosmetics industry, the Commission did do something just like that.

    They file eight or nine proceedings, one of them being against Elizabeth Arden.

    And while Elizabeth Arden was going on, they entered into agreement with the rest of the boys in the other cases to hold it up and not proceed with them and not make the — the decree final against there — Elizabeth Arden — against the rest of them until Elizabeth Arden has been brought to a final conclusion.

    It is in their words, they used their discretion may I say that.

    I don’t say that they have no discretion but they don’t have due equitable jurisdiction.

    The Court has held that they are not a judicial body but they can use their discretion.

    I do know that they have filed —

    Felix Frankfurter:

    If they hold up in the Elizabeth Arden case, that’s not a bad target I suppose.

    Felix Frankfurter:

    If they hold up the enforcement of the order against Elizabeth Arden until they get through with the others?

    Malcolm I. Frank:

    Yes, sir.

    They entered to a solemn agreement to do that.

    William O. Douglas:

    But those were the companion cases.

    Malcolm I. Frank:

    Sir?

    William O. Douglas:

    Those were companion cases.

    Malcolm I. Frank:

    No, there were against other concerns.

    William O. Douglas:

    Yes, but I mean they were pending at the time.

    Malcolm I. Frank:

    I don’t know whether they were all pending at the same time or not.

    William O. Douglas:

    But they were eight or nine and one was on appeal and they decided they hold (Inaudible).

    Malcolm I. Frank:

    They may have been all pending at the time.

    I don’t know whether they were filed simultaneously or not Justice Douglas.

    But I do know that they entered into that agreement because of the — so that one would not be competitively injured.

    They entered — they would all be entered so that it would be effective at the same time.

    William O. Douglas:

    But this like — here in this Court, we sometimes hold the case because other cases are about to require —

    Malcolm I. Frank:

    It’s been done before.

    It was done in the Chrysler case.

    It was done in the Ford Motor case, the Justice Department has recognized.

    They entered into an agreement with Ford Motor Company and they entered in — that they wouldn’t hold that against them for — any longer than it took to complete the General Motors case and if they weren’t successful in the General Motors case the order in the Ford Motor case wouldn’t be effective.

    William O. Douglas:

    I don’t believe they would wait at nine years so.

    Malcolm I. Frank:

    Sir?

    William O. Douglas:

    I don’t think that they would wait nine years.

    Felix Frankfurter:

    There are two different questions at least to my mind.

    One, if the — if the Federal Trade Commission has empower, has not the power, I’m not talking about — of course you’re having that equity jurisdiction in any sense because they’re not at court.

    I don’t know all that talking is next to nothing and got equity jurisdiction because they haven’t got any jurisdiction in a judicial sense.

    But if the Federal Trade Commission itself has no power which would surprise me and I’m subject to correction (Inaudible), if they haven’t got power to stay an order after they find illegality, an order out of fairness to treat competitors in the same condition, the same way.

    And there’s one question whether the Court has power to qualify an order which the Commission itself has no power.

    Malcolm I. Frank:

    That’s what I was —

    Felix Frankfurter:

    If the Commission — if the Commission has power but doesn’t exercise it, that raises a totally different question what the discretionary authority of the Court is to hit into or qualify a discretion exercise in a particular way by the Commission.

    Malcolm I. Frank:

    Precisely.

    Felix Frankfurter:

    And those are very different questions.

    Malcolm I. Frank:

    That’s exactly what I was getting into Justice Frankfurter.

    Let’s see what the statute says about that power.

    Section 21 of the Act, it appears — I’ve set it out on page 11 on my brief.

    Upon the filing of the application and transcript, the Court shall cause notice to be served on the person and so forth and shall have power to make or enter on the pleading testimony and proceeding set forth in such transcript a decree affirming, modifying or setting aside the order of the Commission under the Board.

    Now that phrase, that latter phrase appears three times in that section and in the last place and you will find it on page 12, the jurisdiction of the United States Court of Appeals to enforce, set aside or modified orders of the Commission board shall be exclusive.

    Now —

    Earl Warren:

    But can the — can the Court modify or set aside the order of that commission or any other for some reason that hasn’t been raised before the Commission itself?

    Now, as I understand it, in this case, you did not raise that issue.

    You never ask the Commission to — to withhold its order until it had gone through the same procedure with the rest of the — of the industry.

    But here, you — you ask the Court to modify or — or set aside an order of the — of the Commission on a point that was never raised before the Commission.

    Malcolm I. Frank:

    That is true because, Mr. Chief Justice, the Federal Trade Commission don’t have equitable jurisdiction.

    Earl Warren:

    Well, doesn’t it have — I thought you said a little while ago as — as it may exercise this discretion, as a matter of discretion to withhold such — such an order until such time this is acted and the rest of the industry.

    Did I misunderstand you on that?

    Malcolm I. Frank:

    Oh, no.

    Oh no.

    It certainly did.

    Now, whether it has power to exercise that discretion, it’s a very serious question in my mind and that’s what I was getting to when I said a moment ago that the statute says that the jurisdiction of the United States to set aside or modify orders of the Commission is exclusive.

    Felix Frankfurter:

    Was your doubt so fast it is that you felt inhibited from asking the Commission to — to exercise that power?

    Malcolm I. Frank:

    Mr. Justice Frankfurter, I wasn’t in the case at that time.

    Felix Frankfurter:

    All right.

    Well, the counsel then.

    Do you think anybody — I — I approved highly, the lawyer is not raising foolish points but since they have that power it wasn’t raised, if it was raised.

    Malcolm I. Frank:

    Well, it was —

    Felix Frankfurter:

    Can I ask you this?

    I ought to know but I don’t.

    Some statute (Inaudible) say specifically, some of this regulatory statute say specifically you can’t raise a point before the Court that wasn’t raised before the agency that’s a little of the federal power of the Federal Trade Commission Act.

    Malcolm I. Frank:

    Yes, this one does not.

    Felix Frankfurter:

    This one does not?

    Malcolm I. Frank:

    I contend this.

    Felix Frankfurter:

    I’m not saying that it isn’t — that impliedly that is a legal point.

    I just want to know whether the statute tells that specifically.

    Malcolm I. Frank:

    I contend that not alone does the Court have the — the appellate jurisdiction to do this but it has original jurisdiction.

    Felix Frankfurter:

    Yes, but that doesn’t take care of the Chief Justice’s point – question, namely, whether a — a question raise above before the Commission.

    Malcolm I. Frank:

    Well, now —

    Felix Frankfurter:

    But not raised —

    Malcolm I. Frank:

    Here is the way we treated that Mr. Chief Justice.

    The rules of the Federal Trade Commission provide for a Trade Conference Practice, Trade Practice Conference that is one of the duties delegated to it by Congress.

    In 1954, April 1954, your petitioner together with other manufacturers as one group petitioned the Federal Trade Commission to hold a — call a trade practice conference among these manufacturers to correct the very abuses for which they were filing these complaints against mostly smaller companies like ours.

    Ours is a small company compared to the big ones in the industry.

    That application has laid there since 1954 and has never been acted upon.

    In addition to that, that same year, a month or two later, some 200 wholesalers in the industry filed a similar application for a Trade Practice Conference to correct and to go into this very same abuses that the Federal Trade Commission is complaining about because they were receiving discounts and for being liable.

    They wanted to get it correctly.

    The Federal Trade Commission has done nothing in that respect.

    A year later — a year later, this doesn’t appear in the record but it’s correct and I’m sure the Federal Trade Commission counsel will not deny it.

    In December of 1955, Mr. Cassedy, a counsel in this case, wrote to the Chairman of the Commission, calling his attention to the fact that this Trade Practice Conference had been requested by these manufacturers as one group and the wholesaler is another group and that no action had been taken on it and requested and prayed that call this Trade Practice Conference.

    Earl Warren:

    Do you offer — offer that as an excuse or a reason, let us say, for you’re not applying to the Commission to withhold its order until it had gone through the procedure (Voice Overlap) —

    Malcolm I. Frank:

    That’s — that’s one of the reasons Mr. Chief Justice and while you say this maybe a play on words.

    I don’t consider it a play on words.

    Our agencies are either judicial and in the sense they’re semi-judicial but they don’t have equity jurisdiction.

    Whether or not the Federal Trade Commission, when they entered into an agreement with the attorney’s, for these cosmetics people to hold up any action until final decree was entered in the Elizabeth Arden cases so that they can all work together and then work under the same rules recognizing the competitive disadvantage.

    It is a serious question in my mind whether they have that right.

    Here’s what they did in the lumber industry, in the Algoma case.

    Earl Warren:

    Well, I thought Justice Douglas pointed out that there was a distinction in that Arden case from this one.

    I thought he pointed out that in that case, they have tried these cases in the — that were being — being held awaiting the disposition of one — of one case.

    Malcolm I. Frank:

    My recollection is all the cases had not been tried.

    Elizabeth Arden was the first one tried.

    Earl Warren:

    Yes.

    Malcolm I. Frank:

    And the others were being proceeded and Elizabeth Arden was being appealed.

    Earl Warren:

    Yes.

    Malcolm I. Frank:

    And on the final appeal, the agreement was again entered into that it would not be enforced against Elizabeth Arden until a final decree had been entered in the last of the eight cosmetic cases.

    Felix Frankfurter:

    Mr. Arden, I beg your pardon.

    Mr. Frank, lawyers can try two lawsuits at the same time if he’s skillful enough.

    So I can see that you don’t have to choose between two positions, but do you take either or both namely that the power — that the Trade Commission has not the power to stay it’s order and that relief for that must be had from the Court or you say alternatively, if it has the power and doesn’t exercise it.

    It’s such an abusive discretion that the Court can rectify that abuse.

    Malcolm I. Frank:

    I would say —

    Felix Frankfurter:

    Or you take some other position still?

    Malcolm I. Frank:

    May I put it this way, sir.

    I would say that the Federal Trade Commission has power to make effective the date of an order anytime that it see fit it chooses.

    There is no question about that.

    They can have the power to relate a decree effective a year from next Tuesday if they want to or eight years from the next Tuesday if they want to.

    But I say that when a record shows as this one shows even though a request is not made, there is no waiver of the right.

    There is no waiver of the right.

    Unquestionably, not alone has the Court of Appeals, the exclusive jurisdiction to modify, affirm or set aside a Federal Trade Commission order.

    It is my opinion Your Honors that the Constitution of the United States gives the Court a reasonable equitable jurisdiction in any case presented to it at any time.

    Chief Justice Marshall said so in Osborn against United States Bank, decided by this Court many, many years ago.

    In Old Colony Trust Company against Commission of Internal Revenue, that was a case where the question was referred to this Court referring to a decision of the Board of Tax Appeals and referred to Article 3 of the Constitution.

    Article 3 of the Constitution as you know says that the judicial power extends the whole cases in law and equity arising under the Constitution and the laws of the United States.

    Felix Frankfurter:

    Well, then it’s your position that to enforce an order to stay, to cease and desist a violation of the Federal Trade Commission Act against a particular business would be so inequitable if the same order conceded is — the same order violated by competitors of the petitioner and not also ordered to be stay just to be ceased and desisted, so inequitable to the Court of Appeals to which — which has the reviewing power of such an order or as an exercise of its inherent or granted equity powers grant such a stay, is that your position?

    Malcolm I. Frank:

    That is the position especially where the record shows that this is a standard practice in the industry.

    We are in effect, Your Honors, made legal guinea pigs.

    We’re a little concerned in a two and a half billion dollar industry.

    Our volume in 1952 was a little under 5,000,000.

    We’re a drop in the bucket in the big industry like this.

    We can’t compete with other concerns.

    We lose customers weekly and daily to our competitors who are still offering volume discounts who have not been proceeded against.

    When they go and say “Well, we can give you a cheaper price.”

    Earl Warren:

    Mr. Frank do you have — do you have any authorities in this field which — which hold that the Court of Appeals can modify an order of the Federal Trade Commission on a point that was not raised or could not — or could not have been raised or that was not raised before the Commission itself?

    Malcolm I. Frank:

    I know of no case on that point offhand Mr. Justice, but I do know this, that this Court held in Old Colony Trust Company against Commissioner of Internal Revenue that on the petitioner finding of an executive or administrative tribunal, it was not important whether the proceeding was originally began by administrative or executive determination if when it came to the Court and that’s the Court of Appeals.

    If — when it came to the Court, it call for the exercise of the judicial power of the Court upon which jurisdiction was conferred by the law.

    Malcolm I. Frank:

    And then in that same case, this Court said, at page 723, judge, the Court further held that the jurisdiction and that cause was like that of Circuit Courts of Appeal in review of orders of the Federal Trade Commission and cited in support the Eastman Kodak case and the Silver against the Federal Trade Commission case.

    Now, Courts of Appeals in the Second Circuit have done it.

    Courts of Appeals in the Seventh Circuit have done it.

    Courts of Appeals in the Sixth Circuit have done it and Court of Appeals in my own Eighth Circuit did it, notwithstanding Justice Whittaker’s overruling of it.

    They did it in the Chamber of Commerce case that’s cited in the brief.

    Now, whether it’s a question —

    Earl Warren:

    Do you know —

    Malcolm I. Frank:

    — we ought to raise it first down there or whether we ought to raise it originally in here in the Old Colony case, it’s says it has the original jurisdiction in the Court.

    Earl Warren:

    Do you know — do you know Mr. Frank if in those cases that you have just cited, the — the petitioner did or did not request the Commission to withhold its order.

    I don’t know myself.

    Malcolm I. Frank:

    No, the only one that I know of where the Commission was asked to withhold its order was in the Niehoff case which is to be argued right after mine.

    Earl Warren:

    Yes.

    Malcolm I. Frank:

    In the other cases, I don’t think it was raised.

    Felix Frankfurter:

    Mr. Frank, may I ask you one more question.

    Malcolm I. Frank:

    Yes, sir.

    Felix Frankfurter:

    Suppose the request — a request for a stay of the enforcement of an order against competitor one until competitors — the rest of them dealt with, were made before the Commission.

    And suppose the Commission considered it and after hearing arguments pro and con, decided against such a stay.

    But it’s considered and gave reason for denying.

    I can think of administrative process and so on and so on, would that be a different — would that present a different case than where as in the Niehoff case, a request is made and denied.

    Malcolm I. Frank:

    I think so.

    Felix Frankfurter:

    Would that make any difference?

    Malcolm I. Frank:

    Very much so.

    I’ll —

    Felix Frankfurter:

    But if it makes different —

    Malcolm I. Frank:

    I’ll tell you why.

    Felix Frankfurter:

    All right.

    Malcolm I. Frank:

    In my opinion, this Federal Trade Commission can’t make a finding of fact on something on which it has no jurisdiction.

    Felix Frankfurter:

    Well, but you just —

    Malcolm I. Frank:

    It would have to make a finding of fact and the — the Government’s brief says that there’s no finding of fact made on it.

    They can’t make a finding of fact on something that’s beyond their jurisdiction.

    Felix Frankfurter:

    But I — I — pardon me because I thought you agree that the Commission could state an order of invalidity, didn’t you say that?

    Malcolm I. Frank:

    I said that but Your Honor said they made findings of fact and state that there are reasons for it.

    There’s a distinction between the two.

    If the Federal Trade Commission had come out totally and said “We’re going to make this order effective when we get the balance of the industry in line.”

    That’s one thing.

    But if the Federal Trade Commission come out and says “For the reason that so and so and for the reason that so and so, we don’t consider this evidence sufficient and makes findings of fact.”

    I say they haven’t got jurisdiction to make those findings of fact.

    Felix Frankfurter:

    Well, then they must always grant a stay if there are competitors in the field according to your argument.

    Malcolm I. Frank:

    No, sir.

    Felix Frankfurter:

    But if not then —

    Malcolm I. Frank:

    Not unless the record justifies that it is a standard practice throughout the industry.

    I don’t mean that it should be done indiscriminately.

    Here, it’s standard practice in the industry.

    There’s no denial of that fact that there are rebates and discounts on piston rings and replacement parts in one form or another throughout the industry.

    It’s just the same as years ago when you walk and — when my daddy used to walk into the drugstore and bought a cigar and he could buy one for 10 cents or he could buy three for a quarter.

    That’s the cost.

    It was quantity.

    Or when I can remember very well, a relative of mine was in business and when he bought thread from the Spool Cotton Company.

    The more thread you bought in a year, the bigger credit bonus you got at the end of the year.

    Quantity discounts are in grand in the industry of commerce in almost any line that you want to talk about.

    And it’s awful hard, it’s awful hard to just uproot it and say to this one and this one you can’t do it anymore while it takes years to get the rest of that industry in line.

    In the meantime, we’ve lost customers.

    The Federal Trade Commission says “Well, you’ve got a remedy, you can sue them.”

    Well, of course we can sue them but that don’t get us our customers back and money damages wouldn’t replace the lost of those customers that are gone from us.

    There’s just one more thing if I may indulge.

    The attorney general with reference to price, the attorney general’s committee to investigate the antitrust back said in one paragraph and it’s referred to in the brief and it’s very important to me and I think to you is that competition where it’s keen and a reduction in price in order to meet a rival’s price if it’s forbidden, forbidden is reductio ad absurdum.

    That’s it.

    Thank you very much and I would like very much to have this Court not tell the Trade Commission what to do in it’s discretion but to stay this order until the Federal Trade Commission can either exercise its discretion in calling a trade conference or bring these cases against our competitors to a conclusion.

    Thank you very much.

    Earl Warren:

    Mr. Kintner.

    Earl W. Kintner:

    May it please the Court.

    Counsel has made reference to the cosmetics case, the fact that the Federal Trade Commission entered into an understanding that the Court’s decision in the Elizabeth Arden case would bind the parties with respect to other pending proceedings which were at various stages of the administrative process.

    The Commission exercised it’s discretion as in its law enforcement capacity in entering into this understanding.

    It did subsequently dismissed six — those six pending cases and attempted — and did have a Trade Practice Conference to suggest rules of conduct for the parties and it is a fact that after the Trade Practice Conference and after they’d all signed the pledge card, the Commission found it necessary to institute an industry wide investigation of the cosmetics industry.

    It issued complaints against three of those against whom it had dismissed the cases and the other three had signed the pledge cards.

    This illustrates graphically, I think, the fact that these voluntary procedures of the Commission indeed of any law enforcement agency are no better than scraps of paper unless they are backed up by firm enforcement of the laws.

    It is true that there was an application for a Trade Practice Conference in 1954 with respect to certain segments of this industry.

    It is also true since we’ve gone beyond the record that the Department of Justice subjected to the holding of that Trade Practice Conference because it then had under investigation certain segments of the industry and it was not — and it is not the department’s policy nor that of the Commission to settle by Trade Practice Conferences, matters which are in litigation or where substantial amount of investigative authority has been exercised and substantial amounts of the public’s money spent to investigate the practice or where there is real controversy with respect to the legality or illegality of the practices in question.

    It is true that there was another application in 1957, but these cases were then in litigation.

    The Commission had filed 16 price discrimination complaints in this particular industry, the Automotive Replacement Parts Industry.

    Felix Frankfurter:

    The Commission — I’m sorry, the Commission had done what?

    Earl W. Kintner:

    Had filed 16 companion cases or two-way cases in this industry.

    Felix Frankfurter:

    Could — could such — such an inquiry or could such complaints be considered in a single proceeding to where the I.C.C.often brings before it the vast inquiry?

    Earl W. Kintner:

    In my judgment sir, it would be utterly impossible because in price discrimination cases, each respondent has certain defenses, the cost defense, the defense of good — of meeting competition; the question indeed in the first instance of whether he is engaged in Interstate Commerce.

    And finally, the all important question which makes these cases so complicated and so lengthy in many instances, the question of whether or not there has been the requisite injury to competition or the tendency to — toward monopoly required by the statute.

    Felix Frankfurter:

    You impliedly by that answer did not deny the suggestion or the claim that in fact there was uniform trade practice here which governed all those in it.

    You deny that.

    Earl W. Kintner:

    To the extent that there were certain pricing practices being engaged in by certain segments of the industry.

    Counsel is right.

    But it is not necessarily true that all of these pricing practices of all members of the industry were violative of the law.

    Felix Frankfurter:

    No, but as to those — as to practices that were uniformly though not all the practices that you might look into, but as to practices where there was uniformity in the industry, does the Commission or the Commission enable to bring the whole industry before it and order — one fell order to outlaw in such a uniform practice.

    Earl W. Kintner:

    The Commission has not found it possible Mr. Justice Frankfurter to do this.

    If it were able, it would have exercised its administrative discretion to do so.

    Felix Frankfurter:

    Tell me why as to the admission that you’ve made.

    I mean the statement you made a minute ago.

    There were certain practices that were uniformed.

    What is the — what are the administrative pampering that this does that prevent those practices from being dealt with in — in a comprehensive, in an all industry comprehending order?

    Earl W. Kintner:

    The fact that each respondent has a cost justification defense under the statute available to him.

    The cost of one respondent may not be the cost of another.

    Each respondent under the statute has a possible defense of good faith meeting of the competition.

    Earl W. Kintner:

    And in this industry, there were seven — there were approximately 75 lines of products, each product in many instances broken down into sub lines with literally thousands of parts within some particular line.

    Felix Frankfurter:

    Or what — on what basis did you say that Mr. Frank’s statement was true as to some practices?

    Earl W. Kintner:

    Only to the extent that some of his competitors, we believe, because we’ve issued 16 complaints in this industry, do use annual volume discounts either rebating in — at the end of the year in cash or in merchandise.

    Felix Frankfurter:

    Does the establishment of that uniform practice require individualized, complicated inquiry as to each business?

    Earl W. Kintner:

    We certainly do not think so, Your Honor.

    Felix Frankfurter:

    So that — there you could have a single — I’m not saying that makes a difference.

    I’m just trying to find out what the administrative problems are which may make a difference in what courts do or allowed to do.

    Earl W. Kintner:

    The problem might graphically be expressed by — by this example that A and B compete with C in this industry, but C competes with D and E.

    There would be a never ending succession of competitors, one of it competes with another and then with two others in such a proceeding.

    The case — the proceeding would never end.

    There would never be an order issued, an effective order by the Commission.

    And as to the practices of each of these competitors, there would come into play the defenses of the Act and above all the question of whether or not each pricing practice of each have the requisite adverse effects as required by the statute upon the competition.

    Felix Frankfurter:

    But are you saying — are you saying — this is what I gathered from what you’ve said that although it may appear on a surface, on a façade view that there is a uniform practice in an industry concerning so many — anywhere from two or more many competitors, although it may appear there is a single uniformed industry wide practice.

    As a matter of fact, that apparently single uniformed practice is so individualized that you cannot do it otherwise in case by case.

    Is that what you’re saying?

    Earl W. Kintner:

    Yes, sir.

    Now, there had been instances, notably, the lead pigment industry and the cement industry where the — the factors in the industry were tied together in a price fixing conspiracy or combination where their practices were uniform.

    There, the Commission has exercised its discretion in issuing a price discrimination count with respect to the — the conspiracy portion of the complaint and has cleaned up the industry in the one proceeding.

    But this is not the case in the Automotive Replacement Parts Industry.

    Are there any — are there any of instances where you failed to file a complaint against the — what might be fairly called as the Moog — any of Moog’s competitors.

    Have you proceeded against the whole industry —

    Earl W. Kintner:

    We have —

    — for this class of — for this class of violation?

    Earl W. Kintner:

    As we have collected evidence and as it has appeared to the Commission that the statute may be violated.

    The Commission has proceeded to issue its complaint and has proceeded to hold its administrative hearings as speedily as possible.

    What did you find happens when you litigate one of these cases?

    You’ve got talk of consent decrees coming in or do you have to litigate them all?

    Earl W. Kintner:

    Interestingly enough Mr. Justice Harlan, one of respond — of petitioners, principal competitor’s sealed power has signed a consent settlement with the Federal Trade Commission.

    The same scope that the non-consent decree here (Voice Overlap) —

    Earl W. Kintner:

    Yes, sir.

    — the story that you presented?

    Earl W. Kintner:

    Yes, sir.

    We — we expect and can only expect when the Commission issues complaints against individuals in an industry charged with violating the law that once the principles or practices therein involved have been litigated and passed upon by the courts that others in the industry similarly situated will fall into line.

    If they do not of course, the Commission must proceed to investigate as the practices of competitors are called to its attention and to issue complaints and hold hearings within the limits of his — of its budget.

    For example, here, during a nine year period, 25% of the price discrimination complaints issued by the Federal Trade Commission, during that nine-year period have been issued in this particular industry.

    The Commission has moved vigorously to stand proud, practices which it believes are unlawful in the industry.

    Felix Frankfurter:

    Did the — did the proceeding which resulted in the order in the Moog case, in this case, start by some private complaint or on the Commission’s initiation?

    Earl W. Kintner:

    Now that is a very interesting question and requires some background detail at this point.

    The Commission’s attention was invited to the fact that the jobbers who are the customers or petitioner here and others similarly situated were that certain jobbers were receiving better prices than others because those jobbers belong to buying groups.

    The buying groups were able to secure from petitioner and others far better prices than the individual members were able to secure in their own negotiations.

    Members of the buying groups bought individually.

    They individually ordered.

    Shipments were made individually, but they were billed through the buying group, a mere book keeping device in our view to avoid the law.

    The situation is graphically illustrated by the Dallas situation.

    There were six customers, our petitioner.

    Four of them belong to jobbing groups and secured discounts of 12% to 15%.

    Two did not belong.

    One jobber didn’t get any discount.

    The other jobber who was the largest one in the area got 7.29% discount.

    And I invite the Court’s attention to the fact that the record indicates that this industry, the jobbing end of it, operates on a 4% or less net profit basis, so that the discount that the largest jobber was not receiving simply because he didn’t belong to this bookkeeping transaction.

    It’s terribly important to him in his survival as an independent businessman and it was because the Commission found that these buying groups, these bookkeeping devices were pervading the industry that it moved against the manufacturers who were according the prices to the buying groups.

    Felix Frankfurter:

    We’ll not take that thing — could the whole — all those who are pursuing that practice could they not be brought into a single proceeding?

    Earl W. Kintner:

    We don’t think so, Your Honor.

    First place, we don’t believe that all of the manufacturers in the industry are engaged in the same pricing practice.

    Felix Frankfurter:

    Those who did — those who did.

    I’m trying to — I’m drawing the legal (Voice Overlap) —

    Earl W. Kintner:

    As to those who —

    Felix Frankfurter:

    — get understanding of what the administrative does and why does it and what it has to do and what it does not have to do for effective administration.

    Earl W. Kintner:

    As to those in the industry who are engaged in according annual, volume, discount, rebates based upon cumulative purchases during the year as to those.

    Each in a proceeding would have here a separate defense that his price is valid because he is simply according a differential based upon the cost of doing business or that he accords this price differential based upon the fact that he’s meeting the competition of a competitor in a certain area.

    Felix Frankfurter:

    Well, I don’t understand from what you said that any of that would be irrelevant to a situation where as a matter of bookkeeping, a fellow gets the discount because he belongs to a buying group and the other fellow who doesn’t stands out against the buying group doesn’t get the discount.

    What is that — what kind of a defense the difference in cost be if that’s the reason of the differential?

    Earl W. Kintner:

    We have proceeded against the buying groups.

    We have some 10 complaints pending against the buying groups or receiving the — the unlawful price discriminations.

    They in turn of course have their defenses.

    But as to each of these respondents, they would have each their various defenses and then there would be the question of whether or not individually they were entering competition and each would have varying lines of competitors.

    They sell different products in this industry and each has a variety of competitors, some common and some not common one or the other.

    Felix Frankfurter:

    Mr.– may I ask you this Mr. Kintner.

    Apart from the Elizabeth Arden case, does the Commission sometimes stay its order to cease and desist?

    And if so, on what ground does it stay if — if they are capable of generalization?

    Earl W. Kintner:

    The Commission uses its administrative discretion in practically and I believe all orders that it issues to require compliance within 60 days of a forthwith order and the courts have sustained scores of such orders and have made it a part of the Court’s judgment that compliance shall be had within 60 days.

    Once an order of the Commission has been issued in a case of this character and has been affirmed by Court of Appeals, there comes the arduous process of securing compliance with that order.

    First, there is the 60-day waiting period during which respondent may adjust its business and must at least convince the Commission of its good faith and effort to comply with the order.

    The division of compliance which is lodged in my office has authority on its own motion and without reference to the Federal Trade Commission to grant an additional 60 days during which respondent may use good faith in attempting to adjust his business practices.

    And then after all that and assuming that respondent has not satisfied the Commission that it’s using good faith and attempting to comply with the order, after all that, the Commission then enters into the second stage of the proceeding.

    It goes to a Court of Appeals and phrase an enforcement of the order.

    And even that doesn’t end the procedure.

    The Commission must detect a third violation and must go again to the Court of Appeals and enforce the order to the Court’s contempt power.

    Felix Frankfurter:

    That’s all worked out administratively.

    I mean that — the process which you’ve just outlined has been evolved —

    Earl W. Kintner:

    It is.

    It has —

    Felix Frankfurter:

    — with the help of the Commission.

    Earl W. Kintner:

    — it has been evolved following this Court’s decision in the Ruberoid case, 343 U.S. 470 at page 476 where this Court held that such procedures so far as the second and third stage, were required by the statute.

    (Inaudible)

    Earl W. Kintner:

    In — the instance here, the two cases have — have been in gestation nine years, two and a half of those before the Court’s —

    (Inaudible)

    Earl W. Kintner:

    I don’t think it’s entirely typical, but the Commission finds that next to the price fixing industry wide price fixing cases that these two-way cases under the Robinson-Patman law are very difficult and lengthy if respondent wishes to try out all of the defenses available to it and all of the issues which may properly be examined under the law.

    We must rely upon establishing precedent and then bringing the rest of the industry into compliance.

    (Inaudible)

    Earl W. Kintner:

    That — I would go further than that and say that the case would never end.

    The possibilities for litigation are such that half the antitrust part would be gainfully employed for half a century.

    That is the result which the Commission devoutly does not seek part.