United States v. Concentrated Phosphate Export Assn., Inc.

PETITIONER: United States
RESPONDENT: Concentrated Phosphate Export Association, Inc. et al.
LOCATION: W. R. Grace & Co. Corporate Headquarters

DOCKET NO.: 29
DECIDED BY: Warren Court (1967-1969)
LOWER COURT:

CITATION: 393 US 199 (1968)
ARGUED: Oct 24, 1968
DECIDED: Nov 25, 1968
GRANTED: Apr 01, 1968

ADVOCATES:
Samuel W. Murphy, Jr. - for the respondent
Warren Christopher - for the petitioner

Facts of the case

After World War II, the United States made funds available through the ‘Marshall Plan’ to many countries to pay for commodities sold by American companies and shipped from the United States and other free-world sources. Congress made foreign aid funds available to bring commodities to the Republic of Korea, beginning with the Mutual Security Act of 1954.

In 1961, the Concentrated Phosphate Export Association (CPEA) organized to act as an export-selling agency for the concentrated phosphate products of its member corporations. CPEA organized under the Webb-Pomerene Act, which Congress passed to help American firms compete with foreign cartels. The process began when Congress allocated funds to various Agency for International Development (AID) programs. The United States thus directly financed the purchase of commodities allocated to Korea, approved via a complicated, tightly regulated application procedure. The United States assigned two of the CPEA contracts, and the Republic of Korea assigned the other nine, subject to detailed regulation by AID. The contracts only circulated in the United States.

The United States filed an action to enjoin price fixing and business allocation activities among the CPEA’s five major member corporations. The district court held that CPEA’s sales were ‘export trade’ for the purposes of the Sherman Act; hence, although CPEA conceded that its members were coordinating their sales actions, CPEA did not violate the Sherman Act. On January 1, 1967, the State Department amended its regulations to preclude Webb-Pomerene associations from bidding on contracts where the procurement was limited to United States suppliers; in response, the CPEA dissolved on December 28, 1967, despite the district court’s favorable ruling.

Question

(1) Is the case moot because the CPEA dissolved and joint operations were no longer economically viable?

(2) Does the CPEA fall under the Webb-Pomerene Act’s ‘export trade’ exemption because it is engaged in selling goods procured under the government’s foreign aid program?

Media for United States v. Concentrated Phosphate Export Assn., Inc.

Audio Transcription for Oral Argument - October 24, 1968 in United States v. Concentrated Phosphate Export Assn., Inc.

Earl Warren:

Number 29, United States, Appellant versus the Concentrated Phosphate Export Association, et al.

Mr. Attorney General.

Warren Christopher:

Mr. Chief Justice and may it please the Court.

This is a civil antitrust case which comes here directly from the Southern District of New York.

The court below dismissed the Government's complaint which had charged that the defendant's activity has violated Section 1 of the Sherman Act.

The issue presented here is whether or not the antitrust exemption of the Webb-Pomerene Act extends to the procurement of goods under the United States for foreign aid program where the goods are shipped abroad and where the funds to pay for the goods come from the United States Treasury.

The facts are all stipulated here and they're not in dispute.

The defendants below appellees here are five major United States corporations which produce concentrated phosphate and the export association which they formed in 1961 and which is called the Concentrated Phosphate Export Association.

This association was organized in order to enable these members to act jointly in the overseas sales of phosphate which is used in the production of plant food or fertilizer.

The association is properly registered with the Federal Trade Commission under the Webb-Pomerene Act.

Now, the Board of Directors of this association determines the prices at which the corporate members of the association will sell their phosphate to the association and it determines the prices at which the association will sell the phosphate to others.

In addition, the Board of Directors of the association also allocates the available business among the members of the association.

Transactions here on issue involved some 43 million dollars in sales to the Republic of Korea by the export association.

These sales were all made pursuant to our United States Foreign Aid Program.

Indeed, under this program, the United States through AID, the Agency for International Development has been making grants to Korea since 1953.

Two basic methods of procurement are involved in this case in two of the transactions which are before the court involving some 8 million dollars.

The procurement was handled by the United States General Services Administration.

In that situation, GSA issued a standard invitation to bid, accepted the low bid on behalf of the United States, paid the Association, took delivery of the phosphate and arrange for it shipment to Korea.

In nine other transactions before the Court involving some 35 million dollars, eight authorize the Office of Supply of the Republic of Korea to handle the procurement of the phosphate.

Each face of this transaction however was rigidly controlled by AID.

In these transactions, the Phosphate Association was paid by United States Bank which in turn received its funds from the United States Treasury.

Whichever method of procurement was followed, either through GSA or through the Office of Supply of the Republic of Korea, AID supervised every aspect of the transaction.

Until final delivery, the aid -- AID retained the right to divert the shipment.

As indicated above, my comments in both cases, the funds for the phosphate came from the United States Treasury.

The court below said, AID initiated controlled, directed, and financed the transactions involved.

Abe Fortas:

Mr. Christopher, I may have missed you when you're talking about the two transactions in which GSA did the procurement directly.

Did you say that GSA took delivery?

Warren Christopher:

Yes and then transshipped to Korea.

Abe Fortas:

Oh!

What's the basis of that statement?