Document 51vop4oaqMk6vrZ9JdVmKvzD

. T C. V HAfflOHAL LEAP COWHUTf Sunnary of Opinion of Court of Appeals, Seventh Circuit Ob December 1, the Seventh Circuit decided the appeal in the above entitled action. The opinion was written by Judge Lindley and concurred in by Judge* Swain and Sehnackenberg. In substance# the Court held: 1. That it wee beyond the province of the Court to disturb the Cenalsslen1* finding that rciqpondenta (National Lead* lagle-Picher, (Hidden* SherwinWilliaauB and international Snelting * Refining)* had conspired during the RXA parted to establish uniform sons prices and certain tarns and conditions of aale of load pigacntsi 3. That the CcMedssion's findings of price dlserial~ ^ nation resulting frm the use of differing sene prices and quantity discounts were supported by the evidence* or the reasonable inferences to fee drawn therefrom, except that there was no proof that the two sene system used in the sale of dry white lead resulted in illegal price discriminations j 3, That the jNKWHutsnt injunction against any and all future acquisitions fey Motional Load in the lead pig ment field was *se wanting in evidentiary support and so arbitrary that it cannet stand*; and nor Internaticiial manufactured or sold lead oxides* The Court dississed the order against Anaconda# the parent of international, heading that Anaconda was a separate corporate entity. It also dismissed the proceeding against International sine# the record showed that International had sold its white lead plant in 19*6# and that there was no reason to believe that It would ever reenter the lead plgasnts field. NL 000040470 24. That the portion of the Commission's order which prohibited respondents individually (as distinguished from colluaivoly) from employing any zone method in the sale of the various lead pigments was beyond the scope of the Commission's authority, sines this pert of the order in effect sought to prohibit lawful eonduet. Bio Court ordorod the Coamisaion to submit within 20 days a proposed decree modifying its present order and the res pondents were directed to file, within 10 days thereafter, their consent or objections to the Commission's proposes decree. In order to weigh the effect of this decision, it would perhaps be helpful briefly to review the proceedings to date. ^ The amended complaint of the Commission (filed in April, 1946) contained three major charges: 1. That the respondents during 1933-34 (the NRA code period) conspired to establish uniform prices, uniform zones, and certain uniform terms and conditions of sale, in the sale ef white lead in oil end keg products, dry White lead and lead oxides: 2. That Rational lead through its acquisitions of competitors was manopolising or attempting to monopolise ttilv of load pigmsotaj and 3. that tho prlooe of oaoh respondeat constituted illegal price discriminations in that (a) different customers with in the same some wore charged different "mill not" prices (l.e*, tho delivered price less cost of transportation), (b) customers in different zones were charged different delivered prices, and (c) there were unjustifiable quantity NL 000040471  3differentials. Hearings were held before the Trial Examiner In 19^6 and 19^7. Briefs were then submitted and, after oral argument, the Trial Examiner filed hie recommended decision, upholding the major charges of the amended complaint, except that he found that respondents' prices were not their `'mill net" prices and that, therefore, the uniform intra-son# delivered prices of res pondents were not discriminatory. He also held that the red lead quality differentials, the container differentials and the 500 lb. white lead in oil quantity differential were either cost-Justified or had no adverse competitive offsets. Two "final11 arguments were had before the Commission, the first in May, 19^9 and the second, fixed by the Commission or$ its own motion, in February, 1950. On January IS, 1953* the Commission filed its findings and Issued its cease and desist order enjoining conspiracy, the individual use of the sons method, end price discrimination, and permanently enjoining national Load from acquiring any stock or assets of a competitor (regardless of the else of the competitor or the circumstances surrounding the acquisition).* The majority upheld the Trial Examiner's recommended decision. Commissioner Mason dissented from the findings of con spiracy as well as from those portions of the order which enjoined individual use ef the seme method and further acquisitions by national load. Me concurred, however, in the findings of price discrimination. NL 000040472 Following this decision, a conference was held in Mr. Martino's office at which we pointed out that while it was very S, Hila' might have prevented the Pacific Coast Branch, for example.? from acquiring any independent paint store, large or small, since such store would probably be a competitor of Company-owned paint stores in the sale of white lead in oil, red leal in oil and other difficult to persuade a Court to sot aside findings of tho emission, and particularly findings of conspiracy based on conflicting evidence frosi which different inferences could bo diisn^ thoro was, nevertheless, a good 'flghtlius1 chance of reversing tbs emission on the?#refcibitiei* against individual use of the sens flatbed and tbs injunction against national Load, QwAnlati of Judas Lindloy After reviewing the Cossaiselen'e findings timing that during tbs HU period tbs respondents discussed certain changes in their satthods of sale, the Court said that frosi the evidence the Conlstlon "could noli find" that all respondents ^ adopted the tone syatsa shortly after the HRA discussions, and that the Cewaissisn bad 1resolved the eenfliot in the evidence adversely to pstttissm /respondents belog^ and it is beyond our province to substitute our juilgnont in that remet*. *ho Court said that while there uas no direct evidence of agrtsisont, there wore discussions of smo and other sales ethods saswig tbs rs^tndontt during 1993 and 193b followed by the adoption of swell nsthods in 19)1, It stated! "Hhe inference of agreomt, if not necessarily lapoHod by this evidence, is ertaiiily a reasonable one whleh tbs Cmfoioffi as tbs trier of fast was entitled to draw tbsrefmu* federal leads emission let, tbs flndtwgs of the r if suppoft>sd by svidsnss* are conclusive# lbs Courts have said that tbs findings nust bo based on *atfbetatial1 evidence, but a review of tbs eases HU show that generally tbs Cenaission's findings ere sustained if there is any smarting evidence, direct or elrewnstantlal. NL 000040473 -5- (2) The issue of price discrimination The Commission had found that the differing zone delivered prices for white lead in oil, dry white lead and lead oxides con stituted illegal price discriminations. Zt also found that the oxide five-ton and less-than-five-ton quantity differentials, as well as the 25^ Pr ewt. l.c.l. dry white lead differential (except where rail transportation was employed) constituted illegal price discriminations. It held that Rational Lead's evidence, based on freight and invoicing costs. Justified the dry white l.c.l. differ ential where rail transportation was involved, but not where delivery was made by local trucking. The Court upheld most of the Commission's findings but it found that there was no evidence that the dry white lead two ^ zone system resulted in illegal price discriminations, since there was no proof that paint manufacturers (the principal purchasers of this commodity) last and Vest of the Rockies (the dividing line for the dry white lead zones) were in competition with each other, (It is to be noted that in this respect the dry white lead zones are similar to the zones used in the sale of titanium pigment.) With respect to our argument that, in any event, the zone and quantity differentials resulted in insignificant price differences, which could have no competitive effect, the Court statedt "Ve believe, however, that this raises a question peculiarly within the competence of Idle Commission, and that its determination thereon, as an expert administrative body, should be accorded full respect." (3) The charge of "incipient monopoly" against Rational Lead The Court here adopted the contentions advanced in our NL 000040474 brief and orti agrunent be the offset that the facts slaply did net warrant a perpetual injunction against National ls*d#s further acquisitions In the lead pigments field* Xn view ef tale, the Court said It was net necessary to pass epee ear additional, lal epe PHAeeepeev feefwrsnnjfHcpfc th*oncews Cweceaenaotloseapalowv**i had newi* authority to --*<**. a*^#et |*w?i*Hi ws*i*e*io^w ws which did net violate Settle* 7 ef the Clayton let* The Ceurt In effect held that the deflation was net Intent to Mnopolla* ihphr because ef eertaln tranaaetlena which eeeurred In the l9G*s er in the early 1900*#, er because National Lead In the 1930* a purchased and thereafter sold, at a gross profit of $300,000, eertaln steak ef Hagle-Mcher. It statedt *1le find the assertion that occurrences concluded store than twenty years ^ before the erder wee entered text justify a perpetual injunction against any future acquisition ef stock er physical aeeets ef National's conpetitere a startling one'** The Oeurt further saidt a^d held that the Conn I imtoi i had no authority te y*j<^* the indi visual use ef the am sysfcera* which wae a ncthod ef tale* It held that the CsesriLssltn has the power to enjoin Illegal act# NL 000040475 only, and that it could not, as a matter of law, seek to Justify this portion of tho ordsr on the theory that such an order was necessary to sake tho injunction against conspiratorial action effective. On the latter pthit, the Court saldt "Clearly, the Connisaion was concerned here with enforcement of its order prohibiting concerted action* In Justifying the paragraph in question, it pointed up the 11 trail tiiirt* that pet 111 oners night continue to uao the sane sene sjntsms and plead that they have abandoned the unlawful agraaaent and that such use is merely Individual parallel conduct* It seams to us that this la an unwarranted anticipation of a situation which nay never arise and an attempt to decide, by an anticipatory order, questions which will be a subject for this court to consider should seas future enforcement proceeding become necessary* We refuse to sustain such a sweeping inroad on individual liberty of competitive action, without a prior determination by the Commission, after an appropriate hearing, that such activity la a viola* tlon of the Act, Lawful acts do not become automatically unlawful because of an administrative guess that a declaration of their illegality may facilitate enforce ment of a valid order." ? *UBHt tf h* Pclloa As noted above the Crawl salon la to submit!? December 81 a proposed decree modifying its present order In accordance with the Court's opinion. This would require eliiaination of the injunction against Motional lead, elimination of the prohibition against the individual use of the sene system, and elimination of dry white lead am prices from that section of the order relating to prise dlacrimlnatiena. She respondents have 10 days thereafter in which to ofiseat to this proposed decree or file objections thereto. After the final decree la approved by the Court and entered, the Commission or any of the respondents, NL 000040476 My file a petition for a writ of cortiorari in the Suprew* Court seeking review in that Court. Our present opinion la that tho respondent* would have vary little chance of upsetting ths findings of essispdU'eey and price disoriainatien, for thoso find ings essentially involve questions of fast whleh the Suprets* Court generally doee not review, the CoMlsslen My feel labelled to aeek a review on the reversal as te the Matlenal lead injunotiea and the Individual use of the aone nethod. Zt would appear that the sane considerations should apply in the case of the national lead injunction, that is, that since this was largely a question of fact, the Supresw Court would ho likely to deny review, although the fact that the Seventh Circuit based its decision largely on unsentradlated evidence 1 night lead the Suprene Court to view tho Mtter as a question of law. Unfortunately, this particular question of law has never been considered by the Staprene Court. 0a the other hand, the Step**** Court night dony revlow, la any ovont, on the ground that tho Seventh Circuit correctly decided that the Cosnlselcn had no such broad powers of injunction. The second question, relating to the Individual use of soao methods, would appear to ho purely a question of law. This quostloa has not hoot decided by the Stgrsno Court. Zn the Btdd Steel Cmdttit ease, the pigrMe Court afflawed the Sevonth Circuit where the latter hod held that tho ffeowteeton woo justified in enjoining the individual use of a baaing point aethod. The afftrnaaee woe by an equally divided Court, however, with JUetlee Jackson not partlelpatlag* Za addition, la the Mold Steel Conduit case, tho oooplalnt specifically sharped that the individual use of NL 000040477 -9- baaing point system constituted an unfair method of competition. Ho auch charge is made in the amended complaint here. Again, however, we cannot now determine whether the Supreme Court would ho interested In reviewing this point. If the Commission doea file & petition in the Supremo Court, consideration should be given to the advisability of filing a counter-petition stating, in effect, that if review bo granted, it should also include the question of whether a finding of con spiracy may bo based upon BRA evidence, l.e, upon activities undertaken at the specific request of the Government. The cease and desist order of the Ccsssisslon, which new is to bo revised and modified in the light of the Court's opinion, required respondents to submit within sixty days a written report^ showing compliance with the order. If the final decree to be enter ed by the Seventh Circuit contains the same provision and if the Commission does not took review, then within approximately ninety days national Load will bo roqulrod to filo a wrltton report showing compliance with the order. This will necessitate a review by the Company ef its methods usod in the sals of white lead In oil and keg preducts, dry white lead and lead oxides* It will undoubtedly be necessary eventually to revise white leed in oil semes either to draw the boundaries In such fashion that there could be no question of competition between dealers in different semes, or to use a flat uniform delivered pries for the whole country. He understand that the Ceapany no lemgsr saploys senes in the sale of oxides to battery mamfacturors. It le our further understanding that sales to other customers. NL 000040478 10* howsvsr, ara on s ms son* teals. This should te ohoekod sad perhaps s ms ohangss will have te te aads In ths sons aoteods saplsyod la sash sal*. tells ths Court hold test ths dry shite load seass wars ass discriminatory perhaps s o n s revisions si' ths ms boundaries ahctOd te aids in order te show eoMilsnes with ths order against conspiratorial uss of sonss. In tew old days ths rp--i ni nn aads vary llttls effort te ssok snforesasnt of its orders but thsrs is now an safereeasat division la ths Crawl salon and it la likely that tela division would not aeoept any atetaaant that wo wars using ths sans sonss now on sn Individual rather than on a oolluslvs basis. Othsr ehanges nay have to te aads in osaasetloa with osntalnsr differentials, preatluaii for 97% sad 9ai rod load, ate tea differentials ovsr pig land saployed in ths prising of oxides, although in teo latter case, ws utesrstand, ths prsssnt diffsrsntials differ froa those established in 1933* 34(all*gsdly by sollusive aotlon). Ths steer shanges asosssltatsd by tea Eleventh Circuit's opihion (again sa ths sastaptisa that as review is sought or granted by ths fuprte* Court) rolats to teo quantity difforontials uaod in dry white load sad oxide*. Either tbs present quantity diffsrsntials will hate te be Justified by oast data or shangos aust be aids whish saa te justified by a oaat state* Dsosater 5, 1939* axmm a mam NL 000040479