Document O3YL8yokzKqr9y7KRL7RrBXMK

Winter 38-117 , ,2-M-,s Cited 19SS Trade Cases Natl. Lead Co. v. I TC 70,981 {fl 68,211] National Lead Co. v. Federal Trade Commission. The Sherwin-'Wdliams Company, et al. v. Federal Trade Commission. The Eagle-Picher Company, et al. v. Federal Trade Commission, Anaconda Copper Mining Company, et al. v. Federal Trade Commission. In the United States Court of Appeals for the Seventh Circuit. 0'clohcr Term and ,Session, 1955. Nos. 1083V through 10843. respectively. Dated December 1, 1055, Petitions for review of order of the Federal Trade Commission. Federal Trade Commission Act and Robinson-Patman Price Discrimination Act Unfair Practices--Conspiracy To Fix Prices--Zone Pricing System and Uniform Pricing Practices--Sufficiency of Evidence.--A Federal Trade Commission finding that manufacturers oi lead pigments ar.d allied products conspired to fix and control tlie prices and bases fin the sale pj lead pigments was held to be supported by substantial evidence. Evidence that manufacturers met in committees of an association and discussed all ele ments of pricing and sales practices affecting the industry supported the conclusion that there were wide areas of tentative agreement upon revisions of such practices. 'The evidence sustained the finding that all of the manufacturers adopted the zone system of pricing. Price cards and other exhibits tended to show that zoning, and other aspects oi uniform pricing, were uniformly adopted practically simultaneously by all of the manu facturers, and that changes in certain details from time to time were put into cfTect by all of the manufacturers practically simultaneously. The inference of agreement, if not necessarily impelled by this evidence, was certainly a reasonable one which the Com mission as the trier of fact was entitled to draw. S.-e Unfair Practices, Vol. 2, t 5035.40, 5035.56. 5055.66, 5035.90. Unfair Practices--Conspiracy To Fix Prices--Evidence of Varying Prices--Relevancy. --A Fcdctal Trade Commission order prohibiting manufacturers from conspiring to fix prices-of lead pigments was affirmed. 0 lie manufacturers' contention that evidence of sales prices which varied from card ptires refutes a finding1 of conspiracy was rejected. Ofl-card sales represented only a minute percentage of the hundreds of sales reflected in invoices included in the record, and, in another field, such snics represented Mibst.vitia'ii uniform price concessions to certain large buyers to discourage them from producing their own supplies. A finding of unbending price iinif irmitv is not a requisite t-* a find1".' of conspiracy' to control prices. Any device which has the purpose and effect oi fixing prices to consumers ic an illegal restraint of trade. The same principle appliis t- evidence that the manufacturers' bids on government contracts fi eeiu tiily were no: uniform ft is unlawful to fix prices even though other facets of normal competition remain. See Unfair Practices, Vol. 3, f 5035. Unfair Practices--Conspiracy To Fix Prices--Evidence--Conscious Parallelism.-- A Federal Trade Commission order prohibiting manufacturers from conspiring to fix prices in the sale of lead pigments was affirmed. The contention that one of the manufacturers is a price leader in the lead pigments field and that the other manufacturers merely mest its prices in order to stay in business was rejected. Although parallel business behavior among competitors is not illegal /vr .tc, a protective mantle of "conscious parallelism" cannot clothe with immunity a system employed by substantially all the members of an industry whereby all offer their products for sale at any given time and at any given |>oiiit throughout the nation at identical prices, without regard to differences in shipping costs. Such a pricing structure is so arbitrary and artificial as to negative an inference of innocent parallel behavior and to Tequire an inference of prearrangement in view of evidence that all of the manufacturers participated in discussions in which they explored 1 lie advantages of the very pricing practices which shortly later they adopted. See Unfair Practices, Vol. 2, 5035. Unfair Practices--Acquisition of Stock or Asset*--Sufficiency of Evidence To Support Order.--A Federal Trade Commission order prohibiting a manufacturer of lead pigments from acquiring any ownership of stock or properties oi any oi its competitors was set Trade Regulation Reports 68,21 1 N 2289 70,982 ~ Court Decisions Natl. Lead Co. t\ PTC Number as--its is -s o -j j aside ou the ground that it was not supported by the Commission's findings. The Commis sion's ultimate finding of incipient monopoly was based upon occurrences concluded more than twenty years before the order was entered, and there was no evidence of a present intent on the part of the manufacturer to swallow up competition. See Unfair Practices, Vol. 2, 5017. Price Discrimination--Zone and Quantity Differentials--Evidence of Effect upon Competition.--A Federal Trade Commission order prohibiting manufacturers of lead pigments from discriminating in prices through the Use of zone pricing methods and quantity dis counts was affirmed. The Commission did not have to prove concretely that the manufac turers' differentials had an unlawful effect upon competition. Evidence of a probability that discrimination in price between competing purchasers, will have the effect of injuring competition is sufficient to support a finding of a violation. See Price Discrimination. Vol. 1, If 3505.495, 3508.399, 3508.400. Price Discrimination--Zone Pricing--Discrimination Between Buyers in Different Zones.--A Federal Trade Commission order prohibiting manufacturers, with respect to white lead-in-oil sales, from discriminating in price in favor of certain dealers by selling their products at a single price within a par zone and at premiums above such price to dealers located outside the zone was affirmed. The evidence indicated that competition was keen between dealers in paint products and that there was more than a reasonable possi bility that competition would be likely to cross the arbitrary zonal walls which thr manu facturers erected. The barriers which dictated the location of the zonal boundaries were those due to the location of plants of one or more of the manufacturers and to possibly other considerations known only to the trade. The inference that this division probably would have the deleterious effect on competition which Section 2(a) of the Clayton Act, as amended, proscribes, is certainly a reasonable one which the Commission was entitled to make. See Price Discrimination, Vol, 1, ff 3505.390, 3508.399. Price Discrimination--Zone Pricing--Quantity Differential--Discrimination Between Buyers in Different Zones--Injury to Competition.--A Federal Trade Commission finding that manufacturers of lead pigments, in respect to dry white lead sales, discriminated in price by offering a product for sale to all customers within a par zone at a price below that offered to dealers outside the zone was not supported by the evidence. Although there was substantial evidence of a highly competitive relationship between the buyers of the product, there was no evidence that competition did in fact exist between the buyers of the product in one zone and the buyers in the other zone. However, this was not held to be true as to a quantity differential. The evidence indicated that a large proportion of the buyers were concentrated in and around certain cculrafzed districts, that one or mure of the manufacturers operate lead plants in each of these areas, that shipments to such buyers were generally by local cartage, and that the premium for certain shipments bore no reasonable probability of injury to com petition. The latter was a justifiable inference which the Commission was entitled to draw from this evidence. See Price Discrimination, Vol. 1, 3505.390, 3508.399, 3508.400. Price Discrimination--Zone Pricing--Injury to Competition.--A Federal Trade Com mission order prohibiting manufacturers, with respect to lead oxides sales, from discrimi nating in price in favor of certain customers by selling carload lots to all cost'runs in a par zone at a uniform delivered price below that accorded to purchasers in each of three premium zones was affirmed, although the evidence as to the fact of companim and the effect of differentials was conflicting. ` See Price Discrimination, Vol. 1, ft 3505.390, 3508.399. Federal Trade Commission Enforcement and Procedure--Cease and Desist Order-- Validity--Respondent Not Engaged in Business in Industry Subject to Order--Activities of Subsidiaries.--A complaint charging manufacturers with conspiring to fix prices of, and discriminating in prices in selling, lead pigments should not have been issued against a fl 63,211 1 1955, Commerce Clearing House, Inc. HumU(r-n4 ,|K5, Cited 15 Trade Cases Nall. Lead Co. v. FTC 7&,9103 company which did not engage in business in the lead pigments field. The Commission's finding that the company engaged in the field through its wholly-owned subsidiaries was not supported by substantial evidence, No evidence was presented to prove domination of the closely correlated operations of the subsidiaries by the common parent. To support a finding of substantial identity, there must be evidence of such complete control of the subsidiary by the parent as to render the former a mere tool of the latter and to compel the conclusion that the corporate identity of the subsidiary was a mere fiction. See Unfair Practices, Vol. 2, V 5201; FTC Enforcement and Procedure, Vol. 2, E 8801. Federal Trade Commission Enforcement and Procedure--Cease and Desiat OrderValidity--Withdrawal from Business in Industry Subject to Order After Issuance of Com plaint--The issuance of an Order prohibiting violations of the Clayton Act, as amended, and the Federal Trade Commission Act in the lead pigments field against a company was held arbitrary where the complaint was filed in 1944 and an amended complaint in 1946, the company ceased to be engaged in business in the field in 1946, the order was issued in . 1953, and the company had not re-entered the field. There was nothing in the record to - support any reasonable anticipation that the company would re-enter the field. See Unfair Practices, Vol. 2, E 5201; and FTC Enforcement and Procedure, Vol. 2, T 8801. - Federal Trade Commission Enforcement and Procedure--Cease and . Desist Order-- Validity--Scope of Order.--A Federal Trade Commission order which provided that "each of the respondents, its officers, agents, representatives, and employees, in or in connection L with the offering for sale, sale or distribution of lead pigments in commerce * * * cease <-< * / and desist from quoting or selling lead pigments at prices calculated or determined in' 'f-/?**'*' whole or in part pursuant to or in accordance-with a rone delivered price system for the " purpose or with the effect of systematically matching the delivered price quotations or the " delivered prices of other sellers of lead pigmentj^and thereby preventing purchasers from finding any advantage in price in dealing with one or more sellers as against another,'' was set aside on the ground that, it was beyond the power of the Commission. The . respondentiFconteiided that the individual use of the zone delivered price method was j not found by the Commission to he an unfair method of competition and that the Commis- ' sion is without power to prohibit behavior which has not been found to be unlawful. The gTant of the power in Section 5 of the Federal Trade Commission Act is expressly restric tive, and the Commission may exercise only such powers as are granted to it by statute. An order must be restricted, to_ a prohibition of unfair methods of competition found to / cxTst. In the instant action, the Commission expressly points out that it had not considered TfieTndividual use of the zone system. The Commission contention that the order does not restrain all individual use of the zone price system but only that which has the effect of "systematically matching the prices" of a competitor at a particular designation was re jected because there was no complaint, no hearings, and no findings relative to the effect of such parallel individual actions. See Unfair Practices, Vol. 2, fl 5035.56; FTC Enforcement and Procedure, Vol. 2, f 8621. For the petitioners: Miles G. Seeley, Chicago, III., and James D. Ewing and Eugene L. DuBose, New York, N. Y,, for National Lead Co. Miles G. Seeley, Chicago, 111., for Sherwin-Williams Co. Nathan S. Blumberg, Jacob Logan Fox, Wallace R. Sollo, Chicago, 111., and Edmund P. Wood, Cincinnati, Ohio, for Eagle-Picher Company. Harlan L. Haekbert and Elbert A. Wagner Jr., Chicago, 111., for Anaconda Copper Mining Co. For the respondent: Robert B. Dawkins and Janies E. Corkey, Washington, D. C. Modifying and affirming a Federal Trade Commission cease and desist order in Dkt 5253. Before Lin d l ev , Sw a im, and Sc h h ac k en ber g , Circuit Judges. [FTC Order--Review] Lj n d l ev , Circuit Judge' [In full text]: Petitioners seek to set aside a cease and desist order entered by the Federal Trade Commission on an amended complaint charg ing them and the Gliddcn Company with Trade Regulation Reports tl 68,211 g LD000085 70,984 Court Deciilotu Nail. Lead Co. 1'. I'TC Number 38--120 UHlf violation of Section 5 of tin* Trade C*un- mission Act, 15 L, S. C. $ 45<a), and See- ft ion of the Clayton Act, as amended liy llie Robinson I'.iunan Price Discrimina tion Act, 15 U. S. C. IJ. Count 1 of the complaint, filed April 12, 1946, charged that petitioner. National Lead Company, had violated and was violating "Section. 5 * * * bv monopolizing. attempting to monopolize ami acting to control the sale of lead pig ments and the prices thereof in commerce'', and that all named parties acre violating the Act by combining and conspiring "among themselves and with each other" for the purpose and with the effect of eliminating competition in prices and terms of sale of lead pigments in cnmmeice. Count..!! charged all parties with discrimination in prices by menus of various /one pricing methods and quantity and functional discounts. Various attacks are made upon the validity of the order, or pen lions thereof, addressed to the alleged iiisiil.iciincy ot the evidence to support tlie findings ami to the scope oi the order. Some of the questions posed apply only to a single pctfin.iiei, while eti aie pl-ie; ole to a)' 1. 1 ; K!. i V , lit; Out :t; ,\o WX.sl C 'i ia Vc s;.,.l! first do. *.->e of the contention oi petitioner -VnncnmL ''upper .Mining Lotnj ai:v that die oi'dt i camlet stand as to it, Ims i o o ii its as ,ri'ion that it has never engage I in tie- ii 'ln.ii) as a produce), dis tributor or o IIk iw i.m In 1919, Anaconda bead I'lodntli Company, a wholly owned subsidiary ot Anaconda Copper, begat! pro duction of lead pigment!). International Smelting & Helming Company, another wholly owned subsidiary, acquired ail the a-sits oi Anaconda Lead in 1950 and there after, until l'MO. engageil in pr--dueti. i. of certain lead pigments which were sold by it and by Anaconda Sales Company, a !h,id subsidiary of Anac.omla Cuppei. 1 titernational was a respondent in the proceed ing ami is one of the petitioners here. Anaconda Lead i dissolved in It'.lO) ami Anaci'iid.i Sales are inn parties. At the- conclusion of the evidence in sup port of the complaint. Anaconda moved to dismiss as to it, urg"ie, that the cvI 'cuefailed to show tiut it lad eetr encased in maiiuiaciuie or sale of the products. The Commission denied the motion, hold ing that Anaconda had been engaged in the pigments field "through its wholly owned subsidiaries." The Commission found that International and Anaconda Lead "were in fact mere operating divisions of icspnmlcat Anaconda, with no substantial sipai.iie identity of their own," am! lh.o all their acts ami those of Anaconda Sales were those of Anaconda. On this basis, the cease and desist order was directed against Anaconda Copper. We have searched in vain f-.r evidence of a substantial character to support tin. findings on this phase of the asr. Though the record showsMhat rntenialion.d, Ai:;.i unda Lead and Anaconda Sale* are wholly owned subsidiaries of petitioner and in September 1947, at a date after International had withdrawn, from the field. Anaco ida, Ana conda Sales and lutei nuti>-n.i' w/ie r ntr-.Hid by interhirking boai'L of dii'celi rs and (dlirers, there is no i vidi nee which mililate's against the existence ami activity of these subsidiaries as separate entities at any tune pertinent to this inquiry, d ims, though the evidence tends to prove the iucidi tits of a p u'eat-siiiisidiary relation) hip, a fact which has Meier In cn in dispute, the closely correlated operau >ll i f International and Anaconda Saws i- ilecvs no sinister ruimorttiou of domination liy their common par ent, keeping in mind that the >.niy tunctioc lor which Auacuiida Sales was organized was to sell p iimUic Is produced hy intciuatioiial in certain we-teru stales in which the latter wax no; licensed to do business These sparse gleanings from the record fail to support the Commission's tuuling oi substantial identity. To come within the applicable rule, there must he evidence of .`.well complete control of the .sub.fi Jiary by tile parent as to render the former a mere tool of the latter, and to compel the con clusion that the corporate identity oi the sulmidiarv i.> a mere fiction. / Vc.fr Co v. X !.. R. US' R ?,1 957. at 046-947, cert, denied 31J U. S. .'`>5 {CA-DC); (hvl I'limit/aling Cr>rp. Ca'tjvnnu Cyanide Co., Inc., 30 !'. 2d !sld iCA-3). Such a finding has no substantial Mippoit in this record. The complaint should have been dism ssed as to lliis petitioner. U. Tin;CaKsmeCY iTvmxcs fDcjer.ti..'nti~~l'r.<du> is| The principal question raised by the re maining petitioncis is whether the Com mission's findings that the parties Conspired to fix and coiiiio! the pri< es and bases lor fl 68,211 1955, Commerce Clearing House, Inc- Numtor IS--111 U-JO-M Cited 1955 Trade Cases Natl. Lead Co. v. PTC 70,985 sate of lead pigments is supported by sub stantia) evidence. The parties are National Lead Company, Eagle-Picher Lead Com pany, together with its affiliate F.aglc-Picher Sales Company, The Sherwin-Williams Com pany and International Smelting & Refining Company. The GJidden Company, though not a petitioner, was also charged as a eo-conspirator. All are engaged in the production, sale and distribution of lead pigments. National is the leader and pro duces some 50% or more of the domestic production. Its nearest competitor, I'.agiePicher, accounts for a substantial part of the remaining 50%, while each of the other companies occupies a relatively minor posi tion in the industry. The three principal products included in tlie had pigments category are dry white lead, white lead-in-oil1 and the lead oxides, red lead and litharge. White lead is used t .i|- << :> base in paints and its chief hh tht, dtmbn of mantifac*vux/*c( punts. rMife Yad-in-oil is .i .... -r.-X'-.i p,iif|T eiflitfred rmcipally by the individual p;ii. t'tr >- ,Minting con tractor who prefers to tu-.x his own paints. The oxides arc used mostly by the battery industry as the basic constituent in the man ufacture of plates. Throughout the record, a clear distinction is drawn between the several partirs' respectue actions in sales of each of the three kinds of pigments. Although the evidence as to practices in each of these fields differs, there are, nevertheless, certain threads of similarity in the methods employrd by the various petitioners which render it practical to treat the conspiracy question as a unit, pointing out, wherever necessary, the applirrihility or inapplicability of a particular evidentiary segment to one or more of the several petitioners. Each engages in the production oi white leads and oxides, except that International confutes its activities to white leads and has never produced oxides.' Unless otherwise noted, all facts narrated and all statements pertinent thereto apply to all petitioners alike, except that factual statements and discussion which relate solely to the oxides apply to all petitioners except International. {FTC Findings] The facts as found by the Commission follow. Prior to 1933 no standard pricing system was employed in the industry. Each producer established its own practices as to prices and conditions of sale. For the most part, with respect to delivered sales prices, each employed its own system of pricing, based on shipping differentials from centrally located warehousing points. For example. National's lists from 1920, until 1933, include some 589 different cities in 40 states, which it, from time to time, used as free delivery or equalization points. The practices of other petitioners differed quite widely. In 1933, however, each petitioner partici pated in discussions looking to the adoption of a code of fair competition under the pro visions of the National Industrial Recovery Act. These discussions occurred in two committees set up by the Lead Industries Association, one to draft a code for white l'ad-in-oi! marketing and the other a code Yr the div pigments, including dry white lend i.'t.-i ussion within each group dealt with a wide range of subjects relating to prices, freight, quantity and quality differ entials and terms and conditions of sales. Tentative agreements, at least, weie reached as to terms of the proposed code, including an agreement to sell pigments only on a delivered price basis. With respect to white lead-in-jit, juices were to he based on a system of par and premium zones, sales werr to be made by agency or Consignment methods of mer chandising, and premium differentials in steps amounting to ' j cent per pound on an ascending scale were to be added on sales in 50, 25 and 12'5 pound containers over the price based on the norm of a 100 pound container. For dry white lead, a zone sys tem oi pricing was approved, as was a li cent per pound premium 1j be added to Icss-lhan-carlorul shipments of less than 20 tons. In effect, the committee agreed not to adopt uniform conditions for sales, on advice of counsel that to do so might amount to a violation of the antitrust laws. Instead, an alternative course was suggested, namely, that one or more of the parties put into effeet the uniform terms under discussion, ' This term, when used herein, Includes all the so-called keg produces, red lead-ln-olI. etc. The keg products are used principally as pig ments for paints, and marketing practices for these product: are the same as those employed in marketing white lerd ln-ol'.. * International withdrew from the pigments field entirely In 1SM6. Its contentions based on this fact are ..ubsecjuontly cons'i :ted herein. Trade Regulation Reports $-68,21 ? GLD000087 70,986 Court Decisions Natl. Lead Co. v. VTC Numr.cr -- ill 12-50-J5 which the others mif^ht follow. Agreements in tlie group considering oxide sales dealt with separate zone systems for carload and E.C.I.. sales, including a standard price for carload sales pegged on the cost of pig lead as shown by daily (|iintations of the American Smelting & Refining Company,' a price for L.C.L. sales based on a premium differential over the carload price and a premium differential to he added to the price of red lead containing a PbiO, content of 95% or higher. Certain of these provisions were included in the code, while others apparently never reached that stage. The code, though adopted, never lircame operative, however, inasmuch as petitioners, immediately upon its adoption, sought and obtained exemption from its terms. The Commission found that petitioned, during the N'RA discussions agreed n. "cooperatively revise the pricing practices'' in the industry in such a muuuci as to Constitute a violation of the Trade Com mission Act, and effectuated thru agreement !>\ adopti.' is iiniioini mc.ho.i~ ->i ; icing and sales throughout the l nit it' Stans Practices iound to ha.e been h i: in u m pursuant to that plan in tm sale of white lead-in-oil follow, Beginning in early 1934, petitioners lagan pricing tlic product on a uniform, delivered eard price Basis in a par zone enclosing all the area hounded roughly by the western borders of the Stales of Wisconsin and Illinois ami by 1 lie south ern boundaries of the States of Kentucky, West Virginia, Maryland and Delaware, hut including the City of Saint l.onis, Missouri, and the San Francisco area of California The remainder of the nation was divided into some 7 premium zones in which pre miums ranging from 12-cents to $100 per cwt. were added to tlic par zone selling price. About tlic same time, petitiouei s. except Sherwin-Williams, adopted a con signment method of silling, under which stocks were consigned to dealers to be s dd at the standard eard price, plus premiums, if any, on a commission basis Thiidly, a quantity differential was imposed upon sales in container sizes less than 1(1(1 pounds as follows: in cent per pound mi 50 pound, cent per pound uu 25 pound and 44 cent per pound on 12` j pound containers. One variation was noted by the Commission. viz., International, Sherwin-Williams nicl Gliddcn systematically fixed their card price; to dealers for white lead-in-oil, at about 25 cents per cwt. below that fixed lor Na tional's "Dutch Boy" and Esgle-Picher's "Eagle" brands. It found, however, that the product of all petitioners was offered to the public at identical prices, and that the 25 cent reduction of these companies in dealers' prices was a device intended to encourage dealer incentive to promote sales of the products in competition with the widely known and accepted `'Dutch Hoy" and "Eagle" brands. Tile following pv.'u'.ce' v.i found to have hern adopted with respiv' m sales of dry white had. All sail's were made at a standard delivered price basis in a par zone, which included ali slate- east of the eastern borders of Montana. Wyoming, l.'ol >rado and Men Mexico. \ picmium of 25 cents per cut wa- added on ail sales in states nest oi :his boundary. I inform].., a premiimi differentia! of 25 cents pi-: .l w;s added t . 'he pi u v on !, . 1.. s 01 *C ** ! - i. V 1 .'1/ ' ' 'll ** i.-' <c ' to ,.\i -. tin* *.' . r : n -r.i i.uu : pel;Ii-' ' . in I1154, adopted a an'iniM /.,u< pricing sy.-.i..iii, wills sep-a- iate zone prices for carload and L. C. E. sales. For pin poses oi the former, the United States was divided into two par zones and a single premium zone, while, for the latter, a single par zone and three premium zones were established, l'rices were fixed on the basis of differentials of $1.50 and $2.50 per cwt. over AS&R's quo tation for pig lead, geared to fluctuate up or down with fluctuations of 25 cents or nn re. This was the standard price for carload sales A premium of 40 cents per cwt. wa> added to 1.. (.'. 1.. sales of five tons or more and of 91) cents per cwt. over the carload charges for sales of less than five tons. Uniform pn mium prices of 25 and 50 cents per cwt., bn-''d on lead content, were estab lished tor rid lead containing a I'lnO, con tent of 05"5 and above. A- to sah-s of all dry ppiduets. including dry white lead, the Coiiii'ii--i.iu found that petitioners adopted term- of sale of 1% cash in Iff days, net .Iff day s or 25! cash in Iff days, net 30 days, and that at any given time the teims as quoted by all petitioners were identical, ' This Company will be referred to as AS.-l-R hereafter. II 68,21! 'V' 1555, Commerce Clearing House, Ine. Numb* J*~TJ3 1*40.31' Cited l9WTrid;C*es Nall. Lead Co. v. FTC Tbfi&r \Agreement Established] With the exception of Sherwin-Williams, petitioners do not dispute the finding that they employed uniform zone pricing sys tems, In this respect they question only the sufficiency of the evidence to support the findings that petitioners adopted the zone systems pursuant to agreement and that all adopted it at or about the same time. The most that can be said of these contentions is that in some respects the evidence is conflicting. It includes the testimony of petitioners' officers, price cards, invoices and other exhibits on which the Commission could well Find that all peti tioners adopted the zone system of pricing shortly following the NRA discussions. The Commission has resolved the conflict in the evidence adversely to petitioners and it is beyond our province to substitute our judgment in that respect. [Syrteni Adopted] The argument of Sherwin-Williams that it did not employ the zone system of pric ing must also fail. That company employs, for example, an' elaborate list of cities throughout the area in which it 'Iocs busi ness showing many of them as equalization, or par, points, and others as localities war ranting. as they say, premium prices rang ing from 12'A to 75 cents per cwt. on sales of white lead-in-oil. Comparison of this list with the zone maps employed by the other petitioners reveals that the par and premium city listings conform precisely in physical location and scale of premium charges with the established zone system of other petitioners. In view of this evi dence. we cannot say that the finding that tins petitioner participated in and used the uniform zone system lacks substantial support. [Evidence of Agreement] The most serious attack lodged against the conspiracy findings is that there is no substantial support for a finding of existence of an agreement among the parties to adopt uniform prices and terms of sale. The corollary of that position, viz., that the .striking similarity between prices, practices and the conditions of sale fixed by each petitioner is merely the effect of conscious parallelism on the part of petitioners in the sale of products of standard quality and constituent content, is likewise advanced. Trade Regulation Reports Although submitted as separate questions, we think the two issues so inextricably related as' to require that they he treated together. Although there is no direct evidence as to formal agreement on the part of petitioners to adopt the zone system and uniform pricing practices, the finding docs not neces sarily fail. A conspiracy may lie proved by circumstantial evidence. Triangle Conduit & Cable Co. v. FTC [ 1948-1949 Tr ad e Cas k s IT 62.254], 168 F. 2d 175, aff'd stih. nom ClaMon Mark Ir Co. v. FTC [1948-1949 Tr ad e Cas es fl 62,409], 526 U. S. 956 (CA-7); Allied Taper Mills PTC [1948-1949 Tr ad e Cas es [ 62,2631, 168 !'. 2d 600, cert, denied 356 U. S. 918 (CA-7). As we observed in Fort Ilmvard Paper Co. v. FTC [1946-1947 Tr am: Cas es [[ 57,477], 156 F. 2d 899, at page 906 (cert, denied 329 U. S. 795): "Very pertineutlv it was pointed out in the Matslerj case |United States Malstrrs Ass'n v. FTC (CA-7)], 152 F. 2d at pages 162 and 164: `As might he expected, there is little, if any, direct proof of an express agreement. Such proof, however, is not necessary. The agreement may he in ferred from the acts and conduct of the parties as well as circumstances pertinent thereto.'" And, in Milk & lee Cream Can Institute v. FTC [1946-1947 Tr ad e Cas es [157,429]. 152 F. 2d 478, wc said at page 480: "In determining whether su'ch finding [of an agreement to fix prices] is sup ported, it is not necessary, as argued, that there be direct proof of agreement. Such agreement may be shown by circumstan tial evidence, and the Commission, the same as any other fact finding body, is entitled to draw any reasonable inference from the circumstances of the situation." There is before us evidence that peti tioners met in 1953 and 1934 in the com mittees of the Lead Industries Association and discussed and appraised all elements of pricing and sales practices affecting the industry- The minutes of those meetings and tlie correspondence between the parties, or between certain of them and officers of the committees, support the conclusion that there were wide areas of tentative agree ment upon revisions of such practices. As previously stated, some of these tentative agreements were included in the cole adopted in May of 1934. We have found that the evidence sustains the finding that all peti tioners did, in fact, adopt the zone system fl 60,211 70/988 . Court Dociakms Natl.UadCo. v.FTC Nmtbcp 14--lit U-Jd-Jl of pricing in May 1934 or shortly thereafter. Price cards and other exhibits tend to show that xoning, and other aspects ot uniform pricing, were uniformly adopted practically simultaneously by. all petitioners and that changes in certain details from time to time have been put into effect by all petitioners practically simultaneously. The inference c*f agreement, if not necessarily impelled by this evidence, is certainly a reasonable one which the Commission as the trier of fact was entitled to draw therefrom, Ifilk & Ift Cream Can Institute v. I:TC, supra at 480; fort Howard Fafor Co. v. FTC, supra at 906-7; Allied Paper Mills v. FTC, supra at 607. Our language in the latter case at page 607 is pertinent, to-wit; "We cannot say that the Commission's inferences are unreasonable. The peti tioners did with varying; uniformity use the zoning system of price quoting, and the existence of this plan which equalizes driivered prices of competitors having widely different costs at a. given destina tion, is strong evidence in itself of an agreement to use such plan. * * * More over, a uniform participation by competi tors in a particular system of doing business, where each is aware of the others' acts and where the effect is to restrain commerce, is sufficient to estab lish an unlawful conspiracy. William Goldman Theatres, Inc. v. I.cow's, Inc., 3 Cir. {1944-1945 Tr ad e Cas es V 57,430], 150 F. 2d 738, 745." It is uuimportant, we think, that this record does not disclose a closely knit op eration by petitioners under a central in formation gathering and disseminating body as. was the fact in such cases as FTC t . Cement Institute [1948-1949 Tr ad e Cas es 62,237], 333 U. S. 683; United States v. Socony-Vacuum Oil Co. [1940-1943 Tr apf . Cas es [[56.031], 310 U. S. 150, and the Milk Can Institute case, supra. The absence of this aspect of many price fixing agreements may indicate nothing more than that the Very small number of competitors involved in the field rendered needless soch a watch dog agency. [Trifc Variances] Petitioners, to refute tire finding of consjiiracy, rely, also, on evidence of sales prices which varied from the card prices. This, it seems to us, is merely an invitation to weigh the evidence and rc-determine the f-icts. However, assuming arguendo that tiu. question is properly ours to decide, it ft 63,211 is clear that such off-card sales as the record discloses represent only a minute percentage of the hundreds of sales reflected in invoices included in the record. And, in the oxides field, such sales represent sub stantially uniform price concessions to large battery manufacturers to discourage them from producing their own supplies of oxides. Furthermore, it is clear that a finding of unbending price uniformity is not a requisite of a finding of conspiracy to control prices, hut that, any device which has the purpose and effect of fixing prices to consumers is an illegal restraint of trade. United States Soeony-J'aeuum Oil Co. [1940-1943 Tr ad e Cas k s 156.031), 310 U. S. 150, 222-3, and "it is not important that the prices fixed were not fixed in the sense that they we:e uni form and inflexible." Allied Paper Mills r. FTC [1948-1949 Tr ad e Cas es r 62,263], 168 F. 2d 600, 607 (CA-7). The same principle applies to evidence that petitioners1 bids on government contracts frequently wi re not uniform. Wc cannot say that the inference of agreement cannot stand in the /ace of such evidence. IConseiotts Parallelism] What lias been said with reference to agreement disposes in part of the conscious parallelism argumeut. Petitioners contend that National is the price leader in the field and that the other petitioners merely meet its prices in order to stay in business. While parallel busiucss behavior among competitors is not illegal per se, Theatre En terprises, Inc. v. Paramount Filin Distribut ing Corp. [1954 Tr ad e Cas k s [[67,640], 346 U. S. 537, 541, wc do not believe the pro tective mantle of "conscious parallelism'' can olothc with immunity a system employed by substantially all members of an industry whereby all offer their products for sale at any given time and at any given point throughout the nation at identical prices, without regard to differences in shipping costs. See Allied Paper Mitts case, supra at 607; Pori Howard case, supra at 907; Milk Institute case, supra at 483. This pric ing structure seems 60 arbitrary and arti ficial as to negative an inference of innocent parallel behavior and to require an inference of at least tacit prcarangciuent, in view of, the record disclosures that all petitioners participated in discussions at which they explored the advantages of the very pricing practices which shortly later they uniformly adopted. American Tobacco Co. v. United 1955, Commerce Clearing Hours, Ioc; MmW M--131 Cited 1955:Tt*4e Cases Nall Ltai Co. v. FTC 70,939 States {1946-1947 Tk ad f . Cas es fl 57,468], In view of the zealous contention, border 328 U. S. 781, 809; Interstate Circuit, Inc. v. ing on an argument that the Commission United States, 306 U. S. 208, 226-227; Allied must prove concretely that petitioners' price Paper Mills v. FTC, supra at 607-8. differentials have had an unlawful effect on Closely related to the parallel behavior competition, it is well to refer to the test by argument is E&gle-Picher's assertion that, which such findings must be measured. Evi although it systematically matched Matioual's dence of a probability that discrimination in pricing and sales practices, it nevertheless competed vigorously with the latter by sup plying its customers with technical assist ance and other additional services. In view of our conclusion that the finding of an agreement is justified, it is a sufficient an swer to this argument to reaffirm the well settled, postulate that it is unlawful for competitors, by agreement, to block off any price between competing purchasers will have the effect of injuring competition is sufficient to sustain a finding of a 2{a) violation. As the Supreme Court said, in Corn Products Refining Co. t'. FTC [19441945 Tr ad e Cas es 57,363] 324 U. S. 726, 738, the statute "docs not require a finding that the discriminations in price have in fact had an adverse effect on competition. of the normal channels of competition with The statute is designed to reach such dis the purpose of establishing identical prices criminations 'in their incipience-' before the for products of like grade, even though other, harm to competition is effected. * * * Cf. Stand facets of normal competition may remain ard Fashion Co. v. Magrane-Houslon Co., unfettered. FTC v. Cement Institute, supra; 258 U. S. 346, 356-357. Hut, as we held in United States v. Socony-Vacuum Oil Co., the Standard Fashion ca'e, supra, with respect supra. This principle rests on the view that to the like provisions of 5 3 of the Clayton the purchasing public is entitled to an op Act, prohibiting tying clause agreements, portunity to bargain with competing firms the effect of which 'may be to substantially with regard to purchase prices of products lessen competition' the use of the word of like quality. `may' was not to prohibit discriminations having 'flic mere possibility' of those con -III. Pr ic e Dis c r imin a t io n [FTC Finding] sequences, but to reach those which would probably have the defined effect cm competi tion." Ami in FTC r. Morion Salt Co. [1948- Under Count II of the complaint, the Com 1040 Tr ad e Cs s k s * 62,247], 334 U. S. 37, mission found that petitioners and Gtid.Ien 47, the Court again defined the test in these were guilty of price discrimination in the words: "the Commission is authorized by sale of lead pigments in violation of Sec the Act to bar discriminatory prices upon tion 2(a) of the Clayton Act, as amended the 'reasonable possibility' that different by the Robinson-Patman Act, 15 U. S. C. prices ior like gexxls to competing purchasers 113. Specifically, it found that the zone may have the defined effect on competi and quantity differentials were unlawful, tion." Cf. Corn Products Co. v. FTC, supra except that the carload discount on dry white lead was justified by cost factors on shipments made by rail. at 742. When the evidence of record is considered in the light of this test of a rea sonable possibility of injury to competition, [Injury to Competition] we must conclude that most of the Com mission's findings of 2(a) violations are The principal attack on these findings is substantially supported. that there is no substantial evidence of a probability that such price differentials would have an adverse effect on competition be tween petitioner's various customers. Peti tioners argue that the zone boundaries for each type of pigment follow natural trade barriers, that the evidence does not support the finding that competition in fact existed between dealers in the several zones and |Discrimination Among Buyers tti Different Zones] With respect to white lead-in-oil sales, the Commission found that petitioners dis criminated in price in favor of certain deal ers by selling their products at a single price within a par zone and at premiums above that the zone and quantity differentials are such price ranging from \2l/t cents to $1.00 so insignificant as to negate any effect on per cwt. to dealers located outside the zone. competition between, purchasers of peti It found that these differentials constituted tioners' products. illegal discriminations which tended to in- Trade Kfiliation Report* ! 68,211 70,990 Court Decisions .Wall. Lead Co. v. FTC Number Mr-128 1M0-51 jure competition between competing dealers located near the boundaries of adjoining zones. Petitioners urge that the zone boundaries follow natural trade barriers, and that there is no evidence that dealers do, in fact, com pete across these zonal boundaries, inas much as the product is marketed by them only locally, as a semi-mixed paint, to in dividual painters. The evidence does tend to indicate, how ever, that competition is keen between dealers in paint products including white lead-in-oil. Furthermore, the evidence tends to show also that there is more than a reasonable possibility that competition would be likely to cross the arbitrary zonal walls which petitioners have erected. We need only refer to one phase of the proof in this respect, namely, that these zonal boundaries dissect 10 states, in some instances placing a single city or metropolitan area in a pre ferred zone status over the remainder of the state in which it is located. Illinois. Wis consin and Kentucky are largely in a par ionc, but substantial areas in the western part of eacli are in the \2lA cent premium zone, while the city of Saint Louis is segre gated from the remainder of the State of Missouri in a par as contrasted to a 12J4 cent status respectively. The cities of San Francisco, Oakland and Rerkcly are par territory, while the remainder of California is in a 25 cent zone. The area immediately encompassing the cities of Omaha, and Lincoln, Nebraska, and the cities of Atchi son, Leavenworth and Kansas City, Kansas, arc in the 12j.j cent zone as contrasted to a 25 cent status for the remaining area or their respective states. The States of Oregon and Washington arc divided roughly equally between the 25 and 50 cent zones. Finally, a zonal boundary' approximating the loca tion of the Appalachian barrier separates the 25 cent zone of western Virginia from the 12`4 cent status of the eastern portion of the State. With the possible exception of the last mentioned state, the record impels us to conclude that the barriers which dictated the location of the zonal boundaries were those due to the location of plants of otic or more of petitioners and to possibly other considerations known only to the trade. The inference that this division probably would have the deleterious effect on com petition which 2(a) proscribes is certainly a reasonable one which the Commission as I 68,21! the trier of the facts was entitled to draw from the evidence before it. With respect to dry white lead sales, the Commission found that petitioners had dis criminated in price by offering their prod uct for sale to all customers within a par zone at a price 25 cents per cwt. below that offered to dealers outside the zone. It found also that the 25 cent carload-1,.CL. differential constituted an illegal discrimi nation against small purchasers, where de livery was made by local carriers, but found that this differential was a justified cost factor on shipments made hv rail. Peti tioners challenge each of the adverse findings. We fail to tirnl in the record any evidence supporting the finding of competitive injury resulting from the zone differential. Peti tioners employ two zones in marketing this product, a par zone including all states east of the eastern borders of Montana, Wyom ing, Colorado ami New Mexico. The states west of this line arc in the 25 cent per cwt. premium zone. While there is substantial evidence of a highly competitive relation ship between mixed paint manufacturers, the principal consumers of dry white lead, (here is no evidence that competition does in fart exist between those in the eastern par zone and those in the Kockv MountainPacific C<>a-.t premium zone. To this extent the Commission's order is without basis in fact. [Quantity Differential] Hut there is no merit to petitioners' con tentions relative to the quantity differential. The evidence tends to indicate, and the Commission found, that a large proportion of mixed paint manufacturing is centralized in ami around Chicago, Saint Louis and other metropolitan districts; that one or more of petitioners operate white lead plants in each ni these areas; that shipments to such manufacturers are generally by local cartage, and, finally, that the 25 cent per cwt. premium for L.C.L. shipments bears no reasonable relationship to added costs in curred in such shipments. The reasonable probability of injury to competition is cer tainly a justifiable inference which the Com mission was entitled to draw from this showing. [Discrimination Between Large and Small Buyers] With respect to lead oxides, the Commis sion found that petitioners, except Interna- 1955, Commerce Clearing House, Inc. Number i*-- Cited 195$ Trad* Cases Wall LeadCe, v. FTC tional, discriminated in price in favor of certain customers as follows: by selling car-* load lots to all customers in a par zone at a uniform delivered price 25, 50 or 75 cents per cwt. below tliat accorded to purchasers in each of three premium zones; by a uni form base price of $1.50 for litharge and $2.50 for red lead over AS&R's New York quotation for pig lead and adding the appli cable zone differential thereto; and by charging different prices for oxides in car load and L. C. L. purchases, by adding to the carload price 40 cents per cwt for L. C. L. purchases of more than 5 tons and 90 cents per cwt. on those of less than 5 tons. The Commission found further that the oxides are used principally by the stor age battery industry, which is composed of some 200 manufacturers ranging in size from .relatively small operators to industrial giants; that this is a highly competitive in dustry in which the little manufacturer com petes not only against Exide, Willard and other large producers, hilt also against Scars Roebuck ami other large mail order and chain store retailers; that each of the price differentials alluded to added as much as 12 cents to the cost of production of a battery, and that an increase in cost of 5 to 10 cents per battery might, and did, during a sub stantial period of time involved herein, rep resent (he difference between a profitable operation and a losing one on some types of batteries. The most favorable light which the record affords to petitioners is that the evidence as to the fact of competition and the effect of these differentials thereon is conflicting. Consequently, as that conflict has been resolved adversely to petitioners by the triers of fact, we may not substitute our judgment on this phase of the case. Wc observe briefly the argument, which applies to all pigments involved, that the price differentials were such an insignificant factor that no threat of adverse effect on competition can he spelled out. For ex ample, the added unit costs of up to 8 cents per gallon of mixed paint and of up to ap proximately 12 cents per storage battery are singled out. Wc believe, however, that this raises a question peculiarly within the com petence of the Commission, and that its deter mination thereon, as an expert administrative body, should be accorded full respect. The Commission was conceived and created by Congress as an agency especially informed and equipped to act to sustain the vigor of Trod* Regttlttioa Report* the economic pulse. Perhaps in no other field is the economic pulse, as envisaged in {2(a), so critically reflected as it is in the close relationship between added unit cost flifferenccs brought about by discriminatory pricing of raw components entering into the unit and the effect of such cost on competi tion within an affected industry. The courts are extremely reluctant to set aside the Commission's finding that a discriminatory price, though small, adversely affects the health of competition. See FTC v. Cement fnstitnic [1948-1949 Tbad e Cas es 1102,237), 333 U. S. 683, 726. It is noteworthy also, with respect to the 2(a) determinations, that Commissioner Mason, who filed a vig orous dissent against other portions of the Commission's order, concurred fully in the parts pertaining to price discrimination. IV. In c ip ie n t Mo n o p o l y |. IcijHiiitiim of Stock and .4siv/.r] Tlir complaint charged, and the Commis sion found, that National had. beginning in 1891. rngaged in arts tending toward sub stantial control of and a monopoly in the pigment industry in violation of Section 5 of the Trade Commission Act. Accordingly, it ordered the company to cease and desist from acquiring or attempting to acquire any ownership of the capital stock, or properties of any of its competitors in the lead pig ments field. In this respect, National asserts that the Commission lias no power under Section 5 to enjoin acquisitions of stock or assets which do not constitute a violation of Sec tion 7 of the Clayton Act, 15 U. S. C. 18. Irrespective of the Commission's power un der 5 5. we think the order so wanting in evidentiary support and so arbitrary that it cannot stand in any event. Therefore, we do not consider the 5 question. I* [Evidence] The Commission found that National was incorporated in 1891, effecting a merger of some 16 companies engaged In pigment pro duction. and that between that date and the mid 1930's it acquired the properties of more than 30 other producers. From 1931 to about 1935, National made several attempts to acquire the facilities of Eagle-Picher, its largest competitor. Thus, beginning in 1931, National purchased substantial holdings of Eagle-Picher stock, though it never at tained a position even remotely approaching I 68,21 > 70,9*2 Court Bedstone '1 Natl. LeadCb.v. FTC Number If--U ' majority control. The larger part of this stock was sold in '1937. Approximately 3,MX) shares were retained, but these were aold in 1944. Incidentally, whether this rep resented merely a* nrtftstment, as National insists, the record* drwAose* that it grossed more than $800,000 in profits on the Picker stock transaction*. In addition to these findings relating to petitioner's history, the Commission relied on evidence relative to certain contracts, to which National was party, to support its ultimate conclusion of incipient monopoly. Three of these were executed on February 26. 1906. By the first, between National and AS&R, the former agreed to buy front the latter all its requirements of corroding lead, except an amount not to exceed 30,000 tons annually produced by Saint Lonis Smelting Company, a wholly owned subsidiary of National, and 85% of its requirements of other types of pig lead, but not to exceed *85% of AS&R's production. Prices to be paid by National were pegged to AS&R's daily price quotations. It was agreed, fur ther, that the excess of Saint Louis' produc tion over 3b.(XK) tons per annum would be sold to AS&R at a price substantially below the latter's daily quotation. The contract expired in 1921 and was not renewed. Un der the second contract. National acquired nil i i the capital stock and securities of the United Lead Company, a bolding company for all the securities of 13 producers of lead pigments. United was controlled at that time by a syndicate composed largely of AS&K's officers and directors, and AS&R hud a substantial interest in United by vir tue of stock ownership. By the third agree ment, between AS&R and Hoyt Metal Com pany, a constituent company of National, Hwyt agreed to buy and AS&R to sell the latter's entire production of antimonal lead. The Commission referred to a fourth docu ment, which, perhaps, should be mentioned in. passing, la 1924 and in 1938, National agreed to supply du Pont's white lead-in-oil requirements on a processing fee basis. Un der die terras of this contract du Pont furnished all raw materials and National manufactured therefrom and shipped the finished product at the former's direction on the payment of an agreed processing fee. [Order Sri Aside] The ultimate finding of incipient monopoly is based on these findings as to transactions f 6fc;&f in the growth of petitioner to a domineut posi tion in its field. We find the assertion that Occurrences concluded more than twenty years before the order ww entered can justify a perpetual injunction against any future acquisition of stock or physical assets of National's competitors a startling one. The Commission stated that it had not con sidered the question of possible antitrust violations in petitioner's growth from 1891 to the middle 1930's. Nevertheless, it relied on findings which can have no purpose save possibly to prove that a monopoly already exists to support its order which is geared solely to prevention of monopolistic prac tices at some undisclosed future date. Thus, the order is not supported by the findings and must fall under the principles announced in ` the Universal Camera case. Universal Camera Carp. v. NLRB, 340 U. S. 474. We are not here concerned with judicial pronouncements that the Commission has authority to determine the scope necessary in a cease and desist order to prevent viola tions of the Act. Sec e. Q., May Stores Co. v. NLRB, 326 U. S. 376, 390-392. That prin ciple assumes a present violation of the Act, in which ease the Commission is given wide latitude in framing its order to compel com pliance with the Act. But such is not the case before us. The Commission has concluded from its findings of past activities, which may liave had mo nopolistic overtones long ago, that petitioner presently harbors a desire to swallow up all competition and that, at some undisclosed time in the future, it intends to do so. Pre sumably the evidence of this intent is ton delicate to stand the light Of day, since it cannot be found in the record. Drafted on this basis, the order before us seeks to spank the child, not for naughty acts done Or threatened, but on the general principle that he, may somewhere, somehow, in the future engage in mischief. This presumes the existence of a power even broader than that residing in a court of equity. The lan guage of the Court of Appeals lor the Fourth Circuit in the -Ww Standard case is pertinent: "Whea an order of the Commission if . before us for review, the Statute provides .. that to the extent that we do not modify it, we shall use our injunctive power to enforce it, 15 U. S. C. A. 45 (c); and it , is elementary that a court of equity will not enjoin one from doing what lie i not attempting and does not intehd to do, 1955, Comntttw OcSfott How*, Ino. Mumtet-M-JK Utt-15 Cited 1955 Ttaie Cases Nell Lead Co. v. FTC 70*993 * * !* WMt tfn administrative agency is not a tpurt oi equity, its orders must be based on qvujence giving them, reasonable support, at>(l, such support is not given for an order relating to present and future . practices by evidence relating only to transactions u'bich occurred a decade be fore it was entered. * * No one would contend that a cease ' and desist order should be upheld, if all the evidence sup porting it related to business practices which occurred ten years before the filing of the proceeding. * * *" Ncie Standard Pub. Co. v. FTC 11952 Th aw Cas es U67,222], 194 F. 2d 181. 183 V. V'ALipIIV AN* ScOHK Of Ok DF.R The remaining questions relate to the val idity of the order as against International and to its scope as applied to petitioners generally. These questions are hereinafter considered in the order in which they are stated. A. Va l id it y a s t o In t k r v a it o n a i. \Discontintiance of Business Acln-ilies in FitId] international asserts that the record shows conclusively that it ceased production of lead pigments in 1946; that, therefore, any issue as to its alleged violations has become moot arid that the Commission abused its discretion m entering a cease and desist order against it. The facts pertaining to this question are not in dispute. The original complaint was filed in 1944, and the amended complaint in April 1946. On both dates, and for about 10 years prior to 1946, International was engaged in the production and sale of white lead, both dry and in-oil, at hast Chicago, Indiana. In July 1946 it ceased production and, during the following month, the sale and distribution of the product was discon tinued, and the trade given notice of the cessation. At no time since then, has peti tioner engaged in any phase of pigment production or marketing. In October 1946 it sold its plant and facilities to KagleFicher. On completion of the evidence offered in support of the complaint, this petitioner moved to dismiss the complaint against it on the ground that it had permanently aban doned its pigment activities. Petitioner re lied on the ffccts related above and the supporting affidavit of its vice-president stating that petitioner had sold its plant and facilities; that, with one or two exceptions, all qualified pigments technicians and sales person nel bad left its employ, and that the company had uo Intention "ever to re-enter" the field. The Commission denied the motion in March 1947, on the ground that "it is not unlikely that respondent tnav in the future see fit to re-enter" the field. However, upon the evidence submitted, the trial examiner later found that "There is no reason to be lieve that hucrnutioual will ever reenter the business of the manufacture and sale of lead pigments." Despite this finding, the Com missions order, issued in 1953. runs against International as well as the other petitioners and (Hidden. In Marlene's, Inc. v. FTC (1954 Tr ad e Cas es If 67,882], 216 F. 2d 536, we liad occa sion to consider a similar situation. What we there said in reviewing decisions relative to the discretion lodged in the Commission to enter orders against discontinued prac tices is pertinent litre; it need not lie re peated. Id. at 559, and cases there cited. While the Commission is vested with a broad discietion to determine whether an order is needed to prevent the resumption of unlawful acts which have been discon tinued, this "discretion must he confuted * * * within the bounds of reasonableness " Id. at 559. This rule of reasonableness requires some thing mote than a mere guess or suspicion contrary to the evidence and to the finding of the trial examiner that a resumption of discontinued practices inay nut reasonably be anticipated. As we have stated in our discussion of the monopoly question, the Commission is not empowered to "enjoin one from doing what lie is not attempting ami does not intend to do." .Vert- Standard Pub. Co. v. FTC, sufra at 183: FTC r. Cifil Senice Training Bureau, 79 F. 2d 113 (CA-6). The distinction on five tacts between this cause and such cases as Marlene's, Inc. r. FTC, supra, and Caller v. FTC 11950-1951 Tr ad e Cas es If 62,770], 186 F. 2d 810. cert, denied 342 U. $. 818 (CA-7), is readily ap parent. In each oi those cases it appears that the petitioning party was still engaged in the same business in which the unlawful practices had been employed, and there was evidence from which the Commission might properly infer a public need for an order despite the fact that the specific unlawful practices had in fact been discontinued. .Ragukftaa Reports ^ 68,21) CLD000095  -CtMtOectefau Lend Co. v. ):TC WinniMr tt-4K> W4D SS Such * situition presents quite a contrast to ihe tmdisptned- fact here that petitioner is ntv longer engaged in the industry in which , the unlawful practice occurred and his di vested itfeli .of 'production, properties, [Order Held Arbitrary] And it is immaterial that petitioner may still he engaged in the smelting mrt refin ing of pig lead. No charges w*ere before the Commission relating ro that commodity, and there is nothing in the record to sdpport any reasonable anticipation that petitioner wrrl ever employ that cOmrriodity in pigtnHit production. The cease and desist or der entered in the face of this showing is arbitrary and must be set aside. B. Soort or ChAwt {Restriction on Individual Activity] There remains the question of whether the order is too broad, in that it purports to prohibit certain individual activity, f. e., whether the Commission exceeded its au thority, in this respect. In pertinent part the order prohibits any conspiratorial agree ment or other concerted action to do those things which,,according to the Commission's findings, amount to statutory violations. It expressly excludes from its edict agreements between any petitioner and its subsidiaries or affiliates wdrich relate solely to the' busi ness of such petitioner and do not have tire purpose or effect of unlawfully restricting competition, Petitioners do not challenge the propriety of the fortn of these provi sions, but make an attack on the next para graph, which restricts' individual activity as follows: ' "It Is Further Ordered that each of the respondents, its officers, agents, represen tatives, and employees, in or in connec tion with the offering' for sale, Sate or distribution of lead pigments in com merce, as: 'commerce' is defined iu the . Federal Trade Commission Act, dp forth with cease and desist frqm quoting or selling lead pigments at prices calculated or determined ill whole; or in part pursu ant, to or in accordance with a *0nt ' delivered |>rice system for the purpose or with the effect of systematically match* . jug the delivered price quotations or the delivered prices oi other sellers of lead pigments and thereby preventing purchas ers from finding any Advantage in price in dealing with one or more sellers as against another;" 1 ' &'& s This portion "of the order i* Assailed on the grounds first, that it'is improper, since the complaint did not charge, and the Com mission did nof fitifl, that individual use of the aPne delivered price method was an unfair method of competition and. second, that the Commission is authorized under Sec. 5 to 'prohibit unlawful acts only and, conversely, is without power to prohibit behavior which has not been found to be unlawful. The Commission insists that the para graph represents an allowable judgment in its choice of a remedy, as is best shown by the language of its opinion, that "Such a prohibition is necessary, not because it is unlawful in all circumstances for an in dividual seller, acting independently, to sell its product on a delivered prices basis in specified territories, but to make the order fully effective against the trade restraining conspiracy in which each of the respondents participated." [FTC Authority] Reported judicial authorities aud the ele mentary principles of statutory construction compel the conclusion that this paragraph is beyond the power of the Commission and snust, therefore, ho set aside. The grant of power in Sec. S of the Aet is expressly restrictive. Under subsection (a) the Com mission is empowered to prevent any person "from using unfair methods of competition * * * and unfair or deceptive acts or prac tices in commerce.'' Subsection (b) provides that, after a hearing and on a finding "that the method of competition or the act or practice is prohibited" by tbe Act, tlie Com mission may issue an order requiring the person adjudged guilty of such conduct to "cease and desist from using such method of competition or such act or practice." 15 U. S. C. 45(a), (b). t [Frior Decisions] Th< Commission may exercise only such powers as are granted to it hv statute, Arroti'-Ifart & Hrijciruin Co. v. f:TC, 291 U. S. -587, 598; and its remedy against p/ac* Piets must comport precisely with the leg1 i.tlafive gTant Of power. The section is specific: the permissible order is restricted to a prohibition of "unfair methods of com petition" found 1o exist. Jw the Arro\>-IIart ewe, rw/>rj,'the Court said, at page 598: 1955, CommircaClAWihg Hoose. Int. NumktrJS--111 Cited 19S5Tr*d* Cases Nail. J-ead Co. i'. FTC 70>995 "The Commission is an administrative body possessing only wch powers as are granted by statute. It may make only such orders as the Act authorises; may order a practice to be discontinued and shares held in violation of the Act to be disposed of; but, that accomplished, has not the additional powers of a court of equity to grant other and further relief by ordering property of a different sort to be conveyed or distributed, on the theory that this is necessary to render effective the prescribed statutory remedy.'' To the same effect see FTC v. F.astman Kodak Co., 274 U. S. 619, 623-624; FTC v. Sinclair Refining Co., 261 U. S. 463, 475, 476. While it is true that violations of the Clay ton Act were charged in each of these cases, the same principle controls the scope of the permissible remedy under Sec. 5 of the Trade Commission Act. Compare the grant of power under the Clayton Act, 15 U. S. C. 21 with that under Sec. 5 of the Trade Commission Act, 15 U. S. C. 45(a), (b). To support its reasoning that it may pro hibit lawful actions where such a course is deemed necessary effectively to restrain an unlawful practice, the Commission relies on certain language in the opinion in Jacob Siegel Co. v. FTC (1946-1947 Th ai* Cas es If 57.4511, 327 U. S. 608, 611-613, as follows: "The Commission has wide discretion in its choice of a remedy deemed adequate to cope with the unlawful practices in this area of trade and commerce. Here, as in the case of orders of other adminis trative agencies under comparable statutes judicial review is limited. It extends no further than to ascertain whether the Commission made an allowable judgment in its choice of the remedy. * * * The Commission is the expert body to deter mine what remedy is necessary to elimi nate the unfair or deceptive trade prac tices which have been disclosed. * * * (AJnd the courts will not interfere except where the remedy selected has no reason able relation to the unlawful practices found to exist." The quoted language must be read in context, in the light of the facts there in volved. The Commission had determined that Siegel's trade name "Alpacima" as ap plied to- coats was misleading and had prohibited further use of the term. The Court of Appeals affirmed. Jacob Siegel Co. v. FTC (1944-1945 Tr ad e Cas es C 57,3131, 150 F. 2<1 751 (CA-3). On certiorari, the finding that U9e of the trade name was mis leading and thus illegal was not attacked; the Only question before the Supreme Court was whether the Commission properly or dered excision thereof. The Court reversed and remanded, on irs determination that the Commission had not considered whether, by employing sonic qualifying language in connection therewith, use of the trade name might be preserved. The quoted language appears in the general discussion of the pro priety of the excision order, and, when read in that context, does not, we believe, sanc tion a prohibition against lawful acts. We have found no decision sanctioning an order such ns this. True, the Commis sion is not restricted in its choice of a remedy "to prohibiting the illegal practice in the precise form in which it is found to have existed in the past." FTC v. Rubcroid Co. [1952 Tr ad e Cas k s 1(67,27')], .343 U. S. 470, 473. It may frame its order broadly to reach all phases of existing unlawful conduct. Thus, in Rubcroid, the Commis sion prohibited the use of all price differen tials on its finding; that differentials employed by that Company of 59o and greater were discriminatory in violation of 2 of the Clayton Art. as amended. The Court held that the Commission was not required to restrict its order to the specific differen tial previously used, namely 5% and greater, in the absence of a showing by Rubcroid that differentials of less than 5% might be lawfully employed. The same principle was applied in Hershey Chocolate Corp. v. FTC, 121 F. 2d 963 (CA-3). On a complaint charging unfair methods of competition in the sale of one candy item, the Commission had found that similar unlawful practices were being em ployed in the sale of several otlrer confec tionery items as well. The court sustained ax order which prohibited all such unlawful practices which the Commission had found to exist, on the theory that the entire unlaw ful conduct w-as related to the specific un lawful practice of which complaint w h s made. Other cases cited by the Commission fail to supi>ort its contention. In Dorftnan v. FTC (1944-1945 Tr ad e Cas es 1(57,2911, 144 F. 2d 737 (CA-8), no question was raised but that the practice prohibited by the chal lenged portion of the order was unlawful. The determination in California Lumber men's Council v. FTC, 115 F. 2d 178, 185, cert, denied 312 U. S. 709 (CA-9), was that the practicei which the Council insisted were Ttid* RetbfetiothRejiofta I 68-21 T 79,996 Court Decisions .Vo//. U-ad Co. v. FTC Numker 1240-Sl lawful were, in facti an unlawful restraint of competition, under the holding in East ern States Lumber A sin y. United States, 231 U. S. 600, 612. Arid, finally, FTC v. M 'allace, 75 F. 2d 733 (CA-8), must be read in the light of the unique situation there involved. That was a proceeding brought to enforce an order. The objectionable conduct exist ing prior to the proceeding iu which the order was cutercd bad been accomplished through the offices of an association, com posed of all individual respondents, but, as the Commission found, wholly controlled by Wallace. After a cease and desist ardor was entered, the association was dissolved, but Wallace continued the same practices unabated in behalf of himself and the other ex-members of the association. The Com mission filed a petition against Wallace only, for enforcement ot its order. IIis answer did not deny the averments nude; he de murred on the ground, inter alia, that the order restrained concerted conduct and, therefore, enforcement could not be decreed against him alone, to restrain his individual conduct. He did not deny that his own con duct was illegal, but argued merely that it did not come within the purview of the order. The court entered a somewhat unique decree, first modifying the Commission's order to prohibit individual as well as con certed use of the admittedly unfair practice, pud then enforcing the order as tints modi fied. against Wallace alone. In each of the cases upon which the Com mission relies, the courls have sustained restraints only against conduct found to be unlawful, resolving all doubts in favor of the Commission's order in those gray areas wherein the legality or illegality of a par ticular course of conduct depends on the circumstances surrounding its use. Cf FTC r. Ruberoid Co. [1952 Tk ad f . Cas es 67,2791, 343 U. S. 470, 473. The individual practices against which this order runs are not shrouded in log. On the contrary, the Commission expressly pointed out that it had not con sidered the individual use of the zone sys tem, but concluded that the portion of the order with reference thereto was necessary in order to prevent evasion. This position presents a striking contrast to the language of the Supreme Court in FTC v. Cetn.-nl Institute 11948-1949 Tr ad e Cas es <!62,237|, 333 U. S. 683, 727-728. wherein the Court, in adutuit-.g an order prohibiting conspiratorial use of a basing joint st stem, c.veSully poimed out that it did not aflcct individual use of such system. Although no question of in dividual restraint was presented, the Court's tneticulousncss, in emphasizing the limita tions of the order before it, is important as indicative of the esteem which it attached to preservation of the individual's right to adopt and employ his own business prac.ices, notwithstanding the fact that con certed action l>etween competitors to employ the samr practices ntay violate the- Act. i'he part of the order with which we are now concerned does not dilTcr in any sig nificant respect from the one we struck down in Salt I'roducrr's Ass'n v. FTC [19401943 Tr ad e Cas es H 56,261). 134 F. 2d 354. There, as here, we sustained the Commis sion's findings that the petitioners, acting in conceit, had employed a uniform zone delivered pricing basis in the sale of salt. There, as here we sustained the determina tion that such concerted activity was viola tive of the Act and the order prohibiting its prospective use. There, as here, the com plaint contained no allegations with respect to tiic individual use of the zone system. Petitioners were ordered to cease anil desist front employing "uny common cause of netinn * * * establishing or maintaining de livered juice zones, or making quotations and sales of salt upon a delivered price basis under a zone system whereby the cost of salt * ' * is made identical at all destina tions within such zone." We set the order aside saying. 134 F. 2d at page 358: "The complaint discloses the Commis sion's aim to eradicate and prohibit all concert of action by these petitioners, look ing to the establishment and fixation of jirices. There was no indication in the complaint that they were assailing the /one. system fer sc as an unfair method of rotnpt tition by one manufacturer in relation to two purchasers of his salt, iu the same zone, where the freight cost.-, are averaged, and otic hears a greater burden than the actual freight cost incurred "It the zone system per se is to he con demned. there ought to he a hearing by the Commission and a finding on the pre cise issue oi the unfairness of sucli a com mercial practice " Although the Salt Producers order is not identical with that before us, we think the two raimot be distinguished in principle. The Commission asserts that the present order does not restrain all individual use of the zone system but only that which lias the %7 1955, Commerce ClciTirg House, Inc. XinJw tMn Cited 19S5 TradiC^scs New Amtricbn Library of Worl4>Litenalurt, Inc. v. FTC ro%& effect .of .*,4yr,tc2ietllji-)taitching ;the *rke" > `Sivity is- violation of the Act* lawful acts of a competitor at a particular designation. do not become automatically unlawful be The fact remains, however, that there have- cause qf An administrative guess that a dec been no complaint, no hearing and no find laration of their illegality may facilitate ings relative to the effect of svch parallel enforcement of a valid order. individual 3etioriF. Suit Producers'' Ass'n v.. If individual use of the /one system by FTC, ntpra. Ci. FTC v. Grata. 2S3 U. S. petitioner-; is'to be restrained, that result 421.-424. must be achieved by a proper order Hi a proceeding'conducted in conformity with [Anticipatory Order Not Sanr/iotird} the statute, in which I lie invalidity of such Clearly, the Commission was concerned here WkB enforcement of it* order prohibit ing concerted action. In justifying thp para graph in question, it pointed up "the likeli hood" that petitioners might continue to use the same /one systems and pleaal-tliat they have abandoned the uplavyful agree ment and that sfuclv use is merely Individual conduct Is determined. The Commission's power.to act is conditioned on such a de termination. Salt Producer's Assn v. FTC suf>ra; Cf. Arroyo-f!art dr f-fecteman Co. v. FTC, 201 lb S. 5.7; FTC v. Postman Kodak Co., 27-1 U. S. 610, 623-624; FTC v. Western 3feoi Co., 272 l!. S. 554; FTC v. Sinclair K*filing Co, 261 V. S. 463, 475-476. parallel conduct. It seems to us that this is an unwarranted anticipation of a situation [Order, Modified, Afiitmed[ which may never arise and art attempt to The order, as modified by this opinion, decide, by an anticipatory order, questions will be affirmed. The Commission shall, which will be a Subject for this court to within 20 days, submit a proposed decree consider should some future enforcement modifying iis present order in accord with proceeding become necessary. We refuse the views expressed herein and submit the to sustain such a sweeping inroad on in same to petitioners and to this court. Within dividual liberty of competitive action, wi'h- lfl days thereafter, petitioners shall consent oui a prior determination by the Commission, or file objections thereto. The final decree after an appropriate hearing, that such ac- will then be entered. The New American Library of World Literature, Inc.; and Kurt Enoch and Victor Weybright, individually and-as officers ef the New American Library of World Literaturej'lnc. v. Federal Trade Commission. In the United, States Court of Appeals for the Second Circuit. No. 79--October Term, 1955. Docket^No. 23553. Argued November 16, 1955. Decided November 25, 1955. Upon a petition to review the modified decision and order of the Federal Trade Com mission entered January 13, 1955.. Federal Trade Commission Act Unfair Practices--Misrepresentation--Books--Abridgements--Modified Order Af firmed.--The Federal Trade Commission, pursuant to an opinion of the Court of Appeals modified a cease and desist order requiring the publishers of pocket si/e reprints of books to give the pubiic notice that the publisher's "pocket" hooks are abridged. The modifier order prohibits the offering for sale or selling of any abridged copy of a hook unless one of the following words, namely, "abridged," "abridgement," "condensed," or "cciulcusatioo," or any other word or phrase stating with equal clarity that said book is abridged, appears in clear conspicuous type upon the front cover and upon the title page of the hook either in immediate connection with the title or in another position adapted readily to attract the attention of * prospective purchaser. Previously, the order required that the above words be used in immediate connection with the title. See Unfair Practices, Vol. 2, 5 5051.073, For thf petitioners: Sidney A. Diamond. For the respondent: Janies A. CorUey. Trsde .Peculation Report* ? 63,212 GLD000099