Document XEYMEmDba5JzE4YEvJG6dp0B

T3KITED STATES OF AMERICA Before the FEDERAL TRADE COMIISSION RECEIVED S<%\ MAY 25 1948 In the Matter Rational Lead Company, a corporation, et al. R ET ') ) ) ) ) ) Docket Eo, 5253 ) ) ) ) )- Now come the respondents. The Sagle-Picher Company and The Eagle-Picher Sales Company (hereinafter called "Eagle-Picher") by their attorneys, Edmund P. V/ood and Richard Serviss, and adopt as their own the exceptions taken by each other respondent herein to the "Trial Examiner's Recommended Decision". A. In view of the fact that the Recommended Decision of the Trial Examiner treats the practices of Eagle-Picher as Incidental or tributary to those of Rational, thus dispersin' direct and indirect reference to them throughout the Recommended Decision, and rendering-it difficult to challenge each allusion to Eagle-Picher separately and individually, Eagle-Picher asserts the two following general exceptions to the Trial Examiner's Recommended Decision: 1. As to Count I, the Trial Examiner erred in holding or insinuating that Rational lawlessly achieved a monopolistic position of industrial dominance, that Eagle-Picher aided, abetted, supported, REPRODUCED AT THE NATIONAL ARCHIVES \ 1045 -- \ N 4140 and contributed to Nationals monopolistic delinquency and nov; parti cipates in the illegal fruits as virtual 'co-partner in criminal monopoly, that National procured this sinister intimacy by the device of its erstwhile minority stock ownership in Eagle-Ficher, and that these conclusions are compelled by the manifest intimations of the evidence, in weighing which the categorical statements of top executives, whose honesty is not questioned, must be disregarded as unqualified, in favor of possible inferences emanating from the extraneous doings and scrivenings of underlings, which, although irrelevant, should be regarded as transcending normal competitive amenities. Eagle-Ficher excepts to and objects to each and every item which holds, insinuates, implies, suggests, infers, or intimates to this general effect, posi tively or negatively, or both. REASON: The Trial Examiner so erred because he chose to ignore the testimony offered or. behalf of Eagle-Ficher, and because he disregarded the established law of evidence that inferences cannot be used to contradict direct and positive testimony, unless they are ines capable. bore particularly, it was testified that Eagle-Ficher had no agreements with National and competed with it actively but had no alter native. to following National's prices on products made from pig lead, because Eagle-Ficher was not relatively strong enough to start or finish a price war. This direct and positive testimony, which is more particu larly identified below in Paragraphs 3-1, , 3, and 4, stands uncontra dicted in the record, and the Trial -xaminer's laborious deduction of intricate and sinister conspiracy is completely unnecessary to explain the transparently simple, commonplace^competitive situation. (See 2 li `4f> REPRODUCED AT THE NATIONAL ARCHIVES A s* Paragraphs (1-f), on Page 10; (7-cl), on Page 43; (6-A), on Page 79; and (7-A1), on Page 80, of the Trial examiner's Recommended Decision.) 2. As to Count II, the Trial Examiner erred in that, after holding that the price discriminations of the respondents should be treated individually, (Page 57, Paragraph (10-m)), he concluded that Eagle-Picher v.'as violating Section 2(a) of the Clayton Act, with out making the appropriate and necessary findings of fact as to Eagle-Ficher. I!ore specifically, the Examiner held: "The question of discrimination involved in this case is individual and must be considered with respect to each respondent acting alone from the standpoint of effects as between its customers." However, the Recommended Decision contains no finding that any two or more actual customers of Eagle-Richer were affected by Eagle-Picher's price differentials or that anything more specific than hypothetical competition between hypothetical customers might be affec ted. The Recommended Decision goes beyond, due process of law in recom: lending a restraining order against i.agle-?icher, in the absence of a clear-cut finding that Eagle-Picher's individual pricing practices substantially affected the conpetitibetween 1dentifiable customers. FEASOR: At the close of the Commission's case. Eagle- Pi cher moved to dismiss the complaint, on the -round, among others," that the evidence in respect to violation Section 2(a) of the Clayton Act was too vague and indefinite to permit pror.er defense or rebuttal and hence. Eagle-Pic: .er, denied opportunity for intelligent defense. REPRODUCED AT THE NATIONAL ARCHIVES 104;' ] was being deprived of due process of lav:. The proposed finding that Eagle-Picher has violated this Act is unsupported by any finding as to when, where, how, or whom. If Eagle-Picher1s price differentials have substantially .lessened competition among its customers, or if their effect may be to substantially lessen competition, then certainly the hecommen-Vc Decision should have identified the customers so affec ted with sufficient particularity to permit Eagle-Picher tc at leas*- argue the matter before the Commission. The record indicates throughout that Eagle-Picher has many customers, and that there is much competition in at least several of the industries in which Eagle-Picher customers engage. The Trial : Examiner speculated academically as to hypothetical effects on hypo thetical customers, but did not instance from the record any proved violation cf law. As basis for the Recommended Order, the Recommended Decision should have found that the effect cf Eagle-Picher pricing practice X may be to substantially lessen competition between Eagle- Picher customers A and B. There should leave beer sue:, a finding in respect to each pigment and each price- different: al. Instead, the oi _agle-Picher differ- as to maybe lesser, competition. In short, t e c cr.mo r.c e d in substance substitutes "maybe" for* "may be " in of law. a&r s defense impossible, and denies Eagle-Pi cher :ue mooes: B. Further, Eagle-Picher excepts to t?'e refusal of the Trial u'zam.ir.er to make tve following findings of fact, proposed to him by magle-Pich.er, and supported by the evidence: -4- 1**48 REPRODUCED AT THE NATIONAL ARCHIVES 1. "The Eagle-Picher Company and The nagle-Picher Sales Company (hereinafter called Eagle-Picher) engage in the business of selling lead pigments in interstate commerce throughout the United States in which business they are second in size to National Lead Company (hereinafter called rational). Due to the difference in sloes of the two companies, Eagle-Picher is not in a position to compete with / National, on lead pigments manufactured from pig lead, by means of a general policy of price cutting or price war. Nevertheless, it is the policy of Eagle-Picher to compete with National in the sale'of lead pigments and Eagle-Picher does so compete Actively by means of re sear c.h which develops different and better products, by means of sales service, by means of technical service to customers providing them with the benefit of Eagle-Picher1s research facilities, and by means of national advertising intended to increase consumer acceptance of the Eagle-Picher products." 2. "Eagle-Picher lias not acted in concert with the other respondents herein or any of them since the invalidation of the National Industrial Eecovery Act, in respect to terms or conditions of sale of lead pigments, and there is no evidence that it has. lore speci fically, the current situation was correctly summarized by Joel N. Bowlby, president of Eagle-Picher, who testified that since the tine he became president of the company, September, 1241, down to the present, no agreements have existed with the other respondents herein or any of then, affecting prices or terms or conditions of sale of lead pigments, and this testimony is uncontradicted." 3. ''Particularly, Eagle-Picher research has developed special pigments known as basic lead sulphate, leaded zinc oxide and blue lead which Eagle-Picher manufactures from its own raw materials 1 5 REPRODUCED AT THE NATIONAL ARCHIVES and sells in competition with pigments manufactured from pig lead. All of the Eagle-Picher organization has been actively engaged in promoting consumer acceptance and greater utilization of these products in comnetn* tior. rith those promoted by the other respondents Vev>e,r.." 4. ''Eagle-Picher ' s research laboratories have developed many special lead oxides for the storage battery industry and EagleFicher's technical experts have instructed the company's customers in the manner of their use, which has improved the competitive position of the Eagle-Picher customers in relation jio that of the customers of National and that of the large battery manufacturers which produce their own lead oxides." 5. "Eagle-Iicher has not'indulged in any unfair method of competition by conspiracy or otherwise." 6. "Eagle-Picher.has not discriminated among its .cus tomers in its sale of lead pigments." 7. "Eagle-Picher cannot compete with National except by selling on a delivered price basis because of National's greater size and greater number of manufacturing plants." 8. "The pricing policies of Eagle-Picher have not had the effect of substantially lessening competition or tending to create a monopoly in the sale of lead pigments, and the record does not pur-, port to evidence a single specific instance of such effect." 9. "The competition of the customers of Eagle-Picher which purchase lead pigments from Eagle-Picher, has not been injured, destroyed or prevented by the pricing policy followed by Eagle-Picher, and the record does not purport to evidence a single specific instance of such effect." 1050 REASONS: Eagle-Picher*s proposed exceptions. Nos. 1, 2, 3 and 4, are supported by the testimony of Alvin C. Goetz, Tr. 3328; Harold R. Harner, Tr. 3416; I-. F.- Chubb, Tr. 3452; W. V,'. Vasterling, Tr. 3591; J. 0. Mitchell, Tr. 3620, J. I'. Bowlbv, Tr. 3632-A; ana V,. II. Kayt, Tr. 3659. Proposed findings Nos. 5 and 6 are negative in form and are supported by the negative aspects of the record. Proposed finding Ko. 7 may be found in substance in the Recommended Decision, but the Trial Examiner refused to make this proposed finding with quotable ,V conciseness. Proposed findings Nos. 8 and 9 are negative, and are predicated upon the negative aspects of the record. C. More specifically, Eagle-Picher excepts to said Recom mended Decision in the following particulars: 1. Page 6, under "The Issues": "Did National, through its various acquisitions, secure and employ monopolistic control over the lead pigments industry? Did National's relations with Smelting exert a monopolistic influence over the price of pig lead? Did National conspire with uu Pont with the purpose and effect of maintaining fined price levels on white lead-in-oil?" The reason for the exception is that none of these activities comes under Section 5 of the Federal Trade Commission Act, or Sect! cm 2(a) of the Clayton Act, c* under any other statute under which thf Federal Trade Commission has ^nrisdictior. These issues might pertain to alleged violation by National of Section 2 rf the Sherman Act, b"t - 7 li-hii i REPRODUCED AT THE NATIONAL ARCHIVES the Federal Trade Commission is without power to enforce this section of the Sherman Act, in so far as mere purpose or intent to monopolize is concerned, because intent per se is not ah unfair method of conoetition. These issues, properly, have nothin." to do with the Eagle-Ficher respondents; i-agle-Picher is not responsible for the sole and Ion" past actions of 1'ational, and should not be prejudiced by these false issues relating solely to National. 2. Page 9, (1-e) This paragraph is faulty, in that Eagle-Picher*s production of basic lead sulphate and leaded zinc oxide is not ta`jfkif en into account, and further, in that the record does not justify the holding that Eagle-Picher's percentage of business has been increased by its acquisition of International's lead pigment plant. Eagle-Picher did not buy International's business, and there is no reason to believe that Eagle-Picher received a larger share of it than any other respondent. 3. Page 10, (1-f) Properly, these facts, if true, are not pertinent to the issues of this case. The statement that it was not shown that National controlled Earle-Ficher through stock ownership is warranted. but this finding alone should disqualify all other evidence oertaining to National's financial interest in xJagle-Picher. The evidence which is discussed in the second paragraph of (1-f) is too trifling for proper consideration in relation to any valid issues in the case. 4. Pa,<~e 35, (5-e) The record does jjot justify the interpretation placed upon it as to Eagle-Picher. REPRODUCED AT THE NATIONAL ARCHIVES -8- 1052 i iif 1! ~. <ji 14 5. Page 56, (6-a) There is nothing in the record to justify the Examiner's implication that prices were fixed jointly by National and _a e-?icber. _agle-?icher deer not except , to the findi r-~ that tve rrices set by National "had the effect of placing a ceiling on prices which their smaller competitors could charge and of making profit margins sufficiently narrow to induce these competitors to sell at the highest prices they could get (Pars. 1-f, 2-f, 5-c3) 6. Page 58. (7-al) and (r?*-a2) These conclusions have nothing to do. with any proper issue in the case, as explained in relation to the analysis of "Issues". 7i Pare 59. (7-a3) There is nothing in the record to show that "Respondents National and Eaxle-Picher promulgated and adhered to- the zone pricing system without deviation and in such manner as to produce identical prices, terns, and conditions of sale." Eagle-Picher in general followed National's pricing, as to products made from pig lead, > but did not "promulgate" the pricing system. The accusation is without evidentiary support. c. Page 40, (7-a7) This statement is inaccurate, because it does net take into account Eagle-Picher1s sale of basic sulphate white lead and blue lead, which competed against National's basic carbonate white lead and red lead, respectively. 9. Pac-e 40. C7-ag) There is nothing in the record to show that the Eagle-Picher respondents "discussed bases for quotations in sealed bids REPRODUCED AT THE NATIONAL ARCHIVES _o _ It )53 to municipal, state, and federal purchasing agencies"* Paragraph (5-c7), to which the Examiner refers in (7-aS) comprises only an analysis of invoices, and provides no basis for the Trial examiner's unsuroorted charge that discussion of quotations in sealed bids took place. There is no such evidence in the record. 10. Page 40, (7-bl) Eagle-Picher has always admitted following gener ally the price leadership of Rational in respect to prices and terms and conditions of sale, of most of its products. There is no evidence /** in the case to warrant the inference that these prices and terms and conditions of sale were arrived at by collusion between Rational and Eagle-Picher. The evidence is to the contrary, and is designated with particularity in the exceptions to the Trial Examiner's refusal tomake the findings requested by them. 1.1. Page 45. (7-cl) The conclusions stated .in this paragraph are ex cepted to for the reasons set forth in the exception to Paragraph (7-bl). 12. Page 44, (7-c4) There is no evidence in this record as to what an unrestrained marketin'- system would provide in the ray of price variation for the purposes of bargain and sale. In an industry in which price leadership obtains, some conformity in pricing is to be expected; the assumption to the contrary is without judicial sanction, and must be predicated upon some undisclosed, obscure, out-moded text on economics, of which these respondents have no knowledge. mocOoTm*SOoO , o > O73 X > Ti -10 1 13 Page 44. (7-c5) Inasmuch as the Ifiller-Tydings Act legalizes the fixing of resale.prices, it is not within the province of the Federal ^rade Commission to condemn under the Federal Trade Commission Act tvose who sought and obtained a legal result. A legalized method of competition cannot be an unfair method of competition. After the t't.ller-Tydings Act was passed, the Connission altered many orders pre viously issued. 14. Page 44, (7-dl) ^ The suspension of the enforceability of Schedu.le A and Article VII, Section 2, of the K.E.A. Code was without legal sig- , nificance as to those who voluntarily adopted the practices approved therein. 15. Page 45. (7-d2) There v;as no conspiracy. The simpler and correct explanation of such conformity of prices, terms and conditions of sale as existed, insofar as Eagle-Picher is concerned, is that Eagle-Picher deliberately and. purposefully followed the pricing policy of Rational as to products made from pig lead, which, it had a right to do legally. 16. Page 45, (7-d5) The delineated activities of Rational are not in _ violation of the Federal Trade Commission A.ct, because monopolistic purpose, even if proved, violates only Section 2 of the Sherman Act, and is r.ot an unfair method of competition. Further, the Federal Trade Commission Act was intended to nip monopolistic tendencies in the hud, whereas the alleged improper cop^uct of Rational took place in the long past, and the Issue itself is improper in this case. 1.055 li REPRODUCED AT THE NATIONAL ARCHIVES 1 17 PSP* 45. (7-d4) Eagle-Picher acted within its rights in following generally the pricing policies of the National Lead Company as to products made from pig lead. 18. Page 46 (7-d5) and (7-d6) The conclusions stated in this paragraph are excepted to for the reasons asserted in the exception to Paragraph (7-64). 19. Pages 49 and 50. (8-a4j This item is unsupported by either the record references therein made or any other portion of the record. 20. Page 56. (10-h) The cases pointed out in Paragraphs 8-a3, a4, 10-a, and d, are not discriminatory in the sense in which the word is used in Section 2(a) of the Clayton Act, and the price differentials shown to exist were not shown to be substantial or to lessen competition between Eagle-Picher's customers. 21. Page 57. (10-.i) It is not shown that the price differences in ques tion were discriminatory in the sense of Section 2(a) of the Clayton Act, that they were substantial, or that they had the tendency or effect of lessening competition between large and small customers, to the injury of the latter. 22. Page 57. (11-a) The Trial Examiner erred in considering individual sales to customers in premium zones, 4nstead of considering the zone JLU5^ 12 ......... ...........ruitruii iiiii iiiiM iiiiiiiin >in < lf i i*iiii)i< n n r m i" REPRODUCED AT THE NATIONAL ARCHIVES -1 i price, that is, the average of all of the transactions within the zone. Zone selling is legal. (Salt Producers Association v. Federal Trade Commission, 134 Fed, (2d) 354), There is no showing that individual customers were damaged or put at a competitive disadvantage in competi tion with customers in a different zone. 25. Page 58. (11-b) It is improper to hold that prices are discrinina-. tory and violative of Section 2(a) of the Clayton Act, in the absence of proof that competition, in this case amgng customers, may be lessened. 24.' Page 61, "IV. RhCOIl'EUDU) -FINDINGS AND COKCLUSIOrS" This section of the Trial Examiner's Recommended Decision, that is, from Page 61 to Page 96, "Recommended Order", is essentially a repetition of the foregoing sections to which specific exceptions have been noted. Eagle-Picher particularly excepts to Page 81, (7-A3); CO to A# Page (7-A0); Page 84, (7-C1); Page 85, (7-D1); Page 86, (7-D2); Page P7, (7-P4); rage c7, (?-"5); Page 87, (7-D6); Page 89, (8-A4); and Page 92, (10-D); for the reasons previously indicated. Also, :Eagle-Pic her excepts to the inclusion of the findings l-h, 1-1, 1-h, 2-A, 2-1?, 2-C, 2-D, 2-Z, 2-?, and 3, as improper issues in the case, for the reasons described in relation to. exception lie. 1. 25. ?a~e 64, (1-J) Respondents except to the recommended finding that na~le-ri ch.er ' s percentage of tine lead pigment business lias been increased by its recent acquisition of International's lead pigment plant and business. The Trial Examiner is grossly in error as to nagle-Picher's acquiring International's business, because it did not, and there' is REPRODUCED AT THE NATIONAL ARCHIVES 105'? 13 3 { nothing in the record to suggest that it did. Further, there is nothing in the record to show that Lagle-Picher1s acquisition of International1s plant in any way increased Eagle-Picher1s business or percentage. 26. Pare 64. (1-K) Eagle-Ficher objects to the inclusion of the finding that National ow.v: * Eagle-Pi che-r stock. In view of the finding that National did not control Eagle-Picker, the inclusion of the finding -f '-.he stock ownership is improper. Obviously, the Trial Examiner was prejudiced by tills circumstance, and hence exaggerated the importance of trivial contacts between the companies Itemized in said Paragraph 1-K. Particularly, Eagle-Picher objects to the statement: "Eagle-Picher1 files contained National's price changes on the Pacific Coast", because there was just one casual letter in the Eagle-Picher files, showing one change of price by National on the Pacific Coast, whereas the recommended finding intimates greater intimacy. Lagle-Picher objects to the characterization of the itemised trivia as "direct evidence of close relations between these two respondents". None of the specified contacts between National and Eagle-Picher personnel was improper, and all were trivial. A limited number of casual and isolated lawful contacts, five ever fifteen years, is inadequate basis for drawing the inference that the parties rare enraged in an illegal conspiracy. 27. (3-A) _agle-richer excepts to the first sentence of t: paragrapl , which treats National ana Eagle-Picher as an entity, and further objects to all casual insinuations throughout the report to like effect. REPRODUCED AT THE NATIONAL ARCHIVES li )58 14 i R 20. Page 80. (7-A1) Eagle-Picher excepts to the latter part of the first sentence, which asserts that national added to its dominant power by establishing close cooperation with Eagle-Picher. There is nothin- in the record to show that _agle-?icher cooperated with national to a degree greater than that compelled, by the position of National which the Trial Examiner held to be dominant. Further, it is the strategy of the Trial Examiner, in his compounding of this paragraph, to tie Eagle-Ficher into National* s acquisition of competitors many w f years arc, and its- historic relations with American Smelting and Pefining Company. If National's early operations were improper, then Eagle-Ficher, as its "largest potential competitor", was the chief ' victim. If National's early history here has any pertinency, then the Federal Trade Commission has been guilty of thirty years' gross dere liction, and the Trial Examiner's present attempt to implicate EaglePicher, as an incident to his condemnation of .National, merely adds insult to injury. In short, the Trial Examiner's report is hopelessly inconsistent in every particular and respect, including every insinu ation, as well as statement, by which it attempts to tie National and Eagle-Ficher together as twin culprits. (See Paragraph 7-D-3 on Page 85). 29. Page 82 (7-EI) Eagle-Ficher excepts to the statement in the first and last sentences as not supported by any evidence whatsoever. EaglePicher followed National's prices and terms and conditions of sale, because National was the price leader, but there is not one iota of evidence in the record that the orices and terms and conditions of sale resulted from- joint action. 1059 REPRODUCED AT THE NATIONAL ARCHIVES J 5j 30. Page 94. (10-K) Eagle-Picher objects to the inference of this paragraph that it indulged in discrimination to substantially lessen competition between its customers. There is no evidence whatsoever in the record that any Eagle-Picher price differential substantially lessened competition between Eagle-Picher's customers, and Trial Exam iner's Recommended Decision cites no such case. 31. Page 95, (11-A) The zone system is legal, (Salt Producers Associa- tion v. Federal Trade Commission. 134 Fed. (2d) 354.) and hence, the average zone freight is the critical factor in determining legality, rather than specific zone border examples. The record does not show any instance in which Eagle-Picher's customers, located in different zones, were in competition with each other, and none is suggested in the Trial Examiner's Recommended Decision. 32. Page 95. (11-P) There is no instance of competition between Eagle- Pi cher's customers being substantially lessened by the quantity differentials referred tc in said paragraph, and such quantity differ entials are entirely legal. 15 10GO REPRODUCED AT THE NATIONAL ARCHIVES 33. Page 95. (V. RECOKT-ISKPED ORDER) Eagle-Picher excepts to the order recommended by the Trial Examiner on the ground that each and every provision of it is unwarranted by both the evidence and the lav;. Respectfully submitted, amuna P. Wood, 2B01 Carew Tower Cincinnati, Ohio uicnara Serviss, The Eagle-Picher Company American Building Cincinnati, Ohio Attorneys for The Eagle-Picher Company, and The Eagle-Picher Sales Company luGi REPRODUCED AT THE NATIONAL ARCHIVES