Document yr0ROyraroQakr35zgN6ENDBd

IN THE >ttprm? Court nf tfyr Ututrfo States OCTOBER TERM, 19SS No. Na t io n a l Le a d Co mp a n y , Petitioner, v. Fe d e r a l Tr a d e Co mmis s io n , Respondent. Th e Sh e r w in -Wil l ia ms Co mp a n y , Petitioner, v. Fe d e r a l Tr a d e Co mmis s io n , Respondent. Th e Ea g l e -Pio h e r Co mp a n y , et al., Petitioners, v. Fe d e r a l Tr a d e Co mmis s io n , Respondent. CROSS PETITION FOR WRIT OF CERTIORARI TO UNITED STATES COURT OF APPEALS FOR THE SEVENTH CIRCUIT JOHN B. HENRICH, Jr ., Attorney for Petitioner National Lead Company, 111 Broadway, New York, New York. ROBERT A. STURGES, Attorney for Petitioner The Sherwin-Williams Company, 101 Prospect Avenue, N.W., Cleveland, Ohio. RICHARD SERVISS, Attorney for Petitioners The Eagle-Picher Company, et al., The American Building, Cincinnati, Ohio. JAMES D. EWING, t h o ma s j. Mc d o w e l l , NATHAN S. BLUMBERG, JOHN T. VAN KEULS, EUGENE Z. DuBOSE, Of Counsel. Dated April 18, 1956. 1 NL 000040483 SUBJECT INDEX PAGE Cross Petition ............................................................... 1 Opinion Below ........................................................ 2 Jurisdiction ................................................................... 2 Questions Presented .................................................... 2 Statutes Involved .......................................................... 2 Statement of the Case ................................................ The issue of conspiracy ....................................... The issue of price discrimination ......................... 4 6 14 Reasons for Granting theWrit .......................... 16 Conclusion ..................................................................... 22 Appendix ...................................................................... 23 TABLE OF AUTHORITIES CITED Cases Aetna Portland Cement Co. v. Federal Trade Comm'n, 157 F. 2d 533 (7th Cir. 1946) .................. Allied Paper Mills v. F.T.C., 168 F. 2d 600 (7th Cir. 1948) ........................................................................... Corn Products Refining Co. v. F.T.C., 324 U. S. 726 (1945) ........................................................................ Eugene Dietsgen Co. v. F.T.C., 142 F. 2d 321 (7th Cir. 1944) .......... Federal Trade Comm. v. Morton Salt Co., 334 U. S. 37 (1948) ............................. -.................................... 17 17 21 17 21 1 NL 000040484 11 PAGE Fort Howard Paper Co. v. F.T.C., 156 F. 2d 899 (7th Cir. 1946) .................................................... 17,19 fn. Ohio Bell Tel. Co. v. Comm'n, 301 U. S. 292 (1937).-- 18 Trade Comm'n v. Cement Institute, 333 U. S. 683 (1948) ....................................................................... 16,17 United States v. Socony-Vacuum Oil Co., 310 U. S. 150 (1940) ................................................................ 16 fn. Statutes Administrative Procedure Act, 5 U. S. C. Sect. 1009 3 Section 2, Clayton Act, 15 U. S. C. Sect. 13 ............ 4,21 Section 5, Federal Trade Commission Act, 15 TJ. S. C. Sect. 45 ...................................................................... 2 Section 5, National Industrial Recovery Act, 48 Stat. 198 .................................................................... 3,16 28 U. S. C. Sect. 1254(1) ............................................ 2 NL 000040485 i> 9 IN THE Supreme Court of Unttrib ^totrs OCTOBER TERM, 1955 No. Na t io n a l Le a d Co mp a n y , Petitioner, v. Fe d e r a l Tr a d e Co mmis s io n , Respondent. Th e Sh e r w in -Wil l ia ms Co mp a n y , Petitioner, v. Fe d e r a l Tr a d e Co mmis s io n , Respondent. Th e Ea g l e -Pic h e r Co mp a n y , et al., Petitioners, v. Fe d e r a l Tr a d e Co mmis s io n , Respondent. CROSS PETITION FOR WRIT OF CERTIORARI TO UNITED STATES COURT OF APPEALS FOR THE SEVENTH CIRCUIT Petitioners pray that a writ of certiorari issue to review a decree of the United States Court of Appeals for the Seventh Circuit entered in the above entitled consolidated cases on January 5, 1956.* * Petitioners seek a review of only certain portions of that decree. They are opposing the petition for a writ of certiorari filed by the Solicitor General, on behalf of the Federal Trade Commission, on another phase of the case. ML 000040486 2 Opinion Below The opinion, of the Court of Appeals is reported in 227 F. 2d 825. Jurisdiction The decree of the Court of Appeals was entered on January 5, 1956. The time for filing this petition for a writ of certiorari was extended to April 19, 1956 by order signed by Mr. Justice Minton on April 3,1956 (Appendix, infra, p. 23). The jurisdiction of this Court is invoked under 28 U. S. C. 1254 (1). Questions Presented 1. Whether a finding of conspiracy may be based solely on evidence of activities concerned with the formulation of an NBA Code, undertaken by members of an industry at the insistence of NRA officials. 2. Whether, in any event, there is substantial evidence, in the light of the whole record, to support the finding of conspiracy. 3. Whether, in the absence of any finding or evidence that purchasers of white lead in oil located in different price zones were in competition with each other, the Federal Trade Commission could properly determine that the differing prices paid by such purchasers constituted illegal price discriminations.1 Statutes Involved Section 5 of the Federal Trade Commission Act, as amended by the Act of March 21, 1938, c. 49, 52 Stat. Ill, 15 U. S. C. Section 45, provides in part as follows: 1. At the present time Eagle-Picher neither produces nor sells white lead in oil and therefore it does not seek to raise this question. NL 000040487 3 " (a) Unfair methods of competition in commerce, and unfair or deceptive acts or practices in com merce, are hereby declared unlawful. #** "(c) Any person, partnership, or corporation re quired by an order of the Commission to cease and desist from using any method of competition or act or practice may obtain a review of such order in the circuit court of appeals of the United States, within any circuit where the method of competition or the act or practice in question was used or where such person, partnership, or corporation resides or carries on business, * * *. * * * The findings of the Commission as to the facts, if supported by evidence, shall be conclusive." The Administrative Procedure Act, 5 U. S. C. Section 1009, provides in part: "(e) So far as necessary to decision and where presented the reviewing court shall decide all rele vant questions of law, interpret constitutional and statutory provisions, and determine the meaning or applicability of the terms of any agency action. It shall (A) compel agency action unlawfully with held or unreasonably delayed; and (B) hold unlaw ful and set aside agency action, findings, and con clusions found to be * * *; (5) unsupported by substantial evidence in any case subject to the requirements of sections 1006 and 1007 of this title or otherwise reviewed on the record of any agency hearing provided by statute; * * *. In making the foregoing determinations the court shall review the whole record or such portions thereof as may be cited by any party, and due account shall be taken of the rule of prejudicial error." Section 5 of the National Industrial Becovery Act, 48 Stat. 198, provided: "While this title is in effect (or in the case of a license, while section 4(a) is in effect) and for sixty days thereafter, any code, agreement, or NL 000040488 4 license approved, prescribed, or issued and in effect under this title, and any action complying with the provisions thereof taken during such period, shall be exempt from the provisions of the antitrust laws of the United States." Section 2 of the Clayton Act, as amended by the Act of June 19, 1936, commonly called the Robinson-Patman Act, 49 Stat. 1526,15 U. S. C. Section 13, provides in part: "(a) * * * it shall be unlawful for any person engaged in commerce, * * * either directly or indirectly, to discriminate in price between different purchasers of commodities of like grade and qual ity, * * # where the effect of such discrimination may be substantially to lessen competition or tend to create a monopoly in any line of commerce, or to injure, destroy, or prevent competition with any person who either grants or knowingly receives the benefit of such discrimination, or with customers of either of them: Provided, That nothing herein contained shall prevent differentials which make only due allowance for differences in the cost of manufacture, sale, or delivery resulting from the differing methods or quantities in which such com modities are to such purchaser sold or delivered: * * * >> Statement of the Case The Federal Trade Commission charged and found that petitioners and certain other companies in 1933-1934 entered into a conspiracy to adopt zone methods of pricing and other terms and conditions of sale of lead pigments.2 2. The other companies involved were Anaconda Copper Mining Co., its subsidiary. International Smelting & Refining Co., and The Glidden Company. Glidden did not file a petition for review in the Court of Appeals and that Court dismissed the proceedings as to Anaconda and International (227 F. 2d at 828-829, 839-840). The 1 NL 000040489 5 The Commission also found that the differing zone prices paid by customers located in different price zones, together with certain quantity differentials, constituted illegal price discriminations (R. 3750-51, 3761-67, 3787-96). In January, 1953, the Commission entered an order to cease and desist enjoining further performance of the alleged conspiracy, prohibiting price discriminations, and enjoining individual (as distinguished from collusive) use of any zone method by the petitioners (R. 3799-3802).3 On review by the Court of Appeals, Seventh Circuit, the order of the Commission was modified, and, as modi fied, affirmed (227 F. 2d at 844). The Court of Appeals affirmed the order condemning the alleged conspiracy, but modified the price discrimination feature of the order insofar as zone prices for dry white lead were concerned. It set aside the paragraph of the order prohibiting indi vidual employment of a zone method. Petitioners are here seeking review of those portions of the decree which affirmed the Commission's order enjoining the alleged conspiracy and affirmed the price discrimination paragraph of the order insofar as it pro hibited the use of zone prices in the sale of white lead in oil. three "lead pigments" here involved are: (1) white lead in oil, a semimixed paint sold to painters and paint contractors; (2) dry white lead, used by paint manufacturers in the manufacture of outside paints; and (3) lead oxides (red lead and litharge), principally used in the manu facture of storage battery plates. 3. The Commission also perpetually enjoined petitioner National Lead from acquiring the stock or assets of any competitor. This was set aside by the Court of Appeals (see 227 F. 2d at 837-839; Final Decree, p. 2-3) and no review of this portion of the decree is sought by the Commission. 1 NL 000040490 6 The Issue of Conspiracy The findings of conspiracy were based solely upon evi dence of what occurred during NRA days when the members of the lead pigments industry were attempting to formulate a Code of fair competition. The evidence on this issue is undisputed and is in large part documentary. Following enactment of the National Industrial Recovery Act, petitioners and other members of the industry were reluctant to formulate any code, but, in an effort to cooperate with NRA, were willing to file a code dealing with minimum wages and maximum hours. This was deemed insufficient by NRA officials, who insisted that the industry members attempt to work out a code of trade practice (R. 1062-63, 1204; Resp. Ex. 50, R. 2840-43; Resp. Ex. 81, R. 2851). Complying with this demand, petitioners and the other lead pigment manufacturers established, under the aegis of Lead Industries Association (a trade organization), several committees which were entrusted with the duty of attempting to draw up a code of trade practices covering the various products (white lead in oil, dry white lead and lead oxides). These committees met from time to time during the latter part of 1933 and early 1934. Their deliberations are set forth in minutes, correspondence and various tentative drafts of a Code of Trade Practices (see, e.g.. Com. Exs. 501-504, 799-805, R. 2425-2700). It is upon the evidence concerning these meetings that the Commission predicated its findings of conspiracy. It is undisputed that in their deliberations, the com mittee members (representing petitioners and others) considered numerous trade practices, including zone methods of pricing, the agency method of selling white IML 000040491 7 lead in oil, and the use of certain other terms and condi tions of sale (id.). Zones and the agency method were not adopted in the Code, and the record establishes that no agreement could be reached upon these two practices (infra, pp. 8, 11). Certain terms and conditions of sale for dry white lead and lead oxides were adopted for code purposes only and finally became a part of Schedule A of the Code itself (Com. Ex. 809, It. 2730-35). At the insistence of NEA officials, and over petitioners' objection, the Code (E. 2726) also contained an open price filing provision (Eesp. Ex. 50, E. 2842-43). The Code did not require adherence to the terms and conditions of sale set forth in Schedule A. It merely required petitioners and the other industry members to file terms of sale used by them which differed from those set forth in Schedule A (E. 2726). Primarily because of their unwillingness to comply with the open price filing provision of the Code, the industry members, shortly after Presidential approval of the Code in May, 1934, requested and obtained an exemption from the requirement of price filing and the filing of terms of sale which differed from those provided for in the Code (Eesp. Ex. 50, E. 2842-43; Eesp. Exs. 6-8, E. 2792-93, 2800-03). The Commission found that during the course of these NEA meetings petitioners and the other industry members conspired to adopt uniform zones, uniform prices, the agency method and other uniform terms and conditions of sale (E. 3750-51, 3761-67). (a) Price Zones There is no question about the fact that National Lead itself, shortly prior to approval of the Code, adopted zone methods for the sale of white lead in oil and oxides NL 000040492 8 (R. 1508-09; Resp. Ex. 159, R. 2968-69). The record indi cates that prior to 1933 dry white lead had been sold on a delivered price zone method but National Lead individu ally changed the zone boundary for this product in June, 1934 (R. 1337-38, 3293, 3447; Resp. Ex. 159, R. 2965). White lead in oil was sold on a multiple zone system involving approximately 12 zones (R. 3763) with a par or base zone and slightly higher differentials in the pre mium zones where the increased cost of shipping to National Lead equalled or exceeded the zone differential.4 Dry white lead was sold on a two-zone method, with the Rocky Mountains forming the barrier between the eastern par zone and the Western premium zone (R. 3764). Oxides were sold on the basis of two different zone methods. In less than carload quantities there was a mul tiple zone method consisting of a par zone and four differential zones, while carload quantities were sold in two par zones and one differential zone (R. 3765-66). There is no evidence of any agreement between National Lead and the other manufacturers on the use of zones; on the contrary, the record shows no agreement was reached (Com. Ex. 505, R. 2434).5 4. National Lead had sold this product on a delivered price basis, with prices varying from zone to zone, as far back as 1910 (R. 1495). The former method involved delivery points rather than flat prices which prevailed throughout any particular zone at all points. The territorial boundaries of the zones, however, closely corresponded to the zone boundaries under the method which National Lead individ ually adopted in 1933 or 1934 (Resp. Ex. 147, R. 2953). 5. The minutes of one or two meetings contain some reference to the possible establishment of zones and at least one zone map was proposed for Code purposes. This map, however, depicted zones wholly different from those ultimately adopted by any of the respond ents, and the-minutes expressly state that no agreement was reached (Com. Ex. 513-E, not printed; Com. Ex. 505, R. 2434). Moreover, the testimony establishes that zones were dropped from the Code when the industry decided to abandon price reporting (R. 1316-17). IML 000040493 9 After approval of the Code, and after adoption by National Lead of the zone methods described, some of the other manufacturers began to sell on a delivered price basis, but the record indicates that the methods employed by the other manufacturers differed in signifi cant respects from the zone methods used by National Lead (compare Com. Ex. 580, R. 2471--National Lead's zone map--with Com. Ex. 585, R. 2472; see also, Com. Ex. 836, R. 2737; R. 1317; Com. Ex. 662, R. 2613-16). (b) Prices Prices were not discussed at the NRA meetings. Indeed, the minutes reflect a determination to exclude prices from the field of Code discussion (Com. Ex. 504, R. 2433). No price-fixing provisions were inserted in the Code and, as we have seen, the industry members sought and obtained relief from the open price filing provisions insisted upon by NRA. Prices were never filed with the Code authority and no price information was disseminated among mem bers of the industry (R. 1082). Lead pigments are standard produets. Customarily the other manufacturers, prior and subsequent to 1933, sold dry white lead and oxides at approximately the same price as National Lead's, the largest manufacturer of lead pigments. In the white lead in oil field, however, where National Lead's '`Dutch Boy" product was the quality leader, the other respondents after 1933 sold brands of white lead in oil at prices whieh were from 20 to 25^6 6. Commissioner Mason, in his dissenting opinion, observed (R. 3829): "* * * in my opinion the evidence indicates a healthy and skeptical attitude on the part of the lead pigment entrepreneurs who had no stomach for tying their hands in the competitive battle, no matter how much the NRA wanted them to." T>-SS<*4fs** ML 000040494 10 per hundredweight lower than National Lead's price (R. 709; Com. Ex. 663, R. 2617-18; Com. Ex. 795-L to Z-13; Com. Ex. 656, R. 2542-43).7 Admittedly, lead pigments were sold at a low margin of profit over the cost of the principal raw material, pig lead.8 The record also shows that on a number of occasions National Lead, as well as the other manufacturers, sold at off-list prices (Com. Exs. 772, 798, 754, 795, 845, 846, 847, 840, 831).9 In 1939, 1940 and 1941, on 47 large Gov ernment contracts, petitioners and the other manufacturers submitted 207 widely differing secret bids (Resp. Exs. 306308, R. 3174-82). White lead in oil competed directly with ready-mixed paints which offered the user a vehicle ready for appli cation. Dry white lead was sold in competition with tita nium dioxide, lithopone and leaded zinc oxide, while the manufacturers of lead oxides were always faced with the 7. The Commission attempted to minimize this price disparity by asserting that the resale prices of petitioners' dealers were iden tical (R. 3772). There was no proof of this. The price cards of petitioners, setting forth suggested resale prices, were usually iden tical but there was no evidence whatever that dealers actually sold at such suggested prices. 8. The Commission made the following curious finding (R. 3747): "* * * the price of lead pigments announced and maintained by National and Eagle-Picher as a consequence of their domi nating positions 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." 9. In the Court below, for example, the Commission conceded that, in the case of oxides, 40% of the listed sales by Glidden, 10% of Eagle-Picher's listed sales, and 25% of the listed sales by National Lead were at off-list prices (Brief of Commission before Court of Appeals, pp. 85-86). There was no proof that such off-list sales were made solely to large battery manufacturers, as stated by the Court below (227 F. 2d at 833). NL 000040495 11 threat that the battery manufacturers would process oxides for their own consumption (ft. 625, 630, 764, 1313, 1557-58, 1757, 1918, 1945, 1951). (c) The Agency Method The Commission found that the NBA meetings resulted in an agreement among National Lead, Eagle-Picher and Anaconda to sell white lead in oil through dealer-agents for the purpose of controlling the "resale" price (R. 3761-62, 3767). The undisputed evidence is that National Lead in late 1932, prior to the NRA discussions, experimented with the agency method of distributing white lead in oil and that during NRA it sought to have the agency method included in the Code (Com. Ex. 506, R. 2437-39; R. 3770). When it met serious opposition from the other industry members, however, the matter was given no further con sideration (Com. Ex. 505, R. 2434). National Lead indi vidually, however, began to employ its agency method on a nation-wide basis (Com. Ex. 599, R. 2507). Anaconda independently established a different method (a consignment arrangement) as early as November, 1932, also prior to NRA days (Com. Ex. 836, R. 2737, R. 3771). This method, however, unlike National Lead's, did not make the consignee an agent of the manufacturer, nor did it fix the price at which the consignee was to sell the product (R. 3771). Eagle-Picher was the only other respondent to employ a method similar to National Lead's (Com. Ex. 629, R. 2522). Eagle-Picher abandoned the use of its consignment plan in 1942, while National Lead suspended the use of its method in January, 1944 (Com. Ex. 647, R. 2526; Com. Ex. 624, R. 2520). ML 000040496 12 (d) Terms and Conditions of Sale (1) Container Differentials The Commission found that the NRA meetings resulted in an agreement to sell lead pigments in containers at differentials of 25^ per hundredweight between keg sizes of 12*4, 25, 50 and 100 pounds, respectively (R. 3767). The undisputed documentary evidence establishes that this finding is completely unfounded. National Lead, prior to 1933 and up to some time in 1937, employed a different method of pricing containers of lead pigments (Com. Ex. 659, R. 2545; Com. Exs. 660-662, R. 2603-13). The container differentials found by the Commission to be adopted by agreement in 1933-1934 were not placed in effect by National Lead until January 1, 1937, some 3y2 years later, and it was only after National Lead announced its new schedule that the other manufacturers began to charge the same container differentials (id.). (2) The Dry White Lead Carload Discount The Code provided for a carload discount for Dry White Lead of not more than y4 per pound (R. 2734). In December, 1933, six months prior to approval of the Code, National Lead, individually, adopted the policy of allowing a y4 carload discount (R. 2186-87). Glidden began to employ the carload discount in January, 1934 (Com. Ex. 810-B), but there is no proof as to when any of the other industry members began to use such a discount. (3) Pricing of Oxides at Differentials over Pig Lead The Commission found that the respondents in 1933-1934 agreed to fix prices of lead oxides at certain stated differ entials over the price of the chief raw material, pig lead (R. 3767, 3775). Actually the "fixed differentials" re- NL 000040497 13 ferred to in the Commission's finding had been individually adopted by National Lead in 1927, six years before the advent of NBA (Besp. Ex. 177, B. 3033-34). There is no evidence whatever that during NBA the other manufac turers agreed to adopt this differential and both prior and subsequent to 1933, National Lead used this same differential, which the Commission found came into being at the NBA meetings (id.; B. 3779). (4) Oxide Quantity Differentials The Commission found that the NBA meetings resulted in an agreement to charge specified quantity differentials between carload, five ton, and less than five ton shipments of lead oxides (B. 3767). As a matter of fact, long prior to 1933 National Lead had charged a differential of $1.00 per hundredweight between carload and less than carload shipments (Besp. Ex. 177, E. 3033-34). There was no reference in the Code discussions to quantity discounts other than the agreement to include in the Code a provision that five ton lots of oxides should carry an allowance of not more than y2$ per pound (50^ per hundredweight) under the seller's card or quoted price for less than carload lots. This provision became part of Schedule A of the Code, which was approved on May 24, 1934 (B. 2731). Prior to approval of the Code, National Lead, individu ally, adopted the method of granting a per pound dis count for five ton shipments (Besp. Ex. 159, B. 2966). The record does not show when Eagle-Picher started to grant a similar discount. Glidden adopted this Code provision some six weeks after National Lead, and Sherwin-Williams approximately fifteen months later (Com. Exs. 810-G, 823-3>). NL 000040498 14 This in substance is the evidence upon which the Com mission determined that petitioners and the other pig ment manufacturers, meeting "ostensibly" to draw up an NEA Code, entered into agreements to "revolutionize" their pricing practices, and thereupon put into effect a rigid system calling for uniform price zones, uniform prices, the agency method, and uniform terms and condi tions of sale (R. 3750-51, 3761-67).10 The Issue of Price Discrimination The Commission in effect found that where purchasers of white lead in oil were located near the zone boundaries, the payment by purchasers located in different zones of different prices constituted illegal price discrimination (R. 3793-94). The Commission purported to make findings in support of this but in actuality its findings deal with purchasers of dry white lead, paint manufacturers, and not purchasers of white lead in oil.11 The price zones for white lead in oil were as follows: par or base, plus y%4, plus y4, plus %4, plus y.,4, plus %4, and plus l<j; per pound (R. 3763). The premiums charged in the differential zones approximated the average 10. The uncontradicted parol evidence was to the effect that there were no agreements entered into by industry members except agree ments upon terms to be included in the Code (see Trial Ex.'s Recom mended Decision, R. 3475). Commissioner Mason, in his dissent, said (R. 3831): "I have never observed a charge of conspiracy based on so nebulous a melange of testimony as here presented." 11. The Commission treated the dry white lead two-zone method and white lead in oil multiple zones in a single finding (R. 3793-94) and it referred to the testimony of four St. Louis paint manufacturers. It is undisputed that these paint manufacturers purchased dry white lead, not white lead in oil. Thus the Commission did not find that there were purchasers of white lead in oil (dealers) located in different price zones who competed with each other. NL 000040499 15 freight and cartage cost differential incurred by National Lead in shipping the product to the differential zones (Resp. Exs. 166, 169, 170, 213; R. 3007, 3011, 3025, 3137).12 White lead in oil was sold locally (through agents or dealers) to local painters, home owners or painting con tractors. There was no finding by the Commission, and no testimony, that National Lead's agents or dealers in any one locality were in competition with agents or dealers in other localities, much less was there any finding or evidence that agents or dealers in different zones com peted with each other. The only evidence on the subject clearly indicates that dealers who purchased white lead in oil from National Lead sold that product locally, for local consumption, and that there was no competition between dealers located in different zones (R. 1549, 1551-52). In addition, the zones employed by National Lead (Com. Ex. 580, R. 2471) were drawn to take advantage of natural or physical trade barriers, such as rivers, mountains and state boundaries. 12. For example, the following chart shows the actual cartage and freight charges for shipping white lead in oil incurred in 1941 by the Philadelphia Branch of National Lead which sold white lead in oil in the par, plus J4#> and plus 3i# zones (Resp. Ex. 166, R. 3007): Territory Par ......................................... Plus 54# (0.125# per lb.) ... Plus 34# (0.375# per lb.) ... Freight & Excess over Cartage per par per 100 lbs. 100 lbs. $0,197 0.495 0.808 -- $0,298 0.791 Excess over par per lb. -- 0.3# 0.8# 1 NL 000040500 16 Reasons for Granting the Writ 1. The first question presented here involves the fol lowing: Can one branch of the Government (the NBA), under an implied promise of immunity, insist that industry members undertake certain activities which another branch of the Government (the Federal Trade Commission) may use some thirteen years later as the basis for a charge of collusion and illegal agreement? There can be no question about the fact that the charge and findings of conspiracy made by the Commission were based solely on evidence of what occurred during NBA days, when petitioners and others were trying to draft an acceptable Code. Counsel for the Commission conceded this at the hearings (B. 2269), and again in their brief before the Court of Appeals (Comm/s Brief before Court of Appeals, pp. 57-58). The findings of the Commission also show that only NBA evidence was considered on this issue (B. 3750-51, 3761-62). Section 5 of the National Industrial Recovery Act, 48 Stat. 198, exempted compliance with Code provisions from antitrust prosecution. It impliedly also exempted from antitrust liability activities undertaken in an effort to formulate a code. This Court in the New Cement case clearly indicated that such NBA evidence alone could not form the basis of a charge of conspiracy. Trade Comm'n v. Cement Institute, 333 U. S. 683, 704-05 (1948).18 13 13. United States v. Socony-Vacimm Oil Co., 310 U. S. 150 (1940), is not to the contrary. There the "hot oil" purchase program was undertaken entirely independently of the Code and the defend ants were warned by government officials that Presidential approval must be obtained under the National Industrial Recovery Act (310 U. S. at 176-177). Here, however, the finding of conspiracy was expressly predicated upon the minutes of meetings and other docu ments relating to the drafting of a Code. 000040601 17 It would be unconscionable to apply any other rule. Moreover, the NRA activities here found to be illegal were undertaken by petitioners and the other members of the industry only at the urgent insistence of NRA officials (R. 1062-63, 1204; Resp. Ex. 50, R. 2840-43; Resp. Ex. 81, R. 2851). A finding of conspiracy on such evidence clearly " constitute! s] a fraud, or perhaps confidence game would be a more appropriate designation." (Aetna Port land Cement Co. v. Federal Trade Comm'n, 157 F. 2d 533, 549 (7th Cir. 1946), reversed on other grounds, Trade Comm'n v. Cement Institute, supra.)TM In all other cases where NRA evidence was deemed admissible on the issue of conspiracy, it formed only background material and in all such cases the finding of conspiracy was based on activities undertaken prior to NRA days {New Cement case, supra) or upon evidence showing actual agreements, after the demise of NRA, to continue Code practices (see, e.g., Eugene Dietzgen Co. v. F.T.C., 142 F. 2d 321 (7th Cir. 1944); Fort Howard Paper Co. v. F.T.C., 156 F. 2d 899 (7th Cir. 1946); Allied Paper Mills v. F.T.C., 168 F. 2d 600 (7th Cir. 1948) " Thus, the record here presents an important question concerning the powers of an administrative agency which has not been, and should be, resolved by this Court.14 15 14. Petitioner National Lead and the other companies involved in this proceeding have consistently taken the position that the NRA evidence was inadmissible. Due objection was made to the introduc tion of the NRA evidence at the hearings. After the hearings an appeal was taken to the Commission on the Trial Examiner's ruling admitting the evidence relating to the NRA period (R. 3654-57) and in National Lead's Brief before the Commission (pp. 156-158) and in oral argument, the same position was taken. Similarly the point was specifically raised in the oral argument as well as in National Lead's Main Brief (pp. 49-50) and its Reply Brief (p. 5) before the Court of Appeals. 15. Here, immediately after NRA was declared unconstitutional, petitioners and the other industry members wound up their affairs NL 000040502 18 2. The second question presented, whether in any event there was substantial evidence to support the find ing of conspiracy, involves fundamental principles govern ing the findings of administrative agencies. It also raises the question of whether the courts are to abandon their duty to review, expressly provided for in the Administra tive Procedure Act, and concur in administrative deter minations made without support in the evidence. In administrative proceedings, where "power has been bestowed so freely" upon the administrative agency, the right to a fair and impartial hearing is an "inexorable safeguard" and "one of `the rudiments of fair play' * * * assured to every litigant by the Fourteenth Amendment as a minimal requirement" (Ohio Bell Tel Co. v. Comm'n., 301 U. S. 292, 304. 305 [1937], per Cardozo, J.). Petitioners submit that they did not have a fair and impartial hearing. Instead, the Commission, relying on hypothetical speculation and Procrustean treatment of the evidence, found a conspiracy when, in fact, there was no supporting evidence. We have outlined above (pp. 6-14, supra) the essential evidence upon which the Commission based its finding of conspiracy and it is obvious from this recital of the facts that the Commission's finding cannot stand. Certainly similarity of prices or pricing practices alone is not sufficient to establish conspiracy.1** * * * * 16 and later rejected an invitation from Washington to discuss possible informal continuation of NRA activities (Resp. Ex. 13, R. 2827-38; Resp. Ex. 92, R. 2925-26). After NRA, there were no meetings of petitioners and the other companies, no "collective" activities, and no exchange of correspondence as to prices, methods or terms of sale. 16. On the argument before the Court of Appeals counsel for the Commission conceded that "conscious parallel action" among members of the industry prior to 1933 would form no basis for a charge of conspiracy. By parity of reasoning, similarity of prices or pricing methods subsequent to 1933 could not be condemned as collusive behavior. 19 In our brief and appendix before the Court of Appeals, we took each essential item in the Commission's finding and showed that it was either unsupported by the evidence or contrary to the only evidence on the point at issue. The Court of Appeals refused to consider this meticulous bill of particulars; instead it summarized the findings of the Commission and then held that petitioners' conten tions simply raised a question of the weight of the evi dence. It also suggested that the "circumstantial evi dence'' lent support to the Commission's findings, but the only "circumstance" referred to was the fact that peti tioners and the other members of the industry all em ployed some sort of zone or delivered price method (227 F. 2d at 829-834). The zone method of pricing was the principal object of the Commission's attack. The Commission and the court below, however, both pointedly ignored the fact that the zone methods here under consideration were estab lished individually by National Lead, the largest producer with plants located throughout the country. The zones used by National Lead for white lead in oil reflected the actual average increased freight cost incurred by National Lead in delivering that product. The zone boundaries were similar to the territorial boundaries whieh had been employed by National Lead as far back as 1910 (supra, pp. 7-9, 14-15). There was no question here of any "reciprocal surrender of territorial advantage", suddenly emerging during NBA days, as in the cases cited by the Court of Appeals.17 Moreover, for several years after the NBA period, the delivered price methods employed by the petitioners and the other industry members differed (supra, p. 9). 17. See, e.g.. Fort Howard Paper Co. v. F.T.C., 156 F. 2d 899 (7th Cir. 1946). The Trial Examiner expressly found that there was no evidence of such reciprocal surrender of territorial advantage in this proceeding (R. 3493). ^ NL 000040504 20 So far as prices for white lead in oil are concerned, we see that essentially the Commission has found a conspir acy to charge different prices (supra, pp. 9-10)--a curious conspiracy indeed. The practice of pricing oxides at a differential over the pig lead price had been established individually by National Lead as far back as 1927. The carload discount for oxides was established individually by National Lead at the same time (supra, pp. 12-13). Certain trade practices (such as the carload discount for dry white lead and the five ton discount for oxides) which were adopted individually by the industry members (at varying times) were specifically provided for in the NRA Code (supra, pp. 12, 13) and cannot be the basis for this proceeding. The fact that petitioners and the other companies obtained relief from any implied require ment contained in the Code did not render inapplicable the specific exemption from antitrust liability provided for in the National Industrial Recovery Act.18 The Com mission's contention to the contrary is purely sophistical. In short, the evidence clearly establishes the complete absence of any agreement on zones, prices or terms and 18. Throughout this case the Commission has attempted to make much of the fact that petitioners consulted counsel in the Fall of 1933 about the possible use, prior to Code approval, of a uniform sales contract for dry products (which was to be included in the proposed Code). The proposed uniform contract contained no provisions deal ing with price but counsel felt that other provisions might be deemed indirectly to affect prices. He therefore cautioned against use of the contract by agreement. He suggested, perhaps naively, that one mem ber adopt the contract voluntarily and that the others could follow, without agreement (Com. Ex. 522, R. 2458). Regardless of this, the point is that the advice concerned adoption of a proposed uniform sales contract--not zones, uniform prices, or the like--and the Commission expressly found that uniform sales contracts were never adopted or used generally (R. 3776). There was no warrant for the Commission to treat this insolated transaction as proof that the industry members during NRA all agreed to follow National Lead in making any changes in pricing methods. 1 f* NL 000040505 21 conditions of sale. The only parallel practices involved were minor terms of sale provided for in the Code itself and these were adopted at different times by the industry members. We are not asking this Conrt to weigh the evidence or to decide conflicts in the evidence. This, of course, is properly the function of the Commission as it is of any other expert administrative body. The question here, rather, is whether an administrative body may exercise its functions arbitrarily and without regard to the facts as developed in the record. 3. The third question concerns the propriety of the Commission's determination that the white lead in oil zone prices constituted illegal price discriminations. In affirming this conclusion (227 F. 2d at 835-836), the Court of Appeals overlooked the fact that there was no finding (and indeed, no evidence) that dealers located in different zones who purchased white lead in oil from National Lead were in competition with each other.19 On the contrary, the evidence showed that white lead in oil was sold by dealers locally for local consumption (supra, p. 15). There was no competition between dealers in different localities, much less between those in different zones. Section 2(a) of the Clayton Act, as amended, supra, requires proof that the effect of the price discrimination "may be substantially to lessen competition * * in any line of commerce." It is axiomatic that there can he no finding of illegal price discrimination (at the buyer's level) without initial proof that there were differing prices paid by purchasers who, in fact, competed with each other. This is a condition precedent required both by the terms 19. In its brief before the Court of Appeals (p. 43) the Com mission conceded that "the record did not develop specific evidence of injury with respect to zones employed on white lead-in-oil." NL 000040506 22 of the statute and by the authorities (see, e.g., Federal Trade Comm. v. Morton Salt Co., 334 TJ. S. 37, 45 (1948); Corn Products Refining Co. v. Federal Trade Comm'n., 324 U. S. 726, 732, 738-739 (1945)). There is thus presented the important question of whether the Federal Trade Commission may "infer" the probability of adverse competitive effects in the absence of any finding or evidence of competition between those who paid the different zone prices. CONCLUSION We respectfully request that a writ be issued to consider the questions set forth in this cross petition. Jo h n B. He n k ic h , Jb ., Attorney for Petitioner National Lead Company, 111 Broadway, New York, New York. Ro b e b t A. St u b g es , Attorney for Petitioner The Sherwin-Williams Company 101 Prospect Avenue, N.W., Cleveland, Ohio. Ric h a b d Se b v is s , Attorney for Petitioners The Eagle-Picher Company, et al., The American Building, Cincinnati, Ohio. Ja me s D. Ew in g , Th o ma s J. Mc Do w e l l , Na t h a n S. Bl u mb e b g , Jo h n T. Va n Ke t j l s , Eu g e n e Z. Du Bo s e, Of Counsel. Dated April 18, 1956. NL 000040507 23 APPENDIX (Eourt of tfyp Httiftfo States OCTOBER TERM, 19S5 No. Na t io n a l Le a d Co mp a n y , Petitioner, I v. ! Fe d e r a l Tr a d e Co mmis s io n . Th e Sh e r w in -Wil l ia ms Co mp a n y , Petitioner, v. Fe d e r a l Tr a d e Co mmis s io n . Th e Ea g l e -Pic h e r Co mp a n y , et al., Petitioners, v. Fe d e r a l Tr a d e Co mmis s io n . ORDER Up o n c o n s id er a t io n of the application of counsel for the petitioners, It is o r d er ed that the time for filing petitions for writs of certiorari in the above-entitled causes be, and the same is hereby, extended to and including April 19th, 1956. (SGD) Sh e r ma n Min t o n Associate Justice of the Supreme Court of the United States. Dated this 3rd day of April, 1956. NL 000040508