Federal Trade Commission v. National Lead Co.

of such system, the Commission inserted a provision directing each respondent individually to cease and desist from adopting the same or a similar system of pricing for the purpose or with the effect of “matching” the prices of competitors. The respondents assert that this is beyond the power of the Commission, and the Court of Appeals agreed, 227 F. 2d 825 , striking that provision from the Commission’s order. We granted certiorari, 351 U. S. 961 , because of the importance of the question in the administration of the Act. We restore the stricken provision of the Commission order, permitting it to stand with the interpretations placed upon it in this opinion.

The original proceeding under § 5 of the Act was commenced in 1944. The order was entered on a second amended complaint filed in 1946. After protracted hearings, the Commission entered its findings which the Court of Appeals has held to be supported by substantial evidence. The findings material here are as follows:

The pricing practice of the industry as to the sale of white lead in oil prior to 1933 is not shown in the record. However, National Lead had as early as 1910 sold this pigment on the basis of territorial differentials involving free freight to specified towns. The differentials added to the base price were generally uniform for some 589 cities listed in National Lead’s pricing system in 1933. The charge to purchasers outside the listed cities was the base price plus actual freight to the nearest listed city. In the sales of dry white lead and lead oxides it appears that by the sales practice prior to 1933 there was a uniform delivered price in the case of the white lead, while the purchasers of lead oxides paid the freight charge in addition to the base price.

Beginning in July 1933, the industry held a series of meetings in Chicago for the ostensible purpose of draft

the use of zones or to territorial differences in the prices of lead pigments, or to the use of agency or consignment contracts or arrangements in the sale of white lead-in-oil.” Id., at 839. The Commission added that “with certain exceptions, the respondents have followed the pricing practices and have adhered to the terms and conditions for the sale of lead pigments agreed upon in 1933 and 1934 as herein found from 1934 to the present time.” Id., at 849. The respondents admit that they are bound by these findings and we see no reason to disturb them.

The Commission entered an order prohibiting respondents from entering into or carrying out any “planned common course of action,” agreement, or conspiracy to sell at prices determined pursuant to a “zone delivered price system,” or any other system resulting in identical prices at the points of sale. The order also included a provision, to which respondents strenuously object, directing each of them to cease and desist from

“quoting or selling lead pigments at prices calculated or determined in whole or in part pursuant to or in accordance with a zone 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 pigments and thereby preventing purchasers from finding any advantage in price in dealing with one or more sellers as against another.” Id., at 873-874.

The Commission, in an accompanying opinion, stated that in all cases where it found violations of the law, “it is the Commission’s duty to determine to the best of its ability the remedy necessary to suppress such activity and to take every precaution to preclude its revival.” Id., at 884. In this case, the opinion pointed out, the

respondents cooperatively revised the pricing practices in the industry by establishing a “uniform zone pricing system.” Detailed discussions were carried on which resulted not only in an agreement, but “maps showing the boundaries of the zones to be observed . . . were distributed” by the individual respondents. Id., at 884. Each respondent has “since that time . . . followed the pricing system and adhered to the zone boundaries so discussed and shown on these maps.” Ibid. Discussing the complaint, the Commission in its opinion further noted that charges were included against each respondent as to its individual use of and adherence'to the zone system of selling “ ‘for the purpose and with the effect of enabling the respondents to match exactly their offers to sell lead pigments to any prospective purchaser at any destination, thereby eliminating competition between and among themselves.’... It was the adherence by each of them to this system of pricing that made the combination work. . . . Unless and until each of the respondents is prohibited from so adhering to the system and from so using the zones, the evils springing from the combination, one of which is to eliminate price competition, may well continue indefinitely. Unless the respondents, representing practically the entire economic power in the industry, are deprived of the device which made their combination effective, an order merely prohibiting the combination may well be a useless gesture.” Id., at 884-885. In its view, the Commission added, the “prohibition is necessary, not because it is unlawful in all circumstances for an individual seller, acting independently, to sell its products on a delivered price basis in specified territories, but to make the order fully effective against the trade restraining conspiracy in which each of the respondents [defendants] participated.” Id., at 884. When and if competition is restored and the indi

individual use of zone pricing, a lawful, competitive sales method, and is therefore beyond the authority of the Commission. Respondents further assert that even if the Commission had such authority its exercise here was entirely improper, unnecessary, and would, in fact, hamper competition in the industry. They stress that the complaint did not include a charge that the individual use of zone pricing was unlawful; that it came into the case after the Trial Examiner had filed his recommended decision and order; and that respondents were denied the opportunity of rebutting the charge by evidence showing zone pricing to be “a logical, economical, and competitive method of doing business.” The insertion of the objectionable paragraph, they contend, violates due process in that they had no opportunity to defend. Since § 2 (b) is read into every Commission order and since it would allow respondents to rebut the charge, their contention is completely answered and we shall not deal with it further.

It goes without saying that the requirements of a fair hearing include notice of the claims of the opposing party and an opportunity to meet them. Morgan v. United States, 304 U. S. 1 (1938). The record indicates that the respondents were afforded those safeguards. The emphasis that there was no charge, no evidence, no finding to support the inclusion of the objectionable provision in the order is misplaced. Its insertion was nothing more than a mode of implementation, selected by the Commission, to enforce its findings of violations of the Act. Moreover, the record is replete with evidence that counsel supporting the complaint would seek the use of such a method of enforcement. As far back as in early 1947, while the case was before the Examiner, the issue concerning the effect of the zone pricing system used by respondents was before the Commission on motions to dismiss. Admittedly Count II of the complaint dealt with the use of the zone system itself. The Commission overruled the

motions to dismiss, adopting the view of counsel supporting the complaint that its allegations were directed against the effects of the alleged system or method, i. e., the zone pricing plan, and “not against individual instances" of discrimination in pricing. Furthermore, in May 1948, almost five years before the decree was entered, counsel supporting the complaint filed written exceptions to the recommended decision of the Examiner on the ground, among others, that it did not include a provision similar to the one objected to here. If respondents thought rebuttal evidence necessary, the record is bare of any effort on their part to offer it. Nor was any request made to reopen the case for that purpose after it reached the Commission.

We pass on to respondents’ major contention questioning the power of the Commission. As the Court has said many times before, the Commission may exercise only the powers granted it by the Act. Federal Trade Commission v. Western Meat Co., 272 U. S. 554 , 559 (1926). The relevant sections empower the Commission to prevent the use of unfair methods of competition and authorize it, after finding an unfair method present, to enter an order requiring the offender “to cease and desist” from using such unfair method.

The Court has held that the Commission is clothed with wide discretion in determining the type of order that is necessary to bring an end to the unfair practices found to exist. In Jacob Siegel Co. v. Federal Trade Commission, 327 U. S. 608 (1946), the Court named the Commission “the expert body to determine what remedy is necessary to eliminate the unfair or deceptive trade practices which have been disclosed. It has wide latitude for judgment and the courts will not interfere except where the remedy selected has no reasonable relation to the unlawful practices found to exist.” Id., at 612-613 . Thereafter, in Federal Trade Commission v.

Cement Institute, 333 U. S. 683 , 726 (1948), the Court pointed out that the Congress, in passing the Act, “felt that courts needed the assistance of men trained to combat monopolistic practices in the framing of judicial decrees in antitrust litigation.” In the light of this, the Court reasoned, it should not “lightly modify” the orders of the Commission. Again, in Federal Trade Commission v. Ruberoid Co., supra, at 473, we said that “if the Commission is to attain the objectives Congress envisioned, it cannot be required to confine its road block to the narrow lane the transgressor has traveled; it must be allowed effectively to close all roads to the prohibited goal, so that its order may not be by-passed with impunity.” We pointed out there that Congress had placed the primary responsibility for fashioning orders upon the Commission. These cases narrow the issue to the question: Does the remedy selected have a “reasonable relation to the unlawful practices found to exist”? We believe that it does. First, the simplicity of operation of the plan lends itself to unlawful manipulation; second, it had been used in the industry for almost a quarter of a century; and, third, its originator and chief beneficiary had been previously adjudged a violator of the antitrust laws. United States v. National Lead Co., 332 U. S. 319 (1947).

The respondents were found to have plainly disregarded the law. In this respect the Commission correctly considered the circumstances under which the illegal acts occurred. Those in utter disregard of law, as here, “call for repression by sterner measures than where the steps could reasonably have been thought permissible.” United States v. United States Gypsum Co., 340 U. S. 76 , 89-90 (1950). Respondents made no appeal here from some of the findings as to their guilt. Having lost the battle on the facts, they hope to win the war on the type of decree. They fight for the right to continue to use

been entered. They say our restoration of the contested paragraph will effectively prevent competition. In its supplemental memorandum, see note 5, supra, the Commission has clearly stated its understanding of the scope and effect of the order. It is our conclusion that the order was not intended to and does not prohibit or interfere with independent delivered zone pricing per se. Nor does it prohibit the practice of the absorption of actual freight as such in order to foster competition. Furthermore, as we have said, there is read into the order the provision of § 2 (b) of the Clayton Act as to the right of a seller in good faith to meet the lower price of a competitor. This is not to say that a seller may plead this section in defense of the use of an entire pricing system. The section is designed to protect competitors in individual transactions.

Respondents pose hypothetical situations which they say may rise up to plague them. However, “we think it would not be good judicial administration,” as our late Brother Jackson said in International Salt Co. v. United States, 332 U. S. 392 , 401 (1947), to strike the contested paragraph of the order to meet such conjectures. The Commission has reserved jurisdiction to meet just such contingencies. As actual situations arise they can be presented to the Commission in evidentiary form rather than as fantasies. And, we might add, if there is a burden that cannot be made lighter after application to the Commission, then respondents must remember that those caught violating the Act must expect some fencing in. United States v. Crescent Amusement Co., supra, at 187.

Reversed.