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Milk and Ice Cream Can Institute v. Federal Trade Commission.

January 7, 1946

THE MILK AND ICE CREAM CAN INSTITUTE, ET AL.
v.
FEDERAL TRADE COMMISSION.



Author: Major

Before EVANS, MAJOR and KERNER, Circuit Judges.

MAJOR, Circuit Judge: This is a petition to review a cease and desist order entered by the Federal Trade Commission on September 18, 1943. Petitioners are the Milk and Ice Cream Can Institute, an unincorporated trade association (hereinafter referred to as the Institute), D. S. Hunter, secretary of the Institute (sometimes referred to as the commissioner), and the following corporate members: Buhl Stamping Company located at Detroit, Michigan; The Creamery Package Manufacturing Company located at Chicago, Illinois; Sheet Metal Specialty Company located at Follansbee, West Virginia; Atlantic Stamping Company located at Rochester, New York; Keiner Williams Stamping Company located at Richmond Hill in Long Island (a suburb of New York City); Superior Metal Products Company located at St. Paul, Minnesota; and Solar-Sturges Manufacturing Company located at Melrose Park, Illinois (a suburb of Chicago). Three separate briefs have been filed by the petitioners, one on behalf of the Institute, Hunter and the first three corporate petitioners just named, another on behalf of the next three corporate petitioners, and another on behalf of the last named corporate petitioner.

The Institute has been in existence since 1930, the year of its organization. Hunter has acted as its secretary or commissioner from the beginning, and all of the corporate petitioners have been members during such period. All of the corporate petitioners are and have long been engaged in the manufacture, sale and distribution of milk cans and ice cream cans, with the exception of Atlantic Stamping Company which does not manufacture ice cream cans. The seven corporate petitioners, together with lalance & Grosjean Corporation, a former member of the Institute against whom the proceeding was dismissed by the Commission, and Geuder, Paeschke and Frey Company (a party to the proceeding before the Commission but who has not petitioned for review), manufacture practically all of the milk and ice cream cans sold and distributed in the United States.

The complaint issued by the Commission alleged that the corporate members of the Institute had maintained an unlawful combination to restrain competition in the manufacture, sale and distribution of milk and ice cream cans in interstate commerce; that they had "cooperatively made and announced prices" in such a manner that the delivered cost of their products to a purchaser was the same regardless of the producing point; that as a part of such combination the corporate members had by agreement employed a freight equalization plan; that they had provided themselves with a compilation of freight rate factors; that they had exchanged details of sales with each other; that they had maintained a systematic check upon each other for the purpose of curtailing and eliminating allowances; that they had agreed to discounts and other terms and conditions of sale, and that they had standardized and promoted uniformity in their products for the purpose of lessening competition. It was alleged that the Institute and Hunter had cooperated in the activities of the members. It was further alleged that such acts restrained commerce and constituted unfair acts and practices and unfair methods of competition in commerce within the meaning of the Federal Trade Commission Act.

Answers were filed by the petitioners, denying that they had ever maintained an unlawful combination to restrain competition; that their activities did not result from any combination or agreement; and that their activities were in the aid of, rather than the restraint of, competition. Extensive hearings were had before a trial examiner and the Commission made findings of fact and conclusions of law upon which its cease and desist order, here sought to be reviewed, was predicated.

While numerous contested issues are stated, the basic one is whether the findings of the Commission are substantially supported. If such be the case, there is the further issue as to the scope of the Commission's order.

In reality, the essential question for our determination is whether the members of the Institute acted in combination or by agreement for the purpose of fixing prices, or their activities contributed to such result, as found by the Commission.

"Proof that a combination was formed for the purpose of fixing prices and that it caused them to be fixed or contributed to that result is proof of the completion of a price fixing conspiracy under ยง 1 of the Act."

United States v. Socony-Vacuum Oil Co., Inc., et al., 310 U.S. 150, 224. In determining whether such finding is supported, it is not necessary, as argued, that there be direct proof of an agreement. Such agreement may be shown by circumstantial 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. Much of petitioners' argument is devoted to an attempt to demonstrate that their activities are lawful. That such may be the case when pursued without any agreement or combination may, for the purpose of the instant case, be conceded. Even so, however, it does not follow that they are lawful when practiced as a result of a combination or agreement.

The activities of the Institute and its members follow very closely those which we recently considered in United States Maltsters Assn., et al. v. Federal Trade Commission (No. 8429, decided November 24, 1945). The legal questions presented in this case are identical with those we considered in the Maltsters case and the factual situation is quite similar. Here, as in that case, it is urged that the activities of the Institute and its members are lawful. In support of such contention, petitioners rely upon Maple Flooring Mfrs. Assn., et al. v. United States, 268 U.S. 563; Cement Mfrs. Protective Assn., et al. v. United States, 268 U.S. 588; and Sugar Institute, Inc., et al. v. United States, 297 U.S. 553. Reliance was also placed upon these authorities in the Maltsters case, in which we discussed and distinguished them. What we there said is equally applicable in the instant case and need not be repeated.

The Commission found that "with the exception of short periods of time while adjustments in prices were being made, the prices charged by the respective respondent members (petitioners here), both f.o.b. and delivered, had been uniform and identical." Petitioners do not seriously challenge this finding. The record fully discloses that such was the situation for at least a period of more than four years immediately prior to the time of the commencement of the instant proceeding. To illustrate, a customer located in St. Paul Could purchase cans at the same delivered price irrespective of whether the purchase was made from a member located in Chicago or St. Paul. Just how such an unnatural situation could be brought about by members of an industry without a plan or agreement is difficult, if not impossible, to visualize. The mere fact that the situation did exist in and of itself furnishes strong support that the Institute and its members were acting co-operatively and by agreement. It is contended, however, that the same delivered price, even though the result of a plan or agreement, did not affect price competition. In fact, it is argued that an identical delivered price is in aid of price competition. Not being economists, we confess our inability to comprehend such an argument.True, the same delivered price might still leave room for competition, depending upon the circumstances of the case. This is so for the reason that there might be competitive factors other than price, such as quality and the appearance of the product. But insofar as price competition is concerned, we think that an agreement among manufacturers of a product to sell at the same delivered price would seriously interefere with, if not entirely destroy, competition in that respect.

No good purpose would be served in a detailed discussion of the various activities of the Institute and its members, relied upon by the Commission in support of its finding that they acted in concert and by agreement. A study of the record is convincing not only that the finding is substantially supported but that it would be difficult to reach any other conclusion. We shall, therefore, briefly refer to some of such activities, the most important of which is the so-called freight equalization plan. The Commission found that this plan was maintained for the purpose and with the result that "the delivered cost of their products was the same. regardless of from whom purchase was made or from which producing point the goods purchased were shipped," and further that the plan was not used by petitioners "on a competitive basis when reaching into a competitor's territory, since its use was solely to match competitor's prices," and that it "served only to maintain uniformity of delivered prices." Petitioners do not dispute but that this freight equalization system was used for the express purpose of effecting a uniform delivered price. In one of petitioners' briefs, it is stated:

"As all cans are sold f.o.b. shipping point this equalization permits the manufacturers to submit their product to the prospective purchaser at a net delivery price unfettered by the distance between shipping (point) and that of the nearest competitor."

This is merely another way of saying that by use of the freight equalization system all manufacturers are enabled to ...


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