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Stokely-Van Camp Inc. v. Federal Trade Commission

July 17, 1957


Author: Schnackenberg

Before LINDLEY and SCHNACKENBERG, Circuit Judges, and BRIGGLE, District Judge.


On the petition of Stokely-Van Camp, Inc., et al., we review an order of the Federal Trade Commission directing petitioners to cease and desist from engaging in certain acts and practices found to constitute unfair methods of competition and unfair acts or practices in commerce, within the meaning of section 5 of the Federal Trade Commission Act, as amended.*fn2 The hearing examiner and the Commission found that petitioners, in purchasing raw tomatoes in 1951 for canning purposes, had violated the Act by entering into a common understanding and agreement to refuse to negotiate or deal with Cannery Growers, Inc., a tomato growers co-operative marketing association (referred to herein as "co-op"), or to recognize it as the bargaining agent for its grower members.

The Commission's complaint was issued on May 21, 1952. Petitioners' answers denied that they had violated the act.

The hearing examiner issued two initial decisions in this case. The first was rendered on February 3, 1954, at the conclusion of the introduction of evidence in support of the complaint.*fn3

The second initial decision, rendered on August 8, 1955, at the close of the entire case, dismissed all the allegations of the complaint charging petitioners herein with inducing the grower members to breach their contract with the co-op. As to petitioners and Hunt Foods of Ohio, Inc., the hearing examiner made findings of fact, and concluded, that their acts and practices, beginning in the spring of 1951 and continuing through the remainder of the tomato contracting and harvesting season of that year, were performed pursuant to a common undestanding and planned common course of action (a) to refuse to negotiate or deal with the co-op as a bargaining agent for its grower members, and (b) to refuse to grant recognition of, or to negotiate with, the co-op by deducting the dues check-off for grower members of that organization, which constitutes an unreasonable restraint of trade and an unfair method of competition under the Act. However, he dismissed the complaint without prejudice, saying, that "it is believed that the Commission would be justified in assuming from the facts disclosed that the respondents will not again attempt to engage in these acts and practices in this industry and therefore it would not be in the public interest for the Commission to issue an order to cease and desist at this time."

The Commission, on appeal from the second initial decision, held that the record fully supported the hearing examiner's findings as to the existence in 1951 of an agreement to boycott the co-op. But it held that it would not be justified in assuming that the boycott would not be renewed, and that the public interest required the prevention of such renewal by issuing an order. On June 29, 1956, such an order was issued, directing that petitioners cease and desist from entering into, continuing, co-operating in, or carrying out any planned course of action, understanding, agreement, combination or conspiracy, to do or perform any of the following acts or things:

(a) Refusing to grant recognition of or to negotiate or deal with Cannery Growers, Inc., an association of tomato growers, as a bargaining agent for its grower members;

(b) Refusing to purchase or to contract to purchase tomatoes from growers who are members of Cannery Growes, Inc.*fn4

1.Briefly, petitioners state their position as follows: There was no direct evidence of a conspiracy, and hence this is an inference case. In 1951, the co-op arbitrarily asserted that a refusal to agree to its demands constituted a refusal to negotiate and a refusal to grant a dues check-off constituted a refusal to recognize. The attitude of the various petitioners toward the co-op varied; two for independent business reasons did not negotiate; some negotiated briefly but gave up because of the unreasonable demands of the co-op; others continued to negotiate and came close to agreement. The only similarity of conduct among petitioners was inability to reach agreement with the co-op. This evidence cannot support a finding of a common course of conduct to refuse to negotiate. They further contend that the Commission ignored the obvious fact that the conduct of petitioners toward the co-op was reasonable and the exercise of good business judgment, and that the co-op injected itself into a well-established economic relationship and attempted to effect drastic changes in price and other terms, all within the short space of the few weeks of the tomato contracting season. They point out that the co-op had never negotiated before, lacked confidence in its own position, wrote threatening letters and took extravagant positions in negotiation from which it did not retreat until the end of the tomato contracting season when it was too late to get tomato plants into the ground. It demanded a price increase of 65%, elimination of quality controls, a check-off of dues to it and by bulletins to its members engaged in a campaign of abuse. Petitioners did not know how many growers belonged to the co-op, questioned its responsibility, had no permission from its growers to grant the check-off and could not economically pay the 65% increase in price demanded by the co-op. Petitioners and the co-op failed to agree upon a contract during the relatively short tomato contracting season because of these economic and psychological reasons, leaving no legal basis for the inference that such failure was the result of conspiracy.

On the other hand, respondent's contentions may be summarized as follows: The meetings between the parties do not in themselves constitute negotiations, and petitioners in reality were attempting to obtain approval of their standard forms of contract without negotiation, and at the same time were refusing to recognize the co-op as the bargaining agent of its members.Respondent asserts that the co-op made no adamant demands on the processors and petitioners' alleged business reasons for not negotiating or dealing with the co-op do not render lawful a conspiracy to boycott the co-op.

In their brief petitioners concede that a common agreement to refuse to negotiate with or recognize the co-op would obviously have constituted illegal conduct under the Act.

The record before us is massive. It contains 4463 pages of proceedings and 282 pages of exhibits. There is substantial evidence in the whole record to support the Commission's findings of fact, and showing the existence of such an agreement. Those findings are therefore conclusive. Allied Paper Mills v. Federal Trade Commission, 168 F.2d 600, 605, cert. den. 336 U.S. 918. This is also true as to inferences which reasonably can be drawn from the proven facts.Federal Trade Commission v. Pacific States Paper Trade Association, 273 U.S. 52, at 61; Triangle Conduit & Cable Co. v. Federal Trade Commission, 168 F.2d 175, 180, aff'd sub nom. Clayton Mark & Co. v. Federal Trade Commission, 336 U.S. 956, and National Lead Company v. Federal Trade Commission, 227 F.2d 825, 833, reversed on other grounds, 352 U.S. 419. We hold that on the record as a whole there is substantial evidence to support the Commission's findings. Universal Camera Corp. v. National Labor Relations Board, 340 U.S. 474, 488.

2. With the complaint issued by the Commission, respondents named therein (including petitioners here) were given notice that they had a right to appear and show cause why an order should not be entered requiring them to cease and desist from the violations of law charged in the complaint. Such is the character of the order from which the present appeal has been taken.

The Commission contends that, in the exercise of its discretion, it properly concluded that the public interest required an order to cease and desist. On the other hand, petitioners claim that the purpose of a cease and desist order is not to punish for past practices, but rather to insure that in the future the public will be protected, and that the public interest in the issuance of such an order requires that there be some reasonable expectation that the violations will be repeated.They cite our language in National Lead Co. v. Federal Trade Commission, supra, at 839,

"* * * While the Commission is vested with a broad discretion to determine whether an order is needed to prevent the resumption of unlawful acts which have been discontinued, this 'discretion must be confined * * * within the bounds of reasonableness.'

"This rule of reasonableness requires something more than a mere guess or suspicion contrary to the evidence and to the finding of the trial examiner that a resumption of discontinued ...

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