FTC v. Cement Institute
333 U.S. 683 (1948)

Annotate this Case

U.S. Supreme Court

FTC v. Cement Institute, 333 U.S. 683 (1948)

Federal Trade Commission v. Cement Institute

No. 23

Argued October 20-21, 1947

Decided April 26, 1948*

333 U.S. 683

CERTIORARI TO THE CIRCUIT COURT OF APPEALS

FOR THE SEVENTH CIRCUIT

Syllabus

The Federal Trade Commission instituted a proceeding before itself against an unincorporated trade association composed of corporations which manufacture, sell, and distribute cement; corporate members of the association, and officers and agents of the association. The complaint charged: (1) that respondents had engaged in an unfair method of competition in violation of § 5 of the Federal Trade Commission Act by acting in concert to restrain competition in the sale and distribution of cement through use of a multiple basing point delivered-price system, which resulted in their quoting and maintaining identical prices and terms of sale for cement at any given destination, and (2) that this system of sales resulted in price discriminations violative of § 2 of the Clayton Act, as amended by the Robinson-Patman Act. Upon a hearing and findings, the Commission ordered respondents to cease and desist from any concerted action to do specified things, including use of the multiple basing point delivered-price system to maintain identical prices for cement.

Held:

1. The Commission has jurisdiction to conclude that conduct tending to restrain trade is an unfair method of competition violative of § 5 of the Federal Trade Commission Act, even though the self-same conduct may also violate the Sherman Act. Pp. 333 U. S. 689-693.

Page 333 U. S. 684

2. The legislative history of the Federal Trade Commission Act shows that the purpose of Congress was not only to continue enforcement of the Sherman Act by the Department of Justice and the federal courts, but also to supplement that enforcement through the administrative process of the Federal Trade Commission. Pp. 333 U. S. 692-693.

3. The filing by the United States of a civil action in a federal district court to restrain the respondents and others from violating § 1 of the Sherman Act, though based largely on the same alleged misconduct as in the Commission proceeding, does not require that the Commission proceeding be dismissed. Pp. 333 U. S. 693-695.

4. Since all of the respondents were charged with combining to maintain a delivered-price system in order to eliminate price competition in interstate commerce, some who sold cement in intrastate commerce exclusively were nevertheless subject to the jurisdiction and order of the Commission. Pp. 333 U. S. 695-696.

5. The Commission was not disqualified to pass upon the issues involved in this proceeding, even assuming that the members of the Commission, as a result of its prior ex parte investigations, had previously formed the opinion that the multiple basing point system operated as a price-fixing restraint of trade violative of the Sherman Act. Pp. 333 U. S. 700-703.

6. It was not a denial of due process for the Commission to act in these proceedings after having expressed the view that industrywide use of the basing point system was illegal. Tumey v. Ohio,273 U. S. 510, distinguished. Pp. 333 U. S. 702-703.

7. Although the alleged combination be treated as having had its beginning in 1929, evidence of respondents' activities during years long prior thereto and during the NRA period was admissible for the purpose of showing the existence of a continuing combination among respondents to utilize the basing point pricing system. Pp. 333 U. S. 703-706.

(a) The Commission's consideration of respondents' pre-1929 and NRA code activities was within the rule that testimony as to prior or subsequent transactions, which for some reason are barred from forming the basis for a suit, may nevertheless be introduced if it tends reasonably to show the purpose and character of the particular transactions under scrutiny. Pp. 333 U. S. 704-705.

(b) Administrative agencies such as the Commission are not restricted by rigid rules of evidence. Pp. 333 U. S. 705-706.

(c) A letter written prior to the filing of the complaint by one, since deceased, who was president of a respondent company

Page 333 U. S. 685

and an active trustee of the association, in which he stated that free competition would be ruinous to the cement industry, was admissible in evidence even though the statement may have been only the writer's conclusion. P. 333 U. S. 706.

8. Cement Mfrs. Protective Assn. v. United States,268 U. S. 588, is not decisive of the issues in the present case. Pp. 333 U. S. 706-709.

9. Individual conduct or concerted action may fall short of violating the Sherman Act and yet constitute an "unfair method of competition" prohibited by the Federal Trade Commission Act. P. 333 U. S. 708.

10. The Commission made adequate findings that respondents collectively maintained a multiple basing point delivered-price system for the purpose of suppressing competition. Pp. 333 U. S. 709-712.

11. There was substantial evidence to support these findings. Pp. 333 U. S. 712-720.

12. Maintenance by concerted action of the basing point delivered-price system employed by respondents is an unfair trade practice prohibited by the Federal Trade Commission Act. Pp. 333 U. S. 720-721.

13. Respondents' multiple basing point delivered-price system resulted in price discriminations between purchasers, in violation of § 2 of the Clayton Act as amended by the Robinson-Patman Act. Corn Products Co. v. Federal Trade Comm'n,324 U. S. 726; Federal Trade Comm'n v. Staley Co.,324 U. S. 746. Pp. 333 U. S. 721-726.

14. The differences in respondents' net returns from different sales in different localities, resulting from use of the multiple basing point delivered-price system, were not justifiable under § 2(b) of the amended Clayton Act as price discriminations "made in good faith to meet an equally low price of a competitor." Pp. 333 U. S. 721-726.

15. The objections to the form and substance of the Commission's order are without merit. Pp. 333 U. S. 726-730.

157 F.2d 533 reversed.

A cease and desist order issued by the Federal Trade Commission in proceedings against respondents under the Federal Trade Commission Act and the amended Clayton Act was set aside by the Circuit Court of Appeals. 157 F.2d 533. This Court granted certiorari. 330 U.S. 815816. Reversed, p. 333 U. S. 730.

Page 333 U. S. 687

MR. JUSTICE BLACK delivered the opinion of the Court.

We granted certiorari to review the decree of the Circuit Court of Appeals which, with one judge dissenting, vacated and set aside a cease and desist order issued by the Federal Trade Commission against the respondents. 157 F.2d 533. Those respondents are: The Cement Institute, an unincorporated trade association composed of 74 corporations [Footnote 1] which manufacture, sell and distribute cement; the 74 corporate members of the Institute; [Footnote 2] and 21 individuals who are associated with the Institute. It took three years for a trial examiner to hear the evidence, which consists of about 49,000 pages of oral testimony and 50,000 pages of exhibits. Even the findings and conclusions of the Commission cover 176 pages. The briefs, with accompanying appendixes submitted by the parties, contain more than 4,000 pages. The legal questions raised by the Commission and by the different respondents

Page 333 U. S. 688

are many and varied. Some contentions are urged by all respondents, and can be jointly considered. Others require separate treatment. In order to keep our opinion within reasonable limits, we must restrict our record references to the minimum consistent with an adequate consideration of the legal questions we discuss.

The proceedings were begun by a Commission complaint of two counts. The first charged that certain alleged conduct set out at length constituted an unfair method of competition in violation of § 5 of the Federal Trade Commission Act. 38 Stat. 719, 15 U.S.C. § 45. The core of the charge was that the respondents had restrained and hindered competition in the sale and distribution of cement by means of a combination among themselves made effective through mutual understanding or agreement to employ a multiple basing point system of pricing. It was alleged that this system resulted in the quotation of identical terms of sale and identical prices for cement by the respondents at any given point in the United States. This system had worked so successfully, it was further charged, that, for many years prior to the filing of the complaint, all cement buyers throughout the nation, with rare exceptions, had been unable to purchase cement for delivery in any given locality from any one of the respondents at a lower price or on more favorable terms than from any of the other respondents.

The second count of the complaint, resting chiefly on the same allegations of fact set out in Count I, charged that the multiple basing point system of sales resulted in systematic price discriminations between the customers of each respondent. These discriminations were made, it was alleged, with the purpose of destroying competition in price between the various respondents in violation of § 2 of the Clayton Act, 38 Stat. 730, as amended by the Robinson-Patman Act, 49 Stat. 1526. That section, with

Page 333 U. S. 689

certain conditions which need not here be set out, makes it

"unlawful for any person engaged in commerce, . . . either directly or indirectly, to discriminate in price between different purchasers of commodities of like grade and quality. . . ."

15 U.S.C. § 13.

Resting upon its findings, the Commission ordered that respondents cease and desist from "carrying out any planned common course of action, understanding, agreement, combination, or conspiracy" to do a number of things, 37 F.T.C. 97, 258-262, all of which things, the Commission argues, had to be restrained in order effectively to restore individual freedom of action among the separate units in the cement industry. Certain contentions with reference to the order will later require a more detailed discussion of its terms. For the present, it is sufficient to say that, if the order stands, its terms are broad enough to bar respondents from acting in concert to sell cement on a basing point delivered price plan which so eliminates competition that respondents' prices are always identical at any given point in the United States.

We shall not now detail the numerous contentions urged against the order's validity. A statement of these contentions can best await the separate consideration we give them.

Jurisdiction. -- At the very beginning, we are met with a challenge to the Commission's jurisdiction to entertain the complaint and to act on it. This contention is pressed by respondent Marquette Cement Manufacturing Co., and is relied upon by other respondents. Count I of the complaint is drawn under the provision in § 5 of the Federal Trade Commission Act, which declares that "Unfair methods of competition . . . are hereby declared unlawful." Marquette contends that the facts alleged in Count I do not constitute an "unfair method of competition" within the meaning of § 5. Its argument runs this way: Count I in reality charges a combination to restrain trade. Such

Page 333 U. S. 690

a combination constitutes an offense under § 1 of the Sherman Act, which outlaws "Every . . . combination . . . in restraint of trade." 26 Stat. 209, 15 U.S.C. § 1. Section 4 of the Sherman Act provides that the attorney general shall institute suits under the Act on behalf of the United States, and that the federal district courts shall have exclusive jurisdiction of such suits. Hence, continue respondents, the Commission, whose jurisdiction is limited to "unfair methods of competition," is without power to institute proceedings or to issue an order with regard to the combination in restraint of trade charged in Count I. Marquette then argues that, since the fact allegations of Count I are the chief reliance for the charge in Count II, this latter count also must be interpreted as charging a violation of the Sherman Act. Assuming, without deciding, that the conduct charged in each count constitutes a violation of the Sherman Act, we hold that the Commission does have jurisdiction to conclude that such conduct may also be an unfair method of competition, and hence constitute a violation of § 5 of the Federal Trade Commission Act.

As early as 1920, this Court considered it an "unfair method of competition" to engage in practices "against public policy because of their dangerous tendency unduly to hinder competition or create monopoly." Federal Trade Commission v. Gratz,253 U. S. 421, 253 U. S. 427. In 1921, the Court, in Federal Trade Commission v. Beech Nut Packing Co.,257 U. S. 441, sustained a cease and desist order against a resale price maintenance plan because such a plan

"necessarily constitutes a scheme which restrains the natural flow of commerce and the freedom of competition in the channels of interstate trade which it has been the purpose of all the Anti-Trust Acts to maintain."

Id. at 257 U. S. 454. The Court, in holding that the scheme before it constituted an unfair method of competition, noted that

Page 333 U. S. 691

the conduct in question was practically identical with that previously declared unlawful in Dr. Miles Medical Co. v. John D. Park & Sons Co.,220 U. S. 373, and United States v. Schrader's Son, Inc.,252 U. S. 85, the latter a suit brought under § 1 of the Sherman Act. Again, in 1926, this Court sustained a Commission "unfair method of competition" order against defendants who had engaged in a price-fixing combination, a plain violation of § 1 of the Sherman Act. Federal Trade Commission v. Pacific States Paper Trade Assn.,273 U. S. 52. In 1941, we reiterated that certain conduct of a combination found to conflict with the policy of the Sherman Act could be suppressed by the Commission as an unfair method of competition. Fashion Originators' Guild v. Federal Trade Commission,312 U. S. 457, 312 U. S. 465. The Commission's order was sustained in the Fashion Originators' case not only because the prohibited conduct violated the Clayton Act, but also because the Commission's findings brought the "combination in its entirety well within the inhibition of the policies declared by the Sherman Act itself." In other cases, this Court has pointed out many reasons which support interpretation of the language "unfair methods of competition" in § 5 of the Federal Trade Commission Act as including violations of the Sherman Act. [Footnote 3] Thus it appears that, soon after its creation, the Commission began to interpret the prohibitions of § 5 as including those restraints of trade which also were outlawed by the Sherman Act, [Footnote 4] and

Page 333 U. S. 692

that this Court has consistently approved that interpretation of the Act.

Despite this long and consistent administrative and judicial construction of § 5, we are urged to hold that these prior interpretations were wrong, and that the term "unfair methods of competition" should not be construed as embracing any conduct within the ambit of the Sherman Act. In support of this contention, Marquette chiefly relies upon its reading of the legislative history of the Commission Act. We have given careful consideration to this contention because of the earnestness with which it is pressed. Marquette points to particular statements of some of the Act's sponsors which, taken out of their context, might lend faint support to its contention that Congress did not intend the Commission to concern itself with conduct then punishable under the Sherman Act. But, on the whole, the Act's legislative history shows a strong congressional purpose not only to continue enforcement of the Sherman Act by the Department of Justice and the Federal District Courts, but also to supplement that enforcement through the administrative process of the new Trade Commission. Far from being regarded as a rival of the Justice Department and the District Courts in dissolving combinations in restraint of trade, the new Commission was envisioned as an aid to them, and was specifically authorized to assist them in the drafting of

Page 333 U. S. 693

appropriate decrees in antitrust litigation. [Footnote 5] All of the committee reports and the statements of those in charge of the Trade Commission Act reveal an abiding purpose to vest both the Commission and the courts with adequate powers to hit at every trade practice, then existing or thereafter contrived, which restrained competition or might lead to such restraint if not stopped in its incipient stages. These congressional purposes are revealed in the legislative history cited below, most of which is referred to in respondents' briefs. [Footnote 6] We can conceive of no greater obstacle this Court could create to the fulfillment of these congressional purposes than to inject into every Trade Commission proceeding brought under § 5 and into every Sherman Act suit brought by the Justice Department a possible jurisdictional question.

We adhere to our former rulings. The Commission has jurisdiction to declare that conduct tending to restrain trade is an unfair method of competition even though the self-same conduct may also violate the Sherman Act.

There is a related jurisdictional argument pressed by Marquette which may be disposed of at this time. While review of the Commission's order was pending in the Circuit Court of Appeals, the Attorney General filed a civil action in the Federal District Court for Denver, Colorado,

Page 333 U. S. 694

to restrain the Cement Institute, Marquette, and 88 other cement companies, including all of the present respondents, from violating § 1 of the Sherman Act. Much of the evidence before the Commission in this proceeding might also be relevant in that case, which, we are informed, has not thus far been brought to trial. Marquette urges that the Commission proceeding should now be dismissed because it is contrary to the public interest to force respondents to defend both a Commission proceeding and a Sherman Act suit based largely on the same alleged misconduct.

We find nothing to justify a holding that the filing of a Sherman Act suit by the Attorney General requires the termination of these Federal Trade Commission proceedings. In the first place, although all conduct violative of the Sherman Act may likewise come within the unfair trade practice prohibitions of the Trade Commission Act, the converse is not necessarily true. It has long been recognized that there are many unfair methods of competition that do not assume the proportions of Sherman Act violations. Federal Trade Commission v. R. F. Keppel & Bro.,291 U. S. 304; Federal Trade Commission v. Gratz,253 U. S. 421, 253 U. S. 427. Hence, a conclusion that respondents' conduct constituted an unfair method of competition does not necessarily mean that their same activities would also be found to violate § 1 of the Sherman Act. In the second place, the fact that the same conduct may constitute a violation of both acts in nowise requires us to dismiss this Commission proceeding. Just as the Sherman Act itself permits the Attorney General to bring simultaneous civil and criminal suits against a defendant based on the same misconduct, so the Sherman Act and the Trade Commission Act provide the Government with cumulative remedies against activity detrimental to competition. Both the legislative history of the Trade Commission Act and its specific language indicate a congressional

Page 333 U. S. 695

purpose not to confine each of these proceedings within narrow, mutually exclusive limits, but rather to permit the simultaneous use of both types of proceedings. Marquette's objections to the Commission's jurisdiction are overruled.

Objections to Commission's Jurisdiction by Certain Respondents on Ground That They Were Not Engaged in Interstate Commerce. -- One other challenge to the Commission's jurisdiction is specially raised by Northwestern Portland and Superior Portland. The Commission found that "Northwestern Portland makes no sales or shipments outside the Washington," and that "Superior Portland, with few exceptions, makes sales and shipments outside the Washington only to Alaska." These two respondents contend that, since they did not engage in interstate commerce, and since § 5 of the Trade Commission Act applies only to unfair methods of competition in interstate commerce, the Commission was without jurisdiction to enter an order against them under Count I of the complaint. For this contention, they chiefly rely on Federal Trade Commission v. Bunte Bros.,312 U. S. 349. They also argue that, for the same reason, the Commission lacked jurisdiction to enforce against them the price discrimination charge in Count II of the complaint.

We cannot sustain this contention. The charge against these respondents was not that they, apart from the other respondents, had engaged in unfair methods of competition and price discriminations simply by making intrastate sales. Instead, the charge was, as supported by the Commission's findings, that these respondents, in combination with others, agreed to maintain a delivered price system in order to eliminate price competition in the sale of cement in interstate commerce. The combination, as found, includes the Institute and cement companies located in many different states. The Commission has further found that,

"In general, said corporate respondents

Page 333 U. S. 696

have maintained, and now maintain, a constant course of trade and commerce in cement among and between the several States of the United States."

The fact that one or two of the numerous participants in the combination happen to be selling only within the borders of a single state is not controlling in determining the scope of the Commission's jurisdiction. The important factor is that the concerted action of all of the parties to the combination is essential in order to make wholly effective the restraint of commerce among the states. [Footnote 7] The Commission would be rendered helpless to stop unfair methods of competition in the form of interstate combinations and conspiracies if its jurisdiction could be defeated on a mere showing that each conspirator had carefully confined his illegal activities within the borders of a single state. We hold that the Commission did have jurisdiction to make an order against Superior Portland and Northwestern Portland.

The Multiple Basing Point Delivered Price System. -- Since the multiple basing point delivered price system of fixing prices and terms of cement sales is the nub of this controversy, it will be helpful at this preliminary stage to point out in general what it is and how it works. A brief reference to the distinctive characteristics of "factory" or "mill prices" and "delivered prices" is of importance to an understanding of the basing point delivered price system here involved.

Goods may be sold and delivered to customers at the seller's mill or warehouse door, or may be sold free on board (f.o.b.) trucks or railroad cars immediately adjacent to the seller's mill or warehouse. In either event, the actual cost of the goods to the purchaser is, broadly speaking, the seller's "mill price" plus the purchaser's cost of

Page 333 U. S. 697

transportation. However, if the seller fixes a price at which he undertakes to deliver goods to the purchaser where they are to be used, the cost to the purchaser is the "delivered price." A seller who makes the "mill price" identical for all purchasers of like amount and quality simply delivers his goods at the same place (his mill) and for the same price (price at the mill). He thus receives for all f.o.b. mill sales an identical net amount of money for like goods from all customers. But a "delivered price" system creates complications which may result in a seller's receiving different net returns from the sale of like goods. The cost of transporting 500 miles is almost always more than the cost of transporting 100 miles. Consequently if customers 100 and 500 miles away pay the same "delivered price," the seller's net return is less from the more distant customer. This difference in the producer's net return from sales to customers in different localities under a "delivered price" system is an important element in the charge under Count I of the complaint, and is the crux of Count II.

The best known early example of a basing point price system was called "Pittsburgh plus." It related to the price of steel. The Pittsburgh price was the base price, Pittsburgh being therefore called a price basing point. In order for the system to work, sales had to be made only at delivered prices. Under this system, the delivered price of steel from anywhere in the United States to a point of delivery anywhere in the United States was, in general, the Pittsburgh price plus the railroad freight rate from Pittsburgh to the point of delivery. [Footnote 8] Take Chicago, Illinois, as an illustration of the operation and consequences

Page 333 U. S. 698

of the system. A Chicago steel producer was not free to sell his steel at cost plus a reasonable profit. He must sell it at the Pittsburgh price plus the railroad freight rate from Pittsburgh to the point of delivery. Chicago steel customers were, by this pricing plan, thus arbitrarily required to pay for Chicago produced steel the Pittsburgh base price plus what it would have cost to ship the steel by rail from Pittsburgh to Chicago had it been shipped. The theoretical cost of this fictitious shipment became known as "phantom freight." But, had it been economically possible under this plan for a Chicago producer to ship his steel to Pittsburgh, his "delivered price" would have been merely the Pittsburgh price, although he actually would have been required to pay the freight from Chicago to Pittsburgh. Thus, the "delivered price" under these latter circumstances required a Chicago (non-basing point) producer to "absorb" freight costs. That is, such a seller's net returns became smaller and smaller as his deliveries approached closer and closer to the basing point.

Several results obviously flow from use of a single basing point system, such as "Pittsburgh plus" originally was. One is that the "delivered prices" of all producers in every locality where deliveries are made are always the same regardless of the producers' different freight costs. Another is that sales made by a non-base mill for delivery at different localities result in net receipts to the seller which vary in amounts equivalent to the "phantom freight" included in, or the "freight absorption" taken from, the "delivered price."

As commonly employed by respondents, the basing point system is not single, but multiple. That is, instead of one basing point, like that in "Pittsburgh plus," a number of basing point localities are used. In the multiple basing point system, just as in the single basing point system, freight absorption or phantom freight is an element

Page 333 U. S. 699

of the delivered price on all sales not governed by a basing point actually located at the seller's mill. [Footnote 9] And all sellers quote identical delivered prices in any given locality regardless of their different costs of production and their different freight expenses. Thus, the multiple and single systems function in the same general manner, and produce the same consequences -- identity of prices and diversity of net returns. [Footnote 10] Such differences

Page 333 U. S. 700

as there are in matters here pertinent are therefore differences of degree only.

Alleged Bias of the Commission. -- One year after the taking of testimony had been concluded, and while these proceedings were still pending before the Commission, the respondent Marquette asked the Commission to disqualify itself from passing upon the issues involved. Marquette charged that the Commission had previously prejudged the issues, was "prejudiced and biased against the Portland cement industry generally," and that the industry and Marquette in particular could not receive a fair hearing from the Commission. After hearing oral argument, the Commission refused to disqualify itself. This contention, repeated here, was also urged and rejected in the Circuit Court of Appeals one year before that court reviewed the merits of the Commission's order. Marquette Cement Mfg. Co. v. Federal Trade Commission, 147 F.2d 589.

Marquette introduced numerous exhibits intended to support its charges. In the main, these exhibits were copies of the Commission's reports made to Congress or to the President, as required by § 6 of the Trade Commission Act. 15 U.S.C. § 46. These reports, as well as the testimony given by members of the Commission before congressional committees, make it clear that, long before the filing of this complaint, the members of the Commission at that time, or at least some of them, were of the opinion that the operation of the multiple basing point system, as they had studied it, was the equivalent of a price-fixing restraint of trade in violation of the Sherman Act. We therefore decide this contention, as did the Circuit Court of Appeals, on the assumption that such an opinion had been formed by the entire membership of the Commission as a result of its prior official investigations. But we also agree with that court's holding that this belief did not disqualify the Commission.

Page 333 U. S. 701

In the first place, the fact that the Commission had entertained such views as the result of its prior ex parte investigations did not necessarily mean that the minds of its members were irrevocably closed on the subject of the respondents' basing point practices. Here, in contrast to the Commission's investigations, members of the cement industry were legally authorized participants in the hearings. They produced evidence -- volumes of it. They were free to point out to the Commission by testimony, by cross-examination of witnesses, and by arguments, conditions of the trade practices under attack which they thought kept these practices within the range of legally permissible business activities.

Moreover, Marquette's position, if sustained, would to a large extent defeat the congressional purposes which prompted passage of the Trade Commission Act. Had the entire membership of the Commission disqualified in the proceedings against these respondents, this complaint could not have been acted upon by the Commission or by any other government agency. Congress has provided for no such contingency. It has not directed that the Commission disqualify itself under any circumstances, has not provided for substitute commissioners should any of its members disqualify, and has not authorized any other government agency to hold hearings, make findings, and issue cease and desist orders in proceedings against unfair trade practices. [Footnote 11] Yet, if Marquette is right, the Commission, by making studies and filing reports in obedience to congressional command, completely immunized the practices investigated, even though they are "unfair," from any cease and desist order by the Commission or any other governmental agency.

Page 333 U. S. 702

There is no warrant in the Act for reaching a conclusion which would thus frustrate its purposes. If the Commission's opinions expressed in congressionally required reports would bar its members from acting in unfair trade proceedings, it would appear that opinions expressed in the first basing point unfair trade proceeding would similarly disqualify them from ever passing on another. See Morgan v. United States,313 U. S. 409, 313 U. S. 421. Thus, experience acquired from their work as commissioners would be a handicap, instead of an advantage. Such was not the intendment of Congress. For Congress acted on a committee report stating:

"It is manifestly desirable that the terms of the commissioners shall be long enough to give them an opportunity to acquire the expertness in dealing with these special questions concerning industry that comes from experience."

Report of Committee on Interstate Commerce, No. 597, June 13, 1914, 63d Cong., 2d Sess. 10-11.

Marquette also seems to argue that it was a denial of due process for the Commission to act in these proceedings after having expressed the view that industrywide use of the basing point system was illegal. A number of cases are cited as giving support to this contention. Tumey v. Ohio,273 U. S. 510, is among them. But it provides no support for the contention. In that case, Tumey had been convicted of a criminal offense, fined, and committed to jail by a judge who had a direct, personal, substantial pecuniary interest in reaching his conclusion to convict. A criminal conviction by such a tribunal was held to violate procedural due process. But the Court there pointed out that most matters relating to judicial disqualification did not rise to a constitutional level. Id. at 273 U. S. 523.

Neither the Tumey decision nor any other decision of this Court would require us to hold that it would be a violation of procedural due process for a judge to sit in

Page 333 U. S. 703

a case after he had expressed an opinion as to whether certain types of conduct were prohibited by law. In fact, judges frequently try the same case more than once, and decide identical issues each time, although these issues involved questions both of law and fact. Certainly the Federal Trade Commission cannot possibly be under stronger constitutional compulsions in this respect than a court. [Footnote 12]

The Commission properly refused to disqualify itself. We thus need not review the additional holding of the Circuit Court of Appeals that Marquette's objection on the ground of the alleged bias of the Commission was filed too late in the proceedings before that agency to warrant consideration.

Alleged Errors in re Introduction of Evidence. -- The complaint before the Commission, filed July 2, 1937, alleged that respondents had maintained an illegal combination for "more than eight years last past." In the Circuit Court of Appeals and in this Court, the Government treated its case on the basis that the combination began in August, 1929, when the respondent Cement Institute was organized. The Government introduced much evidence over respondents' objections, however, which showed the activities of the cement industry for many years prior to 1929, some of it as far back as 1902. It also introduced evidence as to respondents' activities from 1933 to May 27, 1935, much of which related to the preparation and administration of the NRA Code for the cement industry pursuant to the National Industrial Recovery Act, 48 Stat. 195, held invalid by this Court

Page 333 U. S. 704

May 27, 1935, in Schechter Poultry Corp. v. United States,295 U. S. 495. All of the testimony to which objection was made related to the initiation, development, and carrying on of the basing point practices.

Respondents contend that the pre-1929 evidence, especially that prior to 1919, is patently inadmissible with reference to a 1929 combination many of whose alleged members were nonexistent in 1919. They also urge that evidence of activities during the NRA period was improperly admitted because § 5 of Title I of the NRA provided that any action taken in compliance with the code provisions of an industry should be "exempt from the provisions of the antitrust laws of the United States." And some of the NRA period testimony relating to basing point practices did involve references to code provisions. The Government contends that evidence of both the pre-1929 and the NRA period activities of members of the cement industry tends to show a continuous course of concerted efforts on the part of the industry, or at least most of it, to utilize the basing point system as a means to fix uniform terms and prices at which cement would be sold, and that the Commission had properly so regarded this evidence. The Circuit Court of Appeals agreed with respondents that the Commission had erroneously considered both the NRA period evidence and the pre-1929 evidence in making its findings of the existence of a combination among respondents.

We conclude that both types of evidence were admissible for the purpose of showing the existence of a continuing combination among respondents to utilize the basing point pricing system. [Footnote 13]

The Commission did not make its findings of post-1929 combination, in whole or in part, on the premise that

Page 333 U. S. 705

any of respondents' pre-1929 or NRA code activities were illegal. The consideration given these activities by the Commission was well within the established judicial rule of evidence that testimony of prior or subsequent transactions, which for some reason are barred from forming the basis for a suit, may nevertheless be introduced if it tends reasonably to show the purpose and character of the particular transactions under scrutiny. Standard Oil Co. v. United States,221 U. S. 1, 221 U. S. 46-47; United States v. Reading Co.,253 U. S. 26, 253 U. S. 43-44. Here, the trade practices of an entire industry were under consideration. Respondents, on the one hand, insisted that the multiple basing point delivered price system represented a natural evolution of business practices adopted by the different cement companies not in concert, but separately, in response to customers' needs and demands. That the separately adopted business practices produced uniform terms and conditions of sale in all localities was, so the respondents contended, nothing but an inevitable result of long continued competition. On the other hand, the Government contended that, despite shifts in ownership of individual cement companies, what had taken place from 1902 to the date the complaint was filed showed continued concerted action on the part of all cement producers to develop and improve the basing point system so that it would automatically eliminate competition. In the Government's view, the Institute, when formed in 1929, simply took up the old practices for the old purpose, and aided its member companies to carry it straight on through and beyond the NRA period. See Fort Howard Paper Co. v. Federal Trade Commission, 156 F.2d 899, 906.

Furthermore, administrative agencies like the Federal Trade Commission have never been restricted by the

Page 333 U. S. 706

rigid rules of evidence. Interstate Commerce Commission v. Baird,194 U. S. 25, 194 U. S. 44. And, of course, rules which bar certain types of evidence in criminal or quasi-criminal cases are not controlling in proceedings like this, where the effect of the Commission's order is not to punish or to fasten liability on respondents for past conduct, but to ban specific practices for the future in accordance with the general mandate of Congress.

The foregoing likewise largely answers respondents' contention that there was error in the admission of a letter written by one Treanor in 1934 to the chairman of the NRA code authority for the cement industry. Treanor, who died prior to the filing of the complaint, was at the time president of one of the respondent companies, and also an active trustee of the Institute. In the letter he stated, among other things, that the cement industry was one "above all others that cannot stand free competition, that must systematically restrain competition or be ruined." This statement was made as part of his criticism of the cement industry's publicity campaign in defense of the basing point system. The relevance of this statement indicating this Institute official's informed judgment is obvious. That is might be only his conclusion does not render the statement inadmissible in this administrative proceeding.

All contentions in regard to the introduction of testimony have been considered. None of them justifies refusal to enforce this order.

The Old Cement Case. -- This Court's opinion in Cement Mfrs.' Protective Assn. v. United States,268 U. S. 588, known as the Old Cement case, is relied on by the respondents in almost every contention they present. We think it has little relevance, if any at all, to the issues in this case.

In that case, the United States brought an action in the District Court to enjoin an alleged combination to violate

Page 333 U. S. 707

§ 1 of the Sherman Act. The respondents were the Cement Manufacturers Protective Association, four of its officers, and nineteen cement manufacturers. The District Court held hearings, made findings of fact, and issued an injunction against those respondents. This Court, with three justices dissenting, reversed upon a review of the evidence. It did so because the Government did not charge, and the record did not show, "any agreement or understanding between the defendants placing limitations on either prices or production," or any agreement to utilize the basing point system as a means of fixing prices. The Court said:

"But here, the government does not rely upon agreement or understanding, and this record wholly fails to establish, either directly or by inference, any concerted action other than that involved in the gathering and dissemination of pertinent information with respect to the sale and distribution of cement to which we have referred, and it fails to show any effect on price and production except such as would naturally flow from the dissemination of that information in the trade and its natural influence on individual action."

Id. at 268 U. S. 606. In the Old Cement case and in Maple Flooring Mfrs.' Assn. v. United States,268 U. S. 563, decided the same day, the Court's attention was focused on the rights of a trade association, despite the Sherman Act, openly to gather and disseminate statistics and information as to production costs, output, past prices, merchandise on hand, specific job contracts, freight rates, etc., so long as the Association did these things without attempts to foster agreements or concerted action with reference to prices, production, or terms of sale. Such associations were declared guiltless of violating the Sherman Act because, "in fact, no prohibited concert of action was found." Corn Products Refining Co. v. Federal Trade Commission,324 U. S. 726, 324 U. S. 735.

Page 333 U. S. 708

The Court's holding in the Old Cement case would not have been inconsistent with a judgment sustaining the Commission's order here, even had the two cases been before this Court the same day. The issues in the present Commission proceedings are quite different from those in the Old Cement case, although many of the trade practices shown here were also shown there. In the first place, unlike the Old Cement case, the Commission does here specifically charge a combination to utilize the basing point system as a means to bring about uniform prices and terms of sale. And here, the Commission has focused attention on this issue, having introduced evidence on the issue which covers thousands of pages. Furthermore, unlike the trial court in the Old Cement case, the Commission has specifically found the existence of a combination among respondents to employ the basing point system for the purpose of selling at identical prices.

In the second place, individual conduct or concerted conduct which falls short of being a Sherman Act violation may, as a matter of law, constitute an "unfair method of competition" prohibited by the Trade Commission Act. A major purpose of that Act, as we have frequently said, was to enable the Commission to restrain practices as "unfair" which, although not yet having grown into Sherman Act dimensions, would most likely do so if left unrestrained. The Commission and the courts were to determine what conduct, even though it might then be short of a Sherman Act violation, was an "unfair method of competition." This general language was deliberately left to the "Commission and the courts" for definition because it was thought that "[t]here is no limit to human inventiveness in this field;" that, consequently, a definition that fitted practices known to lead towards an unlawful restraint of trade today would not fit tomorrow's new inventions in the field, and that for Congress to try to keep its precise definitions abreast of this course of conduct

Page 333 U. S. 709

would be an "endless task." See Federal Trade Commission v. R. F. Keppel & Bro.,291 U. S. 304, 291 U. S. 310-312, and congressional committee reports there quoted.

These marked differences between what a court must decide in a Sherman Act proceeding and the duty of the Commission in determining whether conduct is to be classified as an unfair method of competition are enough, in and of themselves, to make the Old Cement decision wholly inapplicable to our problem in reviewing the findings in this case. That basic problem is whether the Commission made findings of concerted action, whether those findings are supported by evidence, and, if so, whether the findings are adequate as a matter of law to sustain the Commission's conclusion that the multiple basing point system, as practiced, constitutes an "unfair method of competition" because it either restrains free competition or is an incipient menace to it.

Findings and Evidence. -- It is strongly urged that the Commission failed to find, as charged in both counts of the complaint, that the respondents had, by combination, agreements, or understandings among themselves, utilized the multiple basing point delivered price system as a restraint to accomplish uniform prices and terms of sale. A subsidiary contention is that, assuming the Commission did so find, there is no substantial evidence to support such a finding. We think that adequate findings of combination were made, and that the findings have support in the evidence.

The Commission's findings of fact set out at great length, and with painstaking detail, numerous concerted activities carried on in order to make the multiple basing point system work in such way that competition in quality, price, and terms of sale of cement would be nonexistent, and that uniform prices, job contracts, discounts, and terms of sale would be continuously maintained. The Commission found that many of these activities

Page 333 U. S. 710

were carried on by the Cement Institute, the industry's unincorporated trade association, and that, in other instances, the activities were under the immediate control of groups of respondents. Among the collective methods used to accomplish these purposes, according to the findings, were boycotts; discharge of uncooperative employees; organized opposition to the erection of new cement plants; selling cement in a recalcitrant price-cutter's sales territory at a price so low that the recalcitrant was forced to adhere to the established basing point prices; discouraging the shipment of cement by truck or barge, and preparing and distributing freight rate books which provided respondents with similar figures to use as actual or "phantom" freight factors, thus guaranteeing that their delivered prices (base prices plus freight factors) would be identical on all sales whether made to individual purchasers under open bids or to governmental agencies under sealed bids. These are but a few of the many activities of respondents which the Commission found to have been done in combination to reduce or destroy price competition in cement. After having made these detailed findings of concerted action, the Commission followed them by a general finding that

"the capacity, tendency, and effect of the combination maintained by the respondents herein in the manner aforesaid is to . . . promote and maintain their multiple basing point delivered-price system and obstruct and defeat any form of competition which threatens or tends to threaten the continued use and maintenance of said system and the uniformity of prices created and maintained by its use. [Footnote 14]"

The Commission then concluded

Page 333 U. S. 711

that

"The aforesaid combination and acts and practices of respondents pursuant thereto and in connection therewith, as hereinabove found, under the conditions and circumstances set forth, constitute unfair methods of competition in commerce within the intent and meaning of the Federal Trade Commission Act."

And the Commission's cease and desist order prohibited respondents

"from entering into, continuing, cooperating in, or carrying out any planned common course of action, understanding, agreement, combination, or conspiracy between and among any two or more of said respondents . . ."

to do certain things there enumerated.

Thus, we have a complaint which charged collective action by respondents designed to maintain a sales technique

Page 333 U. S. 712

that restrained competition, detailed findings of collective activities by groups of respondents to achieve that end, then a general finding that respondents maintained the combination, and finally an order prohibiting the continuance of the combination. It seems impossible to conceive that anyone reading these findings in their entirety could doubt that the Commission found that respondents collectively maintained a multiple basing point delivered price system for the purpose of suppressing competition in cement sales. The findings are sufficient. The contention that they were not is without substance.

Disposition of this question brings us to the related contention that there was no substantial evidence to support the findings. We might well dispose of the contention as this Court dismissed a like one with reference to evidence and findings in a civil suit brought under the Sherman Act in Sugar Institute v. United States,297 U. S. 553, 297 U. S. 601:

"After a hearing of extraordinary length in which no pertinent fact was permitted to escape consideration, the trial court subjected the evidence to a thorough and acute analysis which has left but slight room for debate over matters of fact. Our examination of the record discloses no reason for overruling the court's findings in any matter essential to our decision."

In this case, which involves the evidence and findings of the Federal Trade Commission, we likewise see no reason for upsetting the essential findings of the Commission. Neither do we find it necessary to refer to all the voluminous testimony in this record which tends to support the Commission's findings.

Although there is much more evidence to which reference could be made, we think that the following facts shown by evidence in the record, some of which are in dispute, are sufficient to warrant the Commission's finding of concerted action.

When the Commission rendered its decision, there were about 80 cement manufacturing companies in the United

Page 333 U. S. 713

States, operating about 150 mills. Ten companies controlled more than half of the mills, and there were substantial corporate affiliations among many of the others. This concentration of productive capacity made concerted action far less difficult than it would otherwise have been. The belief is prevalent in the industry that, because of the standardized nature of cement, among other reasons, price competition is wholly unsuited to it. That belief is historic. It has resulted in concerted activities to devise means and measures to do away with competition in the industry. Out of those activities came the multiple basing point delivered price system. Evidence shows it to be a handy instrument to bring about elimination of any kind of price competition. The use of the multiple basing point delivered price system by the cement producers has been coincident with a situation whereby, for many years, with rare exceptions, cement has been offered for sale in every given locality at identical prices and terms by all producers. Thousands of secret sealed bids have been received by public agencies which corresponded in prices of cement down to a fractional part of a penny. [Footnote 15]

Page 333 U. S. 714

Occasionally, foreign cement has been imported, and cement dealers have sold it below the delivered price of the domestic product. Dealers who persisted in selling foreign cement were boycotted by the domestic producers. Officers of the Institute took the lead in securing pledges by producers not to permit sales f.o.b. mill to purchasers who furnished their own trucks, a practice regarded as seriously disruptive of the entire delivered price structure of the industry.

During the depression in the 1930's, slow business prompted some producers to deviate from the prices fixed by the delivered price system. Meetings were held by other producers; an effective plan was devised to punish the recalcitrants and bring them into line. The plan was simple, but successful. Other producers made the recalcitrant's plant an involuntary base point. The base price was driven down with relatively insignificant losses to the producers who imposed the punitive basing point, but with heavy losses to the recalcitrant who had to make all its sales on this basis. In one instance, where a producer had made a low public bid, a punitive base point price was put on its plant, and cement was reduced 10

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