Federal Trade Commission v. Ruberoid Company/Opinion of the Court

In this case we granted cross-petitions for certiorari to review the decree of the Court of Appeals affirming, but refusing to enforce, a cease and desist order issued by the Federal Trade Commission to the Ruberoid Co.

Ruberoid is one of the nation's largest manufacturers of asphalt and asbestos roofing materials and allied products. The Commission found that Ruberoid, in a number of specific instances, had discriminated among customers in the prices charged them for roofing materials. Further finding that the effect of those discriminations 'may be substantially to lessen competition in the line of commerce in which (those customers) are engaged, and to injure, destroy, or prevent competition between (those customers),' the Commission held that the discriminations were violations of § 2(a) of the Clayton Act, as amended by the Robinson-Patman Act. 46 F.T.C. 379. Ruberoid was ordered to:

'(C)ease and desist from discriminating in price:

'By selling such products of like grade and quality to any     purchaser at prices lower than those granted other purchasers      who in fact compete with the favored purchaser in the resale      or distribution of such products.'

Upon Ruberoid's petition for review, the Court of Appeals affirmed and granted enforcement of the order. 2 Cir., 189 F.2d 893. However, on rehearing, the Court of Appeals amended its mandate to strike that part which directed enforcement. 2 Cir., 191 F.2d 294. We granted certiorari to review questions, important in the administration of the Clayton Act, as to the scope and enforcement of Federal Trade Commission orders. 342 U.S. 917, 72 S.Ct. 368.

We first consider the contentions of Ruberoid, which are mainly attacks upon the breadth of the order. Orders of the Federal Trade Commission are not intended to impose criminal punishment or exact compensatory damages for past acts, but to prevent illegal practices in the future. In carrying out this function the Commission is not limited to prohibiting the illegal practice in the precise form in which it is found to have existed in the past. 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. Moreover, '(t) he Commission has wide discretion in its choice of a remedy deemed adequate to cope with the unlawful practices' disclosed. Jacob Siegel Co. v. Federal Trade Comm., 1946, 327 U.S. 608, 611, 66 S.Ct. 758, 759, 90 L.Ed. 888. Congress placed the primary responsibility for fashioning such orders upon the Commission, and Congress expected the Commission to exercise a special competence in formulating remedies to deal with problems in the general sphere of competitive practices. Therefore we have said that 'the courts will not interfere except where the remedy selected has no reasonable relation to the unlawful practices found to exist.' Id., 327 U.S. at page 613, 66 S.Ct. at page 760.

In the light of these principles, we examine the specific objections of Ruberoid to the order in this case. First, it is argued that the order went too far in prohibiting all price differentials between competing purchasers, although only differentials of 5% Or more were found. But the Commission found that very small differences in price were material factors in competition among Ruberoid's customers, and Ruberoid offered no evidence to the contrary. In this state of the record the Commission was not required to limit its prohibition to the specific differential shown to have been adopted in past violations of the statute. In the absence of any indication that a lesser discrimination might not affect competition there was no need to afford an escape clause through which the seller might frustrate the whole purpose of the proceedings and the order by limiting future discrimination to something less than 5%.

The roofing material customers of Ruberoid may be classified as wholesalers, retailers, and roofing contractors or applicators. The discriminations found by the Commission were in sales to retailers and applicators. The Commission held that there was insufficient evidence in the record to establish discrimination among wholesalers, as such. Ruberoid contends that the order should have been similarly limited to sales to retailers and applicators. But there was ample evidence that Ruberoid's classification of its customers did not follow real functional differences. Thus some purchasers which Ruberoid designated as 'wholesalers' and to which Ruberoid allowed extra discounts in fact competed with other purchasers as applicators. And the Commission found that some purchasers operated as both wholesalers and applicators. So finding, the Commissioner disregarded these ambiguous labels, which might be used to cloak discriminatory discounts to favored customers, and stated its order in terms of 'purchasers who in fact compete.' Thus stated, we think the order is understandable, reasonably related to the facts shown by the evidence, and within the broad discretion which the Commission possesses in determining remedies.

Finally, Ruberoid complains that the order enjoins lawful acts by failing to except from its prohibitions differentials which merely make allowance for differences in cost of manufacture, sale or delivery, or which are mede in good faith to meet an equally low price of a competitor. Differences in price satisfying either of these tests are permitted by the terms of the Act. It is argued that the Commission has radically broadened its prohibitory powers through failure to include these provisos in the order. We do not think so because we think the provisos are necessarily implicit in every order issued under the authority of the Act, just as if the order set them out in extenso. Although previous Commission orders have included these provisos, they gained no force by that inclusion. Their absence cannot preclude the seller from differentiating in price in a new competitive situation involving different circumstances where it can justify the discrimination in accordance with the statutory provisos. Nor is the seller required to seek modification of the order each time, for example, that a competitor's price reduction requires it either to lower its price in good faith to meet the lower competing price or to lose a fleeting sales opportunity. On the other hand, the implied inclusion of the provisos in the order does not shift from the seller the burden of proof of justification. Neither does recognition of the implicit availability of these defenses allow the seller to relitigate issues already settled by prior proceedings before the Commission which resulted in an order that was affirmed in the courts. If questions of justification, claimed upon the basis of facts relating to costs or meeting competition, have once been finally decided against the seller, it cannot again interpose the same defense upon substantially similar facts when the Commission seeks to show that its order has been violated. The same result follows where the evidence supporting the defense, although not produced in the previous proceedings, was then available to the seller. In short the seller, in contesting enforcement or contempt proceedings, may plead only those facts constituting statutory justification which it has not had a previous opportunity to present.

The sole question presented by the Commission's petition concerns the lower court's holding, with one dissent, that the Commission could not 'obtain a decree directing enforcement of an order issued under the Clayton Act in the absence of showing that a violation of the order has occurred or is imminent'. The pertinent parts of the Act provide:

'If such person (subject to the order) fails or neglects to     obey such order of the commission *  *  * while the same is in      effect, the commission *  *  * may apply to the circuit court      of appeals of the United States *  *  * for the enforcement of      its order *  *  *. (T)he court * *  * shall have power to make      and enter *  *  * a decree affirming, modifying, or setting      aside the order of the commission *  *  *.

'Any party required by such order of the commission * *  * to      cease and desist from a violation charged may obtain a review      of such order in said circuit court of appeals by filing in      the court a written petition praying that the order of the      commission *  *  * be set aside *  *  *. (T)he court shall have     the same jurisdiction to affirm, set aside, or modify the      order of the commission *  *  * as in the case of an application by the commission *  *  * for the enforcement of its order      *  *  *.

'The jurisdiction of the circuit court of appeals of the     United States to enforce, set aside, or modify orders of the      commission *  *  * shall be exclusive.'

The Commission argues, first, that the provision authorizing it to apply for enforcement 'if such person fails or neglects to obey such order' is merely 'a Congressional directive to the Commission as to the circumstances under which it may go into court to seek enforcement,' which does not amount to a prerequisite to the court's granting of enforcement. We cannot subscribe to this argument, which disregards the unequivocal language of the statute and its consistent interpretation over the thirty-eight-year period of its existence. Congress, in 1938, amended similar language in the Federal Trade Commission Act, so that the reviewing court is now plainly required, upon affirmance, to enforce an order based upon violation of that Act. The Commission has repeatedly sought similar amendment of the Clayton Act provisions involved in this case. We will not now achieve the same result by reinterpretation in the face of Congress' failure to pass the bills thus brought before it. Effective enforcement of the Clayton Act by the Commission may be handicapped by the present provisions, but that is a question of policy for Congress.

Alternatively, the Commission argues that, even though disobedience of the order is a condition to enforcement upon the application of the Commission, there is no such condition where the order comes before the court upon petition for review by the affected party. This argument begins with the difference in language between the statutory paragraphs providing for review at the instance of the respective parties, but consideration of the section as a whole convinces us that the most that can be said for the argument is that the section is ambiguous. We think the statutory prerequisite to enforcement applies when the Commission seeks enforcement by cross-petition after review has been set in motion by the party subject to the order as well as when the Commission makes the original application. There is no reason why one who has complied with the order, but who seeks to have it reviewed and modified or set aside, should be placed in a worse position than one who does not exercise that right. We doubt that Congress intended its requirement for enforcement to depend entirely upon which party goes to court first.

Affirmed.