California Rice Industry v. Federal Trade Commission

MATHEWS, Circuit Judge

(dissenting)-

This is a petition to review and set aside an order issued by the Federal Trade Commission. Petitioners are California Rice Industry (an unincorporated association), members of the association (hereafter called the millers),¹ members of the association’s marketing board² and members of its crop board.³ The order requires petitioners to “cease and desist, in connection with offering for sale, sale and distribution of rice and rice products in commerce as defined in. Section 4 of the Federal Trade Commission Act,⁴ from doing and performing by agreement, combination or conspiracy between or among any two or more of [petitioners], or with others, the following acts and things:

“1. Fixing and maintaining uniform prices.

“2. Compiling, publishing and distributing any joint or uniform list or compilation of prices.

“3. Adopting any joint or uniform price list or other device which fixes prices.

“4. Discussing through the medium of meetings of the [association] or its Marketing and Crop Boards, or in any similar manner, uniform prices, terms, discounts, agreements upon prices, by resolution or otherwise, or employing any similar device which fixes or tends to fix prices, or which is designed to equalize or make uniform the selling prices, terms, discounts or policies of [the] millers.

“5. Fixing or determining the quotas or percentages of the rice crop that the [millers] may mill or process which, thereby, unlawfully restricts or hinders the sale of rice or rice products in interstate commerce.”

The order was issued on March 26, 1938, in a proceeding under § S of the Federal Trade Commission Act.⁵ Hence, the Commission’s authority to issue the order must be found, if at all, in § 5, as it existed on that date.⁶ Section 5, as it then existed, declared that unfair methods of competition in commerce⁷ were unlawful. It empowered and directed the Commission to prevent persons, partnerships or corporations, except banks and common carriers subject to the Interstate Commerce Act, from using such methods of competition. To that end, it provided: “Whenever the commission shall have reason to believe that any such person, partnership, or corporation has been or is using any unfair method of competition in commerce, and if it shall appear to the commission that a proceeding by it in respect thereof would be to the interest of the public, it shall issue and serve upon such person, partnership, or corporation a complaint stating its charges in that respect, and containing a notice of a hearing upon a day and at a place therein fixed at least thirty days after the service of said complairit. The person, partnership, or corporation so complained of shall have the right to appear at the place and time so fixed and show cause why an order should not be entered by the commission requiring such person, partnership, or corporation to cease and desist from the violation of the law so charged in said complaint. * * * If upon such hearing the commission shall be of the opinion that the method of competition in question is prohibited by this Act [chapter], it shall make a report in writing in which it shall state its findings as to the facts and shall issue and cause to be served on such person, partnership, or corporation an order requiring such person, partnership, or corporation to cease and desist from using such method of competition. * * * ”

Then, as now, § 5 empowered this court, upon petition of either party, to review and affirm, modify or set aside any such order, and provided that, upon such review, the Commission’s findings as to the facts, if supported by testimony, should be conclusive.

Section 5, as it then existed, did not empower the Commission to prevent, or to require anyone to cease or desist from, any act or thing except the use of an unfair method of competition in commerce. The order here under review does not purport to be an order preventing, or requiring petitioners to cease or desist from using, any such method of competition. It says nothing about competition or methods of competition.

There is no finding, nor any evidence which would warrant a finding, that petitioners have any competitors, actual or potential. On the contrary, it appears from the findings that the millers — who, so far as shown, are the only petitioners engaged in any business — are engaged in the business of milling, in the State of California, a particular type of California-grown rice and in the business of selling and distributing such California-grown, California-milled rice in interstate commerce and in commerce between the State of California and the Territories of Hawaii and Puerto Rico, and that no one else is similarly engaged. Whether anyone else desires to, or could under any circumstances, engage in either of these businesses, the record does not show. Since, from the record, petitioners do not appear to have any competitors, actual or potential, they cannot, I think, be said to be using any unfair method of competition. Federal Trade Commission v. Raladam Co., 283 U.S. 643, 646-654, 51 S.Ct. 587, 75 L.Ed. 1324, 79 A.L.R. 1191.

The conclusion just stated is not inconsistent with Federal Trade Commission v. Pacific States Paper Trade Ass’n, 273 U.S. 52, 47 S.Ct. 255, 71 L.Ed. 534.⁸ The respondents in that case were wholesale paper dealers and trade associations of which they were members. The respondent dealers ‘ constituted a majority, but not all, of the wholesale paper dealers in the Pacific Coast States and had 75%, but not all, of the wholesale paper business in that region.⁹ In their business, the respondent dealers had actual as well as potential competitors. They had, as actual competitors, wholesale dealers who were not members of the association, paper manufacturers who sold direct to the retail trade, and paper brokers who negotiated such sales.¹⁰ In that competition, the respondents used methods which the Supreme Court held were unfair methods of competition.

If, in the Pacific States case, the respondents had had no competitors, actual or potential, the Supreme Court, undoubtedly, would have applied in that case the doctrine which, subsequently, it applied in the Raladam case — that one who has no competitors cannot be said to be using an unfair method of competition.

The order should be set aside.

1 Charles S. Morse, Allen A. Morse, Nelson B. Morse, Clarence G. Morse and Gertrude Morse, trading as Capital Rice Mills; Ellen S. Grosjean and Eileen Callaghan, trading as C. E. Grosjean Rice Milling Company; Growers Rice Milling Company, a corporation; Pacific Trading Company, a corporation; Phillips Milling Company, a corporation; Rice Growers Association of California, a corporation; Rosenberg Brothers & Company, a corporation; and William Crawford, trading as Woodland Rice Milling Company.

2 George W. Brewer, William Crawford, Harry M. Creech, Florence M. Douglas, Charles S. Morse, J. S. Ritterband, W. T. Welisch, I. Yamakawa and O. F. Zebal.

3 Hugh Baber, Leon Brink, Harry M. Creech, N. F. Dougherty, Ernest Grell, Lewis Manor, R. A. Renaud and A. E. Scarlett.

5 38 Stat. 719, 15 Ü.S.C.A. § 45.

6 With the amendment of June 23, 1938, 52 Stat. 1028, 15 U.S.C.A. § 45, we are not here concerned.

7 See footnote 4.

8 Reversing, in part, Pacific States Paper Trade Ass’n v. Federal Trade Commission, 9 Cir., 4 F.2d 457.

9 273 U.S. page 59, 47 S.Ct. 255.

10 4 F.2d page 460.