of proof of competitive injury when it was shown that there was a causal connection between the price discriminations and a substantial loss of sales by competitors. There has never been a case of territorial price discrimination in which the crux of the matter was not diversion of sales. Every order entered as a result of territorial price discrimination has been entered solely for the purpose of preventing unlawful diversion of sales. May I also invite your attention to those findings of the hearing examiner: "... Undercutting, or selling below cost, furnish a clearer picture of injury and predatory intent, but no case holds it to be a sine qua non of injury, actual or potential, or tendency to monopoly. Similarly, no case holds complete destruction of competitor necessary before injury is found-neither death nor mayhem are essential. The facts here show a distinct probability of the one, if not the other, if A.B.'s price raid had continued longer, or indefinitely; and we are here concerned not only with actual injury but with potential injury as well, and there is nothing in this record to show that what A.B. did in the St. Louis market, could not or would not be done by it, in the future, in other markets as well." (App. 38) It is also significant that in the recital of the facts in this matter in our previous appearance before the Supreme Court that the decision of the hearing examiner was exclusively relied upon. This represented nothing more than realistic approach to the proceeding. The Commission made no separate and individual findings of its own but adopted in toto, as its own, the findings of the Hearing Examiner. We do not feel that the ill effects of the present decision can be effectively overcome by subsequent proceedings against another seller or by reopening the present case. The Court has said, "the inferences on which the findings of the Federal Trade Commission were based are so overborne by evidence calling for contrary inferences. . . that the findings of the Commission cannot, on the consideration of the whole record, be deemed to be supported by substantial evidence." If the Court is unable to accept the Commission's present findings on the basis of the instant record, surely any enlargement or attempt by the Commission to improve upon its findings would be viewed at best with jaundiced eyes. While it is a fact that the market structure has changed completely since the local price cuts of Anheuser-Busch and that this change undoubtedly resulted in large part from the local price cuts, it would be extremely difficult to establish that as a fact. Both Griesedieck Western and Griesedieck Brothers have disappeared from this market. Griesedieck Western sold out to the Carling Brewing Company. Griesedieck Brothers has recently been merged into Falstaff Brewing Company. One would suppose that neither of the surviving companies would be particularly anxious to stir up old coals and thereby offend Mr. Busch, the nation's leading seller. In bringing any new territorial price discrimination action the Commission would immediately be confronted with the instant decision and the Court's holding with relation to the quantum of proof of competitive injury. The action, of necessity, would undoubtedly involve the sales of a seller of national standing and in all probability nationwide sales. In this event, since the Commission can in no way dictate the circuit in which a respondent seeks review, we would again be faced with a review by the same Court of Appeals, and unless that Court's interpretation of the Clayton Act drastically changes, we would again be faced with an adverse decision. Quite frankly, I do not relish being in the position of justifying expenditure of our already limited funds under such circumstances especially when it is our view that it is extremely unlikely that we will ever again be able to demonstrate such an immediate and dramatic diversion in sales. The decision to seek further review in this case should not be made on the basic of any criticism of the Commission's order. The Court of Appeals did not consider the appropriateness of the order in reaching the decision that the Commission had failed to prove a violation of the statute. The Commission has long recognized the inherent difficulties of drafting effective orders in cases of this nature. We feel that the appropriateness of the order should not influence the determination of the existence of a violation of the statute. It may be that "once the Government has successfully borne the considerable burden of establishing a violation of law, all doubts as to the remedy [will] be resolved in its favor," United States v. E. I. du Pont de Nemours & Co., 29 U.S.L. Woek 4434, 4439 (U.S. May 22, 1961). Sincerely yours, PAUL RAND DIXON, Chairman. SWANEE PAPER CORP. 2. Swanee Paper Corp. v. F.T.C., 291 F.2d 833 (2nd Cir. 1961) (a) Court Action: Order enforced as modified. (b) Commission Action: 1. On October 4, 1961 directed General Counsel to request Solicitor General to petition for certiorari. Vote: 3-0, Mr. Kern was recorded as in favor of this action. 2. On December 21, 1961 directed that Solicitor General be again requested to file a petition for certiorari. Vote: 5–0. 3. On March 13, 1962 modified order to cease and desist referred to Secretary for issuance and service upon the parties. Vote: 5-0. OCTOBER 5, 1961. (2) Swanee Paper Corp. v. Federal Trade Commission, 2d Cir., No. 26311 (Docket 6927-Swanee Paper Corporation) Memorandum of October 2, 1961, from the General Counsel transmitting draft of letter to the Solicitor General requesting that he petition the Supreme Court for a writ of certiorari to review the opinion of the United States Court of Appeals for the Second Circuit of June 22, 1961, modifying the order in Docket 6927. On October 4, 1961, pursuant to the recommendation of Mr. Dixon in memorandum of October 4, 1961, Messrs. Dixon, MacIntyre and Elman directed that the Solicitor General be requested to petition the Supreme Court for a writ of certiorari to review the opinion, and approved and ordered forwarded, after signature by the Chairman, letter to the Solicitor General making such request and transmitting pertinent material. Mr. Kern was recorded as in favor of the foregoing action. DECEMBER 21, 1961. (2) Swanee Paper Corp. v. Federal Trade Commission 2d Cir., No. 26311 (Docket 6927-Swanee Paper Corporation) Letter of December 19, 1961, from Archibald Cox, Solicitor General, with reference to the Commission's request, pursuant to the action of October 5, 1961, that a petition for certiorari be filed in the above matter. Mr. Cox concluded that no petition should be filed. The General Counsel, Assistant General Counsel Truly, and Attorney Emerson Elkins of the Appellate Division were called in and consulted. Mr. Elkins circulated to the several Commissioners copies of arguments against the Solicitor General's conclusion not to seek certiorari. It was directed that the Solicitor General be again requested to petition the Supreme Court for a writ of certiorari to review the opinion of the United States Court of Appeals for the Second Circuit of June 22, 1961, modifying the order in Docket 6927, and the staff was instructed to prepare an appropriate letter and to circulate copies of the letter to the several Commissioners. MARCH 13, 1962. (5) Swanee Paper Corporation v. Federal Trade Commission C.A. 2, No. 26311 (Docket 6927-Swanee Paper Corporation) Mr. Dixon reported his consideration of memorandum of March 5, 1962, from the General Counsel advising that on August 3, 1961, the United States Court of Appeals for the Second Circuit entered its final decree modifying, and as modified, affirming and enforcing the Commission's order in Docket 6927, and that on February 19, 1962, the Supreme Court denied Swanee's petition for certiorari. The General Counsel recommended that the submitted modified order be issued and served. After consideration, the modified order to cease and desist submitted by the General Counsel was referred to the Secretary for issuance and service upon the parties. ОСТОВЕВ 4, 1961. Re Swanee Paper Corporation v. Federal Trade Commission, 2d Cir. No. 26,311— FTC Docket 6927. Hon. ARCHIBALD COX, Department of Justice, Washington, D.C. DEAR MR. SOLICITOR GENERAL: On June 22, 1961, the United States Court of Appeals for the Second Circuit handed down its opinion in this case. In that opinion it upheld the Commission's determination that petitioner had violated Section 2(d) of the Clayton Act, but ruled that the Commission's order to cease and desist must be modified, and noted that its Rule 13 (1) required the Commission to submit a proposed decree modifying that order. No formal judgment was entered upon the filing of the opinion. Thereafter, on August 3, 1961, after submission by the Commission and petitioner of proposed decrees, the court entered a final decree modifying the Commission's order to cease and desist. The purpose of this letter is to request the filing of a petition for certiorari to review that decree. The case arose before this Commission, which on November 6, 1957, issued and served its complaint upon the petitioner, Swanee Paper Corporation, charging it with a series of violations, over a long period, of subsection (d) of Section 2 of the Clayton Act, as amended, 49 Stat. 1527; 15 U.S.C. 13 (d). The complaint charged and the Commission found that petitioner's violations consisted of paying substantial sums of money for the benefit of one of its customers, the Grand Union Company, as compensation or consideration for advertising petitioner's paper products on an animated "spectacular" sign leased and controlled by Grand Union, and for in-store promotion by Grand Union of petitioner's products, without making such payments or their benefits available on proportionally equal terms to petitioner's other customers competing with Grand Union in the distribution and sale of those products. In the proceeding before the Commission petitioner contested the Commission's view that the payments were illegal, and contended that even if they were found to violate the law no order to cease and desist should be entered because they had been stopped before the Commission's complaint was issued. The examiner, in his initial decision, held against petitioner on both issues and issued an order commanding petitioner to cease and desist from— Paying or contracting to pay to or for the benefit of any customer anything of value as compensation or in consideration for any advertising, promotional displays or other services or facilities furnished by or through such customer in connection with the handling, processing, sale or offering for sale of respondent's products unless such payment or consideration is made available on proportionally equal terms to all other customers competing in the distribution of such products. On its appeal of that decision to the Commission petitioner raised only the same issues; it did not contend that the order was in any way improper in form or scope or that the Commission should modify it in any way. The Commission rejected petitioner's appeal and adopted as its own the examiner's findings and decision, including the order to cease and desist. Thereafter, petitioner filed in the court of appeals a timely petition for review of the Commission's order (Apdx. 49a-52a). Therein petitioner for the first time contended that the terms of the Commission's order were erroneous, asserting in paragraph 6 C that "the order of the Commisson is too broad because it is couched in the general language of said statute and not in conformance of said alleged specific violations" (Apdx. 52a). The petitioner, however, did not state in what way the order was considered to be too broad, nor did it suggest that the order should be modified in any specific manner; its contention was that because of excessive breadth and for other reasons the order was "erroneous and unlawful and should be set aside" (par. 8; Apdx. 52a), and that the Commission's findings did not, even if true, "justify or warrant the issuance of said order or any order" (par. 9; Apdx. 52.). Nor did the relief prayed include modification; petitioner asked only that the court "enter a decree (a) setting aside the order * * *, (b) that the Commission's complaint be dismissed and (c) that such other and further orders and decrees be made as to the Court may seem just and proper” (Apdx. 52a). However, in its brief filed in the review proceeding, in addition to repeating its contentions that it had not violated the statute (pp. 27-38) and that because its use of the sign had stopped before the complaint was issued the order should be entirely set aside (pp. 22-26), petitioner introduced for the first time the contention that the Commission's order "should be modified and limited to the specific practice held to be a statutory violation" (pp. 8-22). But although petitioner argued at length the general proposition that the order should be modified and limited, it did not explain the nature of the modification or limitation it desired except in the most general terms, i.e., "the specific practice held to be a statutory violation" (p. 8), "the business practice at issue herein" and "the facts at issue" (p. 9), the facts which are the subject of the complaint herein" (p. 11), "the particular offense or those like or related thereto" (p. 14), "the facts at issue” (p. 22), and "the specific type of practice alleged to be a violation in the complaint herein" (p. 38). 66 In its answering brief the Commission pointed out that petitioner had failed to raise any issue before the Commission as to the terms of the order, despite ample opportunity to do so. The Commission argued that the court therefore should not entertain the issue (pp. 38-40), but that in any event the order was entirely proper and should be affirmed (pp. 40-42). In its reply brief petitioner was no more specific in its criticism of the order or in its request for modification, contending only that the order should be limited to "the specific practice which is the subject of the complaint as well as related practices 'in a slightly altered garb'" (p. 7), to "the specific practice involved herein" (p. 11), or to "the specific type of practice alleged to be a violation in the complaint herein" (p. 12). This was still the situation when the case was submitted, for no explanation of petitioner's desires was given in oral argument, although the lack of such explanation was urged by Commission counsel as resulting in the presentation of a merely abstract question and as preventing evaluation of the appropriateness of any particular change in the order. The court held that the facts set out in the Commission's findings were supported by the evidence, and that petitioner had violated the Act. Strangely the court stated that petitioner's four and one-half year series of discriminatory monthly payments under two slightly different arrangements constituted only a "single violation," and, despite recognition of facts showing petitioner's awareness of the illegality of its actions and its purpose of evasion of the law and concealment of its violations (pp. 2272-73), said that the record did not show "flagrant or extensive violations" (p. 2277). The court rejected sub silentio petitioner's contention that its cessation of the violations before the complaint had been issued required the order to be set aside entirely, but held that the order "should be limited to the particular practice found to violate the statute." However, that ruling was as abstract as petitioner's argument had been, for it did not give any indication of what it considered the "particular practice" to be, or explain what practices, if any, it believed the existing order improperly prohibited, or prescribe any particular type of modification or limitation. The court did not remand the case to the Commission for determination of the issues which would be presented in drafting a new administrative order conformable to the court's imprecise pronouncement. Instead it stated that it would enter an order "in conformity with this opinion," pursuant to its Rule 13(1), which it stated required the Commission to submit first a proposed decree "in conformity with the opinion" and allowed petitioner, if it disagreed, thereafter to submit its proposed decree. Being informed only in the most general way as to the court's desires, and having no information as to the nature of the limitation which petitioner wanted and apparently had won, the Commission submitted a proposed decree containing an order to cease and desist which would have prohibited discriminatory payments for advertising or promotional display services only, omitting the original order's additional prohibition against such payments for "other services or facilities" not involved in the case. That order would have been applicable whether such payments were made directly ("to") or indirectly ("for the benefit of") 36-138-70-vol. 3- -25 the customer. The Commission submitted its proposed decree in a memorandum to the court, in order to place in the record its objections to the court's transfer of the initial litigation of the terms and coverage of the administrative order from the administrative proceeding to the summary decree-settlement stage of the review. Petitioner thereafter submitted a proposed decree containing an order which also would have prohibited both direct or indirect discriminatory payments ("whether paid directly to Swanee's customer or to another person") but would have been limited to occasions involving the rental of an advertising sign leased and controlled by the customer. Thus as a result of the court's construction of its Rule 13(1) the Commission first learned what were petitioner's objections to the existing order and its alternative proposals only after all opportunity to comment thereon had passed, for that rule provides that after receiving the petitioner's proposed decree "the court will thereupon settle and enter the decree without further hearing or argument." This the court did. But the court did not adopt either proposed order; it narrowed the order beyond the limitation which petitioner had requested. Its order prohibits discriminatory payments only when they are made to "any third person ** to provide benefits" for a customer of petitioner, leaving petitioner completely free to make such discriminatory payments directly to its customers. This is an entirely new order, omitting a type of restraint which both petitioner and the Commission had explicitly asked the court to include, and limiting the order's coverage in a way not sought by either, never even mentioned in this case, and not suggested by anything in any reported decision cited to or by the court. By what may not be a coincidence, however, the order imposed by the court is of the same type as that sought by The Grand Union Company in a different review proceeding pending in the same circuit (The Grand Union Company v. Federal Trade Commission, 2d Cir. No. 26553), in which briefs have been filed and argument is to be heard on October 10, 1961. The petitioner in that wholly separate case is the customer to which Swanee had made its series of illegal payments, and which the Commission in a separate administrative proceeding had held to have violated Section 5 of the Federal Trade Commission Act by inducing and receving the benefit of the discriminatory payments from Swanee and other suppliers. In that case the Commission's order prohibits Grand Union's future inducement and receipt of discriminatory payments either to it or to others for its benefit, and Grand Union is contending that the order should be so modified as to prohibit only its inducement and receipt of the benefit of discriminatory payments to third parties, and to eliminate the prohibition of its inducement and receipt of discriminatory payments directly from its customers. By thus modifying the Commission's order so that it will include a loophole which neither the petitioner nor the Commission had sought, the court not only has denied petitioner the relief it asked, it has used petitioner's prayer for relief as a pretext to carve Grand Union's proposed loophole into the order applicable to this one of Grand Union's suppliers, thereby leaving that supplier exposed, in a way which petitioner's proposed decree strongly suggests that it did not care to be exposed, to future demands from Grand Union or others that it commit for them further violations of the Act, either by open and direct payments or by some new subterfuge not dependent upon the participation of third parties. We believe that, even if the issue had been properly before the court and the Commission's order improper in scope and coverage, the court clearly erred in formulating the terms of an administrative order, in ruling that its summary decree-settlement procedure provided an appropriate method of determining th proper remedy to be applied by such an order, and in using the petitioner's prayer for one type of modification as the basis for imposing upon petitioner and the Commission a completely new substitute order which neither had sought. In doing these things the court stepped outside its function and authority as a reviewing court-the only role given it by the Congress-and improperly assumed one of the fundamental functions of the administrative agency. "The relation of remedy to policy is peculiarly a matter for administrative competence.” Carter Products v. Federal Trade Commission, 268 F.2d 461, 498 (9th Cir. 1959), cert. denied, 361 U.S. 884. "A reviewing court usurps the agency's function when it sets aside the administrative determination upon a ground not theretofore presented and deprives the Commission of an opportunity to consider the matter. make its ruling, and state the reason for its action." Unemployment Compensation Commission of Alaska v. Aragon, 329 U.S. 143, 155 (1946). Accord, Federal Power Commission v. Idaho Power Co., 344 U.S. 17, 20 (1952); Federal Communications Commission v. Pottsville Broadcasting Co., 309 U.S. 134, 141–4 |