Standard Oil Co. of New York v. Federal Trade Commission

273 F. 478, 17 A.L.R. 389, 1921 U.S. App. LEXIS 1494

• Court: Court of Appeals for the Second Circuit
• Decided: May 11, 1921
• Docket: Nos. 111, 204
• Status: Published

Opinion

HOUGH, Circuit Judge

(after stating the facts as above). As the matter has not been argued, we have not referred to and will not dwell upon the pleadings put forth by the Commission; and assume, but not hold, that they comply with the rules suggested, if not prescribed, by Federal Trade Commission v. Gratz, 253 U. S. 427, 40 Sup. Ct. 572, 64 L. Ed. 993. In the language of the statute, we think the “findings of the Commission as to the facts are supported by testimony,” so far as they go. But there are other facts thoroughly proven, admitted at bar, and aiding discussion.

Every pumping station is an advertisement; each bears the name of the oil producer whose gasoline is supplied therefrom, if the retailer honestly observes his bargain. The system is a great convenience to the public; it has increased enormously the ease with which motor drivers may obtain “gas” even in remote and thinly settled districts. It is the only method known or suggested, of keeping before the consuming public the oil manufacturers’ trade-mark, and it has largely succeeded the system of distributing oil in barrels, which barrels bore the maker’s trade-mark and were practically loaned to the vendees, to be returned empty.

The choice between owning and leasing pumps depends upon the extent of the retailer’s business and the amount of his capital. The majority of small dealers have small capital, and therefore lease rather than buy. It is perfectly possible to buy from the same manufacturers who supply to the oil dealers the pumps leased by the latter. • The’competition between the various oil-selling persons and corporations is and has been very keen; each is desirous of extending the sale of his own brand, and the system of leased pumps, each bearing the trade-mark or trade-name of its lessor, is regarded by many, though not all, wholesalers as a profitable form of advertisement. There is no agreement, combination, or arrangement between the various wholesale lessors as to parceling out territory or abstaining from supplying pumps to a community already supplied by another wholesaler.

By these facts three questions of law are presented:

(1) Is the system outlined an “unfair method of competition in commerce,” the prevention of which would be “to the interest of the public.” Section 5, Trade Commission Act, 38 Stat. 719 (Comp. St. §■ 8836e).

(2) Is the above-stated method of leasing unlawful under section 3 of the Clayton Act (Comp. St. § 8835c), whereof the language here important is noted in the margin.¹ ■

(3) Does the business here involved amount to interstate commerce ?

[1,2] Whatever may be the exact meaning or extreme scope of the still novel phrase “unfair method of competition,” it is settled that it is for the courts and not the Commission to determine as matter of law' what is and what is not included in the phrase. Federal, etc., Commission v. Gratz, supra. And this rule is not avoided by stating as a finding of fact what is a mere conclusion of law. New Jersey, etc., Co. v. Trade Commission (C. C. A.) 264 Fed. 509.

The Commission justifies the order complained of by looking to the future rather than at the present — a position summed up in argument as follows:

“The loaning practice restrains compelition and tends toward monopoly, for the reason that it destroys the freedom of solicitation for business which the oil distributor would otherwise have. The gratuity which the practice confers removes the opportunity for competition, because it ties tens of thousands of individual retailers to the oil-distributing corporations which engage them.”

The Commission, looking forward, sees in the present highly competitive business of the various wholesalers a seed which will in time produce the fruit condemned in Patterson v. United States, 222 Fed. 599, 138 C. C. A. 123, where the court held:

“For one competitor to exclude all or substantially all other competitors from such opportunity — i. e., drive them from the field of freely offering their goods, so as to have that field to himself — is to monopolize, according to the legal and accurate sense of the word.”

[3] Applied to the present case, this means and is admitted to mean that since most retailers do a small business they need only one pumping device; wherefore the first wholesaler who furnishes a free pump has monopolized the business of that retailer and so unfairly competed with all other wholesale dealers.

We think this reasoning confounds commerce with convenience, besides introducing into trade an element of unfairness, and indeed dishonesty. There is no contract, agreement, or understanding by which any retailer is prevented from selling any brand of. oil, and he can own or lease as many pumps as he likes or can u'se. It is unfair and dishonest to give out from a pump bearing one brand another maker’s oil, and all that secures any one retailer’s trade for any one wholesaler is the amount of business the retailer can gather from the community.

■ It is possible, when any system of distributing an article of' prime necessity and enormous consumption is well established, that temptation arises for competing distributors to enter into treaties regulating prices, classifying customers, or dividing the area supplied into spheres of influence — one sphere for each distributor;

[4] It may be admitted that one function of the Trade Commission is to discern and suppress such practices in their beginning; but a thing exists from its beginning, and it is not a conclusion of law from any facts here found that a system which at present is keenly competitive, extremely advantageous to the public, and, in the opinion of a majority of the competent witnesses, economical, is at present unfair to any one or unfair because tending to monopoly. A tendency is an inference from proven facts, and an inference from the facts as found by the Commission is a question of law for the court. As matter 6f law there is at present no violation of the Trade Commission statute; therefore the first of respondent’s contentions cannot be sustained.

[5] For substantially the same reason the leases of these petitioners do not violate section 3 of the Clayton Act; i. e., the effect of their leases is not “to substantially lessen competition or tend to create a monopoly in any line of commerce.” We note Coco-Cola Co. v. Butler (D. C.) 229 Fed. 224, as containing a valuable commentary on this section of the Clayton Act, and the facts>of that case are suggestive of the advantages to the public in being reasonably able to rely upon getting the “gas” he pays for out of any trade-marked pump.

It is, of course, trae that if the trade or business under consideration is not interstate commerce the Commission had no jurisdiction. We express no opinion on this point; but because, as matter of law, no unfair method of competition has been shown, and no violation of the Clayton Act, the orders complained of are reversed.

1 “It shall be unlawful for any person engaged in commerce, in tbo course of such commerce, to lease * * * machinery * * * or other commodities * * * for use * * * on the condition * * * that the lessee * * * shall not use or deal in the goods * * * of a competitor * * * of the lessor, * * * where the effect of such lease * * * may be to substantially lessen competition or tend to create a monopoly in any lino of commerce.” 38 Stat. 731.