Sterling Drug Inc. v. Federal Trade Commission

450 F.2d 698
CourtCourt of Appeals for the D.C. Circuit
DecidedSeptember 27, 1971
Docket24878
StatusPublished
Cited by162 cases

This text of 450 F.2d 698 (Sterling Drug Inc. v. Federal Trade Commission) is published on Counsel Stack Legal Research, covering Court of Appeals for the D.C. Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Sterling Drug Inc. v. Federal Trade Commission, 450 F.2d 698 (D.C. Cir. 1971).

Opinions

TAMM, Circuit Judge:

In a case now in progress before the Federal Trade Commission (hereinafter “the Commission”), Sterling Drug, Inc. (hereinafter “Sterling”) has been [701]*701charged with a violation of section 7 of the Clayton Act, 15 U.S.C. § 18 (1964), in connection with its acquisition of Lehn & Fink Products Corporation (hereinafter “Lehn & Fink”). In the course of the proceeding the Commission denied Sterling's request for certain documents which it felt were essential to the presentation of its case. On this appeal Sterling seeks reversal of a District Court decision upholding that order. It claims that the documents are subject to disclosure under the Freedom of Information Act, 5 U.S.C. § 552 (Supp. IV 1969), and, in the alternative, that it will be denied the full and fair hearing required by the Administrative Procedure Act, 5 U.S.C. § 551 et seq. (1964) if it is not granted access to the documents.

I. History of the Case

Sterling manufactures, distributes and sells drug products, household consumer products, and cosmetics throughout the United States. (J.A. 41). In 1966 Sterling acquired Lehn & Fink, whose primary products are “Lysol” brand disinfectants and deodorizers. Lehn & Fink also produces health and beauty aids, acne aids, and external antiseptics, among other products.

On April 12, 1968, the Commission served upon Sterling a complaint alleging that its acquisition of Lehn & Fink violated section 7 of the Clayton Act, 15 U.S.C. § 18 (1964). The complaint charged that the acquisition would have an adverse competitive effect in the markets for household liquids and aerosol disinfectants and deodorizers. There were no allegations of anticompetitive consequences in other fields.

Shortly after the complaint against Sterling was issued, another case involving a diversified drug company came before the Commission. This was the proposed acquisition of S.O.S. Company (hereinafter “S.O.S.”) by Miles Laboratories, Inc. (hereinafter “Miles”), a direct competitor of Sterling. General Foods Corporation (hereinafter “General Foods”) had originally acquired S.O.S., but it had been ordered to divest itself of the company in an earlier proceeding1 and on July 8, 1968, filed with the Commission an application for approval of Miles as the purchaser. Three days later the Commission approved the divestiture plan, stating that it had “entirely relied upon the information submitted by General Foods and its approval [was] conditioned upon this information being accurate and complete.” (J.A. 8.) On September 27, 1968, the Commission received notice that the merger had been consummated.

In the course of these proceedings Miles twice wrote the Commission requesting that certain documents which it and General Foods had submitted in support of the Miles-S.O.S. merger be considered confidential. Then, on October 25, 1968, General Foods, acting for itself and Miles, formally requested confidential treatment of these documents. The documents were resubmitted as part of the General Foods Final Compliance Report, and on November 29, 1968, the Commission notified General Foods that they would be classified confidential.

Believing, that the Miles-S.O.S. merger was very similar to its merger with Lehn & Fink and that the Commission’s approval of the former merger was therefore dispositive of the case against it, Sterling petitioned the Commission to close the file on the proposed complaint issued to it and requested a hearing on this petition. On December 2, 1968, the Commission notified Sterling that both its petition to close the file and its request for a hearing were denied.

The Commission eventually issued a formal complaint against Sterling on August 7, 1969. This complaint charged that the Sterling-Lehn & Fink merger would have anti-competitive effects in [702]*702three product lines in addition to the one specified in the proposed complaint — ■ household deodorizers. The three additional product lines were health and beauty aids, proprietary drugs and personal care products, and acne aids and external antiseptics.

In its answer to this complaint Sterling asserted two affirmative defenses. It first reiterated its contention that the Commission’s approval of the Miles-S.O.S. merger demonstrated that its acquisition of Lehn & Fink did not violate the Clayton Act. Second, it charged that the Commission’s issuance of the formal complaint was:

arbitrary and capricious and a denial of due process of law because the drastic revisions and change in theory from the proposed complaint constituted a deliberate attempt to avoid the consequences of the Miles-S.O.S. determination, and to accord diametrically opposing treatment to substantially identical transactions.

(Brief for Appellant at 9.)

To obtain information regarding these defenses, Sterling moved for production and disclosure of the following documents in the Commission’s files:

1. All documents submitted to the Commission by General Foods and others concerning the sale of S.O.S. to Miles which were not in the public record.
2. All documents prepared by the Commission or its employees giving findings or reasons for its approval of the Miles-S.O.S. merger or otherwise commenting on this merger.
3. All documents prepared by the Commission or its employees comparing the two mergers.
4. All documents prepared by the Commission or its employees “re-fleeting the Commission’s reasons for (a) limiting its original proposed complaint to the grounds asserted therein or (b) changing the grounds for challenging the subject acquisition from those asserted in its original proposed complaint to those contained in the present complaint.”

Sterling’s request for these documents was based on the Commission’s rules and the Freedom of Information Act.

The Hearing Examiner struck Sterling’s affirmative defenses and denied its request for production of documents on the ground that the defenses to which these documents related were no longer in the case. Although he noted that a claim had been made under the Freedom of Information Act, he did not rule upon this claim.

Sterling applied to the Commission for leave to appeal these actions on the part of the Examiner, but this application was denied. In its opinion the Commission said:

The hearing examiner is responsible for framing the issues to be tried and permitting discovery based upon those issues. At present, the examiner is in the process of defining and delineat-. ing the issues prior to discovery. By striking respondent’s “affirmative defenses” as separate issues, the examiner has not eliminated the substance of those alleged defenses from the hearing. Nothing in the examiner’s ruling has foreclosed respondent from arguing any point he wishes to raise concerning the Commission’s action in approving Miles Laboratories’ acquisition of S.O.S.

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Bluebook (online)
450 F.2d 698, Counsel Stack Legal Research, https://law.counselstack.com/opinion/sterling-drug-inc-v-federal-trade-commission-cadc-1971.