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UNITED STATES v. ST. REGIS PAPER CO.

March 15, 1960

UNITED STATES of America, Plaintiff,
v.
ST. REGIS PAPER COMPANY, Defendant



The opinion of the court was delivered by: RYAN

This suit arises under Sections 9 and 10 of the Federal Trade Commission Act. 15 U.S.C.A. §§ 49 and 50. Section 9 vests the District Court with jurisdiction to issue orders in the nature of mandamus commanding any person or corporation to comply with any order of the Commission made in pursuance of the Act. Section 10 gives any District Court of the United States, in which a corporation has its principal office or is doing business, jurisdiction of suits by the United States for the recovery of forfeitures, if the corporation shall fail to file any special report required by the Act within the time fixed for filing same and such failure shall continue for 30 days after notice of such default.

Defendant, St. Regis Paper Company, a New York corporation with its principal place of business in this District, was made the subject of a Federal Trade Commission resolution, dated January 6, 1959, which directed an investigation of the organization, business, conduct, practices and management of the defendant for the purpose of uncovering possible violations of Section 7 of the Clayton Act, as amended (15 U.S.C.A. § 18). Pursuant to this resolution and Section 6(a) and (b) of the F.T.C. Act (15 U.S.C.A. § 46(a) and (b)), the Commission issued orders to each of six corporations, *fn1" including defendant, requiring each to file a Special Report, containing specified data and documents, with the Commission, within 30 days after service of the order. The orders, with a copy of the January 6th resolution, were served according to statute. Since each of the other corporations served is wholly owned by defendant and since defendant was in possession of all the data and documents required, defendant was responsible for complying with the notice to file for all corporations served.

Defendant moved, before the Commission, to vacate the orders and for other appropriate relief. After first denying this motion, the Commission, on March 5, 1959, permitted defendant to file a brief in opposition to their issuance. After consideration of the matter, the Commission denied the motion on May 6, 1959, and later denied defendant's motion for reconsideration.

 On June 4, 1959, the Commission adopted a second resolution in which it asserted that it was 'in the public interest to broaden its investigation' and on June 8, 1959, the Commission issued orders to defendant, Cupples-Hesse Corp. and Northwest Door Co. requiring the filing of Special Reports. Since the latter two corporations were wholly owned by defendant, it was again responsible for the filing of all reports. Some of the information ordered to be furnished has been filed but the Commission alleges that this was not sufficient and St. Regis refused to comply further.

 Under the compulsion of the last three orders and under subpoena issued at an earlier date and not relevant here, defendant has supplied a large volume of data and documents. The Commission has supplied the Court with a stipulation of deficiency which lists the items required by the order which, it is alleged, have not been supplied. Documentary evidence and stipulated facts were received by the Court at a trial without a jury, which was concluded on January 26, 1960.

 In sum then, we are asked to enforce nine orders requiring Special Reports and to levy forfeitures of $ 100 a day, under Section 10 of the F.T.C. Act, on defendant corporation for the delay in complying with each of the two orders addressed to it personally. The forfeiture on the January 9, 1959 order is claimed to have run from July 20, 1959 and the forfeiture on the June 8, 1959 order is claimed to have run from August 23, 1959.

 The purpose of the Commission's orders was to determine whether the defendant, by its acquisitions of the stock or assets of other corporations, had violated Section 7 of the Clayton Act which prohibits the acquiring, in whole or in part, of the stock or assets of 'one or more corporations engaged in commerce * * * where * * * the effect of such acquisition * * * may be substantially to lessen competition, or to tend to create a monopoly.'

 This is the first time a Section 6(b) order has ever been used by the Commission prior to the filing of a complaint. It is said that the use of the process of 6(b) has never before been necessary because of voluntary disclosures. Since 1950 over 400 alleged violations of Section 7 have been investigated and because of the full or substantial compliance with the requests of the requests of the Commission on a voluntary basis, there has never been a need for the use of either an order under Section 6(b) or a subpoena under Section 9 of the F.T.C. Act. In the continuing investigation of defendant, however, the Commission has felt it necessary to use both types of process.

 Defendant's principal contention is that the Commission has acted beyond its statutory power in the issuance of a 6(b) order in the circumstances of this case. It is claimed that 1) 6(b) was never intended to be used in the investigation of an alleged antitrust violation and 2) that, in any event, the special report was never meant to be used in a pre-complaint investigation and was never meant to elicit the detailed information required by the orders in suit. We cannot agree with either of defendant's contentions.

 Section 6(b) is written in the broadest possible terms. We can find no words of limitation whatsoever and hold that 6(b) is not limited and can be used in antitrust investigations. The Commission concededly has power and certain duties in the antitrust field, including the investigation of alleged Section 7 violations, and we find nothing that would deny the use of the power conferred by Section 6(b) for any purpose within the scope of those duties. In fact, the Supreme Court has '(found) a good deal which would warrant our concluding that 6 was framed with the pre-existing antitrust laws in mind.' United States v. Morton Salt Co., 1950, 338 U.S. 632, 649, 70 S. Ct. 357, 367, 94 L. Ed. 401.

 In its argument concerning the intention of the enacting Congress and the kind of reports contemplated, defendant relies heavily on the legislative history of the Federal Trade Commission Act of 1914. Although making a very plausible and well documented argument, defendant overlooks the fact that the United States Supreme Court has already reviewed this legislative history and rejected almost the same argument.

 In United States v. Morton Salt Co., supra, the Commission used a 6(b) order to require a compliance report under a cease and desist order. Morton Salt Co. argued that the legislative history of Section 6(b) showed that it was only intended to be used in requiring statistical and financial reports as had earlier been filed with the Bureau of Corporations. The Supreme Court rejected this interpretation. Defendant in the present case uses the same history to argue the same point although adding, in deference to the Morton Salt decision, compliance reports to the area of proper subject matter under 6(b). However, the words of the Supreme Court are much broader. It was held that 6(b) could be used in furtherance of any duty which the Act empowered the Commission to perform. The Act is 'to be read as an integral whole' and 6(b) is just another broad grant of investigative power to be used as an alternative to the subpoena power of Section 9. We are bound by this liberal interpretation found in Morton Salt and cannot limit its holding to the narrow confines urged by defendant.

 Simply because the Commission has not seen fit to use the 6(b) order previously in no way destroys or inhibits its power to do so for powers, if granted, are not lost by being allowed to lie dormant and the Supreme Court, in Morton Salt, said that this power granted to the Federal Trade Commission has not been forfeited by non-use.

 Defendant also argues that the Federal Trade Commission Act contains no provision for the judicial review of 6(b) orders and that defendant's only course is to incur the forfeitures and wait for the Commission to proceed in the District Court for the collection of the money. It is alleged that this violates due process. This argument has no merit. Mr. Justice Jackson suggested in Morton Salt, although the question was not before him for decision, that either the Declaratory Judgments Act, 28 U.S.C.A. § 2201, 2202, or the Administrative Procedure Act, 5 U.S.C.A. 1001 et seq., might be used by a defendant to initiate judicial review of a 6(b) order. We feel that the Administrative Procedure Act (5 U.S.C.A. § 1009) supplied adequate review for an order of the type before us.

 We therefore hold that the orders validly issued and proceed to a study of the subject matter of the orders themselves.

 Defendant argues that the Commission has no right to copies of census reports and customers' lists since these documents are privileged. We find no basis in law for sustaining this position. In fact, as to census reports, a summary glance at the cases cited by defendant reveals they do not hold or even remotely allude to the position St. Regis advocates. We believe that the analogy to income tax returns (original returns are privileged, copies in the hands of the taxpayers are not) used in United States v. Continental Can Company (Civil ...


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