The opinion of the court was delivered by: LORD
Applicability of Sections 5(a) and 5(b) of the Clayton Act
The questions now before the court concern the effect of the Government's prior proceedings against these defendants
on the present private treble damage actions. More specifically, the questions are whether, pursuant to § 5(b) of the Clayton Act, 15 U.S.C. § 16(b),
the prior proceedings tolled the running of the four-year statute of limitation, § 4B of the Clayton Act, 15 U.S.C. § 15b, and whether, pursuant to § 5(a) of the Clayton Act, 15 U.S.C. § 16(a),
the judgment in one of those proceedings is entitled to prima facie effect in these actions.
The decision of these questions requires a familiarity with the facts of the prior proceedings. After initial studies of one defendant's pricing policies on a specific product and of the antibiotic industry in general,
the Federal Trade Commission issued a complaint on July 28, 1958, charging all five of the defendants with violations of Section 5 of the Federal Trade Commission Act, 15 U.S.C. § 45, in connection with the sale of antibiotics. The Commission's initial decision finding all five defendants to have violated § 5 was reversed on appeal. American Cyanamid Co. v. FTC, 363 F.2d 757 (6th Cir. 1966). On remand, the Commission found that two of the defendants, Pfizer and Cyanamid, had violated Section 5 and this result was affirmed by the Court of Appeals for the Sixth Circuit. Chas. Pfizer & Co. v. FTC, 401 F.2d 574 (6th Cir. 1968).
In the meantime an indictment was returned on August 17, 1961, against three of these defendants,
naming the other two as co-conspirators, charging violations of sections 1 and 2 of the Sherman Act, 15 U.S.C. §§ 1, 2. After trial to a jury, the verdict of guilty on all counts as to all three defendants was reversed on appeal, United States v. Chas. Pfizer, 426 F.2d 32 (2d Cir. 1970), modified, 437 F.2d 957 (2d Cir. 1970). Aff'd, United States v. Chas. Pfizer & Co., 404 U.S. 548, 92 S. Ct. 731, 30 L. Ed. 2d 721 (1971).
The defendants apparently concede that in all cases but the farm cases and the foreign cases,
which they contend are not based on the prior Government actions, the statute of limitations was tolled by the institution of the criminal action in 1961. They contend, however, that the earlier FTC proceeding could not and did not toll the statute in any case.
The defendants argue that since the prior FTC proceeding in this case was pursuant to § 5 of the FTC Act and since that section is not one of the "antitrust laws" as defined by § 1 of the Clayton Act, 15 U.S.C. § 12, Nashville Milk Co. v. Carnation Co., 355 U.S. 373, 375-76, 2 L. Ed. 2d 340, 78 S. Ct. 352 (1958), the proceeding does not satisfy the requirements of § 5(b).
Defendants' argument ignores the fact that § 5(b), unlike § 5(a), does not require that the prior action be one "under the antitrust laws," only that it be one "to prevent, restrain or punish violations of any of the antitrust laws . . . ." Influenced by this statutory language, two of the three courts facing this precise question have held the statute tolled by FTC proceedings under § 5 of the FTC Act where the purpose of those proceedings was "to prevent, restrain, or punish" violations of the antitrust laws. Rader v. Balfour, 440 F.2d 469 (7th Cir. 1971); Lippa's Inc. v. Lenox, Inc., 305 F. Supp. 182 (D. Vt. 1969); contra, Laitram Corp. v. Deepsouth Packing Co., 279 F. Supp. 883 (E.D. La. 1968).
It is well-established that § 5 of the FTC Act includes within its terms a wide variety of conduct, including conduct condemned by §§ 1 and 2 of the Sherman Act, 15 U.S.C. §§ 1, 2, Times-Picayune Pub. Co. v. United States, 345 U.S. 594, 97 L. Ed. 1277, 73 S. Ct. 872 (1953); FTC v. Cement Institute, 333 U.S. 683, 92 L. Ed. 1010, 68 S. Ct. 793 (1948). And it would be as arbitrary, in terms of the statutory policy of § 5(b), to hold that the tolling effect of a prior Government action turned on the statute under which it was initiated as it would be to hold that tolling depended upon the agency which initiated the action. Minnesota Mining & Mfg. Co. v. New Jersey Wood Finishing Co., 381 U.S. 311, 320-22, 14 L. Ed. 2d 405, 85 S. Ct. 1473 (1965). Although the Supreme Court was not faced with this problem in 3M since the FTC action was pursuant to § 7 of the Clayton Act, 15 U.S.C. § 18, its logic in holding that FTC proceedings, as well as action initiated by the Justice Department, could toll the statute supports the result reached here.
The determinative factor in each case, then, is the type of conduct against which the proceeding is aimed. As was stated in Rader v. Balfour, supra 440 F.2d at 473, at § 5 FTC Act proceeding "suspends the running of the statute of limitations if the proceeding is directed at alleged conduct which appears to involve an existing or incipient violation of the antitrust laws." And the character of the earlier proceeding must be resolved by an examination of the FTC complaint. Turning to the earlier complaint against these defendants, a reading of its allegations clearly establishes that the defendants were charged with conduct violative of the antitrust laws
and that the proceeding therefore met the requirements of § 5(b).
B. The Farm and Foreign Cases
As earlier stated, the defendants argue that the running of the statute was not tolled in the farm and foreign cases because they are not "based in whole or in part on any matter complained of" in the prior proceedings.
It is settled that the proper method for determining this question, at least initially, see Rader v. Balfour, supra at 473, is to compare the allegations of the Government and private complaints. Leh v. General Petroleum Corp., 382 U.S. 54, 65, 15 L. Ed. 2d 134, 86 S. Ct. 203 (1965). And for purposes of deciding this question, the court will consider the "Preliminary Pretrial Brief" submitted by the Plaintiff's National Steering Committee as a pleading amending the original complaints.
The defendants contend that the farm and foreign cases involve markets and, to some extent, products not included in the prior proceedings. For example, both the FTC complaint and the criminal indictment are said to speak only of broad spectrum antibiotics for domestic human use. And relying on later findings and opinions in the FTC action and the development of the evidence at the criminal trial, the defendants argue that the focus of those proceedings was on tetracycline, a product manufactured predominantly for human use. Defendants also note that the sale of these products in foreign commerce was investigated by a separate grand jury almost three years after the return of the initial indictment and that no action was ever taken by that grand jury.
Accepting the defendants' characterization of the FTC complaint and the criminal indictment, the essence of their argument is that the Government alleged antitrust violations only in the domestic human consumption market while the farm and foreign plaintiffs ...