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Pepsico Inc. v. Federal Trade Commission

decided: November 20, 1972.


Friendly, Chief Judge. Medina, Circuit Judge (dissenting).

Author: Friendly

FRIENDLY, Chief Judge:

On July 15, 1971, the Federal Trade Commission (FTC) filed a complaint against PepsiCo, Inc. under § 5 of the Federal Trade Commission Act.*fn1 The essential allegation was that PepsiCo had "hindered . . . competition in the distribution and sale of pre-mix and post-mix syrups and soft drink products sold under its trade names by restricting its bottlers from selling outside of a designated geographical area." Annexed to the complaint was a form of order which the FTC proposed to issue if the evidence warranted. The order would prohibit PepsiCo, among other things, from entering into, continuing, enforcing, or renewing any contract that would limit the territory in the United States wherein bottlers might sell, or from refusing to sell to any bottler because of the territory wherein he sold. Also annexed was a letter which PepsiCo would be directed to send its bottlers within 60 days after issuance of the proposed order. PepsiCo's answer, dated August 23, 1971, included "as a complete defense" an allegation "that the complaint herein is fatally defective in that it fails to join as parties respondent persons needed for a just adjudication, to wit the soft drink bottlers who have entered into the challenged agreements . . . and made substantial investments in plant, manufacturing and distribution facilities in reliance thereon and upon the territorial security afforded them thereunder, and ignores the property and procedural rights of these indispensable parties whose economic interests would be most directly and adversely affected by the proposed order accompanying the complaint."

Meanwhile the Pepsi-Cola bottlers had not been idle. Two motions to intervene, both dated August 11, 1971 and signed by the same counsel who have represented the intervening plaintiff in this action, Pepsi-Cola Bottling Company of Corvallis, Inc., were submitted to the Hearing Examiner. One of these was on behalf of Pepsi-Cola Albany Bottling Company, Inc., Pepsi-Cola Bottling Company of Central Virginia, and Pepsi-Cola Bottling Company of Tampa. An affidavit supporting the motion set forth the facts concerning the movants' exclusive contracts and alleged that there was no assurance that their interests would be adequately represented by PepsiCo. The other was on behalf of Pepsi-Cola Bottlers' Association. This motion alleged that the Association "effectively represents the interests of all the franchised Pepsi-Cola Bottlers in the United States." A supporting affidavit stated that 512 of the 513 Pepsi bottlers were members of the Association, repeated the allegation that the interests of PepsiCo and the bottlers were not identical, denied that the franchises had an anti-competitive effect, and contended that, absent the enforcement of territorial exclusivity, "a relatively few, large Bottlers, each serving extensive geographical areas and catering almost exclusively to large retail customers, will drive local Bottlers out of the business." On November 18, 1971, the two motions were granted by the Hearing Examiner whose order is quoted in relevant part below.*fn2 He characterized his action as "the granting of the right of full participation" which might "aid the examiner and the Commission in properly resolving the issues presented."

During the same period, PepsiCo, relying in considerable part on the analogy of F.R. Civ. P. 19, had moved to dismiss the complaint because of the nonjoinder of the 513 Pepsi bottlers. The Hearing Examiner denied the motion, finding that joinder of all the bottlers "would create a completely unmanageable situation for trial purposes" and that his grant of intervention to the Bottlers' Association had not been "on a limited basis."

PepsiCo then sought leave to file an interlocutory appeal to the Commission. The FTC chose instead to treat the question as if it had been certified to it with the Hearing Examiner's recommendation. In an opinion dated March 23, 1972, also dealing with similar motions by the other soft drink syrup manufacturers against which the FTC was proceeding, see fn. 1, the Commission denied the motions to dismiss for failure to join indispensable parties.

Shortly thereafter PepsiCo instituted this action in the District Court for the Southern District of New York to enjoin the FTC from continuing the proceeding unless it joined all the bottlers. The plaintiffs moved for a preliminary injunction, the defendants for dismissal of the complaint. While these motions were pending, Pepsi-Cola Bottling Company of Corvallis, Inc., an Oregon bottler, moved to intervene as a plaintiff, and this motion was granted. Judge Cannella then granted the defendants' motion to dismiss, 343 F. Supp. 396, holding that since review was premature, the court lacked jurisdiction over the subject matter.

These appeals followed and, on appellants' request, were given expedited treatment. We shall deal first with the case as it stood before the FTC and the district court, and will later consider the effect of a motion, made after the filing of notices of appeal, by FTC complaint counsel which sought summary judgment with respect to the invalidity of the exclusive territorial clauses and gave notice of counsel's intention to propose a "Metro Area Bottler Handicap" provision as a remedy.


It is desirable to consider at the outset what status the FTC has accorded the bottlers who have intervened and would accord others who might reasonably seek to do so. The governing statute, 15 U.S.C. § 45(b), provides: "Any person, partnership, or corporation may make application, and upon good cause shown may be allowed by the Commission to intervene and appear in said proceeding by counsel or in person." The FTC's Rules of Practice, 16 C.F.R. § 3.14, state, in relevant part, that "the hearing examiner or the Commission may by order permit the intervention to such extent and upon such terms as are provided by law or as otherwise may be deemed proper."

If this had been a civil action, intervention by the bottlers would have been not a matter of grace but of right, F.R. Civ. P. 24(a), and such an intervenor would have had all the rights of a party subject only to reasonable provisions designed to assure against repetitious evidence and argument. We see no reason why a different principle should prevail before administrative agencies, except that the scope of the proceeding and the consequent possibilities of delay may make it reasonable to undertake more vigorous policing against dilatory tactics than would ordinarily be necessary in the courts. Indeed, we think the Supreme Court has held precisely this. Consolidated Edison Co. v. NLRB, 305 U.S. 197, 231-39, 83 L. Ed. 126, 59 S. Ct. 206 (1938); FCC v. National Broadcasting Co., Inc., (KOA), 319 U.S. 239, 87 L. Ed. 1374, 63 S. Ct. 1035 (1943).

There is no reason to believe that the status accorded the four intervenors was anything less than is required. Although the appellants have made much of the fact that the Hearing Examiner's order granting leave to intervene provides for only five particular rights, see fn. 2, the specific inclusion of these rights does not imply an exclusion of all others. We therefore have no cause to think that, if the intervenors wished to make motions or argue orally, the Examiner would prevent them from doing so. A more serious question is whether they could appeal to the Commission from the Examiner's initial decision. Rule 3.52(a), 16 C.F.R. § 3.52(a), limits this right to parties, and Rule 3.41(c), 16 C.F.R. § 3.41(c), is ambiguous on whether an intervenor is a party.*fn3 Contrast the FCC's Rules of Practice, 47 C.F.R. §§ 1.223, 1.302. However, in light of the Supreme Court decisions cited, the Commission would withhold such a right at its peril in a case such as this where the intervenors are persons whose contract rights are at stake.*fn4 Furthermore, we do not construe anything the Commission has done as preventing further intervention; the Examiner announced at a prehearing conference that, if other bottlers wished to intervene, "they will be most welcome by me."*fn5

We thus predicate our discussion on the basis that, subject to reasonable limitations to avoid repetition and delay, the four intervenors and other bottlers who may reasonably apply will receive from the FTC all those rights "provided by law" that are essential to a fair hearing. 16 C.F.R. § 3.14.


Although the Federal Trade Commission Act limits review by a court of appeals to "any person, partnership, or corporation required by an order of the Commission to cease and desist," 15 U.S.C. § 45(c), we agree with appellants that the fact that the order here assailed is not one requiring PepsiCo to cease and desist from anything does not lead inexorably to the conclusion that it is not reviewable, but only that it is not reviewable by petition to a court of appeals. Elmo Division of Drive-X Co. v. Dixon, 121 U.S. App. D.C. 113, 348 F.2d 342, 344 (D.C. Cir. 1965). Whether it was reviewable by suit in a district court depends on the construction given to the first two sentences of § 10(c) of the APA, now 5 U.S.C. § 704:

Agency action made reviewable by statute and final agency action for which there is no other adequate remedy in a court are subject to judicial review. A preliminary, procedural, or intermediate agency action or ruling not directly reviewable is subject to review on the review of the final agency action.

Since the order was not one "made reviewable by statute," its reviewability hinges on whether it constitutes "final agency action for which there is no ...

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