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FEDERAL TRADE COMMISSION v. GOODYEAR TIRE & RUBBER CO.

Supreme Court of the United States1938-05-16No. No. 756
304 U.S. 25758 S. Ct. 86382 L. Ed. 1326SCDB 1937-0751938 U.S. LEXIS 1148

Summary

Holding. The Supreme Court reversed the Circuit Court of Appeals' determination that the case had become moot and remanded for a decision on the merits, holding that cessation of the challenged practice after a cease-and-desist order is issued does not render the controversy moot, as the respondent retains the right to seek review of the order's validity.

The Federal Trade Commission charged Goodyear with unlawful price discrimination under the Clayton Act for selling tires to Sears at lower prices than to independent dealers. Goodyear defended itself by claiming the price differences reflected quantity discounts. The Commission rejected this defense and issued a cease-and-desist order. While the case was pending appeal, Congress amended the Clayton Act to permit price differentials that reflect cost differences related to quantity or method of sale. Goodyear then terminated its arrangement with Sears, arguing the case had become moot because the challenged conduct had ceased and the amended law now permitted such arrangements.

The Circuit Court of Appeals agreed the case was moot and set aside the Commission's order. However, both the Commission and Goodyear appealed, arguing the case remained justiciable. The Supreme Court agreed, holding that the discontinuance of challenged conduct does not eliminate a live controversy when a cease-and-desist order remains in effect and subject to judicial review. The Court emphasized that respondent retained the right to challenge the order's validity under the original statute, and the Commission retained the right to enforce a validly issued order.

Summary generated by law.co from the public-domain opinion. The opinion text itself is public domain.

Key issues

  • Whether discontinuance of unlawful conduct after a cease-and-desist order renders a case moot
  • Whether subsequent legislative amendment affects the validity of pre-existing cease-and-desist orders
  • Right to judicial review of an agency order under Clayton Act procedures

Procedural posture

The Commission issued a cease-and-desist order against Goodyear in 1936; Goodyear sought review in the Circuit Court of Appeals, which declared the case moot and set aside the order; both parties appealed to the Supreme Court.

Authorities cited

No cited authorities resolved to law.co cases yet.

Opinion

majority opinion

Per Curiam.

In September, 1933, the Federal, Trade Commission charged respondent, The Goodyear Tire & Rub oer Company, with the- violation of § 2 of the Clayton Act (15 U. S. C. 13) in selling tires, tubes, etc. to Sears, Roebuck & Company at discriminatory, prices. Respondent, invok ing the first proviso in § 2, contended that its contracts with Sears, Roebuck & Company for sales involving lower net prices than those charged to independent dealers were made because of the great difference in the quantities sold. After hearing, the Commission ruled that it did not consider a difference in price to be on account of quantity unless it was based on a difference in cost and was reasonably related to and approximately no more than that difference. In March, 1936, the Commission issued an order requiring respondent to desist from discriminations in prices as described.

Pending the hearing in the Circuit Court of Appeals of respondent’s petition for review, the Congress amended § 2 of the Clayton Act. Act of June 19, 1936, c. 592, 49 Stat. 1526. The first proviso was amended to read as follows:

“Provided, That nothing herein contained shall prevent differentials which make only due allowance for differences in the cost of manufacture, sale, or delivery, resulting from the differing methods or quantities in which such commodities are to such purchasers sold or delivered: . . .”

Thereupon, respondent informed the Circuit Court of Appeals that in view of this provision respondent had ceased to manufacture tires for Sears, Roebuck & Company under the terms of its existing contract; that, to dispose of the stock on hand, the parties had made a new price arrangement designed to conform to the new law; and that within the year all transactions between re spondent and Sears, Roebuck & Company ceased and obligations were terminated by mutual releases. 92 F. 2d 677, 679.

Considering that there was no controversy between the parties as to the illegal character of respondent’s practices under the amended Act, the Circuit Court of Appeals concluded that the case had become moot. In that view the court set aside the order of the Commission and remanded the case “but without direction to the Commission to dismiss the complaint and without prejudice to its filing a supplemental complaint in the original proceeding if under § 2 of the amendatory act this may now be done” as to which the court expressed no opinion. Id., p. 681.

Both the Commission and the respondent contended below, and contend here, that the case has not become moot. While they disagree in their reasoning, they come to the same conclusion upon this point, and both ask that the case be remanded to the Circuit Court of Appeals with directions to determine it upon the merits. We think that their conclusion is correct and that the remand should be made.

Section 11 of the Clayton Act (15 U. S. C. 21) provides that whenever the Commission has reason to believe that any person is violating or has violated the provisions of the Act, and upon hearing so finds, the Commission shall issue an order requiring such person to cease and desist from such violations. . In case of failure to obey its order, the Commission may apply to the Circuit Court of Appeals for enforcement. And anyone required to cease and desist from a violation charged .may seek review in the Circuit Court of Appeals, praying that the order be set aside. The provisions of the Act of June 19, 1936, show clearly that the orders of the Commission entered before its passage are to remain in effect. Section 2 of that Act provides that nothing therein contained shall “affect rights of action arising, or litigation pending, or orders of the Federal Trade Commission issued and in effect or pending on review, based on section 2 of said Act of October 15, 1914, prior to the effective date of this amendatory Act.”

Discontinuance of the practice which the Commission found to. constitute a violation of the Act did not render the controversy moot. United States v. Trans-Missouri Freight Assn., 166 U. S. 290, 309, 310; Southern Pacific Co. v. Interstate Commerce Commission, 219 U. S. 433, 452; Southern Pacific Terminal Co. v. Interstate Commerce Commission, 219 U. S. 498, 514-516; National Labor Relations Board v. Pennsylvania Greyhound Lines, 303 U. S. 261; Guarantee Veterinary Co. v. Federal Trade Commission, 285 F. 853, 859, 860; Chamber of Commerce v. Federal Trade Commission, 13 F. 2d 673, 686, 687. The Commission, reciting its findings and the conclusion that respondent had violated the Act, required respondent to cease and desist from the particular discriminations which the order described. That is a continuing order.. Its efficacy, if valid, was not affected by the subsequent passage or the provisions of the amendatory Act. As a continuing order, the Commission may take proceedings for its .enforcement if it is disobeyed. But under the statute respondent was entitled to seek review of the order and to háve it set aside if found to be invalid. The question which both parties sought to have the Circuit Court of Appeals decide was whether respondent’s conduct was a violation of. the original statute. Upon the conclusion that it was such a violation, the Commission bhsed its order. Neither the transactions subsequent to that order nor the passage of the amendatory Act deprived the respondent of its right to challenge the order and- to have; its validity determined, or the Commission of its right to have its order maintained if validly made.

The decree of the Circuit Court of Appeals is reversed and the cause is remanded to that court for a determination of the merits.

Reversed.

Mr. Justice Stone, Mr. Justice Cardozo and Mr. Justice Reed took no part in the consideration and decision of this case.

That proviso, in the original Act, was as follows:

“Provided, That nothing herein contained shall prevent discrimination in price between purchasers of commodities on account of differences in the grade, quality, or quantity of the commodities sold, or that makes only due allowance for difference in the cost of selling or transportation, or discrimination in price in the same or different communities made in good faith to meet competition; . .