FEDERAL TRADE COMM'N v. BROCH & CO.
Argument of Cox
Chief Justice Earl Warren: Number 74, Federal Trade Commission, Petitioner, versus Henry Broch and Company.
Mr. Cox: Mr. Chief Justice.
The Broch case is here on certiorari to review a question very closely related to the question which I've just been arguing to the Court.
The writ was issued to review a decree of the Court of Appeals for the Seventh Circuit in which that Court on its own motion modified an order of the Federal Trade Commission in a case arising under Section 2 (c) of Clayton Act, some of the members of the Court may recall that this is the second time that the case has been here.
It was here on the merits, that is to say, on the question of whether the Broch Company had violated Section 2 (c) and was decided in an opinion Mr. Justice Douglas reported in 363 United States.
There were four Justices who dissented but the merit, as I take it, it has now been settled and the case is here on the question concerning the scope of relief which is certainly parallel and we think virtually identical to the question presented in the Ochoa case that was just argued.
Here, there are two questions.
The first is whether a Court of Appeals may cut down the scope of a Federal Trade Commission order on the ground that it is broader than the proven violation warrant where the respondent had the opportunity to object to the scope of the order before the Commission, but raised no question about its scope at that time.
And we submit that under those circumstances, the Court of Appeals had no -- I don't -- no authority, I was about to say, I was hoping the jurisdictional sense as the Court of Appeals erred in cutting down the scope of the order.
Assuming that the Court decides that question against the Government, then the second question is raised, which is whether the Commission upon finding that a seller's broker has unlawfully passed on part of his commission to a large scale buyer as way of producing price or the buyer's cost in violation of Section 2 (c).
Then has the Federal Trade Commission discretion to forbid the buyer from engaging in the same unlawful practice in relation to other buyers and sellers or must the Federal Trade Commission order be confined as a matter of law to unlawfully passing on the brokerage in future sales between the same seller and same buyer, leaving in freeze, so far as the order is concerned, to repeat the unlawful practice in sales for other sellers to other buyers.
The facts of the case, they recall, although I think I need to do it only briefly.
Upon the usual proceedings, the hearing examiner found that the respondent Broch was a broker engaged in selling food products for Canada Foods with the understanding that his commission would be 5%.
Now, Canada Foods had fixed the price of a $1.30 a gallon for apple juice.
A large scale prospective buyer, Smucker, had through another broker offered at $1.25.
It then replied the price was $1.30 and the word got out that the only way the price could be reduced was by -- reduced by the broker.
Broch then arranged two sales from the Canada Foods to Smucker at $1.25.
Broch agreed to reduce his commission from 5% to 3% so that Broch absorb two and a half cents a gallon and Canada Foods absorb the other two and a half cents a gallon in order to make the sale to Smucker.
The initial decision as it's called in the Federal Trade Commission the trial examiner's report, as I fear, I may call it at familiarity with the Labor Board, found these facts and recommended an order against the respondent.
The proposed order is significant.
It appears on page 202 of what we call the old record because it's the record that was used when the case was here on the merits and it's somewhat the fatter of the two brown volumes.
The order directed -- the order proposed that respondent be directed forthwith to cease-and-desist from paying, granting or allowing, directly or indirectly to the J.M. Smucker Company or to any other buyer and the critical words in this case are the words “to any other buyer” or to anyone acting for in behalf of -- or in behalf of or subject to the direct or indirect role of such buyer, what is forbidden to pay, grant or allow any allowance or discount in lieu of brokerage, or any part of percentage, by selling any food products to such buyer at prices reflecting a reduction from the prices at which sales for such food are currently being affected by respondents for Canada Foods Limited or for any other seller principal, and the words “or any other seller principal” are in controversy as the case maybe, where the reduction in price is accompanied by a reduction in the regular rate of brokerages is another.
And then paragraph (2) again, orders Broch to cease-and-desist from in any other manner paying, granting or allowing directly or indirectly to the J.M. Smucker Company or to any other buyer, anything of value as a commission brokerage or other compensation in connection with any sale of food or food products to such buyer for its own account.
In other words, they ordered, proposed that the respondent be directed to cease from unlawfully passing on its brokerage commission as a way of giving the buyer a lower price not only in making sales on behalf of Canada Foods to Smucker but in making sales on behalf of any other seller to any other buyer of food products.
When the hearing officer made his initial decision, the respondent filed a notion of appeal to the full commission.
And Commission has rules relating to the way in which appeal should be taken and specifically to the way in which points shall be raised on an appeal.
The pertinent rule appears at page 45 of the new record.
Down at the -- below the heading which is about the third of the way down the page.
You'll notice that first it speaks of who may appeal and then content of appealed brief.
The appeal should be in the form of a brief and shall contain in the order indicated below the following.
A list of the questions involved and to be argued, an argument presenting clearly the facts of law, in fact it relied on in support of a position taken on each question.
Respondent filed a brief in that form.
The brief made no objection whatsoever with the respect to the scope of the order.
In other words also, there was a case where the examiner not only dealt with the substantive question of whether there was a violation but also recommended a specific order so the respondent had full warning of what was proposed.
His brief was confined to arguments that he hadn't violated Section 2 (c) and there's nothing whatsoever, which even suggest any objection to the scope of this order, assuming that a violation of Section 2 (c) was found to occur.
The Federal Trade Commission's decision approved in general the theory that the examiner had adopted.
And specifically, the Commission entered the order which was in the examiner's proposed -- in the examiner's initial decision.
The case was then taken to the Court of Appeals in the Seventh Circuit and again, the argument went to the substantive questions of law and there was no suggestion that if the substantive questions were ruled against the respondent that the order was still too broad.
The Seventh Circuit sustained the respondent's position on the merits.
Your Honors will recall that it held at Section 2 (c) was not applicable to a seller's broker and also that the respondent, Broch, did not make any allowance in lieu of brokerage.
That decision was reversed, as I said earlier, in an opinion in 363 U.S. written by Justice Douglas and four members of the Court dissenting.
Justice John M. Harlan: Could I ask you this point, there's no provision, general provision (Inaudible)?
Mr. Cox: There is no provision in the statute comparable to 10 (e).
I shall argue that the same rule exists as a matter of administrative law and the decisions of this Court.
There's no statutory provision that is comparable with the respect to raising questions below.
When the case got back to the Seventh Circuit, the respondent filed a motion to set aside or modify the order of the Federal Trade Commission.
And he raised what I think we can conveniently describe as three kinds of questions.
First is the Court to find that the allowance in that particular case had been justified by various economist and competitive considerations that argued that that was a question that hadn't been decided by this Court.
The Seventh Circuit apparently denied that argument.
His second request before the Seventh Circuit was that it modify the order of the Federal Trade Commission in relation to the kind of practice that it prohibited.
The argument stated very shortly was that the order forbad the respondent to do certain kinds of things which this Court had not adjudicated in the case of the merits and then it was to - I think in vertical direction, it covered too many kinds of conduct.
It was phrased in the words of 2 (c).
The Seventh Circuit was apparently persuaded by that argument because it didn't modify the order in that respect.
The third type of objection raised by the respondent in the Seventh Circuit was that the order didn't simply forbid him not to engage in these unlawful practices in effectuating sales between Canada Foods and Smucker but told him not to engage in the unlawful practices at all.
And he objected to that on the ground that such an order was too broad because the only sale – sales, there were two of them, proved in the record where sales from Canada Foods to Smucker.
The Court of Appeals denied the respondent's motion in all respects.
Then on the Court's own motion, it entered an order striking out the words “on behalf of any other seller” or “in sales to any other buyer” so as to confine the order to one to stop passing on brokerage unlawfully when you're selling goods from Canada Foods to Smucker.
Unknown Speaker: (Inaudible)
Mr. Cox: Well, it gave no explanation, Your Honor.
And I could only speculate.
This was the same Court, if my memory is correct, that had decided the Brandman Iron case.
I think its reasoning, and I do want to make it clear, I'm just speculating.
I think its reasoning must have been this that it recognized that under 10 (e) now, I'm now speaking of the labor case, the respondent had no right to raise such questions.
And I infer that it assumed that the same rule was applicable under the Tucker Freight Lines case, other decisions even so there was no such provision in the statute.
Justice Felix Frankfurter: It's very (Voice Overlap)
Mr. Cox: Then mistakenly, I think the Court felt that although there was no -- although the respondent had no standard, nevertheless the Court on the theory in Justice Stone's concurring opinion in Cheney had an -- a Court responsibility, a judicial responsibility for the order and that on its own motion, it had power to change it.
Now, of course, in doing that, it overlooked several decisions by this Court.
One in a case involving the United Mine Workers written by Justice Brennan, another in a case coming from the Federal Power Commission where it was squarely held in each instance in the Federal Power Commission case after some discussion that the same statutory provision forbids the Court to look at objections that were not raised below on its own motion because indeed the language, if you look at the statute, was that -- was that the Court shall not consider.
It wasn't that the respondent shall not raise.
Now, I'm told -- I want to infer that I've made one mistake.
I was under the impression with the Brandman Iron case was a Seventh Circuit case.
I am now told that I am in error that it was a Sixth Circuit case and at my attempt to explain what the Seventh Circuit did on the basis of the Brandman, the Court said they're innovated in -- in that opinion, maybe a nice theory but it doesn't correspond to the facts.
Justice John M. Harlan: (Inaudible)
Justice Hugo L. Black: May I ask if this case preceded or followed the First Circuit's opinion which we just considered?
Mr. Cox: It -- the order in this case --
Justice Hugo L. Black: (Voice Overlap) Court of Appeals.
Mr. Cox: -- entered November 3, 1960, it followed by months and a half Judge Aldrich's opinion in the First Circuit.
Justice Felix Frankfurter: In which they had acted on their own motion.
Mr. Cox: In which they had acted on their own motion.
I do not know whether that case has been called to the Seventh Circuit's attention by Mr. Rowe.
There maybe some connection there obviously.
Now, that the case is here, our argument is two-fold.
First, we submit that the court below erred as a matter of law in cutting down the scope of the Federal Trade Commission order in a case where the respondent had the opportunity to raise a question concerning the scope of the order before the commission and failed to do it in violation of the Commission rule.
Second, we say that if the Court considers the merits of the order, that the Commission's order was proper and then it was not required to limited its order to cease-and-desist to sales made on behalf of Canada Foods to Smucker, but could forbid the continuation of the unlawful practice in sales between any buyer and so on.
I would emphasize first that petitioner again did not raise the contention before the Federal Trade Commission.
You'll recall that the hearing examiner did recommend this precise order that the rules concerning appeals to the Commission require you to set forth what your exceptions are in the form of questions presented in the brief and that this was not done.
Now, the respondent offers two arguments.
First, he says, “Well, the Government says in its brief that the Federal Trade Commission that does consider the scope of orders even so no exception is made by the respondent.”
And of course that is true up to a point.
Now the Commission has a responsibility for the order that it enters and as I understand it therefore, it does consider in general but it takes the scope where the order should be and if there's nothing that appears wrong with it, as proposed by the examiner, then it goes out.
But I submit that that is an altogether different kind of consideration from the consideration that it administered in agency or a Court will give to -- an order or a question where the problem is raised.
It's not unlike the situation with respect to a Judge's charge.
He considers what he instructs the jury but of course the rules required the party who objects to the charge to point out to the parts that are wrong and so that the Judge may really concentrate his attention on it and consider whether a change should be made, what the precise facts are in some detail and so it is with an administrative agency unless the point is raised, the type of consideration is bound to be different from what it is where the point has been thoroughly briefed and argued.
The respondent's other proposition as I understand it is -- well, we challenge the order at every turn.
That of course is true but a challenge to the order of the merits raising questions of statutory interpretation or questions of the fact on the record is quite different from a challenge to the scope of the order which is to be entered once the unlawful practice is established.
Respondent suggests that after the case went back from this Court, it asks for administrative consideration of the scope of the order.
But it seems to me that the record hardly sustains that.
What the respondent did was to request the Court of Appeals to summarily set aside or modify the Commission's order or to remand the proceeding for appropriate further action by the Commission itself.
This was not in any sense a request to the Commission and indeed, it wasn't any primary request anyway.
It was a sort of a falling back.
If you won't give me what I want, we'll then send it back to the Commission.
It didn't ask the Commission to do anything.
Justice Potter Stewart: Well, could it -- our remand went to the -- what was the judgment of this Court?
Mr. Cox: For further proceedings in accordance to this (Inaudible).
Justice Potter Stewart: Well, the case went back, I --
Mr. Cox: The case went back to the (Voice Overlap)
Justice Potter Stewart: Yes, Commission.
Mr. Cox: That's correct.
Justice Potter Stewart: And so --
Mr. Cox: But the Commission responds and argues, I see no reason to challenge it, would have the power to modify its order under those conditions.
Justice Potter Stewart: Only if the case where remanded by the Court of Appeals to the Commission, wouldn't that be true?
Mr. Cox: I --
Justice Potter Stewart: I don't know.
Mr. Cox: -- I guess -- well, I thought -- it suggested in Mr. Rowe's brief that I thought no reason to quarrel with him --
Justice Potter Stewart: Well --
Mr. Cox: -- that the Commission could have done it even while the case was pending before the Court of Appeals for the Seventh Circuit.
We said that --
Justice Felix Frankfurter: I think that – don't you think that was a very dubious proposition.
Justice Potter Stewart: So should I.
Mr. Cox: Well I was surprised I confer this.
But as I say, I saw -- I saw no reason to argue and indeed without any disrespect, may I suggest that it's irrelevant anyway because the point is that of course it was not presented to the Commission.
I don't say he didn't do everything he could at that stage.
But he hadn't done what he's required to at the time he was required to do it.
Justice Potter Stewart: What's the – the usual practice is -- you already told us this but if so I missed it, was the -- was this point ever raised in this Court --
Mr. Cox: No.
Justice Potter Stewart: -- before any other case?
Mr. Cox: No, and it wasn't raised in the Seventh Circuit.
Justice Potter Stewart: Or wasn't raised in the hearing.
Mr. Cox: It was the first time --
Justice Potter Stewart: On a petition for rehearing here, it wasn't -- it wasn't raised then, was it or --?
Mr. Cox: It wasn't raise here in a petition to rehear it, no.
Justice Potter Stewart: Well I am sorry.
When was it first raised?
Mr. Cox: It was first raised on the -- in the motion filed by the respondent in the court below when the case went back on remand from this Court.
Justice Charles E. Whittaker: That -- with this Court's opinion in the Broch case is not the source of the cities felt need to revise its order.
Isn't that what -- or maybe it is that gave rise to the need?
Mr. Cox: I don't -- I don't recall.
I don't think I noticed anything in this Court's opinion.
It would suggest that the -- this order should leave the respondent free to commit this -- this unlawful practices.
Justice Charles E. Whittaker: No, but the majority's opinion as I recall finally limited the decision ad hoc really to the facts of this particular case, isn't it?
Mr. Cox: It was certainly a narrow opinion and it put aside some preference.
Now, with respect that Mr. Justice Whittaker, I think that -- well, perhaps you thought of it before, it's quite true that in arguing the scopes of the order in terms of the kinds of practices forbidden that Mr. Rowe pointed out in the Seventh Circuit as he does here to the fact that the Court has not ruled in this case upon all the questions that might arise concerning the interpretation of Section 2 (c).
But it should be remembered that the court below did not adopt that theory.
It didn't modify this order in terms of the kinds of ways of passing on brokerage that would be forbidden.
It simply cut it down with respect to on whose behalf you could engage in the unlawful practice.
So it would seem to me that in terms of the scope of the order with respect to parties, if I may use what isn't a really accurate word with respect to person's effect, there was nothing in this Court's opinion to justify raising a point.
And the other point was not sustained by the Seventh Circuit and of course, there was no cross-petition, so it isn't properly here because if there were merit to it, which we denied, it would require a modification of the decree at that kind of a point may not be presented to the Court unless it is raised by the respondent on a cross-petition.
Justice Felix Frankfurter: The truth of the matter is that the question of the scope of the review, the order as such -- I mean the scope of the order wasn't an issue at all, and particularly --
Mr. Cox: No.
Justice Felix Frankfurter: -- in original case.
Mr. Cox: No, it won't.
Justice Felix Frankfurter: Naturally enough, the Federal Trade Commission didn't raise it and they will contend the sweeping decision they had below.
Isn't that the truth of the law?
Mr. Cox: It was -- I think it was natural that it was raised here and I don't hold that against it.
Justice Felix Frankfurter: No, no, no --
Mr. Cox: It's the failure to raise it for the Commission.
Justice Felix Frankfurter: I'm not -- I'm not thinking any --
Mr. Cox: (Voice Overlap) Yes.
Justice Felix Frankfurter: I'm not giving debit and credit.
I'm just saying, explaining that this question is quite out of the case when it was new.
Mr. Cox: That is correct.
I think so too.
Justice William J. Brennan: May I get this clear Mr. Solicitor, your position here is the same.
It should have been raised before the Commission even before the order of the Commission order to review.
Mr. Cox: It should have been made as soon as the hearing examiner made what they call an initial decision or a proposed decision, setting forth the report, the order that he recommended because at that time, the respondent had fair notice of what kind of an order was proposed.
If he had any objections, he should have set them forth then that they could have been examined and any additional relevant facts could have been put in the record and that I think indisputably, he failed to do.
Justice Felix Frankfurter: Do you think -- do you think he was foreclosed at that point that in as much as this was a broad to his attack, the applicability of the statute.
He couldn't, if he -- well, if he attacks that before the Commission and then came before the Court, he certainly weren't open for him to raise that before the Board -- the Court?
Mr. Cox: I would think not since he failed to raise it below.
I think he could have raised it perhaps but we don't need to pass on this.
I think perhaps he could have raised it on a petition for reconsideration, rehearing before the Commission after it had passed on the main question.
Justice Felix Frankfurter: But I should think you just, do you think he could have raised it after he had succeeded in his main play that the whole thing was beyond the power of the Commission?
Mr. Cox: Raised in here --
Justice Felix Frankfurter: Even (Voice Overlap)
Mr. Cox: No, I would think we hadn't presented it to Court.
Justice Felix Frankfurter: No, no, no.
If he -- he challenges the statutory applicability to this situation.
He succeeds with the Court of Appeals and that everything what was he concerned with, then he comes here and losses, do you think thereafter, he couldn't have -- that will know that the substantive law question is raised, I now --
Mr. Cox: I think not for this reason.
I think a good way to test the point is to inquire whether when he first went to the Seventh Circuit, he could then have said to the Seventh Circuit, point one, there was no violation of Section 2 (c); point two, even if there was, the order was too broad.
And I would say that he could not -- that that indeed is the very state that the rule of administrative law is directed to and that while we can get it more complicated by bringing different courts in, that they all come back to that fundamental (Voice Overlap)
Justice Felix Frankfurter: That's all or nothing for him and he went before the Court of Appeals.
His position was all or nothing, (Voice Overlap).
Mr. Cox: It had to be.
Justice Felix Frankfurter: That's your position.
Mr. Cox: It had to be.
Now, I would -- I would like to recognize one possible distinction in going through these cases, it does seem to me that sometimes this situates -- sometimes this situation develops.
There may be two disputes with respect to the substantive meaning of the statute.
For example, let's assume that instead of one kind of practice here, there has been different ways on passing on broker, that he might have said, point one, the statute doesn't apply at all to a seller's broker which case you wouldn't have to go on by the second question.
He might say, point two, leave it if he applies to me and practice A is on unlawful, it doesn't forbid practice B.
Now, I will take if he had raised that substantive question, his failure to raise the parallel question with respect to the scope of the order would be immaterial because he's -- he's attracted attention to the question.
But here, of course, the underlying question is whether unlawfully passing on brokers, underlying question for the Commission, would have been whether unlawfully passing on brokerage to Smucker, the sales from Canada Foods, properly gave rise to an inference that unless restrained respondent would give way to pressures from big buyer -- other big buyers in similar situations or was there's something so peculiar about the relations between Canada Foods, respondent to Smucker that the fact that he'd committed the unlawful practice in that instance, gave no reason as supposed, that he would commit the unlawful practice on behalf of that another seller.
Now, that type of question, there was nothing in his presentation before the Commission that would have directed its mind to that type of question.
So I do think that some of the general statements we've been made permitted that distinction.
Chief Justice Earl Warren: We'll recess now.
Argument of Cox
Mr. Cox: Mr. Chief Justice, before the recess, I had pointed out that the respondent did not raise the subjection to the scope of the order when it was before the Federal Trade Commission upon the initial decision or the Hearing Examiner's proposed order.
Having failed to raise the question there, we submit, that he could not raise it in the Court of Appeals and that the Court of Appeals therefore erred not only in permitting him to raise it indirectly, but in modifying the order on its own motion.
As I pointed out in answer to a question by Mr. Justice Harlan, the Federal Trade Commission Act and therefore this case defer from the National Labor Relations Act in preceding case.
And the Federal Trade Commission Act and the Clayton Act do not contain any express provision declaring that the reviewing court shall not consider a question which was not called to the attention of the administrative agency.
As a matter of history and language, I would think that no significance could possibly be attributed to the distinction because the fact is that the Federal Trade Commission Act and the Clayton Act were both enacted back 50 years -- not quite 50 years, 45 or so years ago before our present notions of administrative law had thoroughly evolved.
This Court has held on many occasions that the same substantive rule of law governs those agencies like the government cases coming from those agencies like the Interstate Commerce Commission and the Federal Trade Commission even though their basic statutes do not contain the same words.
I suppose that the most complete and authoritative discussion of that point was in the Tucker Freight Lines case -- Tucker Truck Lines case in 344 U.S., where again the statute did not contain this language.
The Court said, “We recognized in more than a few decisions that Congress has recognized in more than a few statutes that orderly procedure and good administration require that objections to the proceedings of an administrative agency be made while it has opportunity for correction in order to raise issues reviewable by the courts.
And that doctrine has been specifically applied to orders and objections to the form or scope of orders of the Federal Trade Commission in the Moog Industries case where the question was whether the effect -- what should be the effective date of an order in order to avoid alleged unfair substantive advantages and the Court squarely held that since the point respecting the date of the order had not been raised before the Commission, it could not be presented to a reviewing court.
I think I also pointed out in the Ochoa case that there are other decisions holding that it makes no difference whether the Court considers this kind of question on the request of a party or on its own motion and of course the absurdity of such a distinction is brought out in this case where the party raised it.
The Court dismissed his motion and then on its own motion changed the order.
One can't believe that what really happened wasn't that party raised a question and the court heeded its motion.
Justice Charles E. Whittaker: Is there a basis for saying that one does challenge the breadth of the order when he challenges the whole order and said you had no authority to make it at all?
Mr. Cox: I would think -- I would think not.
Now, as said to Justice Frankfurter before the recess, I would think a challenge to findings or rulings with the respect to what was a substantive violation of the statute would necessarily imply a challenge to the parts of the order that were based upon the agency's interpretation of the statute.
And then let's suppose for example that the argument in this case had been, that although Section 2 (c) applies to seller's brokers and forbids the broker himself to pass on the brokerage to the buyer, actually hand the money to it that it does not apply where the broker simply reduces his brokerage fee and what is passed on to the buyer is left in the discretion of the seller.
Now, I would think that if Mr. Rowe had raised that argument before the Commission that it would not -- I don't think it had any merits, but assume that it were held to have merit, I do not think it would lie in the Commission's mouth to come before the Court and say, “Well, you raised that substantively but you didn't object to an order that covered the second as well as the first,” but here you see, as I suggested to Justice Frankfurter before the recess, no one raised the question -- no one raised before the Commission the factual question upon which the issue now before this Court depends if it gets to the merit.
Whether the order should include references to other sellers or other buyers, depends before the Commission and here forgot the merit, on whether passing on this brokerage fee indicates that this is a fellow who is likely to pass on brokerage fees or indicates that this is a fellow who is likely to pass on brokerage fees in transactions between Canada and Smucker.
In other words nothing to suggest, there was no objection raised that would suggest there's something peculiar about the transaction between Canada and Smucker that couldn't repeat itself in transactions between other sellers and buyers.
And therefore, there was no objection raised that would direct the Board's attention to that question which was the -- one underlying I think, the basic scope for the order.
So I would think that a blanket objection to the order based on entirely different grounds that would not suggest then and went only to matters of substance, it couldn't in any sense be said to include an objection of this kind.
Justice John M. Harlan: Could I ask you one question.
This maybe entirely wrong, but I have dim recollection that at some stage along the line the Federal Trade Commission Act unlike the Labor Act provided not for enforcement of the order, but in effect for a -- of the Commission's order but in effect, the entry of a new order, an independent order by the Court.
Mr. Cox: Your -- there is a difference between the Clayton Act which is the one we're dealing with --
Justice John M. Harlan: Yes.
Mr. Cox: -- and the National Labor Relations Act.
When the Federal Trade Commission makes it cease-and-desist order then the respondent may take it to the Court and secure review.
No order of enforcement which is punishable by contempt could be made under the original Clayton Act at that stage.
Therefore, in order -- and that statute incidentally applies to this case so that in order to proceed for a violation of an order under the Clayton Act, the Commission must have a new independent proceeding finding that the order had been violated.
Now that if there was no petition for review then of course that will be a second administrative proceeding.
Having found that the order had been violated, it then could go to the Court for the enforcement of that order.
And so here, regardless of the outcome of these cases as I understand it, respondent would not immediately be subject to citation for contempt if he violated this order.
It would have to be a new violation proved before the Federal Trade Commission and then it could go to the Court getting an order of enforcement.
Justice John M. Harlan: Well, I was just wondering whether that made any difference in the scope of the authority of the court to modify the order as it.
Mr. Cox: I wouldn't think it should because I would think that the underlying reasons were basically the same.
As I see it, there are several reasons for this rule which I submit it's a rule of administrative law applicable to all agencies as well as one embodied in some statutes.
Certainly one reason is that it's -- it's only fair to the other people concerned that you give the agency as was pointed out from the Tucker Truck Lines case that you give the agency an opportunity to consider the point before you go to court and attempt to undo everything that was done below.
Now, the second reason I think as we've pointed out on several occasions is that the question on which the scope of the ordered depends is essentially a question of fact.
If the question is raised before the agency so that it knows there's some controversy about the scope of the order then it may either make its order on the record before it or it might order the proceedings reopened to take new testimony on this point, but if the respondent can lie back and not present it and then raise it in court, it may say the opportunity to build a record on the point has been lost unless, of course, the case gotten -- go back with further delays and various motions.
Then there's another part which ties in with an observation that Justice Frankfurter made during the last case.
If the point is raised before the agency, then the agency has an occasion to explicate its reasons.
It has some -- the case had been argued, it has some reason to spell out why it did what it did, but if there's no indication that the issue was in controversy, it's all too easy and unfortunately the agency do have to grind out a great volume of work, it's all too easy not to bother to set it down because apparently, nobody is arguing about it and under the normal rule, having failed to raise the question for the agency, it wouldn't come up in court.
Now, I submit this is really important to judicial administration as well as agency administration because if as Justice Frankfurter has suggested, the reasoning of the agency is fully explicated, it gives the court an opportunity to pass a far wiser judgment upon the question on review and the thing which invokes the explication is raising the point below and if you don't raise it below, there is no reason to use unnecessary ink and paper giving reasons for things that are requested.
Then there's still fourth reason I think that if the party is able to lie back and not raise the question before the agency, then if the order is too broad, it's going to be rewritten in the Court.
And that means that the framing of the final order will not be done by the expert body, the body that's familiar with the theory, that has the specialized knowledge which this Court is often said was important to take in to account in writing an order but instead will be done, I fear too often in a somewhat verbal fashion as occurred in the First Circuit in the Ochoa instance without adequate appreciation of the differences between different kinds of violations of relations between parties who have different institutional arrangements and the like.
Justice Charles E. Whittaker: I wonder if Congress didn't make that a function of the Court of Appeals, however, when it said it might modify the order.
Mr. Cox: But I think it contemplated that the modification would be made on a record dealing with this and after the benefit of the judgment of the agency.
Now, surely Congress didn't remove this function entirely from the Courts, I don't think that the thrust of my argument is that the Court couldn't ever modify an order and neither do I mean to imply that it was bad -- so bad that it couldn't be done in any instance to have the Court modify it.
All I've been saying is that it's desirable in the greatest number of cases to have the modification of too broad an order made by the agency and that in order to gain that advantage, it is sound to require the parties to present the question to the agency.
Now of course, if the order is too broad, not in the sense that it's broader than it ought to be but it is too broad in the sense that it has no reason -- could not reasonably be thought to have a relation to the threatened violations.
Then of course, the Court must do the cutting down and the disadvantage I would mention would come about, but the rule of administrative law I suggest would at least reduce the number of those occasions and would seem to me to be sound administration from the standpoint of the courts as well as the agency.
I'd like to pass on now and spend a few minutes discussing the case on the assumption which I hope to prove unfounded if the Court does conclude that the court below had the power in a loose end to reach the underlying question because we think that the Federal Trade Commission order, even if the questions were opened should be held proper here that it was certainly within the scope of the Commission discretion.
I take that it's common ground that the purpose of such an order is to prevent violations, the threat of which in the future is indicated because of their similarity or relation to those unlawful acts which occurred in the past.
I've taken the language from Mr. Justice Stone's opinion in the Express Publishing case and it seems to me a task which has been applied over and over again.
In asking this, we should remind ourselves that the Commission is not limited to prohibiting the illegal practice in the exact form in which it was found to exist in the past, that it maybe somewhat broader.
That the Commission has wide discretion that it may as the Court has often said, “Drawn its expert knowledge or generalize experience.”
And the question is whether the order that was entered has no reasonable relation to what the purpose of the order should be to the -- preventing the reputation of the kinds of conduct which one has reason to fear because of what occurred before.
Now, in the instant case as a practical matter, the Federal Trade Commission on the issue now before the Court had only this choice. It could issue the order that it did issue forbidding the unlawful passing on of the brokerage in relation to sales on behalf of any seller, to any buyer or it could have made an order which said don't unlawfully pass on brokerage when you're acting as a broker for Canada Foods in selling to Smucker.
There was no, virtually no practical in between ground and the order would, in this respect, have to be one or the other.
Now, I submit first that this order conforms very closely to what the statute tells the Commission to do.
It says that where the Commission finds that there have been violations of the act and so issue would caused to be served on such person an order requiring such person to cease-and-desist from such violations.
Of course, the violations weren't in any sense personal.
There were violations regardless of the identity of Smucker, regardless of the identity of Canada Foods.
The violation was unlawfully passing on brokerage and what the order entered by the Commission is, “Don't pass on brokerage.”
So that I think that it corresponds very closely to just what the statute told the Commission to do and it's very close to what Justice Stone said in the Express Publishing case with respect to an order cease-and-desist from refusing to bargain collectively.
There was an objection to that and the Court said, “The unfair labor practice was refusing to bargain collectively” and the statute said, “You shall enter an order requiring the respondent to cease-and-desist from the unfair practice.”
I point out further that this is the kind of violation which is just as likely to be performed in relation to one buyer or in behalf of one seller as any other.
There was nothing in the relations as I said before between Canada Foods and the broker that would suggest that he was more likely to do it with Canada Foods or in the relations between Smucker and the broker.
Smucker was simply a big buyer.
And if the broker was going to yield to this temptation for one big buyer, it was just as likely to be yield to the temptation for another big buyer in the future as that he would yield to it for this big buyer in the future.
The record showed that's -- that respondent dealt in food on behalf of other sellers and on behalf -- and in sales to other buyers.
There have been cases where the Commission's orders were narrower because the broker acted only for a particular buyer.
In that event, it would be wrong to enter a broad order arguably at least just as in the case of the union which represents only the employee's one employer, you don't enter a broad general order.
Here, the violation was certainly delivered in the sense that not that he necessarily that he knew it would violate the statute but it wasn't the sort of thing you do negligently or accidentally.
Neither was it the sort of saying which might happen in the labor case where you have a lot of foreman or straw bosses, who may do acts that you ultimately are held responsible for.
This was a topside type of decision and was made conscious of what he was doing with a good deal of talk back and forth.
That being true, we think that this case is entirely different from the Communications Workers case and that it is far more like the situation that was presented in the Mandell case where the Court said that the order the cease-and-desist by cover not only the failure -- the misrepresentations that the respondents had made but also certain similar misrepresentations.
It is like the Gypsum case where also the violations had occurred in one geographical area.
The order covered other geographical areas or like the Cement case where the order -- where the violation was a conspiracy between certain parties and the order also forbade them to conspire not only among themselves again but with other parties to engage in the same unlawful practices and for either reason independently, we submit that decision below was wrong and should be reversed.
Chief Justice Earl Warren: Mr. Rowe.
Argument of Frederick M. Rowe
Mr. Frederick M. Rowe: Mr. Chief Justice, may it please the Court.
I would like to, if I may, place the issue in the controversy in somewhat broader perspective than the presentation just included by the Solicitor General.
First, let me say it is important to realize that we are not dealing with a penalty but rather a cease-and-desist order by an administrative agency which mirrors and reflects the words of the statute.
It is highly synthetic, we submit, to put to one side the order, put the statute to the other side and say, “You've only attacked the statute.
You never said anything about the order” and then to proceed, as if this proceeding had been conducted before the Commission and before the Court in a legal vacuum.
The fact of the matter is that the cease-and-desist order as entered by the Commission is the exact reflection of the statute itself and that every contention that was previously raised by the respondent against the liability that was adjudged by the Commission was precisely applicable to the terms of the order as well because the order is the reflection of the statutory theory which the Commission promulgated in this case and which was at issue in the previous proceedings on the merits at the commission level and before every level of the judicial review.
Let me say at the onset --
Justice Potter Stewart: Where is that -- isn't that argument gets you into a bit of trouble because the -- you say that the order was an exact reflection of the statutory theory which the Commission followed and that theory was affirmed by this Court and therefore it would affirm the reflection of the theory.
Mr. Frederick M. Rowe: The order was a reflection of the theory sir, but it went beyond what this Court's very narrow majority opinion sanctioned and precisely the trouble that arose upon the remand as actuated by this Court's very narrow decision on the merits was whether the order actually respected those limitations which the Court and its majority opinion wrote into Section 2 (c) or went beyond.
Now, the situation was complicated by the fact that the Court of Appeals did not accept this attack on the order for going beyond the majority opinion of the Court, but instead took another attack and limited the order in another respect.
I might say if the Court please that the subject and the controversy over Federal Trade Commission orders and their meaning or their scope is not a new issue before this Court.
It is a recurrent problem that has played judicial review in this Court, a Federal Trade Commission orders not less than six times in the last 12 years.
The problem with these orders by the Federal Trade Commission that have been before this Court has been compounded that in most instances they have arisen out off and have reflected the prohibitions of the Robinson-Patman Act and have inscribed within their restrictive injunctive terms, the words of the statute itself which have been complexed and notoriously obscure and animated interpretations and conflicts such as the one which divided this Court's decision in the Broch case by five to four judgment.
These orders as symptomized by the order in the instant case in effect present two major facets of difficulty.
First of course is the problem of the fairness to the respondent who is forced by the cease-and-desist order which merely reflect the terms of the statute to fathom the meaning of the order and to ascertain what it is really that he is prohibited from doing by the terms of the order -- for the orders as the order in the instant case in – in essential part merely reflects the words of the statute itself and does not explicate and go on to detail precisely what conduct is prohibited apart from the vague and difficult proscription of the statute itself.
And the second problem which is generated by an order of this kind as was noted Mr. Justice Black's opinion in the Morton Salt case in 1948 which was the first time one of these orders created a controversy before this Court.
The very vagueness and the obscurity of the prohibitions in the order in effect cast on the courts the responsibility which Congress invested in the Commission, namely of explicating what the statute means and of telling a respondent what it is that he may or may not do under the terms of the cease-and-desist order entered by the Commission.
Now, with respect to the Ochoa case which preceded the Court's consideration of this case, may I say just two things?
The distinction between the Ochoa case, where the respondent in effect was happy with the order that was issued by his stipulation and the instant case which has been in litigation for four years as manifest, in that case, there was complete consent between the administrative agency and the labor union as well as the employer that the terms of the order which was being entered was satisfactory to both and so that there can be no issue in relation to the Ochoa case as to whether any dictato fairness to the respondent was over stepped by the action of the Labor Board in entering the order that it did.
The only issue in the Ochoa case as we see it from the argument which has been presented the Solicitor General is the proper role of the courts in relation to the Labor Board's responsibility in effectuating the national labor policy, the question being whether the Court may in effect [Inaudible] itself into the issue where the Board has made its peace with the respondents.
In that case too, I understood from the Solicitor General's brief that the Labor Board, at least recently, has adopted the policy of entering broad orders only in particular factual situations where a broad cease-and-desist order is warranted by the record.
There is no comparable policy disclosed so far as the Federal Trade Commission is concerned as we have pointed out in our brief.
As a matter of fact, in one day last year, the Commission under the very provisions of the statute here at stake issued more than 40 orders in the broad language of Section 2 (c), the brokerage clause of the Act and addressed to trade practices by the affected parties with all the world.
And this is a type of order which we have here addressed to the respondent that Henry Broch and Company namely that in effect, in the words of Section 2 (c), in the words of the brokerage clause, he cease-and-desist for the future from violating Section 2 (c).
The first part of the order gives one interpretation of what the Commission conceives the brokerage clause to command and that was the factual controversy before this Court namely that Broch, not accept a lower rate of commission at the same time as the seller reduces his price to a buyer.
The second part of the order is a general injunction, which declares and commands the respondent to desist from violating the brokerage clause in any other manner against anybody else at any time in the future.
We respectfully submit, if the Court please, that in view of the facts and the history of this case as reflected in the administrative proceedings and particularly as reflected in the review proceedings which culminated in this Court's five-to-four decision on the merits that the Commission's order goes far beyond the necessities of the case and reflects a blanket prohibition which leaves the respondent to compete forever at his peril and in effect shifts to the Court the Commission's own responsibility of explicating just what it is that the respondent is prohibited from doing by the terms of the order which has couched in the vague and difficult statutory language of Section 2 (c).
Justice Felix Frankfurter: Mr. Rowe, I suppose when you say a five-to-four decision, you're stating a historic fact and not any relevant element bearing on what was really decided.
Mr. Frederick M. Rowe: No sir, I am stating a status, the hard fact from my view point but it has bearing insofar as the scope of the majority opinion defined the law as applied by the Court of Appeal on remand.
So far as the facts are concerned which gave rise to this proceeding and there is a no controversy about them at this stage, they related to an isolated transaction by the respondent, Broch, relating to his dealings on behalf of one seller in relation to one buyer, Canada Foods.
I don't know what inferences were suggested in the argument of the Solicitor General as flowing from the record or from this conduct as we read the record and the record is perfectly clear, the respondent's books and records were investigated at great length by the Federal Trade Commission.
He cooperated in the investigation.
As a result of this investigation, the Commission and the -- and it so testified on the record of this case decided that one transaction affecting one seller and one buyer out of the multitude of business transactions reflected in the respondent's books raised a legal question under the Act.
The Commission representative who checked respondent's books testified on the record in this case that no other transaction raised any question under the act in his mind.
He further --
Justice John M. Harlan: Where -- where is that sir?
Mr. Frederick M. Rowe: On old record sir, beginning at 19 and running over to 21.
The specific reference Mr. Justice Harlan is on page 21 in the middle paragraph where the witness testifying is Mr. Carmichael who is the Assistant Chief of the Federal Trade Commission office in Chicago.
This is on page 21 of the fact record.
And in -- and Mr. Carmichael stated in observing the different invoices etcetera, it appeared that throughout the year there was no violation that I could observe in the case of the different suppliers I examined.
And Mr. Carmichael, the Commission representative, also testified that he was shown by the respondent everything that he wanted to see in the course of his investigation.
And Mr. Carmichael, the Commission representative further testified that he had interviewed respondent at the time the respondent's books were thrown open to the Commission and that he was told by the respondent that he felt there was no violation of the Act.
He conceded that a violation of the Section until a broker's splitting his commission with a customer or passing something on directly to the customer and the Commission representative then argued with the respondent and told them that there was a violation also if there wasn't any payment directly by the broker, but merely the broker had received a smaller commission and the Commission representative testified that Mr. Broch volunteered that he saw the merit of this argument but that it had been his understanding previously that to violate Section 2 (c), there had to be a direct passing on and he was violently against such a practice etcetera, etcetera.
And the Commission representative went to testify on page 20 and said, “I do not believe Mr. Broch felt he was morally or legally guilty at all in this particular transaction with Smucker.
I believe he thought he was acting entirely within the so-called Robinson-Patman Act.”
The point of my reference to this Commission testimony Your Honor is to make perfectly clear that there is no controversy in this case about any scheme or any longstanding device or anything course of conduct of brazen violation of the statute but that what we have in the record at bar is a unique and isolated transaction on the part of this respondent who in good faith believed as he certainly had reason to believe in view of what previously had been a prevailing understanding of what the Commission was enforcing in this provision that he was not violating the Act by the single transaction which subsequently became the basis of the Commission's charges.
What is more, apart from in effect the exoneration of the respondent of other violations by the Commission's representative as reflected in this record, the Commission in its complaint limited itself expressly to the one arrangement as between the respondent here and the particular seller and the particular buyer.
The Commission's complaint spelled out the respondent's business that he represented 25 or more principals, but expressly confined itself in its charges to the respondent's representation of Canada Foods and sales to Smucker and the particular commission arrangements which existed at that time, which the Commission challenged as violating Section 2 (c).
The fear that might exist in some other case on another record, on the basis of the conduct charge and adjudicated of future violations, we submit that it's non-existent in this case and is affirmatively refuted by the evidence as reflected in the record.
What is more, again, as to bearing on the good faith or the proclivity for violations on the part of this respondent, his belief that he was acting within the law was certainly temporarily validated when the Court of Appeals set aside the finding of violation and which was ultimately reversed by a five to four decision by this Court.
I might say when the case was before this Court on the merits, it was subsequently disclosed by one of the Federal Trade Commissioners that the Department of Justice or the antitrust division of the Department of Justice had recommended that no review be sought here because it considered the Federal Trade Commission theory erroneous and that the case nevertheless was taken before this Court by the Solicitor General who as the Court may recall, declined to take a position on the merits before this Court and in effect merely stated that he was presenting the Commission's arguments.
Justice William O. Douglas: What is the relevance of that namely?
Mr. Frederick M. Rowe: The relevant --
Justice William O. Douglas: You start counting judges, you had more judges on your side than the Government did.
Mr. Frederick M. Rowe: The relevance of that Your Honor is not in terms of what positions the Government intramurally took but rather this that when the case was finally decided by this Court on the merits, the majority opinion by Mr. Justice Douglas was a very carefully, narrowly framed majority opinion which limited Section 2 (c) very carefully to the particular facts at bar and to the particular issue at controversy with express reservations of other theories of Section 2 (c) interpretation which this Court in its majority opinion declined to reach and declined to condemn.
Justice Felix Frankfurter: Are you arguing that the -- that the order that is sought here to be sustained travels beyond what the Court decided in that case?
Mr. Frederick M. Rowe: Precisely sir which is the reason, the basic reason for the challenge by the respondent before the Court of Appeals on remand in order to have the Court of Appeals confine the order within --
Justice William O. Douglas: I don't understand the argument, but I don't understand the argument that Department Justice had trouble making up his mind whether to take review or to seek review.
Mr. Frederick M. Rowe: Perhaps the reason for stating that is once again to indicate the closeness of the case, the difficulty of ascertaining whether there was or was not a violation involved in relation to the respondent's alleged proclivity for misconduct on the one hand and also as responsible perhaps, and we can only speculate, responsible for the very narrow compass of the majority opinion which was issued on the basis of the decision on the merits by this Court as subsequently reflected in the order.
Justice Felix Frankfurter: What you're really arguing is that the Court below conformed to the mandate of this Court?
Mr. Frederick M. Rowe: We certainly arguing Mr. Justice Frankfurter before the Court of Appeals that on remand, the order be conformed with this Court's decision on the merit and mandate.
The Court of Appeals did not accept our number one argument.
The Court of Appeals went off on another point.
Justice Felix Frankfurter: Your argument gets down to that that what they did was to carefully read, it's carefully framed in the Court opinion and then accommodate itself to its requirements.
Mr. Frederick M. Rowe: That was our contention before the Court and I believe the Court's judgement --
Justice Felix Frankfurter: Is it not your contention now?
Mr. Frederick M. Rowe: Yes, it is.
It is and that was the point we raised before the Court of Appeals in relation to the majority opinion and the law of the case in effect as declared by this Court.
To be specific, in several places, the majority opinion of the Court laid great stress on the necessity of having a discrimination in favor of particular buyers in order to constitute a violation of Section 2 (c) within the meaning of the majority opinion.
The Court twice pointed out that the vice of the transaction in effect was the reduction of the Commission by this broker to commit the seller and the broker to get a particular order from a buyer out of a discriminatory price.
Secondly, the majority opinion very carefully reserved and pointed out the fact that in this case the buyer was not shown who have rendered any services or engaged in any business methods which were deserving of recognition in the form of a lower price by the seller.
And after the decision by this Court and upon the remand to the Court of Appeals, it was these two points which the respondent expressed before the Court of Appeals as being in effect defeated by the Commission's blanket prohibition couched in the language of Section 2 (c) which did not require any presence of discrimination which in effect would prohibit conduct not discriminatory.
Justice William J. Brennan: Mr. Rowe, do I get this -- our remand was of course that further proceedings consistent with our opinion.
Mr. Frederick M. Rowe: Yes sir.
Justice William J. Brennan: And are you now suggesting that the -- that in effect opened up the order without regard to any attention you may have given to the form of a -- when it was before the Commission so that what was done by Court of Appeals to be tested here without reference to the prior history before this but only in respect of whether what we've done was consistent with our opinion.
Is that it?
Mr. Frederick M. Rowe: That is part of it Mr. Justice Brennan because as we will go on to detail, there were challenges to the premises of the order and there will be of course some question about whether the challenge was specific on our part before the Court of Appeals the first time around and before the Commission the first time around.
However, we do say that even apart from how precisely or specifically our challenge was the first time around, the majority decision of this Court declared the law of the case at that time --
Justice William J. Brennan: This is what I want to get cleared.
At least, you're arguing alternatively that we may set aside, ignore if you please, the whole history of the order up to the time we finally dealt with it here and then remand it for further proceedings.
That what was then before the Court of Appeals on our remand by virtue of the remand --
Mr. Frederick M. Rowe: Oh but the --
Justice William J. Brennan: -- was in effect an open order now that we treat it consistent with our opinion.
Mr. Frederick M. Rowe: With the opinion of the Court.
Justice William J. Brennan: That's one of your grounds?
Mr. Frederick M. Rowe: Yes sir.
That is correct.
Justice William J. Brennan: And now you're going on -- to argue that in the event.
Mr. Frederick M. Rowe: Yes sir, that there were challenges a --
Justice William J. Brennan: That satisfied the requirements.
Mr. Frederick M. Rowe: -- a prior requirement.
That satisfied the requirements at least in the context of the overall proceeding as it developed.
As I have stated, when the respondent upon the remand from this Court addressed himself to the Court of Appeals and sought action by the Court in light of the decision pursuant to the remand, the respondent pointed out that withstanding the careful limitations of the majority opinion of this Court, the order was a blanket prohibition which in effect penalized conduct by the respondent which was carefully carved out by the limitations of the majority opinion and hence in effect defeated the narrow limitations and the assurances which the petitioner drew from the majority opinion as it was finally framed and handed down.
As a matter of fact, I pointed out that the majority opinion stated that there was nothing at bar at the time which indicated that the buyer rendered any services for which he might be complicated in a form of a lower price.
This very reservation of a situation where services were rendered was defeated by the terms of the order which cut out, which excised from the language of the statute which the order in effect mirrored which cut out from that the reservation of payments made for services rendered and so, so far as the text of the order is concerned, even though services were rendered which according to the majority opinion might justify a lower price to the buyer, that would not, according to the terms of the order, be a justification for the price reduction.
Let me state the impact of that order on the business of the respondent in its present form.
So far as the order is concerned, this respondent cannot lower his commission fees in order to permit a seller to make a sale to a buyer at a lower price which is forwarded simultaneously with his fee deduction.
In a situation of this kind where the respondent represents 25 seller principals, this means that the seller principal can lower his price and lower a broker's commission by simply going to someone else.
He can make such an arrangement with another broker so long as the basic price is justifiable under the statute.
And yet, this respondent, subject to the terms of the order as drafted by the Commission cannot reduce his own commission in order to accommodate himself to such a situation and in effect must give up that business in a circumstance of that time.
Justice Charles E. Whittaker: That is, he may not do so under the order?
Mr. Frederick M. Rowe: He may not do so under the order.
Justice Charles E. Whittaker: But may he do so under the Court's judgment?
Mr. Frederick M. Rowe: As we read the Court's judgment Mr. Justice Whittaker of the majority opinion --
Justice Charles E. Whittaker: Yes.
Mr. Frederick M. Rowe: -- we stopped at the reservation that the particular price reduction by the seller was made in order to get a particular contract to favor a buyer who was not shown by services or otherwise to have deserved the lower price.
In the situation which I posit, I have assumed that the buyer was deserving of a lower price and that such as a lower price was available to him under the statute and yet under the order, the respondent is barred from accepting a lower commission in that situation.
Justice Charles E. Whittaker: I'm looking at this language on page 175 of 363 U.S.
This is not to say that every reduction in price coupled with a reduction in brokerage automatically compels the conclusion that an allowance to a new brokerage has been granted.
As the Commission itself has made clear for this -- such of reduction is tantamount to a discriminate -- discriminatory payment of brokerage depends on the circumstances of each case, etcetera, and there is -- I'll read you more on that page 176.
Mr. Frederick M. Rowe: Yes sir.
Justice Charles E. Whittaker: Now, therefore I'm wondering if you're arguing that the order is broader than our judgment (Voice Overlap) --
Mr. Frederick M. Rowe: Precisely Your Honor because under the opinion, the broker may well do this legitimately and yet, those assurances of the majority opinion are defeated by the order which says, “Without qualification and without regard to particular facts and circumstances that the broker may not accept a smaller commission when the seller lowers its price to the buyer.”
And to that extent, among other points, the order goes beyond what this Court approved in the majority opinion as being a boundary upon the liability established by Section 2 (c).
What is more as I -- to illustrate another aspect where the order goes beyond what the Court approved as we read it, we do not see in the majority opinion any disapproval of the practice whereby the broker makes a permanent arrangement to accept, like stock brokers do, a lower commission rate on larger transactions because the majority opinion carefully points out that it is a discrimination made to get a particular order which is the vice of the transaction.
Yet so far as the cease-and-desist order is concerned, the respondent is foreclosed and is prohibited from entering into a permanent arrangement whereby he would, like stock brokers do, accept a smaller rate of commission on more economical larger transactions.
And I have pointed out where the Court's majority opinion stressed the element of services rendered which were absent in the case when it was here on the merits, and yet so far as the order is concerned, the presence of these services would not nevertheless leave the respondent in violation of the blanket prohibition.
In short, because the order goes beyond the law as declared by the majority opinion of this Court, the respondent at that stage felt, at least justified that the issue before the Court of Appeals and before the Commission upon remand of this Court's decision which after all was the first interpretation in the history of Section 2 (c) by this Court was an issue which the Court of Appeals could consider and would certainly the Federal Trade Commission could consider at that stage since the law of Section 2 (c) as declared by this Court in its majority opinion of 1960 was certainly not precisely the law as it was understood prior to that majority decision in 1960.
I think what we have pointed out about the orders being in an excess of a judgment of this Court which codified the majority opinion is borne out and corroborated by the fact that the Commission's brief before this Court now, in effect gives belated assurances that the order doesn't really mean what it says in so many words.
For example at page 30 of the Commission's brief in a footnote, the Commission takes on these points which petitioner has raised with respect to the order and the footnote goes on to say well, “The order must be read in relation to the circumstances of this case and hence, it's not a blanket prohibition” and the footnote goes on to explain when we say that notwithstanding services rendered by the buyer, the broker would still be violating the order.
To that we brief in the footnote response, there is nothing in the order that such circumstances would not be considered if the proper case and if the proper occasion arose.
We respectfully submit, if the Court please, that now or when the case was before the Court of Appeals was a proper occasion to state what the order meant and not in a footnote to the Commission's brief which gives assurances to the respondent that in effect he shouldn't really worry about what the order says because when the proper time comes, it might not really be so prohibited and so blanket in its prohibition as the text of the order promulgates.
Indeed the very assurances in the footnote of the Commission's brief that the order doesn't really constitute this kind of blanker prohibition, these very assurances are refuted by current precedence of the Federal Trade Commission which take the position, notwithstanding the majority opinion of this Court, in this case, on the merit that you really don't have to have any discrimination in order to have a violation of Section 2 (c).
And which also takes the position that services performed by a buyer are irrelevant and immaterial as a matter of law in a proceeding alleging a violation of Section 2 (c), the so-called brokerage clause.
And in view of this current Commission precedence, which in effect dispelled the footnote assurances in the footnote of the Commission's brief before this Court, we feel justified in taking the position that not only does the order literally go beyond the judgment of this Court, if the judgment reflects the majority opinion and its limitations, but that -- these limitations and that this blanket prohibition in the order is not qualified by any extraneous consideration or any extraneous assurances which the Commission now tenders in a footnote to its brief before this Court to the effect that the order does not really mean what it says.
Justice Felix Frankfurter: Mr. Rowe, these -- the Commission acted, would say were inconsistent with the Court decision in Broch?
Mr. Frederick M. Rowe: Yes sir.
Justice Felix Frankfurter: Is that right?
And this has been taken since Broch?
Mr. Frederick M. Rowe: This has been taken --
Justice Felix Frankfurter: Where are they -- are they referred in your brief?
Mr. Frederick M. Rowe: Yes sir.
Justice Felix Frankfurter: Did the Commission deal with Broch?
Mr. Frederick M. Rowe: The Commission deals with Broch as I see it in a rather equivocal way.
The Commission cites Broch in a situation, which approximate the factual pattern of Broch.
Justice Felix Frankfurter: Discusses Broch?
Mr. Frederick M. Rowe: But does not apply the rationale of -- when it takes the position as it did, for example in the Venus Foods case which we have --
Justice Felix Frankfurter: Where are these requisites, Mr. Rowe?
Mr. Frederick M. Rowe: On page 15, we have cited the Venus Foods case, page 15 of our brief.
In that case, the Commission took the position that discrimination was irrelevant to the existence of a violation of Section 2 (c) of the brokerage clause.
I believe, although I'm not sure that the case is pending in the channels of judicial review but I could not say that for a fact.
However, that was the rationale of the Venus Foods case that discrimination is irrelevant and so once again, the assurances that are contained in the footnote of the Commission's brief that perhaps services if properly rendered would be considered, although it doesn't say that much.
It just said there's nothing in the order that says it wouldn't be considered, we believe that are vitiated by the current course of Commission precedence which do not regard and do not give it -- include considerations which were carved out by the majority opinion of this Court.
I might say that the very necessity for the ad hoc interpretation in effect by the Commission of its order and its brief before this Court points out the vice of this kind of bifocal order where the Commission in effect throws the statute at the respondent and says, “Do not violate the statute anymore” and at that point, the matter is left up to the Court in review proceedings to really fathom what the terms of the prohibition are.
This was the issue before this Court in 1948 in the Morton Salt case where at the end of the opinion and Mr. Justice Black pointed out in respect to one aspect of the order that the order was conditional.
It wasn't open-ended order and Mr. Justice Black's majority opinion pointed out that this type of thing where the Commission leaves an order open in effect shifts to the Courts the responsibility in subsequent proceedings to explicate the law which actually is the responsibility of the agency itself.
And I might say the Morton Salt decision has been followed within the recent few months by the Court of Appeals for the Second Circuit which also modified a Federal Trade Commission cease-and-desist order similar to the Broch case.
In that case, the unanimous ruling by the Court of Appeals for the Second Circuit, the Swanee Paper decision which we have cited in our brief, the Court of Appeals in effect said, “We disapprove of the practice where the Commission in effect throws the statute at the respondent and at the Court and leave -- leaves them to figure out what meaning is.”
And by reference to this Court's Morton Salt decision, the Court of Appeals for the Second Circuit in the Swanee Paper case also modified a Federal Trade Commission order, in that case, not by cutting it down to effect particular parties only but rather cutting it down, you might say horizontally by reducing its scope so as to reach only the particular type of trade practice which had been adjudicated before the Commission on the merits rather than the whole statutory prohibition which can include a multitude of different types of conduct.
Justice John M. Harlan: I'm not sure whether you answered or met the Solicitor General's basic argument here that -- by comparing the rate as before the Commission, you're out of Court.
I realize what you said before that you can't fragmentize to two things, but that doesn't seem to be a very persuasive argument, right?
Mr. Frederick M. Rowe: I'm coming to that sir and I would like to explicate that in some detail also.
Justice Felix Frankfurter: Well, when you say also, that's the heart of the business, isn't it?
Mr. Frederick M. Rowe: It is the heart of the business Your Honor but I feel I should outline the history of the proceedings before exposing what the nub of the case is from the jurisdictional point of view. Perhaps related to the question and I will come to the jurisdictional question of the --
Justice Felix Frankfurter: Only requiring a few more words on the part of counsel.
Mr. Frederick M. Rowe: Very well sir.
In relation to the relationship of the Courts and the agency and that is the jurisdictional issue, namely what is the proper role of the agency and what is the proper role of the reviewing court on review of an administrative cease-and-desist order?
That is the jurisdictional issue.
Collateral to that is the question really of whether the Commission by issuing blanket or boilerplate orders in effect shifts to the Court its own responsibility of expertise of framing orders based on its expert administration of the statute and based on its expert assessment of the competitive practices reflected by the record.
We think, and again, I shall go on to detail that -- that it ill behooves the Commission to lay such exclusive stress on its right and on its power and on its prerogative to issue these orders on the basis of its expertise when in effect the order is no more than a boilerplate version of the statute that shifts up to the Court of Appeals the meaning of the prohibition which the order incorporates.
Now as to the more specific jurisdictional point which has been described in the Commission's brief by reference to the principle of the exhaustion of administrative remedy, the point that the petitioner or the respondent on this case in effect didn't exhaust his administrative remedies and more or less comes in here as an afterthought, after midnight with their point which no one every dreamed really existed in this case.
In regard to that, as I started out by saying, it must realized that we are not dealing with a situation where we can separate the liability from the judgment.
It's not a matter of saying, “Well, we might have been liable, but the penalty is too high, $50,000 is too much” and whereby then someone could say, “Well, you should have thought of that sooner.”
The order in this case is virtually in paragraph 2, a verbatim copy of the statutory provision.
Right from the outset, from the fact -- from the time that the complaint was filed, the respondent resisted that allegation and resisted that theory which culminated in the Commission's judgment as reflected in its order.
The respondent contested liability when the issue was in hearing before the trial examiner of the Commission.
The respondent stated that as a matter law, the acceptance of a lower rate of Commission by a broker at the time the seller got a lower price was not an offense against Section 2 (c).
Precisely that is what the order says. Perhaps the respondent could've drawn a picture before the examiner and said, “We are attacking this theory of the Commission, not only as respects the liability but we're attacking the same thing as respects the order.”
Perhaps in retrospect that would have been the more cautious thing to do.
The fact of the matter is, however, that my contesting the liability before the examiner and before the Commission as reflected in the order, the respondent in effect contested -- he reflects on that liability in the cease-and-desist order.
What is more again in relation to the principle of exhaustion of administrative remedies which is a sound principle and there is controversy about that here.
We understand that principle to be not a boggy or a quibble but a reasonable instrument for ensuring that the agency gets a first crack at the issue which ultimately goes before the Court so that the agency can apply its expertise to the problem and can avert errors before there is any necessity for the Court to get in to the picture.
There is no controversy about that aim of the principle and we have no quarrel with it here.
We think the counterpart of that principle is that a respondent should not lay back or hold back and wait till midnight before he comes up with a legal argument which defeats all of the previous administrative proceedings if he thinks of it for the first time before the Court.
Justice Felix Frankfurter: Mr. Rowe, that's [Inaudible] this question, but I'm puzzled of the number of cases to which this is one in which solid interest as I assume the respondent here is, the Swanee Paper Company was that sizeable interest, interest of substantive law in substance represented presumably by competent counsel to lead that counsel to be parsimonious in the objection they raised that they don't use a second arrow and the content of self of a single arrow.
How do you account for that?
Mr. Frederick M. Rowe: Mr. Justice Frankfurter, in the context of this case, first of all, when we came before the Court of Appeal the first time around, the respondent did --
Justice Felix Frankfurter: I'm talking about what transpired before the Commission?
There are all these serious num -- quite a number of cases of this sort, aren't they?
And it seems to be almost -- what shall I say -- a habit, if you forgive me for repeating, a habit of parsimonious objection.
Now that isn't usual tendency of the merit and counsel.
Mr. Frederick M. Rowe: One answer and I don't know whether it is a god or an adequate answer sir is that before the Commission, the practice of exceptions did not exist at the time this case was before the Commission.
All that the Commission required was a statement of questions involved and to be argued on the appeal.
It wasn't a matter of detailing point per point where the care and caution of the responsible counsel could then -- could come into play to be complete.
It wasn't that kind of thing at all but rather a statement of the questions involved and to be argued.
Justice Felix Frankfurter: But you saw the order when they framed it against your client, didn't you?
Mr. Frederick M. Rowe: We saw the order and we attacked the premises of the order and each ramification.
We said that this is an isolated transaction of [Inaudible].
It does not warrant a commission proceeding in the public interest to single out a particular transaction on the part of this respondent.
We also said that there's no violation for a respondent broker who accepts a lower rate of commission to facilitate the reduction in price by the seller to the buyer.
Justice Felix Frankfurter: But you didn't go on and say, furthermore this is so isolated in instance -- an incident in our view that the Commission does wrong in buck shooting this -- in making a comprehensive universal of prohibition.
Mr. Frederick M. Rowe: The Commission Your Honor had been buck shooting in this area for some years.
Perhaps in retrospect, it might have been more imaginative, more cautious, more prudent to have added on to the list but certainly at the time and certainly before this Court's decision on the merits in this case, it would have been a -- in our view, a feudal gesture.
It is when this Court decided this case on the merits, when Section 2 (c) was interpreted by this Court for the first time and the fashion that it was interpreted that it was not a matter of the Commission being completely wrong on liability which we certainly thought and in retrospect, we are sorry that we thought was an evident only then when the law was narrowed by the majority opinion.
It became clear that apart from what the statute now meant, the order went beyond the judgment of the Court because of the Court in its first interpretation of Section 2 (c) had construed the statute to be of a narrower import than the Commission's order.
Before that, the order was the same as the statute, only then was the order larger than the statute.
Chief Justice Earl Warren: Would you have raised -- raised this question before the Commission and had it decided against you and then had gone to the Court of Appeals on it the first time, couldn't you have had the final decision on this matter the first time it was up in this Court?
Mr. Frederick M. Rowe: Well, Mr. Justice, before the Court of Appeals, we did refer to the fact that the Commission's order was vague, exceeded the language of Section 2 (c) and controvert -- and it was in conflict with the Sherman Act.
We stated that in our bill of exceptions in effect before the Court of Appeals, but certainly the brunt of the attack is and was that the Commission at that time had interpreted the statute in excess of the congressional language and purpose.
And the order merely doing the same thing, we certainly felt was not a separate ground of challenge except as we did list it in our list of exceptions, but rather that the arguments so far as the order was concerned was included and was subsumed within the argument addressed to liability which at that time was the same as the order.
Chief Justice Earl Warren: Was there anything in the record to indicate why the Court of Appeals in this latest proceeding denied you modification of the order and thereafter on its own responsibility did exactly what you asked them to do?
Mr. Frederick M. Rowe: I can only speculate as the Solicitor General did but perhaps I can speculate a little better because the Court of Appeals in this case did not give petitioner the relief which the petitioner had asked for.
We asked for a complete setting aside of the Commission's order and then went on to argue that apart from that the judgment of the Court as giving effect to its majority opinion was an independent reason for limiting the order and so perhaps since the Court didn't want to give us complete relief, it gave us what relief it did give on its own motion.
I have no other explanation than this.
Chief Justice Earl Warren: Suppose the -- suppose the Court had granted you -- you the relief --
Mr. Frederick M. Rowe: That's what he's saying.
Chief Justice Earl Warren: -- instead of doing it on its own motion, would the case be in any different posture for us?
Mr. Frederick M. Rowe: No sir.
I treat the fact of the Court's acting sua sponte to not create any significant difference for purposes of this Court.
It could have done it by granting in part the respondent's relief rather than denying it in its entirety and then coming up with some relief of its own.
Justice William O. Douglas: I will suppose that the only issue left open by our decision with the scope of the decree.
Did you reargue the merits down there on remand?
Mr. Frederick M. Rowe: We didn't reargue the merits.
We did say, and Mr. Justice Douglas, that there was evidence in the record which met some of the qualifications expressed in this Court's majority opinion.
We were -- the Commission said we were rearguing the merits but I think that's argument.
The scope of the order was the principle thing.
We requested that the order be set aside or limited in relation to the majority opinion.
I might also say this coming back to Mr. Justice Frankfurter's point, whether the principle of exhaustion of administrative remedies was in this case satisfied or flouted.
As I understand the principle, it is that the agency had a fair chance to pass on the issue before it gets to the Court.
Now what we have in this case is not only an admission, an express admission by the Commission in its brief that it did consider the scope of its order, which I should think would be satisfying the point that it didn't have a chance, but in addition, the Commission declined on two occasions, further opportunities before the Court of Appeals on the remand to reconsider its order.
And so if the point of the principle is that the agency not to be ambushed by a surprising legal development which it did not have a chance to consider, certainly in this case, the point is met by the fact that the Commission admittedly did consider the scope of its order in light of the evidence and number two, when it again was given opportunities before the Court of Appeals to consider the order, it declined these opportunities.
And I would like to refer briefly to our motion before the Court of Appeals because I believe the Solicitor General in his argument might not had done complete justice to what the opportunity was that the Commission had.
We stated before the Court of Appeals, and this is at the page 49 of the new record, the small record, if the Court should conclude that the issues tendered by petitioner were non-sufficiently explored by the Commission at the administrative level, the proper course would be to remand to the Commission for further appropriate consideration rather than to foreclose all opportunity for a ruling on the merits.
The reason we said that Your Honor was that when it was suggested that one alternative way to proceed was to remand for further Commission consideration.
The Commission came in to the Court of Appeals and said, “The Court has no power to consider this issue.
It is all closed because the petitioner didn't raise it the first time around at the administrative level” and it was in response to that argument by the Commission namely that the Court of Appeals had no power to look at the order at this stage that we came forth and suggested, “Well, if this is so, if the Commission itself wants to consider the orders or more in light of the majority decision here, it should do so.”
Justice John M. Harlan: Did the Commission also argue alternatively that there was power in the Court of Appeals to consider that the order should not be modified.
Mr. Frederick M. Rowe: No sir.
The Commission had no time before the Court of Appeals defended the order on the merits.
Justice John M. Harlan: It stood simply on the so-called jurisdictional --
Mr. Frederick M. Rowe: They stood on the jurisdictional ground, yes sir and so actually, the Court of Appeals had no views of the Commission as to the merit before it at the time he'd made his modification.
And one additional point I would like to mention in that connection, the Commission at no point petitioned the Court of Appeals for reconsideration that its order was modified.
To be sure, the order of the Court is rather naked and Delphic, it doesn't have any opinion attached to it and we are left to speculate as to the whys and wherefores.
But unlike the Labor Board which in the Ochoa case went back to the Court of Appeals and secured from the Court of Appeals an elucidation and an explication of its action, the Federal Trade Commission in this case stood fast for the second time.
And so what is before this Court is necessarily a ruling by the Court of Appeals which did not have the benefit of a Federal Trade Commission explication as to its order.
As a matter of fact, the first explication by the Commission for its order is in the footnote of the brief filed by the Solicitor General for the Commission before this Court in which we are sure that the order isn't really as broad as the text that might dictate because some of these other considerations might be taken into account at a later date.
Justice Felix Frankfurter: Mr. Rowe, will you -- please give me some pleading information about the power of the Commission to review its order in relation to the petition for review.
As I read 15, the 59 Amendment, 21 (b), as I read it and therefore I ask you if I'm right about that, the Board asked the -- the Commission section as you deal generally with Commissions and the Board, but the Commission has power from its motion to reconsider, do I suppose to reconsider it's order prior to the finding of a review in the Court of Appeals?
Once a petition for review is filed, I should think the Commission can't inject itself in the situation, can't it?
Mr. Frederick M. Rowe: I believe I have an answer to that Mr. Justice Frankfurter in that, the new amendment of the Clayton Act in 1959 --
Justice Felix Frankfurter: That's what I'm reading from.
Mr. Frederick M. Rowe: -- makes that Act synonymous with what the Federal Trade Commission Act was previously and that Act has been construed by the Court of Appeals for the Fourth Circuit to the effect that the Commission upon remand --
Justice Felix Frankfurter: On remand, yes.
Mr. Frederick M. Rowe: -- upon a conclusion of -- of a review proceeding may modify its order.
Justice Felix Frankfurter: On remand, but if there is a -- but may it -- may it take any action after there is a petition for review filed during the statutory theories.
Do you say yes?
Mr. Frederick M. Rowe: It may and it has --
Justice Felix Frankfurter: Let me read it to you.
After the expiration at the time allowed for filling a petition for review, if no such petition has been duly filed within such time, the Commission may [Inaudible].
Mr. Frederick M. Rowe: The Commission in several cases during the pendency of judicial review voluntarily before the Court of Appeals and even before this Court modified its order by, you might say voluntary consent, before the Court, during the pendency of the case.
Justice Felix Frankfurter: The Solicitor General so indicated but I -- alright, if that's what the statute -- to be construed.
Judge Moore in the Swanee case says, Swanee did object to that and at the time this was filed, the Commission could have modified.
Swanee did object to the order, however in its petition to review and at the time this was filed, the Commission could've modified its order if it had so wished and if [Inaudible] 15 U.S.C.A., 21 (b).
So I went to 15 U.S.C. 21 (b) but that isn't the way I read it.
In reading, I'll be wrong with it.
You tell me the practice says -- practically says the opposite wasn't what the statute said, I'll accept your word for it.
Mr. Frederick M. Rowe: If Your Honor please, without having the exact word of the statute before me, the Commission before the Courts of Appeals and before this Court --
Justice Felix Frankfurter: I've read (Voice Overlap) if that the word -- the exact words were, after the expiration at the time allowed for filling a petition for review, after the expiration of that time.
If no such petition has been duly filed within such time, now do they read out the “if” clause?
Mr. Frederick M. Rowe: Perhaps the solution lies in what the word modify means.
Perhaps when the Commission comes before the Court of Appeals and says, “We drop this part of this order.”
That isn't the modification and perhaps that maybe the answer to the riddle because in a number of cases, we have cited some in our footnote the Commission before the Court of Appeals, and as the matter of fact, before this Court only three years ago in the Standard Oil case by virtue of the brief of the Solicitor General said, “We don't want this part of the order anymore.
We abandon it” and in effect, that works the modification without being so and (Inaudible).
Justice Felix Frankfurter: I suppose speaking for one if I saw something like that.
I take his words first and I wouldn't go to the statute, but then you've taken this or rather Judge Moore has taken me to the statute, I might say I'm (Inaudible) by having it get some more doctrines upon it.
Mr. Frederick M. Rowe: After this stage Mr. Justice Frankfurter and related to (Voice Overlap) --
Justice Felix Frankfurter: Any how that wouldn't -- doesn't turn -- determine this case one way or the other.
Mr. Frederick M. Rowe: No sir, it does not but I believe it points out that the Commission even at this stage, at this very moment, before this Court as in other cases if it were inclined to do so could modify its order and could concede that part of its order was not valid in reference to the facts of this case and on this record.
Justice Felix Frankfurter: And in all events, you're not like the Swanee case because according to my reading of it, in the Swanee, there's an objection to the order upon filing of the petition for review.
Mr. Frederick M. Rowe: As in -- in our case if Your Honor please.
Justice Felix Frankfurter: [Inaudible] isn't it?
Mr. Frederick M. Rowe: Upon our case in the Court of Appeals even on the first petition, the respondent pointed out and this is at page 14 of the record, the order of the Commission is defective --
Justice Felix Frankfurter: (Voice Overlap)
Mr. Frederick M. Rowe: The fact record sir, page 214 of the fact at the very bottom, Number 7.
The order of the Commission is defective and that it is vague, exceeds the statutory limits of Section 2 (c) and is applied with conflict with the Sherman Act.
Justice Felix Frankfurter: So your objection, isn't that it's vague, that it's too clear.
Mr. Frederick M. Rowe: Our points are before the Court of Appeals was that it exceeded the limits of Section 2 (c) and certainly when this Court's majority opinion confined the limit of Section 2 (c).
At that point, the breadth of the order which went beyond what the majority opinion construed Section 2 (c) to be was the principal basis for our challenge before the Court of Appeals.
In conclusion, I would like to say this and this is perhaps a very general statement but -- of applicability to cases as symptomized by the instant case.
The Federal Trade Commission has been invested with tremendous responsibilities by the Congress to regulate the area of competitive practices and has belonged in the application of these statutes best in the expertise which has been conceded to it by the Courts.
We respectfully submit that it does no honor to the Commission's expertise to issue boilerplate orders in the words of the statute and leave the respondent in the dark as to their meaning and in effect shift to the reviewing courts the task of fathoming the meaning of the order in the context of review and enforcement proceedings.
Chief Justice Earl Warren: Mr. Solicitor General.
Justice Felix Frankfurter: Mr. Solicitor, may I put you to my problems and then I'll leave you alone.
One, would you care to comment on the repeated suggestion by Mr. Rowe that these orders are boilerplate, namely that they're automatic, mechanical things, secondly, I invite your comments on his comment on your footnote on page 31, namely that this order put them to jeopardy in finding out what is right to (Inaudible) --
Rebuttal of Cox
Mr. Cox: Yes.
Justice Felix Frankfurter: -- and by careful conscientious businessmen pursue restriction from doing business which proceedings may show are not within the contemplation (Voice Overlap).
Mr. Cox: May I -- may I comment on that first and in a slightly larger context because that -- I will deal with it specifically but that was the part which I rose to deal with anyway.
There's been a suggestion or at least a question raised as to whether the modification made by the Court of Appeals was an attempt to conform the order to the opinion of this Court and I must respectfully submit that that clearly is not what the Court of Appeals did and would equally say that the effort to change the order was in no sense an effort to clarify any of the points as to which Mr. Rowe says it was uncertain.
Now, let me be specific.
In the opinion of this Court, there are three points on which Mr. Rowe sees this.
One, in the course of his opinion, Mr. Justice Douglas called attention to the fact that this was an ad hoc passing on of brokerage in an effort to get a single big sale.
And Mr. Rowe says, “Well, then maybe we ought to be able to pass on brokerage in connection with big -- all big sales.”
And that's a point which the Supreme Court did not adjudicate and the order should be modified to clarify that issue.
Second, he says that with respect to cases where the buyer may render some services, that if that -- the Court held that situation to open and did not say whether brokerage could be passed on in that situation, I would most effectively disagree with him.
I think the -- no, in that case, the Court did hold that situation open.
It's the third one where I would disagree with him.
Third, he says there maybe situations where their economies in connection with the sale to a particular buyer and that those savings and costs might justify passing on of brokerage.
It seems to me that the Court clearly did say no to that point.
In any event, when Mr. Rowe went to the Court of Appeals, I think he had -- we've -- would've disagreed but possibly had a plausible argument that the language of Section, paragraph 1 or paragraph 2 of the order was broad enough to forbid passing on brokerage under those three circumstances which were perhaps held -- which were held open in two cases, perhaps by the opinion of this Court, but those are modifications that the Court of Appeals refused to make and the order -- the mandatory -- the parts of the order dealing with what kind of practices you can follow were left in turn by the Court of Appeals.
It didn't change those.
If it had been deforming to the order of this Court so as to leave it open whether those practices were permitted or forbidden, it would have changed the part of the order that deals with what it is that Broch is forbidden to do.
Justice Felix Frankfurter: What if you cut down the incidents of the applicability of what this Court had forbidden and what the Court of Appeals carried out then you necessarily cut down the area of applicability.
Mr. Cox: But not as far as you would have cut it down if that had been your theory.
It is true that if it is too broad in these respects then he has heard somebody order it is now issued but not as much as he would have been.
But the point that -- the point of the Court of Appeals dealt with is the point that was never raised in any stage before was simply the inclusion of the words to any other buyer.
Now, second with the respect to the -- whether this -- the order is uncertain in these respects, what we were trying to say in our brief is this, add a little preference.
First, it is quite clear under the prior decisions cited in Mr. Justice Douglas' opinion and under the Commission's ruling that the fact that the buyer has rendered some services is not a defense in a case under Section 2 (c).
It's true that Justice Douglas did not pass on that but it's been passed on plenty of time by Courts of Appeals.
Similarly, it's quite clearly the Commission's view that the fact that there are some alleged economies in connection with the sale is not a defense under Section 2 (c).
There's no question about what the order means and what it forbids in the Commission's view.
What we were seeking to say was that if later this question comes up and it turns out that the Commission is wrong, the statute has some exceptions that the Commission didn't foresee, then as stated by Mr. Justice Clark in the Ruberiod case, the order can be read to be cut down and that it won't interpreted to cover everything conceivably within its terms.
Justice Potter Stewart: But in the meantime, in the meantime, this petitioner will be in contempt for actions which (Voice Overlap) the legality of (Voice Overlap) --
Mr. Cox: But he won't -- in this case, he would not be (Voice Overlap) --
Justice Potter Stewart: (Voice Overlap) --
Mr. Cox: In this case, he would not be in contempt because this order, a violation of this order cannot result in contempt.
Justice Felix Frankfurter: Or at least it will cut down (Voice Overlap) --
Mr. Cox: You see this is under the old statute.
Justice Potter Stewart: Oh, yes, yes.
Justice Felix Frankfurter: But at least, it will cut down his freedom of business action, so what may turn out then in a law of freedom of action under the law --
Mr. Cox: Well, if --
Justice Felix Frankfurter: Now, if he is doubtful, he will -- a careful businessman or a conscientious businessman might (Inaudible) take a chance or --
Mr. Cox: Well, he knows perfectly well that what the Commission's view of the law is and --
Justice Felix Frankfurter: So that that's wrong somewhere then?
Mr. Cox: But --
Justice Felix Frankfurter: They can (Voice Overlap) --
Mr. Cox: Oh alright, these points, what the Commission's view is, it's perfectly clear Your Honor.
There's no uncertainty about the Commission's view.
There's no uncertainty about the view of the Court of Appeals.
I see my time has expired.
Justice Felix Frankfurter: Well, would you --
Mr. Cox: Oh excuse me.
I think that it is not fair to say that the Commission's orders are boilerplate.
The Commission -- the suggestion that's made, in Mr. Rowe's brief, this is a recent habit of issuing much broader orders.
It is true that the Commission feels generally speaking that the inference from a violation of Section 2 (c) is that the likelihood of other violations of Section 2 (c) is so great, but unless something special appears, the prohibition should be as broad as that provision.
I point out that it is itself a comparatively specific restriction.
Justice Felix Frankfurter: Is there (Voice Overlap) --
Mr. Cox: On the other hand --
Justice Felix Frankfurter: -- the argument if I may, that is, if the argument that you made in reference to an employer's anti-union buyer to be analogized to this situation?
Mr. Cox: Well, I would -- I would think that fairly could be.
I speak with less conviction on that.
In one case I feel that I can speak with something approaching the expertness of the Board.
In this case, I feel that I don't have the knowledge, but it seems to me that the same argument would be a rational and reasonable one.
Now, as I understand the Commission's view that although it's a normal case, it would feel that a violation of 2(a) should result in the kind of order -- 2 (c) should result in the kind of order entered here that if there were some special circumstances, it would consider them and it might issue a narrower order.
Suppose for example that Broch were buying only for a particular firm then the order would not be general in relation to these purchases and there are cases that indicate that.
Equally if he were selling only for a particular firm, it would not be general and one can imagine other cases where there were special facts.
So I don't think that it is quite true to say that they are invariably boilerplate, although I would not want the Court to go away thinking that the Commission held a review other than that a violation of 2 (c) normally should result in an order of that scope.
Justice John M. Harlan: Could I raise one more question?
Assuming that the view should be taken that the Court was not barred in considering (Inaudible) -- would you care to comment on the questions for whether there's any practical use in sending this back to the Commission?
Mr. Cox: Well, I think that assuming that it were not barred, that -- I hesitate to comment because I can't -- I would like -- I don't like to say yes --
Justice John M. Harlan: Well --
Mr. Cox: -- when I am not able to think of the circumstances --
Justice John M. Harlan: Well, could I --
Mr. Cox: -- that might be developed under this theory.
Justice John M. Harlan: Can I -- can I make this comment and then see whether you would think this was unreasonable comment.
The Commission has been defending its order across the board here, to use a colloquialism.
It's done in it in the Court of Appeals, it stood on the question of power, it's taking the same position up here through you because you argued as an alternative proposition that if there was power, the order was alright.
Therefore, what practicable reason would there be assuming that one would disagree with you on the question of power in sending with Com -- in sending the order back, sending it both back?
Mr. Cox: Well, I -- I can't in good conscience say that there are other circumstances that might be developed.
There may well, I don't feel as I -- I'm well enough advised to -- advice the Court on that.
There is another reason Mr. Justice Harlan that does suggest to me that that would be a thoroughly appropriate course.
Looking at this problem, a problem of excessively broad orders in somewhat broader perspective, I am persuaded at least that if there is a problem in this area and the communications were this case several terms goes suggested there may have sometime to be that the place to correct it is before the agencies and that the one -- and that is partly the responsible of counsel who appeared before the agency because what you are to do is to get the agencies to direct their minds to this problem.
And then one of the first ways to do that is to make sure that the rule that the agency must have an opportunity to consider is enforced.
Now, sending this back would at least go part way to make sure that the agency got the opportunity.
Then if the agency is issued boilerplate, well of course it's an opportunity for the Courts to step in.
But the thing has been brought back to the critical point and I would think as a matter of general judicial administration quite apart from the peculiarity of this case that that would be a way of emphasizing, that the things must be raised for the agency rather than encouraging counsel to drag out, especially a trade regulation proceeding by picking it up piecemeal at various stages as they think of objection.
Justice Hugo L. Black: Of course, the other side as a dragging out is if there'd be considerable dragging out of that conclusion.
That of course is -- fall in this case.
Mr. Cox: Yes, but I think the total dragging out overall that -- would be less and if Broch is as good as Mr. Rowe says, he is -- isn't ever going to violate again, there'd be no great harm.
Justice Hugo L. Black: Must we constitute -- continue to say raise before the [Inaudible] the rule required should be raised at the time the appeal is taken to the full Commission.
Would you be making this argument that this had to be a rigid application as a rule if they had raised it before the agency itself?
Mr. Cox: You mean by a petition for rehearing?
Justice Hugo L. Black: Yes.
Well, the agency, the agency – [Inaudible] they forget -- didn't for some reason didn't raise it on that appeal from the hearing officer to the Commission.
Mr. Cox: Well, I would think my case will be quite -- quite different then the question would be whether it was unreasonable for the agency to stand out of proposition that you must raise such a point the first time, but it would give the agency all the opportunities to consider it.
Justice Felix Frankfurter: Well -- go on.
Mr. Cox: That -- that really ended the sentence.
Justice Hugo L. Black: Well, you wouldn't -- I didn't gather through your argument that you thought that it must be raised, how could it be raised before the hearing officer?
I mean timing up, therefore his report comes to the Commission.
Mr. Cox: As I understood Mr. Justice Black, maybe I misunderstood him, he asked me to consider a case in which the respondent did not object to the scope of the order at the time the hearing officer made his report.
Justice Hugo L. Black: Which is the time the rule required.
Mr. Cox: That's correct.
But asked me to consider, asked me whether I would be making the same arguments here, if the fact were that Broch had raised this question before the Commission in a petition for rehearing and I said that then I thought that many of the arguments that I made here would not be applicable that then would be -- I still make the argument that the interest of orderly administrative process required him to conform to the Commission's rule and the Commission adopted unfair and enforcing its rules, but the argument would have to be somewhat different.