Florida Citrcs Mutual

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IN THE MATTER OF FLORIDA CITRCS MUTUAL ET AL.

Doclcet 6074. Order an,l opinions, May 10 , 1954 Before Mr. J. Earl Oox and Mr. Everett F. Haycraft hearing examiners.

Mr. Fletcher G. Oohn and Mr. Le'iois F. DepTO for the Commission. Mabry, Reaves, Oa.rlton, Anderson, Fields Ward and Mr. Oounts Johnson of Tampa, Fla. , and Mr. Robert E. Fleet of Washington D. for respondents.

Mr. A. Y. Milam of Jacksonville, Fla., for Florida State Chamber of Commerce, intervenor.

Mr. William H. Dial of Orlando, Fla., for Florida Bankers Ass intervenor.

ORDER SUSTAIXING Appeal OF COCNSEL IN SUPPORT OF COMPLAINT REVERSD!G INITIAL DECISION, AND RE Dlng CASE TO IIEARlNG EXAJlHNER This matter coming on to be heard by the Commission upon an appeal, filed by counsel in support of the complaint, horn the hearing examiner s initial deeision dismissing the complaint herein withoutprejudice; and The Commission having decided, for the reasons set forth in the written opinion which is being issued simultaneonsly herewith, tlmt said initial decision was improvidently isoned: It i8 or-dend That the appeal of counsel in support of the complaint , and it hereby is, sustained.

It is further ordered That the hearing examiner s initial decision filed .June 12, 1953, be, and it hereby is, vacated and set aside. It is further ordered That this case be, and it hereby io, remanded to the hearing examiner with instructions to proceed in accordance with t.he Commission s opinion COlImissioner Howrey dissenting in part but concurring in the result, and Commissioner Mead not part.icipating. OPINION OF THE COJlLiHSSION :MASO , Commissioner:

This matter is before the Commission on appeal by Government counsel from a hearing examiner s order dislIissing the complaint. The initial decision of the examiner grant.ing the respondents' motion to dismiss prior to trial is reversed. The case is remanded for disposition in accord with this opinion.

Opinion 50 F. T. C.

The facts of record are as follows:

The complaint herein, issued December 15, 1952, charges respondents with violation of Section 5 of the Fedeml Trade Commission Act. Amongst other things, it charges respondents agreed with shippers canners, packers and concentrators of citrus fruits to Jlx the prices and control the interstate shipments of said fruits, and to restrain the trade of other growers.

The complaint states that said practices are beyond the protection and immunities from Federal antitrust jurisdiction granted to agri- 1 andcultural marketing cooperatives by the Capper- Volstead Act other related Federal statutes. Under these Acts growers are permitted to form marketing associations through which they may perform all of the necessary practices incident to the processing, sale shipment, marketing and distribution of their products so long as they do not include in such efforts the participation of third parties that is, in this matter the said handlers, etc., to whom title to the products passes from respondents.

One of the averments of this complaint was that the Commission had "reason to believe" it was in the public interest to bring suit against respondents for an alleged conspiracy to fix prices and restrain trade.

At first respondents /ied a general denial. This answer has not been withdrawn and stil controverts the essential allegations in the complaint. After some delay, during which efforts to adjust or set1Jc the issues were attempted and failed, the respondents tendered a motion to dismiss, challenging only the Commission s averment that the suit was in the public interest.

From the state of the record it is diffcult to determine whether respondents wish to stand on their presumption of innocence and await the introduction of evidence by the Government, or seek confession and avoidance. as they do by their motion to dismiss. All we are certain of is that reopondents feel the case lacks public interest. This is a feeling common to all defendants. In issuing the complaint herein the Commission, acting in its administrative capacity, made the preliminary determination that there wero reasonable groundo to believe respondents had conspired to restrain trade and that it appeared to the Commission the proceeding would be to the interest of the public (Section 5 (b)). That it was in the public interest for the Commission to challenge said alleged conspiracy was a natural sequitur. On this basis a complaint was filed on December 15, 1952.

1 Act of Congress Feb. 18, 1922, 7 U. S. C. A. 291 , 292. FLORIDA CITRUS MUTUAL ET AL. 961 959 Opinion Prior to the issuance of the complaint and prior to trial, the adminexistence ofistrative discretion of the Commission regarding the it is subject topublic interest is not subject to review. After trial, review by the courts. The respondents' motion to dismiss on the ground of a lack of public interest, therefore, does not present an issue on which a hearing examiner has authority to rule. An examiner has no power to sit in judgment on the discretionary deeisions of the Commission within the range of the administrative process. Even courts are limited to challenge only the abuse of administrative discretion. To hold otherwise would subvert the very policy of the Act from which the Commission derives its discretionary powers. And the authority to sub-Commission has not delegated to its examiners any stitute their discretion for that of the Commission. An examiner s cardinal function is to sit in a judicial capacity. He may (subject to review by the Commission) dismiss a complaint if in his opinion the facts alleged do not state a cause of action. This is an initial adjudicatory function delegated to the examiner. His decision to dismiss a complaint is based upon his review of the facts and his review of the law. But he may not search into the mental processes of the Qommission to determine whether it rightfully concluded the public interest justiJled complaint, for to do so he would have to examine the statements, affdavits, reports, etc., of the Commission s investigators on which the averments in the complaint are founded.

To students of Government polity there are quite obvious reasons why the Commission cannot delegate these administrative functions to an examiner.

In the first place the criteria as to the quantum and quality of evidence used by the Commission in establishing the averment in the complaint is that it has "reason to believe" and that a proceeding appears to be in the public interest. These criteria are different from those used by a hearing examiner of the Commission when trying issues controverted by the pleadings in the trial of a case. Then to establish the element of guilt the final decision must be based on the preponderance of the evidence.

But there is, however, another more compelling reason why we cannot have examiners exercising the above administrative function. commerce are not easy to detect. MostUnfair acts and practices in of them are uncovered by competitors or consumers injured by the alleged illegal practices of the proposed respondents. To publicly arraign injured parties or other informants against tlleged law vio- 1 See fi T. O. v. IllcsncT 280 U. S. 19. 443- - 57 962 FEDERAL TRADE COMMISSION DECISION'S Opinion 50 F. '1' . C. lators prior to the presentment of complaint would discourage the institution of any corrective proceedings.

The Commission s original administrative determination of public interest is predicated on evidence presented to it by its ill \'estigating attorneys. This preliminary marshalling of evidence is not subject to public scrutiny and necessarily has not met the test of an adversary proceeding. It is fundamental to the Anglo-American system of jurisprudence that in the initiatory stage in any proceeding, whether civil or criminal, the issuance of a complaint is of necessity based on ex parte presentations. If the Commission had to litigate the question of public interest prior to trial of its complaint in the manner the hearing examiner here seeks to innovate, the orderly trial of the controverted issues would be gutted. Kor may the examiner sort out and try any single averment in a complaint to the exclusion of all others that are at issue. This applies with special force to the question of public interest, for the answer to that question lieo in the totality of all the facts in the case.

Turning now to the question of mootness presented by the proposed pretrial "adjustment"--so much of the transcript of the lJearings was taken up with this subject that it is in the interest of clarity that the Commission comments on matters not properly part of the offcial record.

It seems to us that the adjustment or setttlement contemplated in the Administrative Procedure Act is addressed to the speedy disposition oJ causes where both the prosecution and the respondents can agree to its terms. It is true these efforts to adjust or settle are under the aegis of the hearing examiner, and certainly his good offces and interest in developing such proposed settlements can do much toward expediting the couroe of justice. In such pretrial proposed settements, the hearing examiner s preliminary endorsement or rejection ,will be considered by the Commission in its final decision. In this connection the Commission has noted with approval the recent recommendations on this subject adopted by the President's Conference on Administrative Procedure.

But settlements or adjustments are, as their name implies, agreements. If a settlement proposed by a respondent does not come forward with the approval of the bureau involved, the examiner has no more authority to force dismissal of the case prior to trial than would have to force a cease and desist order on the respondent prior to trial.

The C0Il1Tlission is fully cognizant of its authority to dismiss a complaint at any time during the course oJ a proceeding. -While it would be impossible to certify that the intimate details of all pending trials FLORIDA CITRUS MUTUAL ET AL. 963 959 Opinion are closely followed by the entire membership of the Commission, it would be equally diffcult to assume that in a matter of such magnitude as the instant case, the proposals for dismissal submitted by counsel for respondents and by the then acting counsel in support of the complaint ,were not given the most careful consideration at the highest level.

The distinguished counsel representing respondents were fortified in their endeavors through petitions to intervene by the State of Florida, the Chamber of Commerce of the State of Florida, and the Florida Bankers Association. This veritable armamentary of support would command the respectful attention of any agency of Government but the fact remains that the irregular procedures thus far followed have not presented evidence suffcient to persuade the Commission in its administrative capacity to accept the proposed settlement. Respondents (in support of their motion to dismiss) averred that in May of 1952 the alleged unlawful practices were abandoned, that the subject of the complaint is moot, and that the alleged conspiracy no longer exists because it failed to accomplish its goal. When properly introduced as a part of the respondents' defense this may be proof of the present non-existence of an ilegal practice. However, the public interest is concerned with more than the fortuitous abortion of an ilegal combination in restraint of trade. To say that wrongful acts wil not be repeated because in the past they proved unfeasible does not meet the burden of the Commission s responsibility. Prior to the passage of the Federal Trade Commission Act the public interest might have to wait on the successful culmination of unlawful combinations, but the Commission s function is prophylactic not punitive. It projects its action in the future and, while we need not proceed against illegal actions dead and buried, there is nothing to prevent our proceeding against respondents who have in the past violated the law, even though at the time of suit they may have desisted of their own accord, if there is reason to believe there may be a resumption of the illegal practices. Whether this desistance came through penitance or because the acts proved unprofitable might be considered by the Commission in determining the need for future protection of the public interest by a cease and desist order. At any rate, in the instant case, whether or not the public interest requires a cease and desist order or may be satisfied with a dismissal rests not on the present existence or non-existence of an illegal restraint so much as it does on the entire context surrounding all actions of the respondents. This context only can be determined through a complete disclosure of the facts encompassed in the complaint. 964 FEDERAL TRADE COMMISSION DECISIOKS Opinion 50 F. T. C.

The appeal of counsel in support of the complaint is granted and the case remanded with instructions to proceed in accordanee with this opmlOn.

Chairman HOWREY dissenting in part but concurring in result. This case is before us on a procedural and jurisdictional question. The merits are not now involved.

I agree that the ease should be remanded to the hearing examiner but for reasons quite different from those expressed in the opinion of the Commission.

The Commission has, I believe, committed fundamental error and perhaps without fully realizing it, dealt a serious blow to administrative law and procedural due process.

The statutory issue of public interest has been removed from the adjudicatory processes of the Commission and made a matter of administrative discretion. This has been done without so much as a passing nod to statutes, rules of practice, and Supreme Court decisions which, I think, clearly require a contrary deeision. If the basic issue of public interest ean be removed from the hearing table and determined by the Commission, as plaintiff instead of judge, upon the basis of information contained in secret files, so can any other issue. It was just this sort of bureaucratic action that the Administrative Procedure Act was designed to stop.

Because of the philosophy which apparently underlies the Commission s opinion I feel compelled to deal wi th the matter at some length.

The respondents are the Florida Citrus Mutual, a non-profit eooperative marketing association, its directors, offcers and members. The complaint charges that respondents, in violation of Seetion 5 of the Federal Trade Commission Act, were "parties to a combination * * * to fix prices and control the distribution of citrus fruits and citrus products moving in interstate commerce from the State of Florida." The complaint alleges that the challenged practices went beyond the protection and immunity 01' the Capper- Volstead Act which permits producers of agricultnral products to act together in 1 The Commission states the basic Vroposition that "Prior to th(- issuance of the complaint and prior to trial the adrninistra tive discretion of the Commission regarding the existence of public interest is not subject to review. Based on this premise, which would seem to have no application to the instant case, the COInmisRion holds that "The respondcIl ts' motion to dismiss on the ground of lack of public interest, therefore, does not prcsrnt an issue on which a hearing examiner has authority to rule. he complaint in this case had long since issued, answers had been filed, and the case hfld tJpp'l. fit issup for more than fOllr months before the Ilotion to dismiss "\Y:JS filed. The matter became adjudicatory in nature, and the Administrative Procedure Act came into vlay, Immediately after the complaint issued and the case was assigned to a hearing examiner.

, FLOIUDA CITRUS MUTUAL ET AL. 965 959 Opinion collectively processing and marketing their products, providing this group activity is done through the medium of associations operated for the mutual beneJlt of their producer members." The Ca paper- Volstead Act has been construed as an exception to the antitrust laws insofar as collaboration among members is concerned. This immunity ends, however, at the point where they commence to act in concert with other persons who are not farmers-where, for example, they combine or agree with distributors and others to eliminate competition at successive stages in the marketing process. After answer was filed and issues joined, and after intervention on behalf of respondents by the State of Florida, the Florida State Chamber of Commerce, and the Florida Bankers Association, respondents filed a motion to dismiss upon the grounds (1) that the complaint was "improvidently issued" and the public interest required dismissal and (2) that the issues were moot.

Respondents' contentions rest primarily on the claim that the challenged practices were abandoned prior to the issuance of the complaint. Two basic questions are presented on appeal: 1. Does the hearing examiner have the power, on preliminary hearing, to entertain a motion to dismiss a complaint upon the ground of Jack of public interest? 2. If so, does the record on the preliminary hearing show that the practices were abandoned and that there is no likelihood of their resumption? The hearing examiner, before hearing the merits, took several days of testimony on the issues raised by the motion. Some of the evidence 2 Act of February 18, 1922, 7 U. S. C. 291 , 292. The Capper-Volstead Act provides: Persons engaged in the production of agricultural products as farmers, planters, ranchmen, dairymen, nut or fruit growers may act together in associations corporate or otherwh;€, with01' without capital stock, in collectively processing, preparing for marke.t handling, and marketing in interstate and foreign commerce, such products of persons so eng-ager1. Such associations may have marketing agencies in cOIlmon; and such associations ano. their members may make the necessary contracts and agreements to effect such purposes: P1' ovirled, however That such associations are operated for the mutual hcndlt of the members thereof, as such producers, and conform to one or both of the following requirements:

First. That no member of the association is allowed more than one vote because of the Uffount o( stock or membership capital he may own therein, or Second. That the association does not pay dividends on stock or membership capital in excess of 8 per centum per annum.

And in any cas( to the following:

Third. That the association shall not deal in the products of nonmembers to an amount greater in value ihan such as are handled by it for members. It provides further:

If the Secretary of Agriculture shall have reason to believe that any such association monopolizes or restrains trade in interstate or foreign commerce to such an .'extent that the price of any agricultural product is unduly enhanced by rea on thereof, he shall sprvc upon 811eh association a complaint stating his charge in that respect United States v. Borden ComJlany 308 U. S. 188 (1939) ; United States v. Maryland and Virginia Milk Producers Assn., Inc., et al. 179 F. 2d 426 (1949), cert. den. 338 U. S. 831 (1949).

,j Opinion 50 F. T. C.

ndduced at this preliminary hearing dealt with the merits. This of course, cannot be considered by the Commission at this time except as it may bear on the question of public interest. "On a motion to dismiss it is settled law that the complaint should be construed in the light most favorable to the plaintiiI, with all doubts resolved in his favor and the allegations accepted as true. * * * K 0 matter how unlikely it. may seem that the pleader will be able to prove his case " 4 he is entitled * * ,., to an opportunity to try. The facts relevant to the question of abandonnlPnt are sumllari:;ed below:

Florida Citrus Mut ual was chartered in 1948 and began operation on farch 25, ID4D. It has approximately 7 000 members and functions through its board of directors. T'he Board selects the offcers and elects an execntive committee which acts for the Board. The Board also elects an advisory commitiee, UJe llernbership of which includes both growers and handlers (shippers, processors, and eanners). Some of the latter are not mcrnbers of the association and are not engaged in the production of citrus products within the meaning of the Capper- V oJstead Each member of the associations.ct.must be a grower who has signed a contract to sell his eitrus producto only through handlers affliftted by contract with Mutual. Handlers are di vided into three separate groups determined by the type of contract under which they operate the "A" contract is for canners and concentrators who purchase raw fruit for processing, the "B" contract is primarily for handlers engaged in the packing and shipping of fresh fruit, and the "C" contract for intermediary handlers. Mutual attempted to accomplish it.s objeetives of stabilizing ar. admittedly distressed citrus industry through (1) its information service, (2) minimum or floor pricing, and (3) proration or allotment of shipments.

As part of its information service, price statisties were compiled and sent to members, shippers, processors, and other agencies. c n attBllpt was made to keep members and all other segments of the industry fully informed on current market prices and trends and other items of interest to the citrus industry.

In ovember 1949, at a time of declining prices, 2\1utual established a minimum price for fresh fruit and on fruit for processing. These prices held until the market improved and gradually reached a rela- United States Guarantee CO. V. i\1ountaineer Engineering Co. 12 FRD 520 (D. C. W. D. Pa. 1!152). See also Delaware Floor P)"ocTuets, Inc. v. Franklin Distributors, Inc. , et al. 12 FRD 114; Cool v. Internntiona:l- Shoe Co. J42 l( 2d 318 (C. A. 8 , 1944); Shupi,roRfJJjtll Indemnity Co. 100 F. Supp. 801 (D. C. \V. D. Pa. 1951) Continental Collieries, Inc.v. Shober 1:10 F. 2d 631 (C. A. :1, 1942). FLORIDA CITRUS MUTUAL ET AL. 967 1)59 Opinion 1950. In thetively satisfactory level; it remained stable until April fall of 1950, price minima were again established and were again which maintained a satisfactoryfollowed by increasing fruit prices, level until April 1951.

In the year 1951 further attempts were made to establish minimum prices. These moves, unlike the previous ones, were not successful in stabilizing prices. Handlers refused either to payor maintain the minimum prices established by the association. Early in HJ52 Mutual undertook a mandatory proration program under which shipments of fresh fruit were to be strictly limited. Mutual's effort in this direction is shown by a motion adopted by its 100 carsexecutive committee authorizing "a compulsory allotment of 1 of oranges and 700 cars of grapefruit for interstate shipment, effective , 19, , and12: 01 A. M., February 4, 1952, to 12: 00 P. M., February 9 that such an allotment be prorated over the entire industry, based upon the performance of each shipper for the last three years. These attempts at compulsory proration were not very successful. In lieu thereof a so-called voluntary allotment program was adopted which is still in effect.

The Department of Agriculture made a series of studies of the Three reportsFlorida Citrus Industry and the operation of Mutual. were published, one in October 1950, one in May 1951, and the third e.ach other insofar as reeom-in June 1952. They largely parallel mendations are concerned. In the 1952 report the Department , ascommented on the three primary features of Mutual's program follows:

Information Services. For the. past three seasons Mutual has operated a successful market information service. Under present conditions the association can probably make its greatest contribution by continuing to operate an accurate and complete market information service.

"Minimum pricing. Experience with other commodity programs indicate. that Mutual should not and the past experience of Mutual continue to operate a minimum price program. "* * * The vast differences of ownership and ways of doing business made it impossible for Mutual's minimum price program to and coop- mceeed. There was no effective way for grower-handlers program requirements. eratives to eon form to the minimum price "Proration (orderly distribution to the fresh fruit market). Mutual's proration program has been operated primarily on a voluntary basis. This program has been helpful in getting an orderly distribu- .

Opinion 50 F. T. C.

tion of citrus to the fresh fruit market; however, the diffculties of developing an equitable base have made it impossible for the program to be fully successful.

If Mutual were a marketing agency which fully controlled the sale of almost 100 percent of the fruit, it could effectively allocate the movement of fresh fruit from the State. However, indications are that there is little likelihood that the association could become a central sales agency for all of Florida eitrus.

In mid-March 1952, when Mutual was convinced that its mandatory programs could not be successful, its president appointed a committee known as the Citrus Industry Planning Committee to consider and recommend to the directors a new program. At a meeting on May 21 1952, Mutual released a report of this committee which said that a that control or necessary condition to maintaining a floor price is ownership of the packed or processed product be in the hands of a central agency owned and controlled by growers. Since the industry is not so organized, it follows that it is not possible, under present conditions, to enforce successfully a floor price and it is misleading for the industry to try.

The Board at the same meeting adopted a new program which included the following:

Use a voluntary allotment program, as needed, to assist in orderly movement to the fresh fruit markets.

Make economic studies on price and release information to the industry of the justifiable minimums for raw fruit for processing and FOB packed fresh fruit as indicated by such studies. Use every means possible to develop accurate market information and promptly and currently disseminate such information to growers handlers and the trade.

For the purpose of his decision on the motion to dismiss the hearing examiner construed the pricing and proration activities of Mutual prior to May HJ52 (to the extent they were binding on both growers and handlers), as beyond the provisions of the Capper- Volstead Act and in violation of section 5 of the Federal Trade Commission Aet. He held, however, that Mutual ceased all illegal activities in May 1952, six months before the complaint was issued; that such cessation was in good faith and not because of the Federal Trade Commission investigation; that there was no reasonable probability that such ilegal practices would be resumed in the future because of their 1\ The record indicates that :.Iutual controls about 85 percent of the Florida citrus crop but that some of its members do llot ahvays keep in step with the association s program. , p.

FLORIDA CITRUS MUTUAL ET AI,. 969 959 Opinion economic futility and because economic compulsion had induced their abandonment. :From this he concluded that the public interest did not require further prosecution of the proceeding and ordered the complaint dismissed.

Implicit in this holding is the assumption or decision by the hearing examiner that other practices challenged by counsel supporting the complaint, for example, the handler contracts and the voluntary allotment program, were legal and proper. This latter ruling seems to us to be one on the merits improperly made at this time. Before discussing this question, however, let us consider the jurisdiction or power of the examiner to hear and decide the motion to dismiss. Section 7 (b) of the Administrative Procedure Act provides that Offcers presiding at hearings shall have authority, subject to the published rules of the agency and within its powers, to (1) administer (3)oaths and affrmations, (2) issue subpoenas authorized by law, rule upon offers of proof and receive relevant evidence, (4) take or cause depositions to be taken * * * , (5) regulate the course of the hearing, (6) hold conferences for the settlement or simplification of the issue * * *, (7) dispose of procedural requests of similar matters (8) make decisions or recommend decisions * '" "', and (9) take any *" fiother action authorized by agency rule * * Rule X or the Commission s Hules of Practice provides that "During the time a proceeding is pending before a trial examiner all motions * * * shall be addressed to and ruled upon by him * * *" This clearly includes motions to dismiss inasmuch as the rule goes on to state ",;Vhen a motion to dismiss is granted as to all charges of the complaint in regard to one or more respondents, or is granted as to any part of such charges in regard to any or all respondents the trial examiner shall forthwith render * * * an initial decision dismissing the complaint as to such charges or such respondents. The enumerated powers of the examiner should be liberally eonstrued in the light of the history and intent of the "Administrative Procedure Act. It was thr general statutory purpose to enhance the status and role of hearing offcers.' The Senate Report said "This subsection (7b-Hearing Powersl is designed to assure that the presiding offcer wil perform a real function * * * The agency itself- '5 U. s. C. 1006 (b).

7 See Attorney General' s Manual on the Administrative Procedure Act 74 (1947); Final Report of Attorney General's Committee on Administrative Procedure, pp. 43particularly at pp. 45-46 and 50 (1941). See also First Report of the President' Conference all Administrative Procedure, Recommendations adopted Nov. 23- , 1953, pp. 12, 32 33.

970 FEDERAL TRADE COMMISSION DECISIO Opinion 50 F. T. C.

which must ultimately either decide the case, or consider reviewing it or hear appeals from the examiner s decision-should not in effect conduct hearings from behind the scenes where it cannot know the detailed happenings in the hearing room and does not hear or see the 8 Theprivate parties." House Report used substantially the same langua.ge.

It was intended that the hearing examiner stand in somewhat the same relationship to the agency as does a trial judge to an appellate " JOjudge.

The courts, since the passage of the act, have placed increaoing reliance on the hearing examiner s initial decioioll. In the l)ni1J(JT8al Cain(!r-a case, for example, the Supreme Court referred to the examiner o special competence to determine gnestioJ1o involving credibility of witnesses. The Court emphasized that the "evidence supporting a conclusion may be less substantial when an impartial, experienced examiner who has observed the witnesoes and lived with the " JJ ase has drawn conclusions diiTerent from the Board' Under the Commission s Rules of Practice, as modified since the enactment of the Administrative Procedure Act, the hearing examiner s initial decision becomes Jlnal unless it is set aside on appeal or is reviewed by the Commission on its own motion." He must of necessity therefore consider and decide all the material and jnsticiable issues presented by the record whether they be ones of fact, law, j urisdiction or discretion.

In ohort, the jurisdiction of the pn sidiJ1g oUicer, insofar as adjudicatory mattero are concerned, is largely coequal with that of the Commission itself.

The real question before us then seems to be whether "public interest" io an isoue to be adjudicated or whether it is a matter of administrative discretion to be decided before the complaint issues and not thereai'er qnestioned except by the Commission acting in its administrative capacity.

Section 5 (b) of the Federal Trade Commission Act provides that "\Vhenever the Commission shall have reason to believe that any person, partnership or corporation has been or is using any unfair 8 Administrative Procedure Act, Legislative Histor:', Sen. Doc. 248 , 79th Cong. , 2d Sess. 207 (1946).

'Ibid. , p. 269.

10 "The Status of the Trial Examiner in Administrative Agencies " Harv. L. Rev. , Vol. 66, p. 1065 (1953).

11 Universal Camera Corp. v. N. L. R. B. 340 U. S. 474 , 496 (1951), See also Fowls F. '1' 187 Ii . 2d 658 (C. A. 7 , 1951) and MinnearJulis-IIoneY1Dell R6flulator Co. F. T. C. 191 F. 2d 786 (C. A. 7 1051) cert. den. 344 U. S. 206, in which the United States Court of Appeals for the Seventh Circuit relied heavily on the hearing examiner s initial decision in reversing tbe Commission s decision. Rule XXII.

FLORIDA CITRUS MUTUAL ET AL. 971 Opinion method of cOlnpetition or unfair or deceptive act or practice in commerce, and if it shall lppear to the Commission that a proceeding by it in respect thereof would be to the interest of the public, it shall issue and serve '" a complaint stating its charges in that re- " 13 spect " " "' Section 5 then goes on to provide for notice, hearing, the taking of testimony, findings, order, and review by the courts. This would seem to make "public interest" not only an issue t.o be adjudicatcd in the same manner as any other issue but also, like interstate commerce, a jurisdictional prerequisite. It is t.rue that the Commission s decisions have not generally dealt with "public interest" ao such pxcept in the most cursory manner. This is probably due to the fact that the phrase lacks speeificity lld is rather nebulous in character. But the issue io there nonetheless and is necessarily adjudimted in every eaoe arising under section 5 of the Federal Trade Comn ission Act.

The Commission in the instant case has confused its administrative duties with its adjudie:ttory responsibilities. This, of course, is one of the grave dangers again.st \which an administ.rative agency must allntys be on guard. In its :1dministrative capaeity the Commission ordered the issuance of thc C'omnlaint because it had "reason to believe" that the stat.nt.e may hftyc been violated. But it did not thereby and must not in any case prejndge any of the issues rflised by the complaint. jYhen the Commisoion assumes its adjudicatory role the delioion on all issueo, including that of public interest, must be decided on the public record and n01 on information hidden in its privflte investigfltivefiles.

It may be helpful, at the risk of repetition, to consider the question of Pllblic interest as coming to bear at two stflges: (1) as justifying the issuflnce of a eomplfl.int, and (2) as justifying a cease and desist order. The COInmission s decision to issue a complaint is, as we have indicated, a matter of administrative discretion. The Commission deeision to issue an order, on the otller hand, is adjudicatory and reviewable in the courts. J n considering the issue of "public interest" after complaint, the hearing examiner is looking toward the second stage.. It is his duty to make a decision that will stand up before the Commission and in coni'/. The Commission s decision to issue a complaint merely means that it is :tt that time, in its administrative capacity, of the opinion that the public interest requires a proceeding. It cannot mean that the Commiosion is of the opinion, in its adjudicatory capacity, that it is to the interest of the public to issue an order n 151: S. C. 45 (b).

H F. T. C. lOesner 280 TJ. S. 19 (1929). See sections 5, 7 and 8 of the Administrative Procedure Act, 5 U. S. C. 1004, 1006, 1007. &: p. Opinion 50 F. T. C.

for that would be to prejudge the case and do violence to fundamental principles of administrative and constitutional law. It is well sewed that the Commission can and should dismiss a proceeding at any time when it appears there is a lack of public interest. F. T. O. v. Klesner 280 U. S. 19 (1929). The Commission has regularly dismissed complaints on this basis. In the Klesner- case the Court said: "The specific facts established may show, as a matter of law, that the proceeding which is authorized is not in the public interest, within the meaning of the Act. If this appears at any time during the course of the proceeding before it, the Commission should dismiss the complaint. If, instead, the Commission enters an order, and later brings suit to enforce it, the Court should without enquiTY into the meT'it8 dismiss the suit." (Italic supplied. ) In lI0retrench Om" v. F. T. e. 127 F. 2d 792 (C. A. 2, 1942), Judge Learned Hand observed that the Klesner case supra did indeed decide that the public interest in the controversy was a jnsticiable issue * * * "17 Counsel supporting the complaint urge, however, that regardless of the Commission s right in this respect, the hearing examiner hasno such power. As indicated above I believe that the jurisdiction of the hearing examiner is the same as that of the Commisoioll insofar as adjudicatory matters are concerned. Furthermore the hearing examiner has long 16 See, for example In the .Matters of Wildroot Co. , Inc. Docket 5928, June 30, 1953; Denver Chemical Mfgr. Co. Docket 5755, March 25 1954; Metal Lath Mtgrs. Assn. Docket 5449 , 1954.

17 The following decisions have also cited the Klesner case will1 approval and have treated the existence of public interest in a proceeding under the Federal Trade Commission Act as a justicinble issue:

Motion Picture Advertising Service Co. Inc. v. P. '1. 194 F. 2d 633 (C. A. 5 , 1! 52). reversed on other g1' ou.nds 344 U. S. 3D2 (11)53). See also statement of .Justice Frankfurter in his dissent in the same case on page 404. Bnlnch v. P. T. C, 141 F. 2d 31 (C. A. 7 , 1944). Royal Milling CO. V. F. '1' 58 F. 2d 581 (C. A. 6 , 1932), eVCTserZ on other grou-uds 28R U. S. 212 (1D3iJ).

Flynn Bmrich Co. v. F. '1. 52 F. 2c1 S:- (C. A. 4 , 19: 1). F. . O. v. Raladam 283 U. S. 643, 646 (1iJ31). In the Royal 11-1filing Cu. case supra the lo,yer court set aside the Commission s order for lack of public interest in the pro eeding. This Was reversed b y the Supreme Court of the Unitrd States. wbi h held that the IJrocceding "nis in the interest of tile public. In its opinion the Court stated: .

To sustain the orders of Ow Commission, three requisites must exist: (1) that the metlJOds used arc unfair; (2) that they are rnethods of competition in interstate commerce; and (3) that a proceeding by the Commission to prevent the use of the methods appears be in the illterest of the public. (P. '1' C. v. lluyal JlillInq Co. 2t'H L. ::. ..l, 210 (1933). (The srcund requirement was hallged by the '''heeler- Lea Act to permit, as anaHernative, a showjng that they are "unfair or deceptive acts or prncticcs in commerce, 52 Stat. 111 (JfJ38).

See also Stanua.nl O'i (Yo. v. P. T. C. 282 Fed. 81 (C. A. 3, 1922), affrmed 261 U. S. 463 (1923).

FLORIDA CITRUS MUTUAL ET AL. 973 959 Opinion been under a Commission directive to include in his deeision a finding language usually em-on the question of "public interest." The ployed is:

"* * * and said hearing examiner, having duly considered the record herein, finds that this proceeding is in the interest of the public and makes the following findings as to the facts, conclusion drawn therefrom, and Manifestly theorder."examiner cannot18make a finding on public interest without considering the question.

Counsel supporting the complaint also question the wisdom of ruling on the "public interest" issue prior to a hearing on the merits. They suggest that public interest cannot be determined until all the facts are in the record. There is much to be said for the argument and certainly restraint should be exercised in ruling on such motions before counsel in support of the complaint have closed their case-inchief. As I have indicated, public interest lacks specificity and cannot be directly measured; it is usually determined from all the facts and circumstances of the particular case. However, this is not to say that such motions should never be granted. In exceptional instances, like the Klesner case, for example,'" the hearing examiner should by all means consider and decide the matter on a preliminary motion. This is consistent with recent decisions of the Commission with court cases, and with the best interests of the public-which inelude economies resulting from early focusing on the decisive issue and speedy disposition of cases.

In the Eastman Kodak case the Commission broadly interpreted Rule X of its Rules of Practice and held that the hearing examiner had jurisdiction, prior to hearing the merits, to entertain a motion to dismiss because of the failure of the complaint to state a cause of action.

The conclusion that "public interest" is lacking flies no more in the face of the complaint, and is no more of an attack on the Commission prerogatives, than a conclusion that its complaint is faulty. The other question we are ealled upon to decide is whether the examiner, while acting within the scope of his authority, reached the right or wrong decision.

:18 In the Mattct"s of Mink Traders Association Inc. , et al. Docket 5844 , 1952; and Associated Greeting Card Distributors oj America, et al. Docket 5983, 1954. "See P. T. G. v. Ele8ner 280 U. S. 19 (1929). 20 In the Matter afEastman Kodak Co. Docket 6040 (Sept. 25, 1953). , Opinion 50 F. T. C.

From the partial record now before the Commission it appears that respondents have abandoned their mandatory minimum price program and their compulsory aUotment program. It seems equally clear that they have not abandoned their contracts with handlers, nor their voluntary allotment program. Counsel for respondents claim that the latter are entirely proper and within the provisions of the Capper- V olstead Act. Counsel supporting the complaint vigorously deny this. They say that the contracts, particularly the "E" contract, and the vol untary allotml' nt program are two of the principal activities on which they rely to support the aUegationo of the complaint that the Federal Trade Commission Act has been violated. These conflicting positions seem to us to present issues which go to the merits of the case and which can only be decided after regular hearings. Under the provisions of the contracts Mutual has the power, according to the examiner, to control its handlers in various respects which would be violative of the law. The "E" contract requires II hancUcr to sell, ship, and diotribute fresh fruit according to "rules, regulations orders and instructions" issued by Mutual. If he failo to do so he is required to pay :Mutual 25r per box as liquidated damages. The examiner held that "The mere existence of a power is not something against which the Federal Trade Commission proceeds, and the contracts go no farther than to give Mutual a power which hao not been exercised, so far as the record disclose,s at leaot since :May 1952. This assumes, without adeqllate proof or the type of hearing required by the Administrative Procedure Act " that the voluntary allotment Program is entirely proper. As we have indicated, counsel supporting the complaint challenge this aosumption. They refer to a newsletter of K ovember 21, 1952 , approved by iutnal's Board of" Directors, which sayo It will give widespread publicity to the In,mes of shippero who stay within the ullotments ancl furnish theoe names to the offcers of its Grower Councik In that way, all grower members of Mutual can know who eoopel'ted in this effort." They say that whether an allotment program is compulsory or voluntary is immflterial; that the issue is whether there was an agreement or combination cite Arkansas TV ho7es!17ers GI'OC r8 A 88'11.in restraint of trade. They et al. v. Federal Trade Oommission Hi F. 2d 866 (C. A. 8, 1927), cert. den. 275 U. S. 533, which held that a " restraint produced by peaceable; 21 Mutual claims that the "B" handlers are "marketillg ageIlt in ('common " ,yithiu tile meaning of the .Capper-Volstead Act; that title does not p:lhs to such agent:3 out rpIIHlins in the growing number. Counsel supporting the complaint deny this and point to a 1\1ut\1al letter which states: "of the 186 B contracts presently effective there are l:ifi contracts that would be classified as independents, in other words, handlers who purchase part or all of thpjr sUPIllies for caslJ. '" 5 1:. S. C. 1004.

FLORIDA CITRUS MUTUAL ET AL. v.v 959 Opinion persuasion is as much within the prohibition as one accomplished by force or threats of force.

Counsel supporting the complaint urge further that the operation of the voluntary allotment program and a comparison between it and the compulsory program can only be demonstrated and made in a full hearing on the merits. vvith this I agree.

Furthermore, the continued existence of a .large number of handler contracts, which the examiner says gives Mutual the power to do wrong, is not consistent with the viewpoint that there is no likelihood of resumption of the ilegal practices. Counsel for respondents claim that the handlers having "II" contracts are "marketing a.gents in common" specifically authorized by the Capper- Volstead Act. This mayor may not be the case-we don t know, and, of course, cannot decide without evidence.

In the WildToot case the Commission held that where the practices had been stopped and there was no likclihood of resumption, that where everything that could be accomplished by a cease and desist order had already been accornplished by cooperative effort, the present public interest was adequately served by dismissing the complaint without prejudice. But there wa.s no uncertainty in tha.t case about abandonment. The challenged practices had been stopped and the management had filed an affdavit to the effect that the compa.ny had no intention of resuming such practices. And there wa.s "no reason to doubt respondent' s. . . declaration that it has already ceased and wil permanently refrain from use of the practices complained of by " 21the Commission.

In the instant case the record does not establish that all the qlle,;boned practices have been abandoned and there is no clearcut declaration by respondents against resumption. In the latter cOlmection the hearing exa.mjner said that the compulsory programs were abandoned because of their economic futility; that "no representations of respondent or their counsel in this respect would be as convincing or as binding as the economic compulsion which induced the a.bandonment." This statement overlooks, it seems to me, the fact that the price stabilization programs were relatively successful in the years 1949 and 1050 although entirely unsuccessful in 1951 and the first part of 1952. The questions raised by the motion to dismiss, other than the jurisdiction of the hearing examiner, should not in my opinion be foreclosed. I would permit them to be renewed and reargued when the matter comes before the Commission on a full record. 23 See footnote 21.

In the Matter oj WildToot, Inc. Docket 5928 , June EO, 1858. Decision 50 F. T. C.