The California Sportswear & Dress Association, Inc.

Text (OCR of the scan at left; may contain errors)

In tar Marrer or THE CALIFORNIA SPORTSWEAR & DRESS ASSOCIA- TION, INC., ET AL.

ORDER, ETC., IN REGARD TO THE ALLEGED VIOLATION OF THE FEDERAL TRADE COMMISSION ACT Docket 63825. Complaint, Apr. 4, 1955—Order, Dec. 27, 1957 Order dismissing complaint charging three associations of dress manufacturers, dress jobbers, and dress contractors, respectively, and two labor unions in the $40 million California sportswear industry, with making illegal agreements to control production and fix prices, holding the agreements to be immune from the antitrust laws inasmuch as they did not aid or abet a management conspiracy to suppress competition but were closely related to wages and conditions of employment and were among. “congressionally permitted union activities.” Mr. George W. Williams} and M/r. Rufus E. Wilson supporting the complaint. .

Mr, Hugene B. Shapiro, of Los Angeles, Calif., for The California Sportswear & Dress Association, Inc., and certain named respondent. members; Afr. Wilbur &. Quint, of Los Angeles, Calif., for Associated Sportswear Manufacturers of Los Angeles and certain named respondent members; d/r. dfélton J. Levy, of New York, N.Y., for California Apparel Contractors Association and members; Buchadte7, Nemer and Field, by Mr. Jerry Nemer, Rifkind and Elstein, by Mr. George A. Eistein, Minter and Feder, by Mr. Robert S. Feder, Mr. J. George Bragin, Mr. Joseph Stell, and Mr. Olivor B. Schwab, all of Los Angeles, Calif., and Afoss: Moss, of Philadelphia, Pa., for individua] members of respondent associations; IW/7. Jforris P. Glushien and J/r, Wilbur Daniels, of New York, N.Y., and J/r. Basti Feinberg, of Los Angeles, Calif., for respondent. International Ladies’ Garment Workers’ Union and affiliated respondents; and Mr. J. Albert Wall, by Mr. Richard H. Frank, of Washington, D.C. and Stevenson & Hack:ler, by Mr. Charles HK. Hackler, of Los Angeles, Calif., for respondent International Brotherhood of Teamsters, Chauffeurs, Warehousemen. and Helpers, and Joseph M. Mihalow.

Inir1au Decision sy Jonn Lewis, Heartne Examiner STATEMENT OF THE CASE The Federal Trade Commission issued its complaint against the above-named respondents on April 4, 1955, charging them with having 1Mr. Williams’ participation in the proceeding ceased after the presentation of the case-in-chief, he having retired from the Commission shortly thereafter. Decision 54 F.T.C.

engaged in unfair methods of competition and unfair acts and practices in commerce in violation of section 5 of the Federal Trade Commission Act. Copies of said complaint and notice of hearing were duly served upon respondents. Said complaint charges, in substance, that respondents entered into certain collective agreements and understandings to adopt, fix and adhere to certain practices and policies which restrict and restrain competition and trade in the offering for sale, sale and distribution of women’s sportswear and kindred articles, in commerce. Except for certain individual members of the respondent associations, al] respondents appeared by counsel and filed answers which admitted, substantially, that collective agreements were entered into between the respondent. associations and certain of the respondent unions, but. denied that said agreements were entered into with the purpose and effect: charged in the complaint, and affirmatively pleaded that. the Federal Trade Commission has no jurisdiction over the subject matter of this proceeding or certain of the parties thereto. Prior to the date of initial hearing, motions and supporting memoranda of law were filed on behalf of the respondent unions for a dismissal of the complaint on the grounds (a) that the Commission is without jurisdiction in this proceeding, and (b) that the complaint fails to state a claim upon which relief can be granted. Upon request of the moving respondents, oral argument. was held on said motions on October 11, 1955, in Washington, D.C. After hearing argument in support of, and in opposition to, said motions the undersigned made his ruling on the record denying same on the ground that. the issues presented could not. be disposed of until all the pertinent facts had been fully developed at a hearing on the merits. Thereafter, hearings were held in regular course before the undersigned hearing examiner, theretofore duly designated to hear this proceeding. Said hearings were conducted on various dates between November 14, 1955, and May 29, 1956, in Los Angeles, Calif., and New York, N.Y. The proceeding was closed for the taking of testimony on June 29, 1956, subject to the submission of certain documentary evidence by counsel for the respondent. International Ladies’ Garment. Workers’ Union, which documentary evidence was incorporated into the record by order of the undersigned dated July 26, 1956. The parties were granted leave to file proposed findings and supporting briefs which, after the granting of several extensions of time due to the novelty and complexity of the issues of fact and law involved and illnesses of counsel, were filed on behalf of some of the parties on or about October 1, 1956. Pursuant to leave granted, reply memoranda were filed by counsel for certain of the parties on or about THE CALIFORNIA SPORTSWEAR & DRESS ASSN., INC., EY AL. 837 835 Findings ‘October 25, 1956. Proposed findings not herein adopted are rejected as not supported by the evidence or as immaterial. At the hearings held herein, testimony and other evidence were offered in support of and in opposition to, the allegations of the complaint, the same being duly recorded and filed in the Office of the Commission. All parties, except for certain individual members of the respondent associations, were represented by counsel, participated in the hearings, and were afforded full opportunity to be heard and to examine and cross-examine witnesses.

Upon consideration of the entire record herein, and from his observation of the witnesses, the hearing examiner makes the following:

FINDINGS OF FACT J. Tue Business or Respondents A. The Sportswear Industry 1. The term “sportswear” encompasses al] items of women’s and children’s outerwear apparel designed for nonformal wear. It includes particularly, ladies’, misses’, juniors’, children’s and toddlers’ ‘slack suits, slacks, slack tops, play suits, beachwear, bathing suits, loafer jackets, skirts, sport dresses, cotton or casual dresses of a sportswear nature, blouses, honsecoats, pajamas, shorts, unlined or yoke-backed lined jackets and unlined or yoke-backed lined sports coats, unit priced dresses, dozen priced dresses, coats, suits and jackets. 2. The sportswear industry consisis of firms primarily engaged in the production of sportswear items. However, it is actually a part of the broader women’s apparel industry, and other segments of the industry, including the dress branch and coat and suit branch, also produce garments which may be classified as sportswear or which compete with sportswear. The industry 1s highly competitive and sportswear firms compete not only with each other but with other branches of the garment industry.

3. Entrepreneurs in the women’s apparel industry generally, and its sportswear branch in particular, fall into three main categories : Manufacturers, jobbers and contractors.

(a) A manutacturer is one who owns and operates a factory where he produces all or part of the garments sold by him. Such garments are produced from cloth and materials purchased by him and, in finished form, are sold by him to wholesalers or retailers. The factory of a manufacturer is known as an “inside shop.” Therein are performed all of the major operations in the manufacture of a Findings 54 FVT.C.

garment, with the possible exception of certain embroidery or similar finishing operations. This includes the design of the garment, purchase and cutting of the cloth, sewing, displaying of finished product in showrooms and warehouses and ultimate sale to wholesalers or retailers.

(b) A jobber is an entrepreneur who arranges for the sewing of his garments by contractors, for a fee, from cloth which he supplies to such contractors. He supervises the process of manufacture and has responsibility for the sale of the finished garment to wholesalers. or retailers. His status is somewhat similar to that of a manufacturer in that he designs the garments, purchases the cloth and has ultimate responsibility for the sale of the finished product. He maintains a. showroom and/or warehouse but does not own or operate a factory where the actual sewing takes place. Sometimes the cutting of the: cloth is performed by his own employees on his own premises and sometimes this operation, as well as the stitching, is performed by contractors.

During certain periods, particularly during peak demand, when manufacturers find that they do not have enough capacity in their own factories for the stitching of all the garments which they desire: to produce, they avail themselves of the use of contractors to perform the sewing operations. To the extent that manufacturers use con-. tractors for this purpose, they occupy the position of a jobber with respect to such contractors and are sometimes referred to as man~ ufacturing jobbers.

(c) A contractor, sometimes called a submanufacturer, is one who maintains a factory where he sews garments from cloth supplied by jobbers or manufacturing jobbers. His function is primarly limited to sewing the garments, except that it may also include the cutting of the cloth where this is not performed by the firm supplying him with work. However, he has no responsibility for purchase of the cloth, design of the garment, and ultimate sale. The fabricating services performed by him are rendered on a fee basis for the jobber. The factory operated by the contractor is known as an “outside shop” in contradistinction to the “inside shop” operated by a manufacturer. 4. The women’s garment industry, including its sportswear branch, is characterized by the relatively small size of the producing firms. The average factory in Los Angeles employs between 25 to 40 persons. The average size of the contractor’s shop is generally smaller than that of the manufacturer.

The manutacturing processes used are simple and machinery is THE CALIFORNIA SPORTSWEAR & DRESS ASSN., INC., ET AL. 839 835 Findings relatively inexpensive and easy to obtain. Hence a relatively small amount of capital is required for entrance into the business. To enter business as a manufacturer, approximately $10,000 to $15, 000 is required. Even less money is required to do business as a jobber. To enter business as a contractor with 30 employees requires less than $1,000 in cash.

The insignificance in unit size and the Jack of ownership concentration in the industry is in sharp contrast to the considerably larger size, and relatively stronger bargaining power, of the textile firms from which the industry buys its raw materials, and some of the lar ge department stores, retail chains, and mail order houses to which it sells its finished product.

5. The price structure of the industry is characterized by what are known as “price lines.” Garments are sold by the producers in certain more or less established price brackets. Thus, for example, the prices at which blouses are sold, per dozen, at wholesale range from $16.75 to $32.50. Individual firms usually produce garments which fall in a limited number of lines. Even though a producer's costs may vary from item to item, he will frequently sell them all in the same price line or lines in which he specializes.

6. The factor of style plays an extremely important part in the garment industry, including the sportswear branch. The ability of a firm to produce garments styled to meet the demands of the public is as important, if not more so, than the ability to produce them at a pres, . The women’s ¢ appar el industry, including particularly its sportswear branch, experiences a considerable seasonality in its demand and consequently in its production. This seasonality results not merely from weather and climatic conditions, but from the continuous changes in style. This results in a tendency to concentrate production in certain peak periods and to operate on a minimal basis, or close down altogether, during other periods of the year. 8. Due to the insecure capital position of many firms in the industry, its seasonality, the importance of guessing right on style and the intense competition which exists, there is a considerable business mortality and turnover of firms in the industry. The business life of the average firm is estimated to be only about 5 years. Almost one out of every four jobbers and manufacturers in the field has been in business for only 8 years, while two out of every three have been in the field for less than 15 years. The greatest mortality is suffered by the smaller firms and particularly the contracting firms. Findings 34 F.T.C.

B. Identity of the Parties 1. Respondent, The California Sportswear & Dress Association, Inc. (which is hereinafter sometimes referred to as “California. Association” or as the “manufacturer” association), is a corporation organized, existing and doing business under the laws of the State of California, with its principal office and place of business at 117 W. 9th Street, Los Angeles, Calif. The membership of said respondent. is composed of corporations, partnerships and individuals located in the State of California who are engaged in the manufacture of ladies’ garments. The membership of said respondent. is divided into two divisions, the sportswear clivision and the dress division. The nature of the business of its various members determines the division to which each belongs. This proceeding involves only the members of the sportswear division. 2. Respondent Associated Sportswear Manufacturers of Los Ange- Jes (which is hereinafter sometimes referred to as “Associated” or as the “jobber” association), is a corporation organized, existing and doing business under the laws of the State of California with its principal office and place of business located at 850 South Broadway, Los Angeles, Calif. The membership of said respondent is composed primarily of corporations, partnerships and individuals located in the State of California who are engaged in the business of producing sportswear as jobbers.

3. Respondent California Apparel Contractors Association (which is hereinafter sometimes referred to as the “Contractors Association”) , is a corporation organized, existing and doing business under the laws of the State of California, with its principal office and place of business located at 629 S. Hill Street (room 1215), Los Angeles, Calif. The membership of said respondent. is composed of corporations, partnerships and individuals located in the State of California, who are generally engaged in the business of contracting or subcontracting to fabricate sportswear, from materials supplied to them by sportswear manufacturers and jobbers.

4. The complaint names as respondents, a number of corporations, partnerships, and individuals who are now, or were during the times at issue, members of each of the above-named employer associations. In view of the disposition hereinafter made of this proceeding, the undersigned deems it unnecessary to make detailed findings with respect to the name, address and operations of each of these respondents. For the same reason, the undersigned deems it. unnecessary to make separate provision for dismissal of this proceeding as to a number of individually named companies who ceased their membership in the THE CALIFORNIA SPORTSWEAR & DRESS ASSN., INC., ET AL. S84] 835 Findings employer associations prior to the inception of the events at issue, and as to whom motions to dismiss have been made. 5. Respondent International Ladies’ Garment Workers’ Union is an unincorporated association, affiliated with the American Federation of Labor, with its principal office and place of business located at 1710 Broadway, New York, N.Y. Said respondent. (which is hereinafter sometimes referred to as respondent “ILGWU" or as the “union”), has been in existence for many years and during such period, up to and including the present time, has carried, and is now carrying out its operations in the field of Jabor on a nation-wide scale. Its membership is composed primarily of variously classified workers in the wearing apparel industry. Such workers, in turn, are members of various local unions representative of the trade or craft, engaged in by such workers, and said respondent, in many instances, operates or functions through organizations of such locals, including those mentioned herein. 6. Respondent Joint Council of Sportswear, Cotton Garment & Undergarment. & Accessory Workers Unions of the International Ladies Garment Workers’ Union (which is hereinafter sometimes referred to as the “Joint Council”), having its office at 1130 Maple Avenue, Los Angles, Calif., is composed of Locals 266, 482 and 496 of respondent ILGWU. Said Joint Council serves as an instrumentality or vehicle for joint bargaining between the above locals and employers in the industry, including respondents California Association, Associated, and Contractors Association. 7. Respondent. Samuel Otto has been for several years last past, and is now, Vice president and Pacific coast. director of respondent ILGWU, with his principal offiice and place of business located at 112 W. 9th Street, Los Angeles, Calif.

8. Respondent John Ulene has been for several years last past, and is now, the manager of respondent Joint Council and has his office and principal place of business at. 1130 Maple Avenue, Los Angeles, Calif. 9. Respondent Internationa] Brotherhood of Teamsters, Chauffeurs, Warehousemen and Helpers (which is hereinafter sometimes referred to as “Teamsters”), is an unincorporated association, with its principal office and place of business located at 25 Indiana Avenue NW,, Washington, D.C. Respondent Teamsters has been in existence for many years and the scope of its operations is nationwide. Membership of said respondent Teamsters is composed of shipping and receiving clerks, warehousemen, drivers, and helpers. 10. Respondent Joseph M. Mihalow has been for several] years last past, and is now, secretary-treasurer of Local 994 of respondent Team- Findings 54 F.C.

sters, with his office and principal place of business located at 846 S. Union Street, Los Angeles, Calif.

C. Competition and Interstate Commerce 1. The manufacture of women’s sportswear in the United States is centered chiefly in the cities of New York, Boston, Los Angeles, and Dallas. The wholesale dollar volume of the primary sportswear industry in the United States is $509,256,000. Los Angeles producers account for approximately ten percent of the national production. The sportswear produced in union shops accounts for about 15 percent of the total Los Angeles production. Of the total union production in Los Angeles, about 20 percent is produced in contractors’ shops and the balance in the inside shops of manufacturers. The first area in terms of sales is the New York area with sales of $269,963,000 in 1952-58. Los Angeles is second to New York with sales during the same period of $65,677,000. 2. The respondent manufacturers and jobbers of women’s sportswear in Los Angeles generally maintain sales offices in their places of manufacture and elsewhere, some of which are located in New York and other large cities, where samples are displayed and orders are solicited from buyers representing department stores, ladies’ specialty shops, and other stores where women’s sportswear is sold, throughout the United States. In addition, some of these firms employ salesmen who solicit orders for women’s sportswear througout the United States. AJ] orders are forwarded to the producer’s plant in the Los Angeles area where the garments are made, and thereafter shipped to the purchasers thereof.

The respondent manufacturers and jobbers purchase the greater part of the fabrics used in the manufacture of their sportswear garments from textile mills located in States other than California. The cloth, after purchase, is shipped to the respondent manufacturer’s or jobber’s place of business in Los Angeles, where it is cut into the desired patterns and thereafter stitched, either by their own em-. ployees or by contractors with whom the manufacturer or jobber is in contractual relationship. Upon completion of the cutting, stitching and other necessary details, the manufacturer or jobber ships the finished garments directly to the purchasers, a substantial number of which are located in States of the United States other than the State of California.

At all times herein mentioned the members of respondents California, Associated, and Contractors Association in the regular and usual course and conduct of their respective businesses, have THE CALIFORNIA SPORTSWEAR & DRESS ASSN., INC., ET AL. 843 835 Findings carried on, and are now carrying on, a constant course of trade in commerce in said products between and among the various states of the United States and in the District of Columbia, and have been, and are now, engaged in commerce in women’s sportswear, as “commerce” is defined in the Federal Trade Commission Act. 3. The members of respondents California, Associated, and Contractors associations are in competition with one another in their respective fields, and with other like manufacturers, jobbers and contractors, both locally and in states of the United States other than the State of California, in the production of, or selling, or otherwise distributing women’s sportswear and kindred products, in commerce, within the intent and meaning of the Federal Trade Commission Act.

II. The Alleged Unlawful Practices A. Background and Issues 1. The practices which are challenged in this proceeding arise out of collective bargaining agreements which were entered into in 1953 between respondent Joint Council and Local 994, Teamsters, on behalf of employees in the Los Angeles Sportswear Industry, and each of the respondent. employer associations on behalf of their respective members. Such agreements represent a continuation of bargaining relations between the unions in question and the employer associations or their predecessors which had existed for a number of years prior to 19538. When the existing agreements were about to expire in December 1952, negotiations looking toward new agreements were undertaken which continued for about eight months. Separate agreements with respondents California and Associated were signed on July 10, 1953, and another agreement was signed with respondent Contractors on August 4, 1953. Each agreement was for a term of 3 years, retroactive to January 1, 1953.

2. Separate negotiations were carried on by representatives of respondent Joint Council, assisted by respondent Samuel Otto, with each of the employer associations. Negotiations were undertaken first with representatives of respondent California Association on behalf of manufacturers in the industry. After substantial agreement with the manufacturers’ group had been reached, the ILGWU officials began negotiations with the respondent, Associated, representing the jobbers, seeking to obtain from it an agreement. substantially similar to that agreed to by the manufacturers. After agreement had been reached 528577—60 55 Findings d4 F.T.C.

with the jobbers, negotiations were undertaken with respondent Contractors Association on behalf of the contractors in the industry. All three employer groups opposed many of the union demands, including particularly the clauses here at issue, but were finally induced to yield to the union demands. The jobbers and contractors objected particularly to being presented with a fat accompli, in the form of an agreement which had already been reached with the manufacturers, but they finally accepted the agreement presented to them. The agreements with the manufacturers and jobbers associations, although constituting separately signed agreements betaveen the unions and each of the associations, are identical in their terms. The agreement with the Contractors Association also includes substantially identical provisions as the other two agreements, except for such modifications as were required by virture of the fact that the contractors do not occupy the same status in the process of productioin as the manufacturers and jobbers.

3. The only representative of the Teamsters who participated in the negotiations was Joseph M. Mihalow, who represented Local 994 and not the parent organization. The agreements were signed by him in his capacity of Secretary-Treasurer of the Jocal union. Mihalow played an extremely limited part in the negotiations, his participation consisting mainly in the negotiation of certain clauses dealing with the rates of pay of shipping clerks employed in the manufacturing and jobbing establishments.

4. This proceeding, in essence, challenges certain provisions of the 1958 collective agreements and the practices engaged in pursuant thereto, as involving undue restrictions on competition and tending to create a monopoly in the industry. The complaint alleges eleven separate restrictions on competition. These fall into two main categories, (a) those which limit competition among contractors by restricting the free use of such contractors and by controlling the prices to be paid to them, and (b), those which restrict. the production of members of the employer associations by limiting them in the opening of additional plants or acquiring an interest in other concerns.

5. The primary burden of defense in this proceeding has been carried by the ILGWU respondents. Their main substantive defense is that. the clauses of the collective agreements, which are here challenged, were inserted at the insistence of the wnion in order to protect wages, job security and working conditions, and that as such, they are exempt from attack under the antitrust laws by rea- THE CALIFORNIA SPORTSWEAR & DRESS ASSN., INC., ET AL. 845 835 Findings son of the immunity provided for the activities of labor unions in the Clayton Act and the Norris-LaGuardia Act. They also urge by way of defense the following: (a) The Commission has no jurisdiction over labor unions which are not engaged in business for profit, (b) the matters complained of fall within the exclusive jurisdiction of the National Labor Relations Board, and (c) the parent ILGWU and Samuel Otto, its Pacific coast director, are not proper parties to this proceeding since the agreements in question were entered into on behalf of the local affiliates of the union rather than on behalf of the parent organization.

6. The position of the respondent, Teamsters Union, is substan-: tially similar to that of the respondent ILGWU. Said respondent has also moved to dismiss the complaint as to the parent union on the ground that it was not a party to the agreements in question, and did not ratify or adopt them.

7. The position of the employer respondents is substantially that the provisions of the agreements complained of were the result of collective bargaining between each of the associations and the unions, and that the employers opposed said provisions but were forced to accede to the union demands in order to avert. serious labor disputes and work stoppages. The employer respondents permitted the respondent. ILGWTU to carry the burden of the defense in this proceeding, offered no evidence in their own behalf and, except: for the respondent Contractors Association, fled no proposed findings or briefs. 8. The position of counsel supporting the complaint, throughout this proceeding, has been that the provisions of the collective agreement constitute a per se violation of the Federal Trade Commission Act. Counsel accordingly objected to any evidence concerning the conditions which led to the adoption of the challenged clauses or the manner of their practical operation. Commission counsel’s basic position is that, under the Supreme Court’s decision in Allen Bradley Co. v. Local No. 3, 825 U.S. 797, whatever immunity from antitrust prosecution a union may otherwise enjoy is Jost when it combines with employer groups.

9. As the undersigned views it, the basic question which is here involved is whether the agreements at issue are Immune from antitrust attack. Since the facts must. be considered in the ght of the apphicable legal principles and since there is a strong difference of opinion concerning this subject, the undersigned turns. first to a resolution of the question of what are the correct legal criteria to be applied to the facts here.

Findings 54 F.T.C.

B. Application of the Antitrust Laws to Unions 1. The application of the antitrust laws to unions in modern times dates from the Supreme Court’s decision in the famous Danbury Hatters * case, some twenty years after the passage of the Sherman Act. The Supreme Court held that a union-inspired nationwide boycott of plaintifi’s nonunion made hats constituted an illegal restraint of trade in violation of the Sherman Act.

2. In apparent response to this holding, Congress included sections and 20 in the Clayton Act so as to exclude certain activities in the course of a “labor dispute” from the antitrust laws. Section 6 declares ‘that “the labor of a human being is not a commodity or article of commerce.” It further provides that “nothing contained in the antitrust laws shall be construed to forbid the existence and operation of labor * * * organizations, instituted for the purposes of mutual help, and not having capital stock or conducted for profit, or to forbid or restrain individual members of such organizations from lawfully carrying out the legitimate objects thereof; nor shall such organizations, or the members thereof, be held or construed to be illegal combinations or conspiracies in restraint of trade under the antitrust laws.” § Supplementing that provision, section 20 barred the issuance of Federal injunctions prohibiting activities such as strikes, boycotts or picketing “in any case between an employer and employees, or between employers and employees, or between employees, or between persons employed and persons seeking employment, involving, or growing out of, a dispute concerning terms or conditions of employment.” Section 20 concludes with the broad language: “[N]or shall any of the acts specified in this paragraph be considered or held to be violations of any law of the United States.” ¢ 3. Within a relatively short time, the exemption thus conferred was narrowed by the Supreme Court in the Duplex * and Bedford Cut Stone ® cases, both of which involved a union refusal to work on goods made by nonunion firms. The Supreme Court held that the protection afforded by section 20 of the Clayton Act was limited to disputes between an employer and his own employees and, accordingly, the secondary boycott activities of the unions involved were held to constitute a violation of the antitrust laws.

25 1 2 5 1 2 678 2525 294 38 93.271843 Loewe5 1 2 5 1 3 827 2521 32 54 64.877350 v.5 1 2 5 1 4 872 2525 100 38 95.412086 Lawlor,5 1 2 5 1 5 987 2539 47 21 95.650963 2085 1 2 5 1 6 1049 2539 55 21 95.650963 U.S.5 1 2 5 1 7 1119 2539 46 20 96.484749 2745 1 2 5 1 8 1184 2539 100 23 96.467979 (1908).3 1 2 6 0 0 712 2574 265 24 -1 4 1 2 6 1 0 712 2574 265 24 -1 5 1 2 6 1 1 712 2575 47 20 63.256325 $155 1 2 6 1 2 774 2574 92 24 27.257996 U.S.C,5 1 2 6 1 3 880 2579 46 14 87.787659 sec.5 1 2 6 1 4 940 2574 37 19 95.096619 17.3 1 2 7 0 0 712 2607 279 20 -1 4 1 2 7 1 0 712 2607 279 20 -1 5 1 2 7 1 1 712 2608 49 19 57.084469 4295 1 2 7 1 2 778 2607 92 20 32.128288 U.S.C.,5 1 2 7 1 3 889 2612 46 14 92.514488 sec.5 1 2 7 1 4 954 2607 37 20 92.506256 52.2 1 3 0 0 0 710 2637 1267 60 -1 3 1 3 1 0 0 710 2637 1267 60 -1 4 1 3 1 1 0 712 2637 848 27 -1 5 1 3 1 1 1 712 2641 10 12 95.328133 55 1 3 1 1 2 732 2641 95 22 94.997795 Duplex5 1 3 1 1 3 840 2640 116 24 96.209175 Printing5 1 3 1 1 4 968 2639 74 20 95.835083 Press5 1 3 1 1 5 1055 2639 39 20 90.545334 Co.5 1 3 1 1 6 1108 2644 21 14 90.545334 v.5 1 3 1 1 7 1141 2638 116 24 96.174194 Deering,5 1 3 1 1 8 1269 2638 46 20 96.858597 2545 1 3 1 1 9 1329 2638 55 20 85.594498 U.S,5 1 3 1 1 10 1395 2638 47 19 95.137032 4435 1 3 1 1 11 1461 2637 99 23 95.137032 (1921).4 1 3 1 2 0 710 2669 1267 28 -1 5 1 3 1 2 1 710 2675 9 12 55.234909 65 1 3 1 2 2 729 2674 110 23 81.355087 Bedford5 1 3 1 2 3 856 2674 46 20 95.001633 Cuts 1 3 1 2 4 919 2674 77 19 95.592300 Stones 1 3 1 2 5 1012 2673 39 19 86.981239 Co.5 1 3 1 2 6 1070 2677 21 15 84.734619 v.5 1 3 1 2 7 1108 2674 166 21 83.916367 Journcymen5 1 3 1 2 8 1294 2671 76 20 93.272751 Stones 1 3 1 2 9 1388 2671 108 19 72.955498 Cutter’s5 1 3 1 2 10 1513 2670 166 23 96.012894 Association,5 1 3 1 2 11 1694 2671 45 18 93.589722 2745 1 3 1 2 12 1757 2670 55 19 87.347885 U.S.5 1 3 1 2 13 1828 2670 28 19 71.115227 875 1 3 1 2 14 1879 2669 98 21 88.861801 (1927). THE CALIFORNIA SPORTSWEAR & DRESS ASSN., INC., ET AL. 847 835 Findings 4. In order to overcome what it considered to be the unduly narrow construction by the courts in these and similar decisions, of the labor exemption under the Clayton Act, 7 Congress in 1932 passed the Norris- LaGuardia Act in which a “labor dispute” was defined as including “any controversy concerning terms or conditions of employment * * * regardless of whether or not the disputants stand in the proximate relation of employer and employee.” ® In addition, section 20 of the act barred Federal injunction of enumerated union organizational and economic pressure activities.® 5. The immunity of unions from antitrust prosecution, as thus liberalized by the Norris-LaGuardia Act, was first construed by the Supreme Court in U.S. v. Hutcheson, 812 U.S, 219 (1941). That case arose out of a jurisdictional dispute between two unions in which one of them engaged in secondary boycott activities, of the type which had been held illegal in the earlier Duplea and Bedford Stone cases. In dismissing the action, the Court stated : Section 20 of that [Clayton] Act * * * relieved such practices of all illegal taint by the catch-all provision, “nor shall any of the acts specified in this paragraph be considered or held to be violations of any law of the United States” (pp. 229-230).

a * * * * * s So long as a union acts in its self-interest and does not conbine with nonlabor groups, the licit and the illicit under section 20 are not to be distinguished by any judgment regarding the wisdom or unwisdom, the rightness or wrongness, the selfishness or unselfishness of the end of which the particular union activities are the means (p. 232). [Emphasis supplied. ] 6. The contingency suggested in the Hutcheson case of possible loss of immunity when unions “combine with nonJabor groups” was first. considered by the Supreme Court in Allen Bradley Co. v. Local No. 3° in which a union that had combined with employer groups was held to have lost its immunity from the antitrust laws. Since the case of counsel supporting the complaint rests largely on the parallel which he contends exists between the practices here involved and those in the Allen Bradley case, it is well to delineate what that case does and does not stand for In that case the union had entered into area-wide arrangements with electrical contractors and manufacturers in New York City. Under these agreements the contractors were obliged to purchase equipment 7See Milk Wayon Drivers’ Union v. Lake Valley Farm Products, Inc., 811 U.S. 91 (1940), for discussion of Congressional intent. 829 U.S.C., sec. 113(c).

29 U.S.C., sec. 104.

10325 U.S., 797 (1945).

Findings d4 F.T.C.

from none but manufacturers who had clesed shop agreements with the same local of the union. The manufacturers agreed that they would confine their New York City sales to contractors who employed members of the loca] union.

Counsel supporting the complaint suggests that it was these provisions of the collective agreements which established “[t]he fact of union-employer combination [which] distinguished this case from the court’s holding in Hutcheson, and subjected Local No. 8 to the provisions of the Sherman Act.” 1! However, it is clear from a reading of the decision that the case involved more than these restrictive provisions. Thus the Court, after noting that the union had gradually obtained more and more closed shop contracts under which contractors were obligated to purchase only equipment. manufactured by firms which had closed shop agreements with the union and manufacturers agreed to confine their New York City sales to contractors employing members of the union, stated (p. 799) : In the course of time, this trpe of individual employer-employee agreement expanded into industry-wide understandings, looking not merely to terms and conditions of employment but also to price and market control. [Emphasis supplied. | Among the facts relating to price and market control, of which the court. took cognizance, were the following: (a) That agencies were set up by the parties “to boycott recalcitrant local contractors and manufacturers and to bar from the area equipment manufactured outside its boundaries,” (b) that the business of New York City manufacturers “had a phenomenal growth,” (c) that equipment prices in the New York City area “soared to the decided financial profit of local contractors and manufacturers,” (d) that “some New York ‘manufacturers sold their goods in the protected city market at one price and sold identical goods outside New York at a far lower price,” and (e) that the interstate sale of certain types of electrical equipment was “wholly suppressed” (p. 800).

The true nature of the court’s holding must be viewed in the light of the question to which it addressed itself which, after reviewing the above facts, it posed as follows (pp. 799-800) : Quite obviously, this combination of businessmen has violated * * * the Sherman Act, unless its conduct is immunized by the participation of the union. For it intended to and did restrain trade in and monopolize the supply of electrical equipment in the New York City area to the exclusion of equipment manufactured in and shipped from other states, and did also control its price and discriminate between its would-be customers. * * * Our problem in this case 4 Proposed Findings, p. 87.

THE CALIFORNIA SPORTSWEAR & DRESS ASSN., INC., ET AL. 849 835 Findings is therefore a very narrow one—do labor unions violate the Sherman Act when, in order to further their own interests as wage earners, they aid and abet businessmen to do the precise things which that Act prohibits? [Emphasis supplied. ] Addressing itself to the question thus posed, the court ruled as follows {We think Congress never intended that unions could, consistently with the Sherman Act, aid nonlabor groups to create business monopolies and to control the marketing of goods and services.

[T]he purpose of mutual help [under section 6 of the Clayton Act] can hardly be thought to cover activities for the purpose of “employer-help” in controlling markets and: prices (p. S08). [Emphasis supplied.] It would be a surprising thing if Congress, in order to prevent a misapplication of [the antitrust] legislation to labor unions, had bestowed upon such unions complete and unreviewable authority to aid business groups to frustrate its primary objective. For if business groups, by combining with labor unions, can fix prices and divide up markets, it was little more than a futile gesture for Congress to prohibit price fixing by business groups themselves. * kk Binding no purpose of Congress to immunize labor unions who aid and abet manufacturers and traders in violating the Sherman Act, we hold that the district court correctly concluded that the respondents had violated the act (pp. 809-810). [Emphasis supplied.] It is apparent from the above that the Court was addressing itself to an employer conspiracy to fix prices and divide markets, in which the union was an ancillary party, and not simply with collective bargaining arrangements for the primary protection of the union, That the latter type of arrangement alone would not have been illegal may be gathered from the following statement of the court (pp. 808-809) :

It has been argued that this immunity [under the Clayton Act] can be inferred from a union’s right to make bargaining agreements with its employer. Since union members can without violating the Sherman Act strike to enforce a union boycott of goods, it is said they may settle the strike by getting their employers to agree to refuse to buy the goods. Employers and the union did here make bargaining agreements in which the employers agreed not to buy goods manufactured by companies which did not employ the members of Local No. 38. We may assume that such an agreement standing alone would not have violated the Sherman Act. But it did not stand alone. Jt was but one element in a far larger program in which contractors and manufaccurers united with one another to monopolize all the business in New York City, to bar all other business men from that area, and to charge the public prices above a competitive level. [Emphasis supplied. ] Findings 54 F.T.C.

It is significant that on the remand of the proceeding, the court of appeals *? interpreted the Supreme Court decision as being based on the assumption that, standing alone, an “agreement between the union and the employers in which the latter agreed not to buy goods manufactured by companies which did not employ members of the union would not violate the Sherman Act” (p. 74, fn. 2). What the Supreme Court condemned, in the view of the court of appeals, was “the actions of the union in endeavoring to ‘aid and abet business men who are violating the law” (p. 74).

Counsel supporting the complaint suggests that even where industry arrangements are not employer-inspired but involve agreements entered into at the sole insistence of the union, nevertheless, the element of employer connivance, which is necessary to deprive a union of immunity, may be inferred. In support of this position counsel relies on the statement appearing in the coneurring opinion of Mr. Justice Roberts to the effect that certain of the employers were “individually coerced by the union’s power to agree to its terms” and that— It is therefore inaccurate to say that the employers used the union to aid and abet them * * *.

The position of counsel supporting the complaint, in this regard appears to be based on such respectable authorities as the former head of the Antitrust Division of the Department of Justice and the Attorney General’s Committee to Study the Antitrust. Laws.2* With all due regard to the knowledgeability of these authorities, the undersigned cannot accept this argument. In the first place, the majority opinion, which the undersigned feels obliged to accept as controlling, emphasizes again and again that the state of facts on which it was ruling was one in which the union was aiding and abetting an otherwise illegal employer conspiracy and not merely a collective agreement for the benefit of the union. This is the view which the court of appeals accepted as controlling on the remand and accords with that adopted in a number of court decisions, as will hereafter appear. Secondly, even the concurring opinion recognized that some of the employer groups participated in the conspiracy on their own behalf, albeit others were pressured to join by the union. This is a far cry from arguing employer connivance may be inferred where none of the employers sought the arrangement for their advantage but were all forced into it by the union for the latter’s primary advancement. 13164 I. 2d 71 (C.A. 2, 1947).

8 Antitrust Law Symposium—1956, CCH. p. 82; Attorney General's National Committee to Study Antitrust Laws (1955), p. 297.

THE CALIFORNIA SPORTSWEAR & DRESS ASSN., INC., ET AL. 851 835 Findings 7, The decisions which have been handed down since Allen Bradley have made it clear that the employer-union combination which results in a loss of immunity must be based on something more than collective bargaining agreements intended primarily for the union’s benefit. In each case, the Court has made it clear that the illegal combination must be one in which the employer group is seeking to advance its own interests by suppressing competition or fixing prices. The courts have not followed any per se approach but have examined into the facts to ascertain who sought the agreement and for whose advantage it operated.

Indicative of the approach the courts have taken is Anderson- Friberg, Inc. v. Clary, 98. F. Supp. 75 (S.D.N.Y., 1951), involving a collective bargaining agreement which prohibited New York firms from handling or working on granite which was less than 6 feet. It was contended by plaintiffs, a group of manufacturers in Vermont, that the clause in question was intended to suppress competition with them by preventing finished or semifinished stone from being brought into the New York area. The union contended, on the other hand, that the purpose of the clause was to protect their work standards against the competition of products produced under substandard working conditions in Vermont, and that the clause was “independently initiated and advanced in the full exercise of its economic power for the betterment of its membership—and not in the interest of employers or any other nonemployee group nor is it related to price fixing.” The employer defendants pleaded that the clause was imposed upon them by the union through the exercise of its economic power and not as a result of any conspiracy on their part.

Faced with these conflicting contentions, the court ruled as follows, on a motion fora preliminary injunction (p.82) : Jt would seem that immunity from injunctive action is dependent upon a factual determination. If there is conspiratorial action as proscribed by the Allen Bradley case, it would not be protected by the Norris-LaGuardia or Clayton Acts. On the other hand, if it be found that the union was acting in its own self-interest and for the betterment of its members, free and independent of a combination with non-labor groups intent upon violating the antimonopoly laws, it would be immunized against injunctive action. The applicability of those acts as we have seen under the Allen Bradley case turns on a fact determination. [Emphasis supplied.] Since the practice in question was embodied in a collective agreement to which the employers were a party, it 1s clear that the court was refusing to infer employer connivance from the mere fact of participation in the agreement. It thus rejected the per se approach of Findings 54 F.T.C.

plaintiffs which suggested that since the clause in question restricted competition and was embodied in a collective agreement to which employers were a party, the requirements of Allen Bradley were met. The court’s disagreement with this assessment of Allen Bradley is indicated not only in the portion of its opinion above quoted, but in its statement that the “hard core” of the Adlen Bradley ruling is to be found in the question posed by the Supreme Court, viz, whether unions violate the antitrust laws “when * * * they aid and abet businessmen” (p.79).

One of the earliest cases interpreting Allen Bradley is Philadelphia ec. Co. v. Manufacturing Ph.-Engr. Assn. 155 F. 2d 799 (C.A. 8, 1946), which involved an industrywide agreement prohibiting night work, except by consent. The court found, as a fact, that enforcement of the night work restrictive provision by the union against plaintiff was instigated by the employer group in order to put plaintiff out of the commercial photo-engraving field. It accordingly held (p. 803) :

This litigation concerns the converse of the problem involved in the Apex decision, namely, where a labor organization is used by a combination of those engaged in an industry as the means or instrument for suppressing competition or firing prices. Ags such it comes squarely under the rule of the recent opinion of the Supreme Court in Allen Bradley Co. vy. Union * * *, There a combination of union, contractors and manufacturers, forced agreements to purchase and Sell electrical equipment locally. [Emphasis supplied.] It is obvious that the court’s conclusion was not based on any per se approach, arising from the employer group’s being parties to the collective agreement, but on the fact that the union was being “used by a combination of those engaged in industry as the means or instrument for suppressing competition or fixing prices.” It is the latter which the court recognized as being the essence of the Allen B radley decision.

Another significant decision involving a charge of union-employer combination is US. v. Employing Plasterers Assn. of Chicago, 138 F. Supp. 546 (N.D. Ti]. 1956), which involved a collective agreement between a union and an association of plastering contractors. The complaint alleged a conspiracy betaveen the union and employers to suppress competition among Jocal contractors and prevent out-of- State contractors from doing work in Chicago. One of the clauses of the agreement on which the Government relied, provided that. the “original contractor” who started a job was required to finish it. THE CALIFORNIA SPORTSWEAR & DRESS ASSN., INC., ET AL. 853 835 Findings Although the Supreme Court upheld the sufficiency of the complaint," the complaint was dismissed after trial as not being sustained by the evidence.

At.the trial of the case, the Government took the position that the “original contractor” rule constituted a per se violation of the Sherman Act. The union offered evidence to show that the clause in question long antedated the collective bargaining agreement which was under attack, and that it was adopted at its insistence many years prior thereto, in order to prevent the practice of some plastering contractors who sub-contracted part of their work to other firms which were not in contractual relations with the union. The court found this to be the true origin of the clause, rather than a combination by the union and employers to keep other firms from doing work in the Chicagoarea. Itaccordingly, stated (p. 548) : This court finds that the agreement did not come about as a result of a conspiruey between the defendants and has never been so used. Jt concludes that the agreement is not a per se violation of the Sherman Act. On the contrary, the agreement assures attainment of a proper objective which, it appears to this court, is consistent with sound labor policy and labor law. * * *. [Emphasis supplied.] The cases in which unions have been held to have lost their immunity by entering into agreements with employer groups have involved situations in which the employers have taken an active part in bringing about the arrangement and the agreement was intended to limit competition and control prices to the independent advantage of the employers. Typical of these cases is Local 175 v. U.S., 219 F. 2d 431 (C.A. 6, 1955), in which members of an electrical contractors association were required to submit bids only through their association, which decided what member would be permitted to make a formal bid on a job. The union cooperated by refusing to work on a job unless it was awarded to the association designated contractor. The court held that the Clayton Act exemption did not apply since it— does not exempt a labor union * * * when the union and its officials aid and abet nonlabor groups * * * (p. 483).

To the same effect, see Las Vegas Merchant Plumbers Assn. v. U.S., 210 F. 2d 782 (C.A. 9, 1954), involving a contractor association which parcelled out work and limited competitive bidding, assisted by a union. See also United Brotherhood of Carpenters v. U.S., 330 US. 395 (1947), where the purpose and effect of an employer-union combination was found to be to restrain out-of-State manufacturers from selling in the San Francisco area and to prevent dealers in the area 4 347 U.S. 186.

Findings 54 F.T.C.

from handling such products. The arrangement, like that in Allen Bradley, resulted in higher prices in the area and higher profits to the employers.

The cases above discussed are contrary to the per se approach of counsel supporting the complaint. They indicate that it is necessary in each case to review the provisions of the collective agreement in the light of all attendant facts and circumstances, so as to ascertain whether the clauses were adopted as a result of union demands and for the union’s primary benefit, or are the result of an employer conspiracy to restrict competition and raise prices, in which the union merely aided and abetted the employer group. 8. Counsel supporting the complaint argues that even in the absence of employer-union connivance, activities by a union which restrict. competition are subject to antitrust review. In support of this position, counsel cites the Supreme Court’s decision in the Apex Hosiery case.® Counsel has evidently misread the Apea decision since it was unnecessary for the court there to determine whether the union’s sit-down strike was exempt under the Clayton or Norris- LaGuardia Acts, inasmuch as it found that there was no violation of the Sherman Act. The aim of that act, the court stated, was: (p. 498 * * * the prevention of restraints to free competition in business and commercial transactions which tended to restrict production, raise prices or otherwise control the market to the detriment of purchasers or consumers of goods and services ** *, Since the union’s organizational strike did not have as its purpose “restraint upon competition in the market for petitioner’s product,” the court concluded there was no violation of the Sherman Act. It should be noted that. among the cases, from which the court there distinguished the situation with which it was dealing, were the Danbury Hatters, Duplex Printing, and Bedjord Stone cases, in which the unions were found to have violated the Sherman Act. It will be recalled that it was as a result of these cases that the Clayton and Norris-LaGuardia Acts were passed. Since the court found no violation of the Sherman Act, even in its prelmmunity state, the Apex decision obviously cannot be considered as delimiting the extent of the immunity provided under the later acts, or as holding them inapplicable wherever the union’s activity involves a restraint on “commercial competition” (p. 500).

18 Aner Hosiery Co. v. Leader, 310 U.S. 469 (1940). THE CALIFORNIA SPORTSWEAR & DRESS ASSN., INC., ET AL. 855 835 _ Findings Later Supreme Court cases have indicated that even though a union’s activities may restrict competition it may, nevertheless, be immune from antitrust attack by reason of the Clayton or Norris- LaGuardia Acts. Thus, in A/édk Wagon Driver's Union v. Lake Valley Farm Products, Inc., 811 U.S. 91, the court of appeals had concluded that since the union’ 's secondary boy cott constituted a violation of the Sherman Act it was illegal, regardless of the Norris-LaGuardia Act. The Supreme Court reversed, stating (p. 108) : For us to hold, in the face of this legislation [Norris-LaGuardia Act], that the Federal courts have jurisdiction to grant injunctions in cases growing out of labor disputes, merely because alleged violations of the Sherman Act are involved, would run counter to the plain mandate of the Act and would reverse the declared purpose of Congress. [Emphasis supplied.] See also U.S. v. Hutcheson, 812 U.S. 219, 229-232 The cases are legion that. when a union is engaged in activities for bona fide advancement of its interests, it is, absent. participation in an employer conspiracy, protected from antitrust prosecution even though its activities involve a restraint on trade. As stated by the court. in Vew Broadcasting Co.. /ne. v. Kehoe, 94 F. supp. 113 (S.D. N.Y., 1950), in dismissing a restraint of trade action against acunion charged with seeking to induce sponsors to cease doing business with plaintiff radio station (p.115):

It is now well settled that a labor organization, engaged in advancing the legitimate aims of its members. may incur liability under the antitrust laws only by entering into «@ combination with employers, who are themselves violating the antitrust laws.

[I]t is clear * * * that the union’s primary objective has been to advance the interests of its members, however one might characterize some of the methods it is alleged to have emploved. Nor does the allegation that some sponsers have succumbed to the union's pressure disclose that combination with employers to restrain trade which the Supreme Court has deemed a prerequsite to union liability for antitrust violations. [Emphasis supplied. ] It will be noted that the above decision not only emphasizes the broad scope of a union’s immunity but. also makes it clear that the loss of exemption, resulting from a combination with employers, involves 4 combination in which the employers themselves are violating the Jaw. This accords with the view taken by the undersigned abore, that a finding of employer connivance cannot. be based merely on the fact that they are signatories to a collective agreement. To the same effect. see Courant v. International Photographers, 176 F. 2d 1000 (C.A. 9, 1949), holding that— Findings 54 F.T.C.

* * * antitrust or antimonopoly legislation applies to labor unions only when the unions act in company and cooperation with business concerns * * * for the purpose of restraining trade to the ultimate benefit of themselves [i.e., the business concerns].

Since the complaint m the Courant case indicated that “the union’s acts were for their own benefit,” the court dismissed the action. For a similar holding that a finding of employer conspiracy cannot be based on a collective agreement for the union’s benefit, see also Meier & Pohlmann Furniture Co. v. Gibbons, 113 F. Supp. 409 (E.D. Mo., 1958).

This is not to say that a union has unlimited immunity from the antitrust laws. Its activities must, of course, be reasonably related to some aspect of the employer-employee relationship, or, as it has been said, the employer-employee relationship must be the “matrix of the controversy.” 7° The case last cited in the footnote is typical of those in which the union's activities were held to have gone beyond the scope of the employer-employee reiationship. The so-called union there was found to be actually a combination of independent entrepreneurs who owned or leased their own boats, some of whom also had employees of their own. The suit arose out of the efforts of the fishermen’s association to fix the price of fish. Holding that the association was not entitled to the protection of the Clayton and Norris-LaGuardia Acts, the court stated (p. 146) : We recognize that by the terms of the statute there may be a “Jabor dispute” where the disputants do not stand in the proximate relation of employer and employee. But the statutory classification, however broad, of parties and circumstances to which a “labor dispute’ may relate does not expand the application of the Act to include controversies upon which the employeremployee relationship has no bearing. Our decisions in New Negro Alliance v. Sanitary Grocery, 303 U.S. 552 * * *, and Milk Wagon Drivers’ Union v. Lake Valley Farm Products, 311 U.S. 91 * * *, give no support to the respondents’ contrary contention, for in both cases the employer-employee relationship was the matria of the controversy.

The controversy here is altogether between fish sellers and fish buyers. * * * That some of the fishermen have a small number of employees of their own * * * does not alter the situation. For, the dispute here, relating solely to the sale of fish, does not place in controversy the wages or hours, or other terms and conditions of employment, of these employees. [Emphasis supplied.] To the same effect, see Heacatian Tuna Packers v. International L. and W. Union, 72 F. Supp. 562 (D. Hawaii, 1947), which counsel supporting the complaint has cited in his. proposed findings, in addi- 1% Ring v. Spina, 148 F. 20 647, 651 (C.A. 2, 1945) ; Columbia River Packers Ass'’n., Ine. vy. Hinton, 315 U.S. 143, 146 (1942).

THE CALIFORNIA SPORTSWEAR & DRESS ASSN., INC., BT AL. 857 835 Findings tion to the Apex case, supra. That case also involved a price fixing conspiracy in which the so-called union included boat owners, as well as employees.

While, as has been indicated above, a union, in order to qualify for exemption, must be acting in its self-interest within the scope of the employer-employee relationship, the courts have made it clear that they will not act as censors concerning the wisdom of the union’s determination as to where its self-interest lies. Indicative of the attitude of the courts in this respect is Milk Drivers’ Union v. Lake Valley Farm Products, [ne., 311 U.S. 91 (1940), involving a strike to force retail outlets to cease buying milk from certain milk companies, who distributed their milk through so-called “vendors.” The latter were considered as independent contractors by the milk companies but the union insisted that they become members. Holding that a “labor dispute” was involved, the Court stated (p. 98-99): Whether rightly or wrongly, the defendant union believed that the “vendor system” was @ scheme or device utilized for the purpose of escaping payment of union wages and the assumption of working conditions commensurate with those imposed under union standards. To say, as the Circuit Court of Appeals did, that the conflict here is not a good faith labor issue, and that therefore there is no “labor dispute,” is to ignore the statutory definition of the term; to say, further, that the conditioned abandonment of the vendor sysem, under the circumstances, was an issue unrelated to labor’s efforts to improve working conditions, is to shut one’s eye to the everyday elements of industrial strife. [Emphasis supplied.] To the same effect see the Hutcheson case, supra, where the court stated that as long as the union acts “in its self-interest” and not in combination with employers— * * * the licit and the illicit * * * are not to be distinguished by any judgment regarding the wisdom or uuwisdom, the rightness or wrongness, the selfishness or unselfishness of the end of which the particular union activities are the means (p. 282).

In the light of the precedent above discussed, the undersigned turns to a consideration of the collective agreements here involved, including the circumstances, background and purposes of the provisions which are here in question, and the actual manner of their operation, in order to determine (a) whether the agreements involve a bona fide labor dispute in which the employer-employee relationship is the matrix of the controversy, and/or (b) whether they are in aid of a conspiracy or other arrangement. by employers to control markets and prices or otherwise illegally restrict commercial competition.

Findings 54 F.T.C.

C. The Contractor Restrictions 1. The complaint alleges the following restrictions on competition among contractors or in the use of contractors, arising out of the Los Angeles sportwear industry collective agreements: a. Members of the manufacturers’ and jobbers’ associations may employ as contractors only those contractors who (1) are members of the contractors’ association, (2) have entered into collective agreements with the respondent unions, and (3) have been designated and approved in accordance with the provisions of the collective agreements.

b. Prices paid to contractors by members of the manufacturers’ and jobbers’ association are fixed and determined in accordance with a procedure which prevents free and independent bargaining. c. Members of the manufacturers’ and jobbers’ associations may not contract or subcontract. “within their shop,” even though it may be more economical and advantageous to do so. d. Members of the manufacturers’ and jobbers’ associations are required to purchase accessory items such as belts, embroidery and buttons from, or have them made up by, firms which are in contractual relations with respondent ILGWU or one of its affiliates. 2. There is no dispute that the agreements contain certain restrictions on the free and untrammeled use of contractors including particwarly the requirement. that they must. be union contractors and must be designated and approved in accordance with a procedure set out in the agreements. The union contends that these restrictions are required for the protection of its members and are not. subject. to antitrust attack. This argument will be hereafter more fully considered. The union denies, however, that there is any restriction, such as is alleged in the complaint, that contractors must belong to the respondent Contractors Association. The undersigned turns first to a consideration of this issue.

3. There is no provision in any of the agreements here at. issue which requires that. members of the jobbers’ and manufacturers’ associations must deal only with contractors who belong to the contractors’ association. Counsel supporting the complaint cites no provision of the agreements, in his proposed findings, which contains any such requirement. However, he refers in his reply memorandum to two clauses, as inferentially supporting his position. One of the clauses cited by him, which appears in both the manufacturer and jobber asscciation contracts, provides in substance that if the union should enter into a contract with a contractors’ association, the members of the THE CALIFORNIA SPORTSWEAR & DRESS ASSN., INC., ET AL. 859 835 Findings manufacturers’ and jobbers’ associations “pledge themselves and agree to recognize such an association of contractors and to deal with such an association on behalf of its members.” 37 There is nothing in the clause cited which suggests that the pledge to recognize and deal with a contractors’ association on behalf of its members involves any commitment not. to recognize or deal with other contractors who are not members of such association. On the contrary, the fact. that the agreements contemplate there will be contractual relations between the union and nonassociation employers, clearly implies that there may be dealings between nonassociation contractors and association jobbers or manufacturers. Thus, one clause in all of the agreements is entitled “Contracts with Non-Association Firms” and provides, in substance, that contracts with employers who are not members of the associations will conform to the association collective agreements.%? Another clause in the jobbers’ and manufacturers’ agreements, dealing with the settlement of piece rates payable to the contractors’ employees, provides that copies of the rates agreed upon shall be sent to the contractors’ association ‘if the contractor is a member,” ? thus indicating that it was contemplated there would be contractors who were not association members. Counsel supporting the complaint also relies on a clause in the contractors’ association collective agreement, which incorporates into that agreement the provisions of the other two agreements dealing with the designation of contractors.”? Counsel argues that. since the only machinery for the designation of contractors is found in these collective agreements, it may be inferred that. contractors who are not. members of the association are not eligible for use and designation as contractors by jobbers and manufacturers. Counsel's argument in this respect is a complete non sequitur. While it may be that the procedure for designating contractors by manufacturers and jobbers (which will hereafter be discussed in greater detail) is controlled by the provisions of the manufacturer and jobber association agreements, there is nothing in these provisions which suggests that the designated contractors must. be members of the contractors’ association. There is a requirement that the designated contractors must. be union contractors; however, this is not tantamount to a requirement. that such union contractors must also be members of the contractors’ association. On the contrary, the fact that the collective agreements indicate that the union may contract WCKX land 2, par. 88fe) 12(e), p. 28.

18 CX 1 and 2, par. 40, p. 46; Cx 3, par. 39, p. 41. WCN 1 and 2, par. 16, p. 15.

CX5 1 3 1 2 2 667 2695 22 21 94.472244 8,5 1 3 1 2 3 703 2701 51 18 89.191345 par,5 1 3 1 2 4 768 2695 87 23 65.683716 88(d),5 1 3 1 2 5 868 2701 22 18 89.750259 p.5 1 3 1 2 6 903 2695 37 20 89.781105 24.2 1 4 0 0 0 654 2745 261 20 -1 3 1 4 1 0 0 654 2745 261 20 -1 4 1 4 1 1 0 654 2745 261 20 -1 5 1 4 1 1 1 654 2746 120 19 60.490135 528577—5 1 4 1 1 2 786 2746 29 19 81.052109 605 1 4 1 1 3 886 2745 29 19 95.962967 562 1 5 0 0 0 817 2756 66 3 -1 3 1 5 1 0 0 817 2756 66 3 -1 4 1 5 1 1 0 817 2756 66 3 -1 5 1 5 1 1 1 817 2756 66 3 95.000000 Findings «BART.

with nonassociation firms makes it apparent that such nonassociation union contractors are eligible for designation. In view of the provision already referred to, that agreements by the union with nonassociation employers shall conform to the association agreements, it may be inferred that the former either include a similar contractor designation procedure, or incorporate by reference the provisions of the association agreements.

According to the uncontradicted testimony in the record, members of the respondent manufacturers’ and jobbers’ associations use nonassociation contractors. In the face of this credible testimony and the absence of any provision in the agreements to the contrary, it is concluded and found that the allegation of the complaint. that members of the respondent manufacturers’ and jobbers’ associations may recognize and deal only with members of the respondent Contractors Association is not sustained by the record. 4. The collective agreements contain the following provisions, regulating the use of contractors, which the complaint. challenges as constituting an unlawful interference with competition: 7? a. Jobbers and manufacturers may use only union contractors (except that where none are available, nonunion contractors may be used for a limited period).

b. Jobbers and manufacturers may use only such union contractors as they designate by submitting written notification of such designation to the union and receiving its approval. The number of contractors who may be designated by a jobber or manufacturer is limited to the number “actually required by him to manutacture his garments.”

c. There are three categories of contractors who may be designated : (1) Permanent and exclusive, i.e., contractors who work exclusively for a single manufacturer or jobber; (2) permanent and nonexclusive, 1.e., contractors who work for more than one jobber or manufacturer on a regular basis; and (8) temporary, i.e., contractors who work for a jobber or manufacturer for a limited period where a temporary increase in the Jatter’s production has made it necessary to obtain additional contractor facilities.

d. Should a jobber or manufacturer desire to cancel or modify the designation status of any of his contractors, including the adding or eliminating of designated contractors, he must. obtain approval from the union. Among the factors to be taken into consideration in approving such a change of status are: (1) Change in the character 2 CX 1, 2 and 3. par. 33, p. 23 et seq.

THE CALIFORNIA SPORTSWEAR & DRESS ASSN., INC., BT AL. 861] 835 Findings of the manufacturers’ or jobbers’ production which his present contractors cannot properly and efficiently meet; (2) inability of a contractor to properly and efficiently meet the present requirements of the jobber or manufacturer; and (8) curtailment of the manufacturers’ or jobbers’ production caused by financial reasons. e. The decision of the union disapproving any request concerning designation or change of status of contractors is subject to review by the impartial chairman, provided for under the collective agreements, who may reverse the union after a hearing on the question. f. Contractors must confine their production to manufacturers or jobbers who have designated them, except. where any such manufacturer or jobber has no work for a contractor the latter may work for a nondesignating manufacturer or jobber.

5. In addition to the above provisions governing contractor-jobber (or manufacturer) relations, there are several other provisions which are in the nature of restrictions on the use of contractors. These are: a. No contracting or subcontracting shall be permitted within the shop of any individual employer.”

b. Employers who contract out the making of accessory items such as embroidery, pleating, covered buttons, belts, etc., or who purchase such items, shall deal only with firms who are in contractual relations with an affiliate of the ILGWU.”

6. The agreements contain certain provisions governing the payments to be made by manufacturers and jobbers to their contractors, for the latter's services in fabricating the garments. It is these provisions which the complaint alleges create a “procedure to fix and determine the prices to be paid to [contractors] which prevents [manufacturers, jobbers and contractors] from bargaining freely and independently with each other as to the amount to be paid to said [contractors ].”

The basic provision under attack reads as follows: ™4 In view of the fact that the ultimate source of employment and wages paid to the employees of the contractors and submanufacturers is the employer [i.e., the jobber or manufacturer] who supplies the work to the contractors and submanufacturers and controls the nature of the product, the parties hereto acknowledge that the employer is directly concerned with the payment of the wages of the workers employed by the contractors and submanufacturers. Therefore, it is agreed that the emplorer shal] pay to the contractors and submanufacturers for work performed for the emplorer an amount sufficient to enable them to pay to their employees the wages and earnings provided for under this agreement, plus a reasonable amount for 2 CX 1,2, and 8, par. 25, p. 78.

29CN 1. 2. and 8, par. 322, p. 22.

CX J and 2, par. 33(e) 10, p. 27.

§62 FEDERAL TRADE COMMISSION DECISIONS Findings 54 F.T.C.

the contractors’ or submanufacturers’ overhead for producing said employer’s work and in addition thereto, the emplvyer shall pay to the contractor a sum equivalent to the contribution made or to be made to the vacation, health and welfare fund and retirement fund by the contractor for work performed on the employer’s garments, except where the employer makes said contribution for such contractor or submanufacturer directly to the fund.

The employer shall also settle with his contractors or submanufacturers * * * the amount to be paid to such contractors for their overhead, which shall be in addition to the wages and earnings paid to the workers of such contractors or submanufacturers as provided for in this agreement. In line with the theory of the agreements that the jobber and manufacturer is the “ultimate source of employment and wages paid to the employees of the contractors,” the agreements provide that the jobber or manufacturer “shall be responsible for, and guarantee payment of, the wages of workers employed by contractors” and that in the event the latter fail to make payment, the jobber or manufacturer, after notification by the union, will do so in an amount not to exceed 10 days wages. For the same reason, it. is provided that. a representative of the jobber will be present. when the piece rates of the contractor’s employees are settled: * also, that at the time such piece rates are settled, the contractor “may also settle the amount of his overhead, which sums shall be in addition to the wages and earnings provided for herein for the workers.” *" Despite the latter provision, in actual practice the jobber or manufacturer is rarely, if ever, present at the settlement of piece rates between the contractor and his employees. Similarly, the amount of the contractor's “overhead,” is agreed upon between the contractor and jobber, outside the presence of the Union and employees, and may occur before or after the settlement. of employees’ piece rates. 7. It is the position of the union that the clauses regulating the contracting out of work and the payment of compensation to contractors were demanded and fought for by it in order to safeguard the labor standards of employees against. the debilitating effects of the jobber-contractor system, that they were cbtained over the vigorous objection of the employer groups, and that they are not part of any Most production employees in the industry are paid on a piece-rate basis, The cellective agreements, in referring to the settlement of such piece rates, at one point refer to the settlement of “prices.” It is not clear from the argument of counsel supporting the complaint whether he is relying on this reference, as supporting his position that the clause in question involves a form of price fixing. .However, it is the common practice in . the industry to refer to the fixing of piece rates as the settling of “‘prices,’’ and it is clear from the entire context of the clause in question that the reference to ‘prices’ is intended to he to employees’ ‘piece rates.”

2 CX Land 2, par. 16, p. 14.

THE CALIFORNIA SPORTSWEAR & DRESS ASSN., INC., ET AL. 863 835 Findings joint union-employer effort to restrain competition, divide markets or fix prices in the industry. Considerable testimony and other evidence were offered by the ILGWU respondents with respect to the historical conditions in the industry which gave rise to the demand for such provisions in the collective agreement, and the various efforts made by the union to achieve agreement on these clauses from employers in the industry. Such evidence was received over the objection of counsel supporting the complaint, who contended that the agreements were per se illegal and that such evidence was therefore irrelevant.

8. The evidence offered on behalf of the ILGWU respondents establishes that the jobber-contractor provisions of the collective agreements represent the culmination of a struggle on the part of the union, to protect the labor standards of employees in the garment industry, which goes back over 40 years.

At the beginning of the present century the women’s garment industry was still in a most elementary stage in the development of decent labor standards. Most of the industry was concentrated in New York City where the steady stream of immigrants supplied it with a seemingly endless source of cheap labor. Sweatshops, with their unsanitary working conditions, excessively long howrs and extremely low wages, were a prominent characteristic of the industry. Although sporadic efforts to ameliorate conditions in the industry had taken place in the preceding decade, the most persistent and far-reaching efforts at improvement began after the turn of the century. The respondent ILGWU, which was organized in 1900, played a prominent part in this effort.

The union's efforts to organize employees in the industry and improve labor conditions was made difficult by the fact that many employers, who had theretofore maintained “inside” shops and had even entered into bargaining relations with the union, began to contract out all or large parts of their production in order to evade responsibility for the labor standards of their employees. One method of contracting used was the so-called “padrone” system, under which a manufacturer designated his foreman or other supervisory employee as an independent contractor and arranged with the latter to have the garments sewn up for a fee, the latter to make his own arrangements for compensation with the employees. The process of production was performed in the manufacturer’s own factory which the so-called independent. contractor was permitted to use. In 1910, following a strike in the industry, the collective agreement. which was entered into, known as the “Protocols of Peace,” outlawed Findings 54 F.T.C.

the practice of subcontracting within the manufacturer’s own shop. However, the protocol made no provision with respect to outside contracting and this practice continued to expand in the period following 1910. Often these contractors were former supervisory employees who were financed in their new enterprise by their erstwhile employer.

Since entry into business as a contractor involved a minimum of investment, *’ the decade ‘between 1910 and 1920 saw a marked shift away from “inside” manufacturing to production in the “outside” plants of contractors. By utilizing such contractors, the former manufacturers (who came to be known as jobbers) were relieved of all responsibility for production, and hence for employment. conditions. Since they were no longer concerned with spreading out factory overhead costs on a year-round basis, they tended to concentrate their production during relatively brief seasonal periods of peak demand, when they utilized as many contractors as they required, and then allowed most. of these contractors and the latters’ employees to remain idle during considerable portions of the year. The steady increase in the number of contracting shops gave rise to what became known as the “auction block” system. While the jobber tended to concentrate his production among a relatively small number of steady contractors, he maintained a. coterie of additional contractors to whom he supplied a trickle of work and whom he utilized as a threat to beat down the price which his regular contractors sought for sewing up his garments. Actually, what was involved in the bidding among contractors were the wages of employees since their overhead costs were fairly standardized and approximately 75 percent of the price received from the jobber went for labor costs. As the contracting system flourished, it presented the union with a serious problem in its effort to maintain decent labor conditions. The great. number of such contractors, the small size of each operation, the frequency with which they went in and out of business or moved their location, and their lack of financial responsibility made it. difficult. for the union to organize these shops. Even where it did have collective agreements with contractors, the constant economic pressure from the jobbers made it difficult. to maintain union standards. Employees, faced with complete loss of work, were frequently induced to accept. less than the union standards. The deterioration = The contractor was able to buy his machinery on the installment plan or rent it. The only cash required was enough to meet the payroll for the first week or two. Sometimes the jobber would even advance this.

THE CALIFORNIA SPORTSWEAR & DRESS ASSN., INC., ET AL. 865 835 Findings of labor standards in the contracting shops in turn had an adverse effect on conditions in the manufacturers’ inside establishments. Faced with this situation, the union began to look to the jobber as the key to solving the problems which confronted employees. It contended that he was the actual, if not the legal employer, and that only through him could the flow of work be regularized, decent wage and hour standards maintained, and employees assured the payment of wages which were periodically lost to them when financially insecure contractors disappeared from the business scene. The union’s attitude toward the contractor, as a mere agent of the jobber or manufacturer, found support from as respectable a source as the United States Industrial Commission which described him as follows: The contractor is an irresponsible go-between for the manufacturer, who is the original employer. He has no connection with the business interests of the manufacturer nor is his interest that of his help. His sphere is merely that of a middleman. He holds his own mainly because of this ability to get cheap labor, and is in reality merely the agent of the manufacturer for that purpose. Beginning about 1911, the union strove continuously to plug the loophole which had come into being with the widespread utilization of the contractor system. Although the 1910 protocol had abolished all contracting “within shops,” it was silent on outside contracting. Many employers tried to evade the protocol by having their work done in out-of-town shops. In March 1911, on complaint of the union, the Board of Arbitration *° provided for under the protocol, ruled that this practice was against. the spirit of the protocol. The practice of using contractors nevertheless continued, and in May 1912 the Board of Grievances granted the union's demand that contractors should be registered with the union, so as to permit the latter to supervise such shops in order to see to it that the employees received the same wages as employees in the inside shops and that the contractor received an additional allowance for his management fee. This constitutes the first definite move, of which there is any record, to regulate the contractor-jobber relationship. In May 1913 the union submitted proposals looking toward a new collective agreement to replace the protocol, which included demands that contractors be registered and that a jobber would not take on new contractors so long as his existing contractors were not working full time. These proposals were not accepted. However, in 1919, after a strike in the coat and suit branch of the industry, the Reports5 1 2 5 7 2 719 2583 29 56 96.006943 of5 1 2 5 7 3 761 2602 55 21 73.560944 U.S,5 1 2 5 7 4 834 2602 140 21 96.730499 Industrial5 1 2 5 7 5 993 2603 172 21 81.045883 Commission,5 1 2 5 7 6 1183 2603 47 21 95.582481 vol.5 1 2 5 7 7 1246 2604 52 23 54.094780 XV,5 1 2 5 7 8 1315 2609 22 20 92.749527 p.5 1 2 5 7 9 1355 2604 54 23 85.287445 321,5 1 2 5 7 10 1426 2605 90 23 82.447639 quoted5 1 2 5 7 11 1533 2605 24 19 94.832726 in5 1 2 5 7 12 1574 2605 43 20 91.482086 RN5 1 2 5 7 13 1635 2605 20 21 74.980492 8.5 1 2 5 7 14 1672 2611 22 18 74.699036 p.5 1 2 5 7 15 1710 2607 37 22 74.699036 12,5 1 2 5 7 16 1762 2607 37 20 87.624786 fn.5 1 2 5 7 17 1816 2608 20 19 80.305420 1,2 1 3 0 0 0 532 2636 1306 54 -1 3 1 3 1 0 0 532 2636 1306 54 -1 4 1 3 1 1 0 564 2636 1274 25 -1 5 1 3 1 1 1 564 2636 18 12 61.825451 *5 1 3 1 1 2 593 2636 51 20 94.889847 Ones 1 3 1 1 3 661 2638 25 18 95.690918 of5 1 3 1 1 4 703 2637 42 19 96.311653 thes 1 3 1 1 5 763 2638 166 23 96.263184 outstanding5 1 3 1 1 6 946 2638 104 19 96.389977 citizens5 1 3 1 1 7 1068 2638 54 20 96.498650 who5 1 3 1 1 8 1141 2639 86 19 96.498650 served5 1 3 1 1 9 1245 2644 29 14 96.484077 on5 1 3 1 1 10 1292 2638 42 20 96.557816 thes 1 3 1 1 11 1351 2638 81 20 95.724922 Boards 1 3 1 1 12 1451 2644 52 15 96.670586 was5 1 3 1 1 13 1521 2640 42 19 95.665916 thes 1 3 1 1 14 1582 2639 51 20 95.770004 lates 1 3 1 1 15 1649 2640 97 20 95.953819 Justice5 1 3 1 1 16 1762 2641 76 20 83.142365 Louis4 1 3 1 2 0 532 2669 176 21 -1 5 1 3 1 2 1 532 2669 28 20 91.547394 D.5 1 3 1 2 2 577 2669 131 21 95.952286 Brandeis. Findings 54 F.T.C.

agreement with that group of employers included the following provisions: (a) Prohibition of employment of nonunion contractors ; (b) registration of contractors; (c) responsibility of jobbers for wages paid in contract. shops; (d) equal distribution of work among contract shops; and (e) prohibition of employment of new contractors unless contractors already engaged were supplied with enough work to keep ten machines fully employed.

Thus it appears that over 30 years ago the union was successful in winning, in part of the garment industry, agreement on contractor regulatory provisions similar to those now challenged. However, as a result of 1921-24 depression in the industry, compliance with these provisions broke down. When employers refused to accept the union’s proposals with respect to the use of contractors, which limited a jobber to such number as he could supply with work to their full capacity, the union threatened a strike in the cloak and suit branch of the industry, and the Governor of New York, Alfred E. Smith, appointed a special Advisory Commission of outstanding citizens to investigate and make recommendations for a solution of the problems of the industry.*° After 2 years of hearings, devoted largely to the problems arising from the jobber-contractor system, the Commission made its report and recommendations, of which the following are significant highlights:

A decade ago the industry had risen out of the old sweat-shop conditions in which much of the actual work had been done in tenement-house homes. Manufacturing bad become concentrated in large “inside” shops under employers who were directly responsible both for manufacturing and for marketing the product. Since that time, however, there has been a gradual displacement of inside manufacturers by so-called jobbers. This has progressed to such a point that about three-forths of the production now flows through the new jobbingsubmannfacturing systen.

This system has grown up partly as a device to escape labor responsibilities and partly as an adaptation to the newer methods of retail buying. An inside manufacturer creates styles, employs a permanent complement of workers, and seeks, so far as possible, to get advance orders from the retailers, placing his chief emphasis upon quality of production. The jobbers * * * {iJmstead * * * is an indirect manufacturer. He purchases his materials and then farms out the production to an elastic and shifting group of small sub. manufacturers who follow bis instructions as to style. His emphasis is on *® Among those who served on the Commission were Herbert H. Lehman (after Senator from New York), Bernard L. Shientag (later New York State Supreme Court justice), and George Gordon Battle (eminent member of the New York Bar). One of the members, Lindsay Rogers, professor of public law at Columbia University, testified as a witness in this proceeding.

THE CALIFORNIA SPORTSWEAR & DRESS ASSN., INC., ET AL. 867 835 Findings mass production and on selling finished garments from the racks. While * * * the jobbers are the real capitalists in this large branch of the manufacturing process; they do not directly employ labor, and consider themselves free from responsibility for labor standards. Incidentally, they have no incentive for lengthening the season, for the manufacturing overhead is carried by the multitude of small submanufacturers, each with a little loft and a few machines. The submanufacturers, on the other hand, usually have no contact whatever with the retail trade. Their outlet is through the jobbers. They can not create a demand for their production. They have, for the most part, not enough capital to purchase materials. They seek work and materials from the jobbers. This outside system of production is fraught with waste to all concerned. * * * The wastes involved in this system are distributed in various ways. Hundreds of these submanufacturing firms each year lose the small capital with which they have started, and often leave their creditors, including workers, in the lurch. The jobbers themselves have been suffering more and more through the cancellation of retail orders and the return of merchandise due to faulty workmanship, skimping in materials, and disregard of sizes and other specifications. The greatest burden of waste, however, falls upon the workers, through shortened seasons, and through substandard conditions of employment. * * * * * * * Were this pressure [of competition for work] felt only by the submanufacturers, the situation would not be so serious, and it might work its own cure through discouraging the perpetual opening up of new shops. But the fact is that a large proportion of the submanufucturers succeed in shifting the burden on to the workers. The shops being small, there is a comparatively close relation between the firm and the workers. When work is scarce, as it usually is except for a few weeks in each season, the workers are told that in order to meet the exigencies of price competition and to bring some work into the shop, they must enter into secret arrangements contrary to the minimum labor standards which have been agreed upon, and which are pretty successfully enforced in the larger shops of the inside manufacturers.

These concessions by the workers take various forms. They chiefly involve wages, hours, rates of pay for overtime, work on holidays, and the substitution of piece work for pay by the hour. All this is done without the knowledge of the union officials and is frequently concealed in the books of the firm. Incidentally, it subjects the inside manufacturers to such unfair competition as tends to drive out of legitimate manufacturing into jobbing all except those producing garments of the most exclusive and expensive styles.

* * * * * * * Were it practicable, the workers would be justified in taking the stand that they would work only in inside shops and would refuse to work in outside shops, where they were removed from al] direct contact with the owners of the capital involved. The so-called jobbing system of manufacture, however, has become so extensive and so firmly entrenched in the industry that such a stand would be impracticable. :

* * * * * * * Findings 54 F.T.C.

In determining the relationship between jobber, submanufacturer, and workers we should be concerned not so much with the form as with the substance. By whatever name he may call himself, the jobber controls working conditions ; he controls employment, and that element of control imposes upon him the responsibility that he shail so conduct his business that proper working standards may be upheld instead of undermined, and that employment may be stabilized instead of demoralized.

We appreciate that any remedy that is proposed must be reasonable, practicable, and possible of being carried into effect without a disruption of the industry. Bearing this in mind the Commission recommends that there be such structural modifications in the existing jobbing-submanufacturing system as would tend to regularize the flow of work into submanufacturing shops, raise the level of competition between submanufacturers, cause closer relations between jobbers and submanufacturers, and stabilize working conditions in the shops. With this in view, we recommend that the parties adopt a system of limitation of submanufacturers with whom a jobber may do business. At definite intervals every jobber shall, in accordance with a standard to be agreed upon between the parties, select. and designate the submanufacturers he needs to handle his production, leaving him the necessary freedom in securing samples and in changing submanufacturers for cause shown; he shall not give work to other submanufacturers when his designated submanufacturers are not busy, and shall adhere, so far as practicable, to a policy of equitable distribution of work among the submanufacturers designated by him. The administration of such a system would, as cases arise, be usbject to equitable interpretation through the impartial machinery. [Emphasis supplied. ] The recommendations of the Governor’s Advisory Commission were not accepted by the employer groups and the union continued its efforts at. regulating the jobber-contractor relationship. It was not until 1933, in the cloak and suit branch of the industry, and 1936 in the dress branch, that the union was able to obtain jobber approval of a contractor designation system and recognition of responsibility toward the employees in the contractors’ shops. The jobbers agreed: (a) To designate the contractors they actually needed and confine their production to such contractors, (b) to distribute work equitably among their contractors’ work forces, and (c) to pay the contractors an amount sufficient to pay the workers their wages, together with an allowance for the contractors’ overhead. 9. The Los Angeles sportswear industry was established in the middle °30s. The employers in Los Angeles were, by and large, former New York employers. Because of their New York experience they had begun, in many instances, to produce sportswear under the same kind of jobber-contractor arrangement which had existed in New York prior to the collective agreements of 1933 and 1936. The union, desirous of avoiding a repetition of the depressed labor THE CALIFORNIA SPORTSWEAR & DRESS ASSN., INC., ET AL. 869 $35 Findings conditions which had formerly characterized the New York market, sought agreement on jobber-contractor provisions similar to those in the New York agreements. The employers resisted and it was not until 1942, after the union had called a strike, that. the employers agreed to a system of contractor designation and the use of union contractors. The instant agreements were resisted for a period of almost § months before the employer groups accepted the clauses here in issue.

10. Although relying primarily on the agreements themselves as establishing a per se violation, counsel supporting the complaint also offered the testimony of four manufacturing-jobbers for the apparent purpose of showing competitive injury resulting from the contractorjobber provisions of the agreements. The burden of their testimony was that as a result of being required to use union contractors, their cost of production was somewhat higher than it would ‘have been if they had been permitted to use nonunion contractors. One of the witnesses estimated that the price charged by nonunion contractors was about 15 percent less than that of union contractors, due to the formers’ Jower labor costs. Another of the witnesses fixed the difference between union and nonunion contractors as 5% percent.#} Several of the witnesses conceded that the difference in price had not placed them at a competitive disadvantage, since the ditierence was not sufficiently great to raise the selling price of the garment and they merely absorbed it out of their profit.?| However, one of the witnesses testified that he was placed at a disadvantage with respect to nonunion manufacturers since they are able to undersell him in the larger retail chain outlets, where 1 small difference in cost is significant.* In evaluating the testimony of these witnesses it should be noted that their complaints with respect to not being permitted to use nonunion contractors were not based on any greater efficiency of such ‘contractors or any particular advantage afforded by their use, other than the fact that such contractors had lower labor cost by reason of not having to meet union pay and benefit standards. It should also be noted that none of the witnesses complained about. the contractor designation system, as such. On the contrary, one of the witnesses who complained about not being permitted to use nonunion con- It may be noted that the testimony of the latter witness was based on his actual experience when, at the union’s insistence, one of his contractors became unionized (R. 818). ‘The first witness’ testimony, on the other band, was merely a rough estimate not based on actual experience (R. 776).

32 R. 797, 814; see also R. 407.

3 R. 753, 760.

Findings 54 F.T.C.

tractors, conceded that the designation clause had actually proved beneficial because of the increased efficiency resulting from a continuous relationship with an established group of contractors.** 11. There is no evidence in the record to show that the provisions of the agreement relating to payment of contractors has resulted in any price fixing, either at the contractor level or in the prices at which the garments are sold to the retailer. While counsel supporting the complaint hinted that there was some established formula for fixing the amount of the contractor’s overhead,® no evidence was offered either testimonially or through the books and records of jobbers or contractors, to support his ipse dixit. The agreements provide for the payment to the contractor of a “reasonable amount” for his overhead. However, there is no agreement among the employer associations fixing this amount. On the contrary, the record establishes that the amount of such overhead is a matter for individual bargaining between each jobber or manufacturer and his contractors.** Not only is there no evidence of any uniformity of prices among contractors, but there is affirmative credible testimony that the prices charged by a given group of contractors producing the same style garment for the same jobber actually differ.*’ Counsel] supporting the complaint contends that the provision for payment of a reasonable amount for “overhead” was also intended to include a profit to the contractor.® However, there is no evidence to support this assertion. On the contrary the testimony would appear to indicate that the contractor’s profit is a separate item for negotiation, over and above his overhead.” So far as appears from the record, the matter of the contractor’s profit is individually negotiated and is not fixed by any industry-wide formula. The only payment obligation which the jobber or manufacturer has toward the contractor, which may be classified as involving a fixed amount, is to pay him an amount at least sufficient to enable him to pay his employees the wages and earnings provided for under the agreements However, even this obligation does not necessarily involve any uniformity of payments. Most, production employees, as has been already indicated, are paid on a piece-rate basis. These rates are based on the complexity and number of operations involved in a particular garment, and are subject. to negotiation be- *R.7T RR, 251-2 aR, 255 7 RR. 660.

8 Answer to Motions to Dismiss, and Reply Brief, p. 11. 30 R. 246, THE CALIFORNIA SPORTSWEAR & DRESS ASSN., INC., ET AL. 871 835 Findings tween the contractor and his employees. From time to time they cannot reach agreement on such rates and the matter is submitted to the impartial chairman. It was because of the flexibility of these piece rates that the union insisted on the “reasonable amount for overhead” provision, to foreclose the contractor from pleading that he could not pay the piece rates requested by employees because the amount he was receiving from the jobber did not enable him to cover his overhead.

It is the position of the union that the contractor payment provisions were sought by it solely to protect the wage standards of the contractor’s employees and assure that these employees would receive the wages agreed upon, and that they were not intended or used for price fixing purposes. This position is adequately supported by the record.

D. Restrictions on the Acquisition of Additional Factories 1. The other group of clauses in the collective agreements which are challenged in this proceeding relate to the acquisition or opening of additional plants, or of an interest therein, by members of the respondent employer associations. The complaint charges that under the collective agreements:

a. No member of the three employer associations may acquire an ownership interest in any other firm producing women’s sportswear, or open additional factories or establishments for such production, without first giving the respondent. unions notice thereof. b. No member of the three employer associations may acquire an interest. in any factory or establishment producing women’s wear, subject to jurisdiction of respondent ILGWU, located outside the limits of Greater Los Angeles, unless for the duration of the agreements the production of such plant is not increased. c. No officer, stockholder, or director of any member of the three employer associations will acquire an interest in any firm producing women’s apparel, which is subject. to the jurisdiction of respondent ILGWU, wnless such firm is then or shall immediately thereafter enter into contractual relations with respondent Unions or an affiliate of respondent ILGWU.

9. Insofar as the allegation referred to in subparagraph a. above is concerned, all that is apparently challenged is the requirement. that notice shall be given to the Union of an additional acquisition. It should be noted that the clause in question, in addition to requiring notification to the Union, also provides that the additional plant must. Findings 54 F.T.C.

be located in Greater Los Angeles and that the acquisition thereof must not result in reducing the amount of work or the number of employees in the present plant.*° However, these latter provisions are not. charged to be illegal. Insofar as the requirement for notice is concerned, it. should be noted that all that appears to be required is notice be given to the Union, and there is no provision for Union disapproval unless the plant is located outside Greater Los Angeles. 8. With respect to the allegation referred to in subparagraph b. above, it should be noted that this appears to be based on a provision of the agreements which follows that just discussed. After providing that additional plants must be located within Greater Los Angeles, the agreements state that this requirement shall not apply to plants which had already been acquired as of the effective date of the agreement, provided the production of such plants were not. increased during the term of the agreement.

The union’s explanation of this clause is that it had sought to limit all new acquisitions to the Los Angeles area. However, since some employers had already acquired an interest in plants outside the area during the period of negotiation, it was agreed that such plants could be continued provided their production was not increased to the disadvantage of the Los Angeles plants.

4. The allegation referred to in subparagraph c. above, is amply supported by the record. The agreements, in at least two of their provisions, require that where an additional factory, or an interest therein, is acquired, the firm must. be in contractual relations with the appropriate ILGWU unit or immediately thereafter enter into such relations.*"

5. It is the position of the union that the above clauses are aimed principally at preventing the diversion of work and evasion of labor standards, through the setting up of so-called runaway shops. According to the union, such provisions complement those regulating jobber-contractor relations, in that the diversion of work and lowering of Jabor standards can occur not. merely through the use of nonunion contractors, but through the establishment of nonunion inside shops, particularly where such shops are established in outlying areas where policing by the union is difficult.

The record establishes that the runaway shop has been a traditional problem which has confronted the union in the garment industry. Because of the small size of the average shop, its ease of mobility, the minimal capital involved, the simplicity of the labor processes in- 47CX 1.2 and 3, par. 80(b), pp. 21-22.

4 CX 1,2 and 8, par. 8G(b), p. 22: and par. 1(c), p. 2. THE CALIFORNIA SPORTSWEAR & DRESS ASSN., INC., ET AL. 873 835 Findings volved, it is relatively easy for a unionized employer to pull up stakes and move. Actual instances of such diversion of work to new shops in remote areas occurred under the prior agreements in the industry and it was to remedy this situation that the clauses in question were inserted in the agreements which are the subject of this proceeding. E. Gonelusions 1. Insofar as the collective agreements here involved (a) Jamit jobbers and manufacturers to the use of union contractors and firms, both in the sewing of the garments and in the making or purchasing of accessory items, and (b) prohibit subcontracting within the inside shops of manufacturers, it is the opinion and finding of the examiner that. they embody appropriate Jabor demands which fall within the matrix of the employer-emplovee relationship. The record establishes that such provisions have been historic union goals in the industry, resulting from the fact that the practice of subcontracting has been frequently used as a mediwn for the evasion of labor standards by those whom the Union regards as the principal employer, viz, the jobber or manufacturer. The practice of contracting “within shop” was outlawed as long ago as 1910, and the requirement for the use of union contractors was recognized in the industry as early as the collective agreements of 1919.

The regulation of subcontracting hag come to be recognized as a normal subject for collective bargaining. Collective agreements mn & substantial number of industries contain provisions dealing with this subject, which range all the way from the outright prohibition of subcontracting, to permitting it where restricted to union subcontractors.7 The National Labor Relations Board, which is the agency charged with determining what subjects properly fall within the scope of “vood faith” bargaining, as required under section 8(a) (5) of the National Labor Relations Act,*® has determined that the subject. of of subcontracting is one on which employer may be required to bargain. In a proceeding in which an emplover was charged with refusing to bargain collectively with a union representing his employees with respect. to the subcontracting of work, the board sustained the decision of its examiner who held:

Without attempting generally to delimit the subject matter properly included within the scope of collective bargaining, it seems apparent that the respondent’s system of subcontracting may vitally affect its employees hy progressively under- 42°RN 5S A-ZE2.

TOO TLS.C. see. 158(a) (5).

Findings 54 F.T.C.

mining their tenure of employment in removing or withdrawing more and more work, and hence, more and more jobs, from the [bargaining] unit.” In determining what matters appropriately fall within the scope of the employer-employee relationship, due regard should be given to accepted collective bargaining practices, and an agency of government should hesitate to overturn such practices unless they clearly fall outside the province of private arrangements and impinge upon the public interest. As stated by one authority, in discussing the principles which should govern in determining what are proper subjects for good faith bargaining under the National Labor Relations Act:

* * * predominant weight should be given to the practices and philosophy of collective bargaining reflected by voluntary arrangements in industries in which collective bargaining is well established. The law of collective bargaining will have little value to the community if the process of logical deduction from prior decisions results in wide divergence between the administrative and judicial rules and the needs of both management and labor. Furthermore, there is every reason to believe that the needs of the industrial world can be determined most accurately by examining the arrangements which management and labor have worked out through negotiation, trial, and error.”

While there may be circumstances where collective arrangements with respect. to subcontracting which are considered proper by the parties may run afoul of the antitrust laws, the decided cases make it clear that, standing alone, collective agreements which either out- Jaw subcontracting or restrict it to union contractors, fall within the protective mantle of the Clayton and Norris-LaGuardia Acts. Thus in U.S. v. Employing Plasterers Assn. of Chicago, discussed above, the “original contractor” clause which prevented all subcontracting, was held to be proper as “assur[ing] attainment of a proper objective which * * * is consistent with sound labor policy and labor law.” Similarly, a clause in a collective bargaining agreement. governing the fur industry in New York which prohibited contracting by manufacturers “in any shape, manner or form” was upheld by a State appellate court, as “not in violation of the antitrust. laws, national or state.”

Also persuasive. is the decision of the Fifth Cireuit i lmalgamated Association v. Greyhound Corporation, 231 F.2d 585 (April 1956), holding that a collective bargaining agreement providing for 2 The Pimken Roller Bearing Co., 70 NLRB 500, 518. 4 Cox and Dunlop, Regulation of Collective Bargaining, 68 Harv. Tl. Rev. 889, 4085 (19401. See also Order of RR. Telegraphers ve. Ry. Express Agency, Pine, 821 U.S, S42, 3d6 (1948).

4° Mencher v, B. Geller & Sons, Inc., 276 App. Div. 546: 968 N.Y.S. 2d 18, N.Y. Sup. Cte. App. Div.. Ist Dept., Mar. 28, 1950).

THE CALIFORNIA SPORTSWEAR & DRESS ASSN., INC., ET AL. 875 835 Findings reduction in force by seniority does not prevent an employer from laying off employees and hiring an independent contractor to do their work, in the absence of a contract provision preventing the contracting out of work. Presumably, a clause specifically prohibiting contracting would have been held legal by the court and would have been construed as barring the reduction in force. See also Local Union No. 600 v. Ford Motor Co., 118 F. Supp. 834 (E.D. Mich., 1953). There would seem to be little doubt that if a union may properly seek and obtain agreement for the complete elimination of contracting, without thereby violating the antitrust Jaws, it may also seek to obtain the less stringent. restriction permitting the use of subcontractors on the condition that such contractors maintain bargaining relations with it. Support. for this proposition may be found in the Supreme Court’s decision in the Allen Bradley case. While the court held illegal the union-abetted employer conspiracy to fix prices and divide up markets, it recognized that, standing alone an agreement between the nnion and employers in which the latter agreed not. to buy goods manufactured by firms which did not employ members of the union would not be illegal. As has been mentioned above, this interpretation was given official sanction by the Court. of Appeals upon the remand of the case.

The Supreme Court’s decision in the A/ilk Wagon Drivers’ Union case also supports the position that a provision requiring the use of union contractors is not in violation of the antitrust Jaws. There the so-called “vendors” were regarded by the milk companies as independent. contractors, but the union contended they were being utilized as part. of a scheme to evade union wages and working conditions, and insisted that they join the union. The court found it unnecessary to determine whether the vendors were legally independent. contractors or employees, and held that irrespective of whether the union’s views were “rightly or wrongly” held, its demand that they become unionized was properly part of a labor dispute. Counsel supporting the complaint cites the Supreme Court’s decision in U.S. v. Women’s Sportswear Manufacturers Association, 336 U.S. 460, as lending support to his position. That case involved an agreement between a contractors’ association in Boston and jobbers, under which the latter agreed that they would only deal with contractors who were members of the contractors association and were in good standing with the ILGWU. The agreement provided for an equitable distribution of work among the eligible contractors. In response to the argument that the labor provision of the agreement rendered it. immune from antitrust. attack, the court said (p. 464) : §28577—60——_57 Findings d4 F.T.C.

The restraints here went beyond limiting work to union shops; it. limited it to those union shops also members of the Association. The trial court found no evidence that the union participated in making the agreement. And if it did,. benefits to organized labor cannot be utilized as a cat’s-paw to pull employers’ ehestnuts out of the antitrust fires. Allen-Bradley Co. v. Local Union No. 8, 325 U.S. 797. [Emphasis supplied. } In the opinion of the undersigned the Women’s Sportswear Mfrs. Assoc. case lends no support to the position of counsel supporting the complaint. Asis indicated in the quoted portion, the restraints “went. beyond limiting work to union shops.” The district court had found that one of the purposes of the agreement was to maintain a uniform standard of prices among contractors. The evidence disclosed that the association policed its membership to prevent price competition and excluded from membership newcomers in the trade. Of particular significance is the fact that in the orginal draft of the agreement there was no reference to the requirement that contractors be unionized. It was rejected in this form by the jobbers, as probably violating the antitrust laws. In the revised draft the labor provision was Inserted with the obvious purpose, as the Supreme Court. suggested, of utilizing labor “as a cat’s-paw to pull employers’ chestnuts out of the antitrust. fires.” It is thus apparent that the case cannot. be interpreted as holding that a simpie requirement that jobbers must deal only with union contractors is Ulegal, where such provision is included at. the sole request of the Union and for the latter’s benefit. and protection.

The legality of a provision of this type, under the circumstances indicated, has been recently upheld by a United States district court in Davis v. California Sportswear Assn, 388 LURRM 2734 (S.D. Cal, Jan. 27, 1946), involving one of the clauses in the agreements here at issue. The clause there challenged was the one requiring that. all work on accessory items must be performed by firms which maintain contractual relations with the union. On a motion for injunetion by a nonunion accessory firm, which claimed that the agreement. prevented it from working for members of the association, the court. held that. the clause in question was immune from antitrust. attack, absent a showing that “one of the purposes or objects of the contracts entered into by the defendent unions and the employers was some trade benefit to the employers.” It stated, in this connection, that— to Come within the [Allen] Bradley rule whereby the union loses immunity to the antitrust Jaws, one of the purposes or objects of the contract or conspiracy must be some benefit to the nenunion parties thereto proximately resulting from the unlawful restraint upon trade. THE CALIFORNIA SPORTSWEAR & DRESS ASSN., INC., ET AL. 877 835 Findings Since the clause was prima facie for the wnion’s benefit and there was no showing that the nonunion parties had entered into the agreement “for the purpose or object of receiving some trade benefit,” the motion of plaintiff was denied.

It not appearing that the clauses under discussion have any purpose other than the protection of the job opportunities and wage standards of the members of the union, it is concluded and found that, to the extent such clauses involve any interference with competition, they are immune from attack under the antitrust or antimonopoly, laws.

2, In adddition to the requirement. that contractors must. be unionized, the collective agreements also set up a procedure under which the designation or change of contractors, by manufacturers and jobbers, requires union approval. There is no doubt that these provisions constitute a further limitation on the manufacturers’ and jobbers’ free choice of contractors, to the extent that the union, in effect. exercises a veto power over the choice or change of contractors. However, in the light of the historical background which led up to the union’s demand for such provisions and the economic status occupied by the contractor in the industry, the undersigned cannot say that they may not be regarded as falling within the category of matters which the union may appropriately demand, for the pro-. tection of its members, without. losing its immunity from antitrust prosecution.

The basic purpose of these clauses, as has been heretofore seen, is to protect. the employment. opportunities and wage standards of employees. Prior to the adoption of such provisions manufacturers and jobbers tended to concentrate their production into a relatively brief period, using as many contractors as they needed, and during the balance of the year most of the employees of these contractors were unemployed. Likewise, the use of an unlimited number of contractors, far in excess of what. was demanded by the jobber’s normal production requirements, created an “auction block” system of bidding which gave rise to widespread evasion of union standards on the part. of contractors and their employees in an effort. to avoid unemployment. The concessions of the contractors were in reality paid for out. of the employees’ earnings.

The union, under these circumstances, took the position that the jobber or manufacturer was the true, albeit possibly not the legal, employer of his contractors’ employees. Hence it insisted that the employment. and seniority rights of employees not be jeopardized Findings 54 F.T.C.

by the use of additional contractors while the existing contractor work force was not being fully utilized.

Running through the agreement is the union’s concept that the jobber and the contractor must be regarded as an integrated unit. Thus the agreements provide that if the jobber has an “inside” shop, the work must be equitably distributed between that shop and those of his permanent contractors. They make him responsible for the payment. of wages to the contractor’s employees. They provide for the jobber’s presence at the settling of piece rates between the contractor and the latter’s employees (although this procedure is not usually followed in actual practice). The agreements contain the acknowledgment that the jobber and the contractor “are closely allied and have a close unity of interest with each other” in the process of production, and that they are “jointly engaged in an integrated production effort.”

While it may be argued that these provisions and statements are merely the self-serving declarations of interested parties, it should be noted that there is respectable authority for the position of the union concerning the jobber, as the true employer of the contractor's work force. Thus, as has already been mentioned, the U.S. Industrial Commission many years ago described the contractor as the “go between for the manufacturer, who is the original employer,” and as being “in reality merely the agent of the manufacturer” for the purpose of getting cheap labor. The Governor’s Advisory Commission in New York, which investigated the industry, stated that in determining the relationship between the jobber, the contractor and the employees one “should be concerned not so much with the form as with the substance,” and that since the jobber controls working conditions and employment, he should be responsible for the working standards of employees. The State of New York has likewise recognized the unusual relationship existing between the jobber and the employees of his contractor, with respect to hability for unemployment insurance taxes.”

It may be noted, in this connection, that while the National Labor Relations Act now specifically outlaws secondary boycotts, such as were formerly considered to come within the protection of the Clayton and Norris-LaGuardia Acts, it has nevertheless been held that. picketing of a so-called secondary employer is not illegal where he is an “ally” of the primary employer. As stated in Dowds 44 NY. Labor Law, Art. 81, sec. 560.7.

29 ULS.C., sec. 158 (b) (4).

THE CALIFORNIA. SPORTSWEAR & DRESS ASSN., INC., ET AL. 879 835 Findings v. Aletropolitan Fed. of Architects, 75 F. Supp. 672, 677 (S.D. N.Y., 1948) :

* * * the practices in a particular industry may be such that the normal contractor-subcontractor relationship carries with it the label of “ally” in a labor dispute context.

In the light of the evidence in this record, it is the view of the examiner that if there is any relationship to which the appellation “ally” may appropriately be applied, it is that which exists between jobber (or manufacturer) and contractor in the women’s garment industry.

Viewed from the perspective of the close relationship existing betaveen jobber and contractor, the clauses in question may be considered as analogous to clauses in collective agreements dealing with seniority rights and the sharing of work. The subject of seniority Js one which has become. well ‘recognized as appropriate for micnemployer agreement. Ford Motor Co. v. Huffman, 345 U.S. 380. In Amalgamated Association v. Greyhound Corp., swpra., the seniority principle was not held to prevent the discharge of employees and the utilization of the services of an independent contractor to perform their work, due to the absence of a provision in the contract. prohibiting subcontracting. Is a provision which seeks to protect. employment and security rights, not by prohibiting contracting, but. by permitting it on a basis which the union deems necessary to protect. such rights, any Jess appropriate a matter for collective agreement. ¢ A negative answer to this question was supplied many years ago by a decision in New York State involving a substantially identical designation clause which, as has been indicated, is contained in the collective agreements for the dress industry there. In Abelesy. Friedman, 171 Misc. 1042, 14 N.Y.S. 2d 256 (Sup. Ct., N.Y. Co., 1989), there was involved a proceeding by a jobber to enjoin picketing by the union, which sought to obtain from him agreement toa collective bargaining contract. contaiming a designation clause. After reviewing the history of the development of the jobber-contractor relationship, 2s heretofore related, the court concluded that the union s effort. to obtain an agreement “pr oviding, among other things, for jobber responsibility for the conditions of ¥ work in the contractor shops,” involved a “labor dispute or a labor controversy” within the meaning of the New York Jaw.

A situation analogous to the instant case was also presented in U.S. v. Employing Plasterers Assn. of Chicago, which has been discussed above in a somewhat different connection. That case involved Findings D4 F.T.C.

&@ provision in the union constitution and bylaws which required that new contractors desiring to employ union members had to be approved by a union board and had to furnish a $10,000 bond. Although not appearing in the collective agreements, it was contended that these provisions illegally restricted competition. In upholding the legality of these requirements, the court stated (p. 554): This court finds that the basic requirements are reasonable for the protection of a proper union objective, namely, an assurance that the prospective contractor can perform satisfactorily and is able to discharge all financial obligations. It not only promotes the attainment of a proper union objective but provides a safeguard for the purchaser that the plastering work is good and that his premises will not some day become encumbered by a lien for work performed by plasterers.

Fa * * * * x * The record contains no evidence whatsoever that either the defendant Local No. 5 or Dalton employed these regulations in any arbitrary or illegal fashion, either against the local or out-of-state plasterers or contractors. To the extent that the reasonableness of the instant provisions is an issue, it should be noted that the veto procedure, may not. be unreasonably exercised and has not in fact operated fo unreasonably restrict competition. Thus the agreements provide that changes im designation may be sought where the character of the production of the manufacturer or jobber has changed or where it has declined due to financial reasons, or where the contractor is unable to properly and efficiently meet the requirements of the manufacturer or jobber. Also, the refusal of the union to approve a designation or change therein is not final, but may be appealed to the impartial chairman. The record further establishes that the union’s veto rights have not been exercised in an arbitrary or capricious fashion so as to restrict. competition among contractors. The testimony of employer association officials establishes that there was a fairly liberal practice, both in the designation and in the change of contractors.” 1t also appears that there was no effort under the provisions to restrict production or prevent new employers from coming into the Los Angeles area.*' There is no evidence in the record that the contractor designation system, as distinguished from the requirement. for the use of union contractors, has adversely affected competition in the industry. As has already been stated, there were some complaints by manufacturers and jobbers concerning the requirement. that they “R408, 670-678, 677.

Thes 1 6 1 1 2 814 2677 127 24 96.665886 provisions 1 6 1 1 3 966 2678 38 19 83.756790 for5 1 6 1 1 4 1026 2678 41 20 96.488319 thes 1 6 1 1 5 1090 2683 41 15 96.637314 uses 1 6 1 1 6 1153 2678 25 20 96.754356 of5 1 6 1 1 7 1201 2678 175 23 56.540710 “temporary”5 1 6 1 1 8 1400 2679 158 18 95.925301 contractors5 1 6 1 1 9 1580 2683 50 13 95.736618 was5 1 6 1 1 10 1651 2678 150 23 69.749954 specifically5 1 6 1 1 11 1824 2678 112 20 74.511185 included5 1 6 1 1 12 1960 2682 23 15 95.904610 to4 1 6 1 2 0 682 2710 682 25 -1 5 1 6 1 2 1 682 2710 58 21 96.891838 takes 1 6 1 2 2 753 2716 56 15 96.437645 cares 1 6 1 2 3 823 2711 26 20 96.211021 of5 1 6 1 2 4 863 2711 151 24 96.263893 unexpected5 1 6 1 2 5 1028 2712 125 19 96.774841 increases5 1 6 1 2 6 1167 2711 24 20 95.576050 in5 1 6 1 2 7 1207 2711 157 24 95.876488 production. THE CALIFORNIA SPORTSWEAR & DRESS ASSN., INC., ET AL. 88] 835 Findings .

use only union contractors, due to the higher labor cost of such contractors, but there was no evidence that the provisions requiring union approval for the designation or change of designation of contractors has resulted in higher costs or prices, or has adversely affected competition.

It is clear from the record that the designation provisions of the agreement were the result solely of the union’s demands, aimed at protecting the work standards and employment of its members, and were not part of any employer conspiracy to limit competition or raise prices. Insofar as the jobbers and manufacturers are concerned, they obviously have little to gain from a provision which requires union approval for their use of contractors. The contractors are in @ somewhat different position, it is true, in that the operation of the clause so as to regularize the employment. of the contractors’ employees, also results in some regularization in utilization of their services by jobbers or manufacturers. However, any benefit which the contractors receive is purely incidental to, and derivative from, the union’s efforts to protect. the working opportunities of the contractors’ employees. The record establishes that the contractors played no part. in securing the clause in question, it being presented to them as a fait accompli i, and that some of them were opposed to it because they preferred to have the unrestricted right to shift from one jebber to another in the hope of being able to secure more advantageous fees for their services.

Since the designation provisions of the collective agreements were sought by the union solely for its benefit and that. of its members and since these provisions operate primarily for the benefit of employees and not that. of employer groups, and it appearing that the matter is one which reasonably can be considered as falling within the scope of the employer-employee relationship, it is concluded that. these clauses are immune from attack under the antitrust laws. 3. The primary restriction on the prices paid to contractors is that they must. at least cover the wages and earnings of the contractors’ employees which will be due under the agreement. This, in effect, constitutes a floor under the amount which the jobber oy manufacturer may pay to his contractors for fabricating the garment. The reason for this provision, as in the case of the designation clause, is that the union regards the jobber or manufacturer as the real employer of the contractors’ employees. The agreements themselves “acknowledge that the (jobber or manufacturer] is directly concerned with the payment. of the wages of the workers employed by the contractors” for the reason that the former is “the ultimate source of employment and Findings 54 F.T.C.

wages paid to the employees of the contractors * * * and controls the nature of the product.”

It is unnecessary to refer again to the historical conditions which gave rise to the union’s view of the jobber (or manufacturer) as the real employer of the contractor’s employees, or to the support which this view has received from various presumably objective sources. Suffice it to say that under the circumstances here present the union's demand, that the jobber became in effect the guarantor of the payment of wages to the contractor’s employees and pay the latter an amount sufficient to cover such wages, may be deemed to fall within the context of the employer-employee relationship.

It may be that this requirement. operates to place a limit on bargaining between the jobber and contractor to the extent. that the latter may be willing to accept a fee from the jobber which is less than the total amount. of his employees’ wages. However, as stated by the Supreme Court in the Ape Hosiery case, “an elimination of price competition based on differences in labor standards is the objective of any national labor organization,” but. this effect on competition is not considered to be a violation of the antitrust Jaws (310 UGS. at. p. 503).

The examiner is aware that. the agreements also recuire that the contractor must. be paid a “reasonable amount.” for his overhead, in addition to the amount intended to cover wages. However, this amount, is not. fixed by the sereements and is subiect to negotiation between the jobber and contractor, as is the umount of the contractor’s profit, which is not referred to at all in the agreements. The provision with respect. to the payment of a “reasonable amount” for overhead was inseried, ont of an abundance of caution on the part. of the union, to preclude any possible defense by the contractor that he was unable to pay the piece rates which the Union was seeking, because the amount received from the jobber was not. sufficient. to cover his overhead.

There is nothing in the record to indicate that this provision was inserted for any other purpose; certainly not. for the purpose suggested by counsel supporting the complaint, viz, as a medium for establishing price uniformity ainone contractors. On the contrary, the credible testimony is that the jobber and contractor “bargain to the nth degree” (R. 246), and that there are actual differences in prices among contractors producing the same style garment. for the same jobber (R. 661).

This clause was obtained at the insistence of the union and over the vigorous objection of employer groups. The jobber and manu- THE CALIFORNIA SPORTSWEAR & DRESS ASSN., INC., ET AL. 883 835 Findings facturer groups receive no benefits whatsoever from the provision. While the contractor does receive 2 modicum of protection in that he must be paid a sum which is at least the equivalent of his projected wage bill, plus some indeterminate amount for overhead, any benefit which he receives is purely derivative from, and incidental to, the union’s efforts to protect its members. The contractors’ association played no part in the negotiation of the clause, but was presented with it as an accomplished fact. after the union and the manufacturer and jobber associations had completed their separate negotiations.

Under all the circumstances, it is the opinion and conclusion of the examiner that to the extent the provision in the agreement regulating the payment of compensation by jobbers and manufacturers to their contractors restricts competition, it is a provision which may appropriately be considered as falling within the context. of the employeremployee relationship, and as such is immune from attack as a violation of the antimonopoly or antitrust laws. 4. The final group of clauses here at issue is those which counsel supporting the complaint contends were intended or calculated to restrict. preduction by placing limitations on the right. of employers to open, or acquire an interest. in, additional plants. The first of the challenged clauses requires that an employer acquiring an interest. in an additional plant shall notify the union of this fact. prior to the acquisition. However, the clause does not. provide for union approval] of the acquisition. As has been heretofore indicated, the same clause provides that the acquisition of the new plant must not result in a decrease in work in the existing plant and also that. the new plant must. be located within Greater Los Angeles. Although the latter two provisions are not challenged by the complaint, the undersigned will treat them as if they were in issue.

Another requirement of the agreements, which is challenged, is that the newly acquired plant must. be in contractual relation with one of the ILGWU affiliates or immediately enter into such relations. It is obvious that the provisions referred to above all are addressed to the problem of run-away shops which, the record shows, has historically plagued the industry. The record also indicates that provisions for union notification and nonremoval from a specified area are common provisions in collective bargaining agreements in a number of industries. , It does not appear that any of these clauses has as its purpose any limitation of production. On the contrary, the proviso that. the & See, eg., RX 58 B, O, P, Y, 218, Z31, 266. Findings i4 F.T.C.

acquisition must not result in a decrease in production in the existing plant is indicative of an intent to maintain production and, hence, employment. These provisions are obviously intended to accomplish the same result as the clauses prohibiting the use of nonunion contractors, since work can be siphoned off not merely to nonunion contractors, but to nonunion plants of the origina] employer located at points remote from the Union's organizing abilities. The objective which is sought by the provisions above referred to, viz, the protection of the job opportunities and work standards of the union’s membership, is one which may be deemed to fall within the scope of the employer-employee relationship, and the means used are not unreasonably related to that. end. It may be noted in this connection, that while containing a general requirement that newly acquired plants must be located within Greater Los Angeles, the agreements contemplate that there may be exceptions to this rule upon a proper showing. Thus application may be made to the union for approval to open a plant outside the area, and the Union's decision of disapproval is not. final but may be appealed to the impartial chairman.

There is no doubt that the removal of all or part of an employer’s operations for the purpose of evading his collective bargaining obligations would be illegal, and that a strike in protest. thereof would be properly considered as constituting a laber dispute. There would seem to be no reason why an agreement. not. to remove a plant. to another location, beyond the union's jurisdiction, should not, also be considered as properly falling within the employer-empleyee relationship.

The only provision challenged by the complaint which has anything to do with a limitation of production pertains to newly acquired plants outside the Los Angeles area. As charged in the complaint, the gravamen of this provision is that no plants may be opened outside of Los Angeles unless it is agreed that the production of such plant will not. be increased. As thus charged, the purpose of the clause would appear to be to limit production. This does not, however, place the clause in question in its true perspective. Preceding this clause is the one previously discussed, containing the general requirement that newly acquired plants must. be located within Los Angeles. This, of course, was addressed to the union's “Diamond Full Fashioned Hosiery Co. vy. Leader, 20 1. Supp. 467 CED. Pa. 9st: NLRB v. Cape County Mill Co., 140 F. 2d 548 (C.A. 8, 1944) ; Jarr v. Amalgamated Assn, 250 P. 24 904, 907, (Sup. Ct., Idaho, 1952; 152 A.L.R. at 155). 54 Dubinsky v. Blue Date Dress Co., 162 Mise. 177, 298 N.Y.S. 898 (1986); 1738 A.L.R. 681.

THE CALIFORNIA SPORTSWEAR & DRESS ASSN., INC., ET AL. 885 835 Findings primary objective of preventing the establishment of run-away shops.. Had the agreements stopped there, they would have been unobjectionable from the point of view cf antitrust violation. However, since the agreements had been under negotiation until July and August 1952, but were retroactive until] January 1, 1953, there was presented the possibility of infringement of the basic clause by reason of the fact that some employers had acquired extra-Los Angeles plants during the intervening period. Rather than require the dismantling or sale of such plants, the agreements added a proviso permitting their continuance, provided production therein was not increased over what it was at the time of execution of the agreements.

From this perspective it. is apparent that. there was no overall desire to curtail production, but that the clause im question was inserted as a stop-gap measure to meet. a special situation, as an exception to the general requirement that newly acquired plants must. be located within Greater Los Angeles. While an employer to whom the proviso was applicable could not increase the production of his extra-Los Angeles plant during the term of the agreement, he was at liberty to more than make up for this by an increase of production in his Los Angeles plant. The union’s interest Jay not in limiting production but in increasing it, except that it sought to channel that increase into the Los Angeles area where it was in a better position to assure compliance with union Jabor standards. It, was part of a package which the union sought solely in the interest. of its members, and not. in pursuance of any scheme by emplovers to limit. production and, hence, raise prices. While the clause in question might, in another context, be deemed to extend beyond the scope of the employer-employee relationship, it is the opinion and conclusion of the examiner that under the circumstances here present it may be deemed to be properly part. of a protected activity.

5. Viewing the facts here in their totality, including the historic conditions in the industry which gave rise to the union’s demand for the contested clauses, the circumstances under which the clauses were adopted, and the manner in which they were carried out, it is the opinion of the examiner that the clauses in question are all reasonably related to the Union's objective of protecting the employment opportunities and Jabor standards of its membership. The agreements are, accordingly, within the protective mantle of the Clayton and Norris-LaGuardia Acts unless the fact that they are 886 FEDERAL TRADE COMMISSION DECISIONS — Findings 54 F.T.C.

contained in industry-wide labor agreements results in a loss of such immunity.

The cases which have been heretofore discussed make it clear that when a union acts in its self-interest and for the betterment of its members it is immune from antitrust or antimonopoly attack,. except where it acts in combination with nonlabor groups. Although the Supreme Court in the Hutcheson case suggested, by way of dicta, that labor unions may lose their immunity when they “combine with nonlabor groups,” the Court’s decision in the Adlen Bradley case, as well as decisions interpreting the latter holding, makes it clear that the combination with nonlabor groups which results in such loss of immunity must. rest on something more than a collective agreement for labor’s protection, but involves the aiding and abetting of employers who are acting in their own self-interest, to suppress competition or fix prices.

The only resemblance between the situation in the instant case and that in the Allen Bradley case is the superficial one that both involve industry-wide collective agreements. However, there are present here none of the indicia of the employer-inspired conspiracy which the court found to exist in the Al/en Bradley case. The impetus for the agreements here came solely and exclusively from the union and they were vigorously opposed by the employer groups. Even under the concurring opinion’s version of the facts in Adlen Bradley, it appeared that some employer elements were active participants in the conspiracy. Here we have a union-generated arrangement, purely and simply, which none of the employer groups wanted but which they were forced to accept as a result of economic pressure from the union.

There are present here none of the elements of employer benefit, and restrictions on competition for emplover advantage, such as were present in the Allen Bradley case. There is no evidence here of any “phenomenal growth” in the business of the respondent. employers, of any “soaring” increases in prices and profits, of the creation of a “protected” Los Angeles market. in which Los Angeles producers sold at one price and sold outside that area at a far lower price, of the exclusion of new firms desiring to come into the area, of the barring from the area of goods manufactured outside its boundaries, or of the suppressing of sales in certain types of garments.

On the contrary, the evidence shows that the Los Angeles market is highly competitive. Los Angeles producers not. only compete with one another, but with garment producers from New York THE CALIFORNIA SPORTSWEAR & DRESS ASSN., INC., ET AL. S887 835 Findings and other areas. They compete with other firms not only for business in the Los Angeles market, but in seeking to obtain business in other markets. In view of the competition existing between Los Angeles firms and those from other areas, any effort to raise Los Angeles prices or curtail production could only redound to the advantage of producers outside the area.

Such interferences with competition as do exist under the instant agreements are calculated to protect the employment. opportunities and wage standards of employees. However, it has been held that restraints upon competition which are sought “in order to secure continuous employment,” or to eliminate that part of “price competition based on differences in Jabor standards” are either not in violation of the antitrust Jaws or are immune from attack thereunder.® The undersigned entertains no doubt. that the clauses in question were agreed to solely in the interest of the union and not in aid of any employer conspiracy. It may be that some of the provisions give the union a considerable voice in management affairs, as for example, the provision requiring its approval of the designation or change of contractors. It. may be argued that less severe provisions could have been worked out for the protection of employees. However, this is not a matter for review in terms of the personal predilections of the judicial officer. As was indicated in the Hutcheson and JAlilk Wagon Drivers’ Union cases, previously discussed, and recognized in the Allen Bradley case (p. 810), when the union acts solely in its selfinterest, the wisdom or selfishness of the means it has chosen is not a matter for judicial judement.

It. is concluded, from the entire record, that to the extent any of the clauses here in issue interfere with competition, they either do not constitute such an unreasonable interference with competition as to violate the Federal Trace Commission Act, or are immune from attack thereunder as part of a labor dispute or in pursuance of activities which are reasonably related to immune aspects of the employeremployee relationship.

The respondents have raised a number of other matters, by way of defense. The union respondents urge, particularly, that the Commission has no jurisdiction over them since they are not a corporation within the meaning of section 4 of the Federal Trade Commission Act, which only applies to an unincorporated association where it is “organized to carry on business for its own profit.” The melersigned finds it. unnecessary to pass upon any of these defenses dyer case, $10 ULS., at 507. footnote 25, also at 508: also, Schatte v. International Alliance, 182 F, 2d 158, 167 (C.A, 9, 1950), cert. den., 340 U.S. 827. Opinion 54 FTC.

or any of the procedural motions for dismissal which have been presented, in view of the conclusion herein reached with respect. to the substantive issues in this proceeding. CONCLUSION OF LAW Tt is concluded that. counsel supporting the complaint have failed to establish by reliable, probative and substantial evidence that respondents have engaged in any unlawful conduct in violation of section 5 of the Federal Trade Commission Act, and that the complaint should, accordingly, be dismissed.

ORDER lt is ordered, That. the complaint herein be, and the same hereby is, dismissed.

OPINION OF THE COMMISSION By Kern, Commissioner:

Counsel supporting the complaint have appealed from an initial decision holding that the practices challenged were not. shown to be within the purview of section 5 of the Federal Trade Commission Act. The complaint charged that respondents had entered into collective agreements and understandings to maintain certain practices and policies restricting and restraining competition and trade in the sale of women’s sportswear and similar products in interstate commerce. The agreements in question were between certain respondent employee groups and three respondent. associations of manufacturers which account for about 15 percent of the women’s sportswear produced in the Los Angeles area. One of the labor organizations named as respondents was the Joint Council of Sportswear, Cotton Garment & Undergarment & Accessory Workers’ Unions of the International Ladies’ Garment. Workers’ Union, which played a primary role in negotiating agreements. The three signatory respondent associations of employers were composed of manufacturers, jobbers, and contractors, respectively.

The 11 alleged restraints fall mto tavo broad categories: (1) Limitations on competition among contractors by restricting manufacturers’ and jobbers’ use of contractors, primarily through a. contract-designation procedure, and by determining prices to be paid to contractors for their services, and (2) Restraints on production by members of the employer associations, resulting from contract limitations on the opening of addi- THE CALIFORNIA SPORTSWEAR & DRESS ASSN., INC., ET AL. 889 835 ; Opinion tional plants or the acquisition of interests in other concerns producing women’s sportswear.

To determine the legal status, under the Federal Trade Commission Act, of trade restraints resulting from collective-bargaining agreements, we must consider not only antitrust law precepts but also the national labor policy as expressed by the Congress. The Supreme Court declared in United States v. Hutcheson, 812 U.S. 219 (1941) and reasserted in Allen Bradley Co. v. Local Union No. 3, 325 U.S. 797 (1945), that the Sherman,? Clayton ? and Norris-LaGuardia ? acts must be jointly considered in deciding whether given labor union activities run counter to the antitrust legislation. A further congressiona] declaration of national policy on labor matters has been subsequently provided in the Labor-Management Relations Act, 1947.4 We conceive it to be the duty of «this Commission, as well as the courts, to be guided by all four of these legislative expressions of policy.

The aspects of the national labor policy which are especially relevant here are those stated in the Clayton, Norris-LaGuardia, and Labor-Management Relations acts. Under section 6 of the Clayton Act, the acts of members of labor organizations in lawfully carrying out legitimate objectives are excluded from the antitrust laws; section 20 of the same act. decrees that. certain specified activities pursned in the course of labor disputes are not to be held violative of any law of of the United States. The Norris-LaGuardia Act. divests Federal courts of injunctive jurisdiction relating to certain designated activities growing out. of “labor disputes,” as defined by that. act.2. The Labor-Management Relations Act enunciates a policy of avoiding “industrial strife which interferes with the normal flow of commerce and with the full production of articles and commodities for commerce,” of promoting “the full flow of commerce,” and of proscribing practices “on the part. of labor and management. which adfect, commerce and are inimical to the general welfare.” * The hearing examiner held that though not all collective contracts entered into by the labor unions and employer organizations are categorically exempted from the antitrust. laws, neither does the fact that collective agreements impose restrictions on manufacturers and employers regarding the use of contractors and on the employers in 726 Stat. 209, 50 Stat. 698; 15 U.S.C. $1 et seq. 228 Stat, 730; 15 U.S.C. § 12 et seq.

847 Stat. 70; 29 U.S.C. § 101 et seq.

+61 Stat. 126; 29 U.S.C. § 141 et seg.

538 Stat. 731, 738; 15 U.S.C. § 17, 29 U.S.C. § 52. °47 Stat. 70; 29 U.S.C. § 104.

761 Stat. 186; 29 U.S.C. § 141.

Opinion 54 F.T.C.

other respects render such limiting agreements, standing alone, unlawful.

On the basis of his interpretation of relevant judicial decisions, the hearing examiner concluded that the legality of the practices turns on a factual determination of whether the clauses of limitation were adopted as a result of union demands and for the employees’ primary benefit or whether the restrictive provisions resulted, instead, from employer conspiracy to restrict competition and to raise prices with the union aiding and abetting the employer groun. He found that the practices and policies under consideration here did not. come within the latter category.

We think that. the arguments advanced by counsel in support of their contention of error by the hearing examiner misconstrue the Supreme Court’s decision in Allen Bradley Co. v. Local Union No. 3, 825 US. 797 (1945). In that case a union entered into area wide agreements with electrical contractors and manufacturers in New York City whereby the contractors agreed to purchase equipment. solely from manufacturers who had closed-shop arrangements with the local union, while the manufacturers were to confine their sales in that city to contractors employing members of that. local union. It was found that. the combination of businessmen participants had the purpose and effect. of monopolizing the supply of electrical equipment to the exclusion of that. shipped from outside and to control and raige its prices. The emphasis which the court placed on the fact that these agreements resulted from aggressive combination of the members involved and the additional fact that the unions were aiding and abetting businessmen to violate the Jaw render, in our judgment, the Bradley decision inapposite to the facts here. Thus the Supreme Court, speaking through Mr. Justice Black, said (825 U.S. at 809) : * * * Emplorers and the union did here make bargaining agreements in which the employers agreed not to buy goods manufactured by companies which did not employ the members of Local No. 3. We may assume that such an agreement standing alone would not have violated the Sherman Act. But it did not stand alone. It was but one element. in a far larger program in which contractors aud manufacturers united with one another to monopolize all the business in New York City, to bar all other businessmen from that area and to charge the public prices above a competitive level. It is true that victory of the union in its disputes, even had the union acted alone, might have resulted in individual refusals of all of their employers to buy electrical equipment not made by Local No. 8. So far as the union might have achieved this result acting alone, it would have been the natural consequence of labor union activities exempted by the Clarton Act from the coverage of the Sherman Act. * * * But when the unions participated with a combination of businessmen who had complete power to climinate all competition among themselves and THE CALIFORNIA SPORTSWEAR & DRESS ASSN., INC., ET AL. S9I 835 Opinion to prevent all competition from others, a situation was created not. included within the exemptions of the Clayton and Norris-LaGuardia Acts. [Emphasis supplied.] The present arrangement. ‘is quite the antithesis of the Bradley situation. This is conceded by counsel supporting the complaint, who: state in their brief, “It. is well established in the record that the parts of the collective agreements challenged by the complaint were entered into by the employer groups and the contractor association upon the insistence and coercion, so to speak, of the union respondents.” The employer respondents’ complete lack of interest. is thoroughly evident, the hearing examiner having found that “the employer respondents permitted the respondent. International Ladies’ Garment Workers’ Union to earry the burden of the defense in this proceeding, offered no evidence in their behalf and except. for the respondent. contractors association, Aled no proposed findings or briefs” (initial decision, p- 12). This is not. to say, however, that. Jabor unions are to be accorded the immunity from the antitrust laws noted hereinafter merely because they were the sole instigators of the proposals agreed to. The circumstances and evidentiary facts of every case must be fully explored to reach a determination as to whether a claim of immnnization is a proper one. In considering whether the particular provisions of a labor-management agreement. of the sort with which we are concerned here involves those “congressionally permitted union activities” referred to in the Bradley decision (825 U.S. at 811), it is not. conclusive whether the negotiations were originated by labor or management, and the fact that. the collective bargaining was initiated by the union clearly will not serve to validate an agreement that exceeds the limits of permissible union activities. It, seems clear that the holding in the Bradley case is that Congress did not intend to exempt from the antitrust laws labor organizations which aid and abet. business groups in creating monopolies, controlling the market. of goods and services, and otherwise restraining trade. But we think it equally obvious that. the Bradley decision did not hold that union participation, intended solely for the union members’ benefit, in a collective-bargaining agreement with an employer group must bring loss of the statutory immunity. Decisions handed down by lower courts since the Bradley decision similarly hold that an employer-union combination, to result in loss of immunity, must. be based on more than mere collective-bargaining agreements intended solely for the union’s benefit. Thus in A nderson- Friberg, Inc. v. Clary, 98 F. Supp. 75 (S.D.NVY. 1951), the court. considered a collective-bargaining agreement restricting the use of HQShTT—-#O—--- 5S Opinion 54 F.T.C.

certain dimensions of out-of-State stone by local union employers and stated (98 F. Supp. at 82) :

* * * immunity from injunctive action is dependent upon a factual determination. If there is conspiratorial action as proscribed by the Allen Bradley case, if would not be protected by the Norris-LaGuardia or Clayton Acts. On the other hand, if it be found that the union was acting on its own self-interest and for the betterment of its members, free and independent of a combination with non-labor groups intent upon violating the antimonopoly laws, it would be immunized against injunctive action. The applicability of those Acts as we have seen under the Allen Bradley case turns on a fact determination. This and other decisions support. the view expressed by the hearing examiner in the initial decision that “when a union is engaged in activities for the bona fide advancement. of its interests, it is, absent participation in an employer conspiracy protected from antitrust prosecution even though its activities involve a restraint of trade” (initial decision, p. 23). Courant v. International Photographers, 176 F.2d 1000 (9th Cir. 1949) ; Vew Broudcasting Co., Ine. v. Kehoe, 94 F. Supp. 113 (S.D.N-Y. 1950).

Convinced, as we are, of the soundness of the hearing examiner's approach to the labor contract provisions herein involved, we also approve his interpretation of the contract clauses and his conclusion that the record does not. show that the agreements were made for any purpose other than to aid the union membership or that they have resulted in a type of restraint on the employers’ competition that would render such agreements unlawful. Counsel supporting the complaint acknowledge that all clauses in the agreements were inspired by the unions and acceded to by the employers at the employees’ insistence, and it cannot be doubted that all such provisions are closely related to wages and conditions of employment. Under the agreements, members of the manufacturer and jobber associations are required to deal only with contractors who have entered into agreements with the respondent. unions and to employ only such contractors as are designated and approved to do contracting work, with any changes in designation status to be approved by the union. The contractors agree to confine their work to manufacturers and jobbers who designate them, except when they have no work.

These clauses, together with those under which the jobber or manufacturer guarantees the payment. of wages of workers employed by the contractor, represent. the culmination of « union strugele that. goes back almost to the turn of the century. Labor in the garment. industry, which was once plagued by unsanitary sweatshops, excessive hours, and low wages, has long sought to improve working THE CALIFORNIA SPORTSWEAR & DRESS ASSN., INC., ET AL. 893 835 Opinion conditions through establishment. of the principle that a contractor or “outside shop” is in reality the manufacturer’s agent, and that the manufacturer must. assume some responsibility for the conditions obtaining in the shops of such a submanufacturer. After a strike in 1942, the employers in the Los Angeles area, for the first time, agreed to a system of contractor designation and the use of union contractors. The hearing examiner found that there is no substantial evidence in the record to indicate that. the contractordesignation system has markedly affected competition among employers. There is no prospect. of direct gain attending such a provision for the jebbers and manufacturers. Any benefits afforded thereby to contractors derive wholly from and are only incidental to the union’s efforts to protect. the opportunity of workers in “outside shops.”

The clauses relating to prices paid to contractors provide that. such payments must at. least. cover the wages or earnings of the contractors’ employees, together with a “reasonable amount” of overhead. The record is barren of evidence that. this provision looked to price uniformity among contractors. Furthermore, there is evidence tending to show that actual differences in prices among contractors producing the same style of garment. are prevalent. and that. their fees are arrived at. through vigorous bargaining. This gives added emphasis to the differences between the facts of this case and those of the Bradley case, in which competition was stifled because union, contractors, and manufacturers combined as co-partners to achieve a monopoly by means of which they then boycotted equipment. manufactured by the plaintiffs. 825 U.S. at.800. Another of the challenged clauses stipulates that those manufac- — turing or purchasing pleating and other accessories shall deal only with firms which have contractor relations with respondent. International Ladies’ Garment. Workers’ Union or its affiliates. In Davis Pleating & Button Co. v. California Sportswear & Dress Association, /ne., 145 F. Supp. 864 (S.D. Calif. 1956), the court denied a motion for injunction by a nonunion accessory firm on the ground that. the evidence did not. show that. the object. of that. provision was a trade benefit. to the employer. The record in this case does not support a different conclusion.

The final group of contract. provisions challenged ‘by the complaint involves restrictions imposed on the employers’ acquisition of interests in additional plants. The hearing examiner's detailed analysis of these clauses and his conclusion that they did not. look to limiting production by the employers have sound support. in the Opinion 54 F.T.C.

record. ‘These provisions were designed to cope with the problem. of the so-called “run-away” shops, i.e., nonunion “inside” shops which manufacturers establish in outlying areas, where policing by the union is difficult, and to which work can be diverted, with a consequent lowering of labor standards. The evidence established actual incidents of such diversion of work, and the clauses in question were aimed at. relieving that situation.

In deciding whether the foregoing amount. to “unfair methods of competition” or “unfair or deceptive acts or practices in commerce” under the Federal Trade Commission Act, we have not overlooked the most recent majcr utterance of the national labor policy, as set ont in the Labor-Management Relations Act, 1947, which deprecates interference with the normal How of commerce or full production, in. manner inimical te the general good. But because these activities are reasonably related to the advancement of labor well-being—itself’ a principal object of the national policy—and tend, by the consequent rasing of labor standards, to improve the industry output both in quality and in quantity, they cannot fairly be said have overflowed the bounds of permissible labor-management negotiation into the illegal area of oppressive trade restraint hurtful to the public at. large. Counsel supporting the complaint rely heavily on the Jandmark decision of United States v. Socony Vacuum Oil Co.. 310 U.S. 150: (1940), which held that. “any combination which tampers with price structures is engaged in unlawful activity.” 7d. at 221. The Commission accepts this preposition as basic and has consistently followed it. In citing it here, however, counsel supporting the complaint. beg the question by overlooking the statutory immunization afforded a Jabor union which, far from participating in a conspiracy with businessmen bent upon monopolistic restraints, “is acting on its own selfinterest and for the betterment of its members, free and independent of a combination with non-labor groups * * *" Anderson-Friberg. Inc. v. Clary. 98 F. Supp. at 82.

We recognize that arguments may be advanced, sound or fallacious, that, such a broad immunity may no Jonger be in the public interest. But such arguments are more properly a legislative concern than a concern of the Commission or the courts. Our duty is to adhere to our paramount responsibility of following the national policy as expressed in the applicable statutes and as judicially interpreted. We therefore conclude that the practices in which respondents have: indulged are among those countenanced by the national policy respecting Jabor disputes. In implementing that. policy, Congress has afforded a legal immunity primarily directed toward contracting THE CALIFORNIA SPORTSWEAR & DRESS ASSN., INC., ET AL. 895 835 Order the injunctive jurisdiction of the Federal courts. This agency has the duty, however, of giving due consideration to that policy in its administration of the Federal Trade Commission Act. “Congressionally permitted union activities may restrain trade in and of themselves. There is no denying the fact that many of them do so, both directly and indirectly. Congress evidently concluded, however, that the chief objective of antitrust legislation, preservation of business competition, could be accomplished by applying the legislation primarily only to those business groups which are directly interested in destroying competition.” <Adlen Bradley Co. v. Local Union No, 8, 325 U.S. 797, 811 (1944). We therefore hold that because the practices here under consideration are among such “convressionally permitted nnion activities” they do not constitute unfair acts or practices or unfair methods of competition in commerce within the meaning of the Federal Trade Commission Act. We do not find it necessary to discuss the other points raised by counsel for respondents in his brief and oral argument, viz, that al] activities of labor subject to the Federal power were placed within the exclusive jurisdiction of the National Labor Relations Board; that the Federal Trade Commission, by the terms of its own statute, Jacks jurisdiction over labor unions since they are not organized for their own profit or that of their members; that the chal- Jenged activities are not. in interstate commerce: and that some respondents did not participate in the challenged acts. The appeal is accordingly denied, and the initial decision is adopted as the decision of the Commission.

FINAL ORDER Counsel] supporting the complaint having filed an appeal from the hearing examiner’s initial decision in this proceeding, and the matter having come on to be heard upon the record, including the briefs and ora] arguments of counsel; and the Commission having rendered its decision denying said appeal and adopting the initial decision as the decision of the Commission :

It is ordered, That. the complaint be, and it hereby is, dismissed. Decision 54 F.T.C.