gress wanted to go to the utmost extent of its Constitutional power in restraining trust and monopoly agreements such as the indictment here charges admits of little, if any, doubt."

If the legislative history may be looked to for a construction of the Sherman Act, I see no reason why it should not be looked to in construing the Clayton Act as amended. In the case last cited, the Supreme Court found nothing in the legislative history of the former Act contrary to its plain unambiguous language, but the congressional history of the latter Act is clearly at variance with the construction sought by respondent.

The Robinson-Patman Act was reported by the House Judiciary Committee as H. R. 8442 of the 74th Congress, and contained the following definition of "price":

"(5) The word 'price,' as used in this section 2, shall be construed to mean the amount received by the vendor for each commodity unit, after deducting actual freight or cost of other transportation, if any, allowed or defrayed by the vendor."

The Committee report accompanying the bill expressly stated that the object of this definition was to eliminate the basing point or delivered price method of selling, and that the definition would require the use of f. o. b. method of sale (House Reports, 74th Congress, No. 2287). This definition was stricken by an amendment unanimously agreed to by the House (80 Cong. Rec. 8140, 8224). Representative Patman, one of the authors of the bill, in connection with this amendment conceded on the floor of the House that the anti-basing point provision had been eliminated from the bill and that it met with his approval. Representative Citron, a member of the House Judiciary Committee in charge of the bill, stated some of the reasons why the basing system should not be outlawed, and among other things said:

* * *

"There is an economic justification of this system, because it provides an open and above-board method for manufacturers and wholesalers to meet competition outside of their own local freight area. But a more serious consequence of the inclusion of this definition of price, as previously stated, would be to compel all manufacturers to ship f. o. b. shipping point, and therefore compel the very definite localization of operations of all manufacturers and wholesalers, which would have the immediate effect of increasing costs as the result of seriously limited volume production." (80 Cong. Rec. 8224.)

Without quoting further, it is sufficient to note that all members who participated in the House debate agreed that the inclusion of the definition of "price" as originally contained in the bill was directed at the basing point price system, and that the elimination of such definition was for the express purpose of removing the basing system from the proscriptions of the amendment. There was not a single discordant note to this view. It is true that some of the members criticized the system, but even those admitted it was a matter which should be given consideration in separate legislation. For instance, one member of the Committee stated, "I think the basing point practice indefensible and we should deal with it soon in a separate bill." When the bill was before the Senate, Senator Borah, in response to an inquiry by Senator Davis as to the effect the proposed legislation would have on the basing point system, stated, "My opinion would be that this does not have any effect upon that. I defer to the judgment of the Senator in charge of the bill, but that would be my impression." Senator Van Nuys, who was in charge of the bill, then stated, "The Senator from Idaho is correct."

Notwithstanding this imposing legislative history, respondent argues that it is inconceivable that Congress intended to legalize this "indefensible" practice. To my mind this is a spurious contention. The legislative history leaves no room for doubt but that Congress purposely refrained from outlawing the system and by strong implication gave recognition to its existing legal status.

It is also significant that at the same session of Congress the Wheeler Anti-Basing Point Bill was rejected (80 Cong. Rec. 8102, 8223 and 8224). In 1936, hearings were held before the Senate Committee on Interstate Commerce, from March 9 to April 10, on Senate S. 4055, which was expressly aimed at eliminating the basing point system, and again no legislation re[230]sulted. Also, it may be observed that the Temporary National Economic Committee created by joint resolution of Congress on recommendation of the President to study the entire problem of monopoly recommended in its final report the legislative destruction of the basing point system as a monopolistic price fixing device. (Senate Document No. 35, 77th Congress, 1st Session, page 33.) It is also interesting to note that the Assistant Chief Counsel for the Commission who argued the instant case before this court, on January 30, 1940 urged the Committee to "consider whether legislation outlawing the basing point system would be recommended." It was his position then that the system could be reached only under "theories of conspiracy and concerted action which are necessary to make the law applicable." (Record of proceedings of T. N. E. C., Vol. 4, page 400.) Cf. Federal Trade Commission v. Bunte Brothers, Inc., 312 U. S. 349, 352 [32 F. T. C. 1848; 3 S. & D. 337].

All of which shows that not only has Congress refused in no uncertain terms to outlaw the system, but that the Commission has recognized its use as not unlawful except in combination or concerted action. Can it be possible that Congress in the enactment of the Robinson-Patman amendment proscribed the use of the basing system after its clearly expressed intention and purpose to the contrary? I am unwilling to attribute to Congress such a degree of mediocrity. Is it reasonable to suppose that the Commission and its counsel would have continued to urge legislation outlawing the system if such was already an accomplished fact? The plain unvarnished truth is that respondent seeks from this court that which Congress has steadfastly denied.

Respondent relies upon another crutch which furnishes little, if any, support. In 1924, in Federal Trade Commission v. U. S. Steel Corp., et al. (8 F. T. C. decisions 1), it held that the basing point system was illegal under the Clayton Act prior to the passage of the Robinson-Patman amendment. A cease and desist order was issued but, as I understand, no action has been taken by the Commission to enforce its order and the Steel Corporation continues to use this price system or one of the same principle. It is a fair inference in the light of what has since transpired that the Commission entertained no hope that such an order was enforceable under the old Clayton Act, and in view of the legislative history of the Robinson-Patman amendment and other related events, it has little, if any, basis for such hope at this time.

Another factor of some importance is the alternative price system open to petitioners. Of course, I assume it is not within the province of courts or respondent to advise petitioners or anybody else how a business should be operated so as to comply with the law. However, in the instant case, respondent's order requires that petitioners within sixty days file with the

Commission a report in writing setting forth "in detail the manner and form in which they have complied with this order." That means, so I would think, that petitioners must advise the Commission of the price system they have adopted in lieu of that which is condemned. Respondent in its reply brief, in response to petitioners' challenge that it describe a price system which would be nondiscriminatory, makes this pertinent suggestion, "But petitioners obviously do not want one pricing method that rather clearly would not be discriminatory, a uniform f. o. b. plant price with exceptions based only on differences in cost." This suggestion no doubt presents the only alternative to the price system now under attack. At any rate, so far as I know, it is the only system which on principle could be distinguished from the basing point system. The f. o. b., or mill price system as it is sometimes called, is the very system which Congress has refused to impose upon industry for the reason that it would cause or tend to cause the centralization of industry in the more highly populated centers. (See Representative Citron's remarks (80 Cong. Rec. 8224).)

This court in its former opinion expressed the view that there was no evidence in the record to support the finding that the discrimination shown tended substantially to lessen competition or to create a monopoly. I am not convinced that we were in error in this respect. In my view, the basing point system has the opposite effect, that is, it has a tendency to preserve competition and prevent monopoly. Especially is this so when compared with the f. o. b. system now sought to be imposed. It was stipulated in effect that the quality of syrup manufactured by petitioners and all competitors was substantially the same, that petitioners could not sell at a higher price than their competitors, and that competitors could not sell at a higher price [231] than petitioners. To me this means that petitioners and their competitors must sell their product at substantially the same price. Petitioners, forced to an f. o. b. price, could not compete with their competitors in the Chicago market any more than their Chicago competitors could compete with them in the area immediately surrounding Decatur. Competition might become a thing of the past, and each manufacturer have a monopoly of the trade in its own area. Other things being equal, and there is nothing in this record to the contrary, such a price system in my judgment would be calculated to lead to a price war from which only the financially strong and those with a favorable geographical location could survive. Such is the unreasonable result which the Commission would have us produce by embracing its construction of the Clayton Act as amended.

I would refuse such construction and leave the matter in the lap of the legislative branch of the government where, in my view, it properly belongs.

SEGAL LOCK & HARDWARE CO., INC., ET AL. v. FEDERAL TRADE COMMISSION 1

No. 322-F. T. C. Dock. 3896

(Circuit Court of Appeals, Second Circuit. July 14, 1944)

WORDS AND PHRASES-"PICK PROOF"

At hearing on charge that lock manufacturers violated Federal Trade Commission Act by representing that locks were "pick proof," evidence sustained Commission's definition of pick proof as meaning a lock which can be opened without damage thereto only with its own or duplicate keys. Federal Trade Commission Act, sec. 5(a), as amended, 15 U. S. C. A. sec. 45.

CEASE AND DESIST ORDERS-METHODS, ACTS AND PRACTICES-MISREPRESENTATION -QUALITIES OR PROPERTIES OF PRODUCT.

Conflicting evidence whether petitioners' locks could be opened without their own or duplicate keys without damage to locks supported Federal Trade Commission's finding that petitioners' representations that locks were pick proof were erroneous and misleading, so as to warrant order directing petitioners to desist from describing locks as pick proof or from otherwise representing that locks could not be picked.

EVIDENCE-CEASE AND DESIST ORDERS-METHODS, ACTS AND PRACTICES-IF EVIDENCE CONFLICTING.

On petition to review order of Federal Trade Commission directing petitioner to cease and desist from unfair trade practices, Commission's decision on conflicting evidence is final.

EVIDENCE-CROSS-EXAMINATION-TRADE SECRETS.

Trial judge has wide discretion to limit cross-examination so as not to require witness to reveal trade secrets.

EVIDENCE-CROSS-EXAMINATION-TRADE SECRETS-WITNESSES' PRIVILEGE NOT TO

DIVULGE.

At hearing on charges that lock manufacturers violated Federal Trade Commission Act by representing that locks were pick proof, in view of Commission's definition of pick proof, trial examiner properly excluded cross-examination of Commission's expert witnesses concerning methods and instruments used in picking the locks, on ground that witnesses were privileged not to reveal such trade secrets. EVIDENCE-CROSS-EXAMINATION-TRADE SECRETS-WITNESSES' PRIVILEGE NOT TO DIVULGE IF DEMONSTRATION OR DISCLOSURE BEFORE TRIAL EXAMINER ALONE.

A hearing on charges that lock manufacturers violated Federal Trade Commi sion Act by representing that their locks were pick proof was not render by permitting commission's expert witnesses in order to protect their to demonstrate before trial examiner alone their ability to picks

(The syllabus, with substituted captions, is

1 Reported in 143 F. (2d) 935. For case before Commission

On Petition to review and set aside so much of an order of the Commission as directs the petitioners to cease and desist from using the words "pick proof" or words of similar import to describe their locks or lock cylinders, or from otherwise representing that their locks or lock cylinders cannot be picked, order affirmed.

Goodman & Friedman, of New York City, and Mr. Charles M. Palmer of Washington, D.C. (Mr. Charles M. Palmer, of Washington, D.C., of counsel, Mr. Saul W. Goodman, of New York City, on the brief) for petitioners.

Mr. W. T. Kelley, Chief Counsel, Mr. Joseph J. Smith, Jr., Asst. Chief Counsel, Mr. Everett F. Haycraft, and Mr. Jno. W. Carter, Jr., Special Attys., all of Washington, D.C., for respondent.

Before L. HAND, SWAN, and CLARK, Circuit Judges.

SWAN, Circuit Judge:

[936] The petitioners are Segal Lock & Hardware Company, a New York corporation, its wholly owned subsidiary Norwalk Lock Company, a Connecticut corporation, and Louis Segal, who is the president and treasurer of both corporations. The petitioners are engaged in the manufacture and sale in interstate commerce of locks and lock cylinders. They have marketed their locks under the trade name "Segal Pick-Proof" and have advertised extensively by such slogans as "the only lock cylinder that is impossible to pick," "only your key will unlock it," and similar statements representing that the petitioners' lock affords absolute security against picking and is the only lock which does do so. On September 1939 the respondent issued a complaint against the petitioners charging that the representations above referred to constitute a violation of section 5 (a) of the Federal Trade Commission Act, as amended, 15 U. S. C. A. § 45. Extensive hearings were held before a trial examiner and on June 12, 1942 the Commission made the challenged order which directs the petitioners to desist from using the term "pick-proof" in connection with their locks or otherwise representing that their locks or lock cylinders cannot be picked. The questions presented are (1) whether the Commission's finding that the petitioners' [937] lock cylinder is not pick proof is supported by substantial evidence; and (2) whether the hearing was so unfairly conducted, as the petitioners claim, that the order cannot stand.

The first question turns upon the meaning of "pick-proof." The petitioners argue that picking a lock means opening it by the use of conventional picks or instruments customarily used by locksmiths and burglars. But the Commission has made a finding that "picking a lock may be defined as the opening of the lock without the use of the original or duplicate keys and without damage to the lock." Not only is there testimony to support this definition but the petitioners' own advertising shows that they used "pick-proof" to mean that the lock could be opened only with its own key, and was "absolutely" pick-proof. The Commission found that although the lock is reasonably secure against customary or conventional methods of picking, it is not in fact pick-proof, and that the petitioners' representations with respect to the invulnerability of their lock against picking are erroneous and misleading. Plainly there is evidence to support the finding that "pick-proof" is misleading under the Commission's definition of the term. Although six expert locksmiths testified on behalf of the petitioners that they had not been able to pick the lock, three others on behalf of the respondent testified that they had picked it on numerous oc