Ethyl Corp. v. Federal Trade Commission

In the 1970s, changes to environmental policy caused the demand for lead antiknock compounds to fall drastically. At that time, the industry was highly concentrated. There were only four firms producing and selling the antiknock product. This created a naturally oligopolistic market structure that deterred price competition. However, even with this naturally oligopolistic market structure from 1974–79, two of the firms, Ethyl and Du Pont, faced price discount competition from the other two firms, Nalco and PPG. Ethyl and Du Pont responded with competitive non-price incentives like free services and flexible billing terms. In 1979, the Federal Trade Commission (FTC) (plaintiff) filed a complaint against Ethyl, Du Pont, Nalco, and PPG (defendants), alleging that the defendants engaged in unfair methods of competition in violation of § 5 of the FTC Act, 15 U.S.C. § 45. Specifically, the FTC alleged that the firms’ use of pricing on a delivered basis (i.e., including transportation costs), most favored nation clauses, and advance notice of price changes constituted unfair competition. The FTC did not allege that the defendants instituted the challenged practices pursuant to an express or tacit agreement or for any illegitimate purpose. Indeed, all of the challenged practices were first introduced by Ethyl prior to 1948, when Ethyl was the only domestic producer of antiknock compounds. Rather, the FTC only complained that the challenged practices hindered competition in the antiknock market and had the effect of maintaining uniform price levels. The FTC commission held that the defendants’ unilateral but interdependent practices violated § 5 of the FTC Act. The defendants appealed.