Federal Trade Commission v. Universal-Rundle Corp.

Universal-Rundle Corp. (Universal-Rundle) sells a line of china and cast-iron plumbing fixtures. In 1960, the FTC issued a complaint against Universal-Rundle, alleging that it had sold items at higher prices to some customers than it had charged others. The effect of the distinction was to lessen competition. After hearings, the FTC ordered Universal-Rundle to cease and desist from its practices. Shortly after the issuance of the order, Universal-Rundle petitioned the FTC to stay the order to investigate and institute appropriate proceedings to correct industry-wide practices by plumbing fixture manufacturers. In support, Universal-Rundle submitted affidavits and evidence showing that its principal competition offered similar discounts, that Universal-Rundle was one of the smaller players in the industry, and that its competitors had had profits in the last five years whereas Universal-Rundle had suffered losses. It submitted an affidavit from its marketing vice president alleging that Universal-Rundle would suffer severe financial difficulties if it were the only competitor to be restrained from offering truckload discounts. In a unanimous decision denying the petition for stay, the FTC held that a general allegation that competitors were offering similar discounts was not a sufficient basis for instituting industry-wide proceedings or withholding enforcement of the case and desist. Universal-Rundle sought review of the FTC order in the United States Court of Appeals for the Seventh Circuit. The Seventh Circuit set aside the order denying the stay and remanded the case with instructions to the FTC to conduct an industry investigation. The Seventh Circuit conceded in light of Moog Industries, Inc. v. FTC, 355 U.S. 411 (1958), a court should not interfere with an FTC order absent a patent abuse of discretion, but it concluded that there was a patent abuse of discretion here. The Supreme Court granted certiorari.