McLaughlin, Kalodner and Ganey, Circuit Judges.
By McLAUGHLIN, Circuit Judge:
Our decision in this appeal has been delayed because of litigation pending in the United States Supreme Court concerning the power of the Federal Trade Commission (Commission) to pass upon the merits of controversies before it during the period when the Commission was composed of only three of its five members and one of those three dissented. The Supreme Court has validated the hearing and decisional status of the Commission as constituted when it heard and decided that case. Federal Trade Commission v. Flotill Products, Inc., 389 U.S. 179, 19 L. Ed. 2d 398, 88 S. Ct. 401 (1967). We have therefore considered and determined the matter before us on its merits.
The Federal Trade Commission issued its original complaint in this proceeding on January 19, 1954. This was amended and supplemented by a subsequent complaint issued on July 13, 1954. Hearings were commenced on January 12, 1955, and continued periodically until May 14, 1958. During the course of the hearings which took 113 days, the testimony of more than 250 witnesses was taken.*fn1 Counsel for the Commission filed proposed findings of fact and conclusions of law on November 10, 1958. The various respondents (petitioners herein)*fn2 filed their separate counter-findings of fact, conclusions of law and orders from January 5, 1959 to January 13, 1959. The hearing examiner's initial decision was filed on March 29, 1961. Oral argument before the Commission was heard on November 21, 1961, and the Commission's opinion, which basically adopted the hearing examiner's initial decision, was announced on November 15, 1962. On April 11, 1963, Luria Brothers and Company, Inc. petitioned this Court, pursuant to Section 5(c) of the Federal Trade Commission Act, 38 Stat. 719 (1914), as amended, 15 U.S.C. § 45(c) (1958), and to Section 11 of the Clayton Act, 38 Stat. 734 (1914), as amended, 15 U.S.C. § 21(c), to review and set aside the order of the Commission dated February 13, 1963.
The complaint, as finally amended and supplemented, was in two counts. Count I in substance charged that Luria and the other petitioning mills entered into a series of agreements whereby Luria was to act as the exclusive or substantially exclusive broker for the petitioning mills. It charged that these agreements led to a restraint of trade and tended to create a monopoly in the scrap metal market in violation of Section 5 of the Federal Trade Commission Act, 15 U.S.C. § 45(a)(1).*fn3 Count I also charged that the petitioning mills conspired to effect a monopoly in Luria, that Luria and others restrained trade in export scrap, that petitioners engaged in coercive tactics, and that Luria acquired various competing companies -- all in violation of Section 5.
Count II specifically charged Luria with violation of Section 7 of the Clayton Act, 15 U.S.C. § 18*fn4 by the acquisition of the stock of Southwest Steel Company, a competing broker, and the stock of six other companies.
Several charges were dismissed by the hearing examiner and the Commission. Those sustained were a finding that petitioners violated Section 5 of the Federal Trade Commission Act by separate agreements whereby each mill made Luria its exclusive or substantially exclusive broker; that Luria's participation in the sale of scrap to the purchasing agent, Office Commun des Consommateurs de Ferraille (OCCF), for the Coal and Iron Community of Western Europe was illegal; and that Luria's ownership of the stock of Southwest violated Section 7 of the Clayton Act.
The Commission's order prohibited Luria from contracting or agreeing to act as the exclusive or substantially exclusive broker for any plant of any respondent mill or any other buyer of scrap iron and steel; forbad the respondent mills without limit as to time to buy all or substantially all their scrap from or through Luria, and forbad them for five years to buy more than 50 percent of their scrap from Luria except to the extent that scrap, adequate in quantity and quality, is not available from other suppliers on terms which are substantially similar and competitive; forbad Luria, directly or indirectly, to agree to act as the exclusive or substantially exclusive broker in the export of scrap; forbad Luria for five years from acquiring the business of any scrap broker or dealer without the permission of the Commission and ordered Luria to divest itself of its interest in Southwest.
It is from these findings and the foregoing order that petitioners seek review by this Court.
At least 98 percent of the iron and steel scrap consumed in the United States is purchased by the producers of iron and steel. Scrap and pig iron are the principal metallics used in making iron and steel. Part of the scrap used in the production process is generated as a waste product of the mills' own activities and is referred to as "home scrap." This constitutes about one-half of the scrap consumed by producers. The remainder must be purchased from outside sources and is referred to as "purchased scrap." Sources of purchased scrap include railroads, industrial materials, ships, automobiles, discarded household appliances, etc.
Much scrap is collected by a vast army of junk dealers and peddlers who make regular rounds for this purpose. These junkmen usually sell their scrap to larger dealers who in turn sell directly to the consumer or to brokers. Approximately 90 percent of all scrap used is purchased either from dealers or brokers. Scrap brokers, as that term is used in the industry, has reference to persons who purchase and sell scrap for their own account, taking title to it and assuming all the risks incident to ownership. In effect they are wholesale dealers, but do not take physical possession of the material. Scrap dealers, on the other hand, operate yards where they take possession of the scrap, sort and process it. There is no hard and fast line differentiating brokers from dealers since in many instances, a dealer may act as a broker and some brokers also own yards where they operate as dealers.
Brokers derive their profit from the difference between what they pay for the scrap and what they can get for it. In general, they aim at a differential of $1.00 a gross ton, but because of market fluctuations and varying competitive conditions, the brokerage business is highly speculative.
The Luria business began about 1889 when the grandfather and greatgrandfather of the present generation of Lurias began to collect scrap. A small office was opened in Reading, Pennsylvania, and the business was incorporated in 1918. By 1930, Luria had opened offices in New York, Pittsburgh, Boston and Philadelphia and set up two yards in Pennsylvania. By 1946, Luria had become a substantial supplier to eleven of the petitioning mills. At the same time Luria expanded westward opening offices in Detroit, Chicago, Cleveland, Houston and St. Louis. Later Luria opened offices in Colorado, Alabama, Utah, California and Oregon. Domestically Luria is the largest scrap broker with 16 offices and 6 yards located in representative cities throughout the country. When the Korean War ended in 1953, Luria entered the export market by supplying Hugo Neu, a broker specializing in the export of scrap.In 1954, Luria and two other brokers joined forces and entered into export agreements with OCCF.
IV. The Relevant Domestic Markets
The statistical information gathered by the Commission covers the scrap purchases of practically all the steel mills in the United States since approximately 99 percent of the country's steel mills reported their purchases to the Commission. These mills referred to as "reporting mills" account for between two-thirds and three-fourths of all the scrap consumed in the United States. As previously indicated, 90 percent of the scrap purchased by the reporting mills is obtained from broker-dealer sources. In tabulating its data the Commission properly excluded purchases from sources other than broker-dealers since the sales by industrial fabricators, railroads and shipyards do not effectively compete in the market in which Luria and other broker-dealers operate.
In evaluating the effect of Luria's operations on the scrap market the Commission divided the country into five geographic areas, one subdivision and the nation as a whole. (1) The North Atlantic area consists of the six New England states, New York, New Jersey, Eastern Pennsylvania, Delaware, Maryland and the District of Columbia. This area contains 24 reporting mills which operate 38 plants. During the pertinent period of the investigation, the years 1947-1954, the petitioning mills accounted for 80 percent of all scrap purchased by the reporting mills from broker-dealer sources. The purchases by the reporting mills in this district accounted for approximately 20 percent of all purchases by domestic mills from broker-dealer sources. (2) The Eastern Pennsylvania district is a subdivision of the North Atlantic area in which are located 13 of the above 24 mills. The petitioning mills accounted for 84 percent of the purchases made by these 13 reporting mills. Together these 13 mills account for approximately one-half of all purchases made by all the reporting mills in the North Atlantic area. (3) The Pittsburgh-Youngstown area is a hexagonal territory extending from Johnstown on the east, through Monessen and Washington, Pennsylvania, northwest through Steubenville, Ohio, Weirton, West Virginia,Youngstown and Warren, Ohio, east through Sharon, Pennsylvania, and back to Johnstown via Butler, Pennsylvania. Twenty-three mills operating 29 plants are located within this area. In 1954, the petitioning mills accounted for 18 percent of the total purchases in that area by all reporting mills. (4) The St. Louis area includes metropolitan St. Louis and its suburban areas in Missouri and Illinois. Granite City, the only petitioner in this area, and Laclede Steel Company, a reporting mill, operate the only two mills in the area. The purchases of the two mills and three large foundries in the area represent 80 percent of all purchases in the region. Granite City alone accounts for one-half of the scrap purchased by these five companies. (5) The Rocky Mountain area includes the states of Arizona, Utah, Colorado, Wyoming, Idaho and Montana. Petitioners, CF&I at Pueblo, Colorado, and U.S. Steel at Geneva, Utah, operate the only two mills in the area. (6) The Pacific Coast area contains 9 reporting mills with a total of 12 plants in this area which is comprised of the states of California, Oregon and Washington. The purchases of Bethlehem-Pacific, the sole petitioning mill in the area, total almost one-half of all the purchases of the 9 reporting mills. (7) In the United States as a whole, the petitioning mills accounted for 30 percent in 1953, and 24 percent in 1954 of total scrap purchases by all reporting mills from broker-dealer sources.
The following table clearly depicts the extent to which the practices of the petitioning mills affect the scrap markets in the various areas.
Percentage Shares of the Petitioning
Mills' Purchases from Broker-
Dealer Sources in Total Purchases from Such Sources By All
Reporting Mills in the Respective Areas
1947 1948 1949 1950 1951 1952 1953 1954
Nort h Atlantic 80 79 75 74 77 78 79 80
Eastern Pennsylvania 82 81 81 79 80 79 79 84
Pittsburgh-Youngs town 13 15 16 16 18
Rock Mountain 100 100 100 100 100 100 100 100
Pacific Coast 40 37 38 41 43 45 52 49
United States 27 25 27 24 28 38 30 24
Luria's percentage share in the total scrap purchases by all reporting mills from broker-dealer sources in each relevant area between 1947 and 1954 is indicated by the following tabulation.
1947 1948 1949 19501951 1952 1953 1954
North Atlantic 34.1 38.1 46.8 54.6 62.0 68.8 73.1 74.5
Easte rn Pennsylvania 48.5 51.8 58.3 72.4 72.2 74.1 78.9 83.3
P ittsburgh-Youngstown 20.4 20.6 26.2 37.2 32.2 35.4 36.5 36.0
St. Louis 16.5 31.0 51.7 42.5 51.6 45.4
Rocky Mountain 99.3 94.0 98.6 95.2 87.2 90.6 95.5 98.9
Pacif ic Coast 6.6 11.7 21.2 ...