Industries, Inc. (CPS), the Government seeks the maximum penalty of $10,000 per day and a mandatory injunction directing compliance. On March 11, 1975, this Court by Opinion and Order granted the Government's Motion for Partial Summary Judgment, finding Papercraft to be in default of the Divestiture Order. A lengthy history was there given which will not be repeated except as here required for clear understanding.
Proceedings for divestiture were initiated by the FTC on April 10, 1969, alleging illegal acquisition of CPS by Papercraft in December of 1967. FTC's initial Order requiring divestiture was issued June 30, 1971. On June 6, 1973, a Modified Order was entered in compliance with the unappealed Mandate of the Seventh Circuit Court of Appeals.
The Modified Order required Papercraft, within six months of the date thereof, to "divest, absolutely and in good faith, subject to the approval of the Federal Trade Commission, all assets, properties, rights and privileges, . . . of CPS Industries, Inc., . . .". None of the assets were permitted to be transferred to any person who was an officer, director or employee of Papercraft or affiliated corporations, or who controlled more than 1% of the shares of Papercraft Corporation, or to anyone who was not approved in advance by the FTC. However, it was provided that Papercraft could divest itself without the preceding limitations being applicable, if such divestiture was accomplished through a new corporation whose shares could be distributed to the stockholders of Papercraft in proportion to their holdings of Papercraft stock. For a period of ten years, Papercraft was ordered not to acquire, in whole or in part, stock or assets of any concern engaged in the manufacture, production, sale or distribution of any decorative gift wrap product.
Papercraft twice requested extensions of the FTC Order which were rejected, and on August 6, 1974, the FTC, pursuant to Section 16 of the Federal Trade Commission Act, 15 U.S.C. § 56, certified the proceedings to the Attorney General of the United States setting forth that Papercraft had neither divested itself of CPS nor presented to the FTC any plan for divestiture of CPS by sale or spin-off.
Papercraft in this Court unsuccessfully asserted error of the FTC in denying requests for extension, and rather obliquely challenged the FTC's certification to the Attorney General. This Court entered Summary Judgment on the Order violation. A rather lengthy hearing was held by this Court on the imposition of civil penalties and the framing of a mandatory injunction to prevent continuation of the violation of the FTC Divestiture Order.
The Government's suit was brought under both the Federal Trade Commission Act and the Clayton Act. Section 5 (l) of the Federal Trade Commission Act (15 U.S.C. § 45 (l)),
authorized a penalty of not more than $5,000 for each violation. Under Section 11 (l) of the Clayton Act (15 U.S.C. § 21 (l)),
a penalty of not more than $5,000 for each violation was established. The maximum penalty for violation of Section 5 (l) of the Federal Trade Commission Act, 15 U.S.C. § 45 (l), has since been increased from $5,000 to $10,000. See, Pub. L. 93-153, Title IV, § 408(c), 87 Stat. 591, 592 (1973). These statutes must be read in pari materia. Federal Trade Com. v. Cement Institute, 333 U.S. 683, 690, 68 S. Ct. 793, 92 L. Ed. 1010 (1948); Federal Trade Commission v. Reed, 243 F.2d 308 (7th Cir. 1957). Thus, maximum penalties of $10,000 per day are available as contended for by the Government.
Congress, as evidenced by the legislative history, was fully cognizant of the problem before the Court of determining sufficient monetary penalties to provide incentive for prompt compliance with FTC Orders. Thus, in recommending passage of the 1959 Amendment to the Clayton Act, to bring it into accord with the 1938 Wheeler-Lee Amendment to the Federal Trade Commission Act, the House Committee on the Judiciary observed:
". . . Although the maximum penalty may be severe, in certain cases it would be appropriate. In the absence of the maximum penalty for a continuing offense, for example, commission and board orders with respect to mergers and interlocking directorships would be ineffective."