Boise Cascade Corp. v. Federal Trade Com.

Boise Cascade Corp. v. Federal Trade Com.

Opinion

 [*573]  Petitioners in these consolidated actions seek reversal of a Federal Trade Commission (Commission) order finding that each violated section 5 of the Federal Trade Commission Act (FTCA), 15 U.S.C. § 45, by adopting and maintaining a system of delivered pricing which utilized the computation of rail freight charges from the Pacific Northwest in determining the price of southern plywood. Boise Cascade Corp., 91 F.T.C. 1 (1978). We decline to enforce the order.

Petitioners are manufacturers of softwood plywood with mills located in the southern part of the United States. Until 1947 all plywood [**2]  was manufactured from Douglas Fir and was produced in the states of Washington and Oregon. By 1963, technological  [*574]  advances had made possible the fabrication of plywood from various species of southern pine, leading to the development of the southern plywood industry. By 1974 the South produced 32.3 percent of all plywood marketed in the United States and 45.7 percent of plywood sheathing, the subject of this controversy. Petitioners accounted for more than 50 percent of southern production of plywood sheathing.

Because the product is considered to be fungible, price is the main factor of competition in the marketing of southern plywood sheathing. Prior to the development of the southern plywood industry, West Coast plywood manufacturers typically quoted a "delivered price," which consisted of a "mill price" plus the amount for rail freight from the West Coast (West Coast freight). This freight factor was computed by reference to concentric bands or freight zones running from north to south and radiating eastward from a Portland, Oregon zone. Although the rate for shipping plywood increases as a shipment enters new freight zones going east, freight rates are identical [**3]  within any given zone.

The southern plywood industry has from its inception used West Coast freight in calculating and quoting prices to buyers across the country. The parties agree that this practice was a natural development and reflected the fact that in the early years of southern production, western mills remained the dominant supplier of plywood even in the South. Since southern plywood was widely viewed as inferior in quality to western plywood, it was necessary to sell southern plywood at a slightly lower price. The use of West Coast freight made possible ready comparison between western and southern plywood prices, ² encouraged expansion of southern mills, and probably prevented southern prices from dropping so low as to create a disincentive to ship western plywood into the South at a time when southern mills lacked the capacity to meet southern needs.

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