The Federal Trade Commission (FTC) charged the Spalding Corporation with violations of the Clayton Act after Spalding had acquired a major interest in the stock of Rawlings Corporation. Both companies were large manufacturers of athletic goods. The FTC based its complaint on the allegation that competition would be substantially lessened and would create a monopoly on the market of distribution of athletic goods.

A FTC examiner preparing for the hearing served a subpeona duces tecum (a subpeona combined with a request for production of documents from a third party to the lawsuit) on W. W. Tuttle, an accountant with the firm of Ernst & Ernst (EE). EE was responsible for compiling "census reports" for the Athletic Goods Manufacturers Association (AGMA). The reports consisted of memoranda and statistical data sent to AGMA by its members. Part of the agreement between EE and the AGMA was that EE would hold itself to the strictest confidence and not disclose any of the information given to EE to compile. The subpeona duces tecum requested all documents in EE’s possession relating to the census reports EE compiled for AGMA. EE produced the census reports themselves and information from Spalding and Rawlings. EE did not produce information relating to any of the other companies that were members of the AGMA. The FTC then sought an order compelling EE to release the rest of the information.

Tuttle answered with a three-prong defense: 1) the FTC did not have the power to compel release of information about a company not under investigation; 2) the Fifth Amendment of the United States Constitution would be violated if the FTC was held to have such power; and 3) EE would suffer undue hardship and oppression if they were to disclose the material.

The trial Court agreed with Tuttle’s contentions, noting that since Tuttle was not the target of the FTC investigation, the underlying statute of the FTC failed to grant it such power to issue a subpeona against a third party who was not a direct party to the investigation. The FTC appealed this ruling.

Firstly, the Second Circuit Court of Appeals held that such information as compiled by EE into a census report was not privileged or confidential, and that any information relating to the other companies as members of the AGMA was highly relevant to the FTC’s inquiries. Such inquiries were looking specifically at market allocation and structure vis-à-vis the exchange between Spalding and Rawlings. Nor was the subpeona as issued by the FTC overly broad nor oppressive.

A sub-issue of the first Court’s holding was whether the FTC had adequate subpeona power under its enabling statute. The Congressional debates on the Clayton Act and the Federal Trade Commission Act were concomitant and that Congressional intent was, all along, such that the FTC would be the party responsible for enforcing the Clayton Act. The passage upon which the Court focused its attention included the word "such" in the context of the FTC’s being allowed to subpeona the production of "all ‘such’ documentary evidence." The Court determined the meaning of the statute was best addressed through construing it as if the word "such" was not present; i.e., "all such documentary evidence" truly meant "all documentary evidence." The dissenting opinion thoroughly took issue with the Court’s interpretation of the statute. Nevertheless, the Court held that the broader construction of the passage was required to effectuate the true meaning of the other passages of the statute. The Court also noted that to do otherwise would work an evisceration of long-standing administrative policy and other related passages within the statute which depended upon broad construction.

The Court also ruled that the Fifth Amendment does not apply to a natural person in physical possession of books and papers (which may contain information incriminating the natural person) if the books and papers are the property of a company. To do otherwise pursuant to the statute, according to the Court, would have made for an absurd result (ie. that the FTC was allowed to subpeona for oral testimony, but not for the accompanying documentary evidence containing essentially the same information).

The FTC would also have been severely limited, the Court stated, if the Court were to follow Tuttle’s proposed reading of the statute. Under Tuttle’s interpretation, the FTC would be limited only to the company actively "being investigated" even when highly relevant information for a market investigation was in the hands of a third party. The FTC’s need for the information plainly outweighed any other considerations regarding the statute. Even insofar as trade secrets, the Court ruled, should be allowed for examination by the FTC in preparing its case, even if the secrets were never to be made public.

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