A federal district court judge in Philadelphia has thrown a curve at one of the Reagan administration's prize plans to boost U.S. exports and loosen the restraints of antitrust laws -- and government lawyers are trying to figure out how to respond.
The Jan. 3 ruling from Judge Marvin Katz is the first one to test the 1982 Export Trading Company Act.
That statute lets groups of companies, even competitors, band together to promote overseas sales of U.S. products and services. After an investigation by the departments of Justice and Commerce, the joint ventures get certificates that immunize them from antitrust suits based on their joint activities. Without the immunization, companies agreeing on who should get which business or what prices should be charged might be vulnerable to antitrust suits, because export sales can have an impact on how companies do in the domestic market.
Katz said the two executive-branch departments took far too perfunctory a look at the 1984 application from four major chemical companies to get together on foreign sales of chlorine and caustic soda. His order, in Horizons International v. Baldrige, canceled the certificate for Chlor/Alkali Producers International and told the bureaucrats to reopen the whole investigation. The four companies are B. F. Goodrich; Kaiser Aluminum & Chemical; Occidential Chemical, and Vulcan Materials.
Granting the certificate to such giants without looking more closely at how the new venture might hurt U.S. competitors "is arbitrary, capricious and an abuse of discretion," Katz wrote in unusually strong language.
Katz essentially agreed with the arguments of an independent trader in chlor-alkali products and a marketing consultant. They contended that the long history of antitrust abuse in the fields should be factored into the decision of whether to grant the certificate.
There is "a rather checkered past of antitrust violations in the chlor-alkali industry," the decision noted. The two plaintiff companies complain that the four partners in the export venture refuse to deal with independent traders, fix prices, allocate customers and make deals among themselves to limit production.
Production and pricing are tricky in the chlorine business. Chlorine and caustic soda are made simultaneously from electrolysis of salt, but tend to have different demand cycles. Both are intermediaries in the making of other chemicals. Chlorine is used to make polyvinyl chloride, for instance, while caustic soda is used in the textile industry. Chlorine, which is toxic and corrosive, is hard to store, but caustic soda is not. So plants tend to pace their production in response to chlorine demand, which means that excess caustic soda simply piles up until there is a market.
The same qualities that make chlorine difficult to store make it difficult to export. About $1 billion worth of chlorine is made domestically each year; no more than one percent of it goes overseas.
That's why Katz found it suspicious that the companies' application for a certificate listed chlorine as one of the items it would sell.
In taking a new look at whether the joint venture should be approved, Justice and Commerce "should consider the possibility that Chlor/Alkali sought certification for chlorine as a sham to facilitate, and insulate, anticompetitive domestic practices," Katz wrote.
In fact, in a year of operation, Chlor/Alkali has managed to pull off only one sale, and not a very major one at that: 400 metric tons of caustic soda to Panama.
Last year, demand for the compound dropped off so precipitously "that the members of the association aren't really interested in giving away their caustic soda at the prices they can get in the world market," said Robert Smiley, a marketing official at Vulcan.
To the companies that challenged the certificate, however, that sad sales record "just underscores what the real purpose of this was," said Daniel R. Shulman of Minneapolis, one of the plaintiff's lawyers in the case.
Shulman contends that the details of Chlor/Alkli -- the size of the partners in the joint venture and the history of antitrust prosecution in the industry -- make it different from most export trading companies endorsed by Justice and Commerce.
Combines, for instance, have been formed to promote food service equipment, kerosene heaters and bull semen.
Shulman said of the judge's decision, "We hope there are warnings that other companies should heed." The lesson may be that the very big companies Commerce is trying to court into export trading companies will face the toughest roads to approval.
The government disagrees with Katz's decision and will likely ask him to reconsider the case. If he turns down that request -- and most requests are turned down -- an appeal is likely. The government simply could reopen the matter, consider all the points of concern raised by Katz and then reissue the certificate.
In other cases, courts ruled that:
*Power companies need not pay as much for disposal of nuclear waste as the Department of Energy expected. DOE wanted to charge the utilities on the basis of the power they generate, but the U.S. Court of Appeals in the District said that is a misreading of the Nuclear Waste Policy Act. The utilities have to pay the fees only on the basis of the electricity they see, the judges ruled, approving a deduction for the power the companies use themselves. (Wisconsin Electric v. DOE, Dec. 6)
*States can continue to curb television advertising of lawyers. Iowa bar rules permit television advertising. But the rules allow only 19 kinds of information to be included, insist that only "a single non-dramatic voice" present the copy, and ban background music. After the U.S. Supreme Court struck down a number of Ohio rules on lawyer print advertising, it told the Iowa high court to look again at its approval of the television rules. The Iowa Supreme Court took the second look, and continues to endorse the restrictions on television advertising. Television has so much impact on viewers that advertising there demands more stringent regulation than for print ads, the majority reasoned. (Iowa State Bar v. Humphrey, Nov. 13)
*Copyright protection for a ballet does not extend to photographs of the dance in performance. In what is the first case to test the reach of copyright protection for choreographers, the U.S. District Court in Manhattan ruled that a picture book on the making of a production of The Nutcracker is not an infringement, because the pictures do not provide a complete enough record of the ballet so that someone could stage a copy relying just on the book. (Horgan v. MacMillan, Nov. 19)
*A company's obligation to arbitrate questions of dismissal end when the collective bargaining contract containing them expires. In general, laymen might think that all contract obligations end when the contract is over, but that rule does not apply uniformly in labor disputes. Companies have a continuing duty to go to arbitration on rights the workers have won during the life of the contract, such as pensions or disability benefits. And some jurisdictions have included firings on that list. But the Michigan Supreme Court, in a solid decision, rules that if the pink slip is handed out after the union contract expires, there is no requirement that the company go to arbitration on the issue. (County of Ottawa v. Jaklinski, Nov. 7)
*Manufacturers cannot go to court to win protection against imports if the president has rejected their request. The U.S. Court of Appeals for The Federal Circuit -- which has exclusive jurisdiction to review International Trade Commission rulings -- has decided that it has no power to review White House rejection of such decisions. The case involves imports of long-life batteries that a U.S. producer says look unfairly like its own brand. The ITC agreed and ordered the imports to stop, but President Reagan threw out the ITC order. As long as the president says he is making his decision for policy reasons -- and Reagan said just that -- judges have no authority to poke into the matter, the appellate ruling concluded. (Duracell v. ITC, Dec. 9)