United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued October 11, 2011 Decided December 13, 2011
No. 10-5383
FEDERAL TRADE COMMISSION,
APPELLEE
v.
CHURCH & DWIGHT CO., INC.,
APPELLANT
Consolidated with 11-5008
Appeals from the United States District Court
for the District of Columbia
(No. 1:10-mc-00149)
Carl W. Hittinger argued the cause for appellant. With
him on the briefs was Earl J. Silbert.
Mark S. Hegedus, Attorney, Federal Trade Commission,
argued the cause for appellee. With him on the brief were
Willard K. Tom, General Counsel, David C. Shonka, Principal
Deputy General Counsel, John F. Daly, Deputy General
Counsel, and Leslie Rice Melman, Assistant General Counsel.
2
R. Craig Lawrence, Assistant U.S. Attorney, entered an
appearance.
Before: SENTELLE, Chief Judge, GINSBURG, * Circuit
Judge, and WILLIAMS, Senior Circuit Judge.
Opinion for the Court filed by Circuit Judge GINSBURG.
GINSBURG, Circuit Judge: Church and Dwight Co., Inc.,
the leading manufacturer of condoms in the United States,
appeals an order of the district court enforcing a subpoena and
an accompanying civil investigative demand (CID) issued by
the Federal Trade Commission insofar as the FTC would
require it to produce information related to its sales of
products other than condoms. Church & Dwight contends
such information is not reasonably relevant to the
Commission’s investigation into its potentially monopolistic
practices in the market for condoms. Because the
Commission’s inquiry lawfully extends to the possibility
Church & Dwight is engaged in the exclusionary bundling of
rebates to retailers that sell condoms and other Church &
Dwight products, we hold the district court did not err in
finding that the information on products other than condoms
was reasonably relevant to the Commission’s investigation.
Accordingly, we affirm the order enforcing the subpoena and
the CID against Church & Dwight as issued.
I. Background
Church & Dwight sells condoms primarily under its
Trojan brand name. According to the Commission, the
Company accounts for “at least 70%” of the latex condoms
*
As of the date the opinion was published, Judge Ginsburg
had taken senior status.
3
sold in the United States. * In order to market its condoms,
Church & Dwight offers retailers a discount based upon the
amount of shelf space they devote to its condoms. Church &
Dwight also sells a variety of other products, including such
consumer products as cat litter and toothpaste.
In June 2009 the Commission issued a “Resolution
Authorizing Use of Compulsory Process in a Nonpublic
Investigation” in order to determine whether Church &
Dwight
has attempted to acquire, acquired, or
maintained a monopoly in the distribution or
sale of condoms in the United States, or in any
part of that commerce, through potentially
exclusionary practices including, but not
limited to, conditioning discounts or rebates to
retailers on the percentage of shelf or display
space dedicated to Trojan brand condoms and
other products distributed or sold by Church &
Dwight, in violation of Section 5 of the Federal
Trade Commission Act ....
Pursuant to the Resolution, the Commission issued a
subpoena duces tecum seeking, among other things,
production of documents related to Church & Dwight’s sales
and distribution of condoms in the United States and Canada.
At the same time the Commission issued a CID seeking
information about cost, pricing, production, and sales of the
Company’s condoms in the United States and Canada.
*
Although its inquiry into the market for condoms is not limited to
the latex variety of the product, the Commission has not provided
an estimate of Church & Dwight’s share of a market that includes
both latex and non-latex condoms.
4
Although the Commission did not explicitly request
information on products other than condoms, Specification R
of the subpoena provides: “All Documents responsive to this
request ... shall be produced in complete form, unredacted
unless privileged ....”
Church & Dwight turned over to the Commission
documents and data sets relating to its condom business with
the information on other products redacted. Church &
Dwight petitioned the Commission either to limit or to quash
the subpoena and the CID. The Commission denied that
request and petitioned the district court to enforce the
subpoena and the CID.
In the district court, Church & Dwight argued, “Properly
read, the FTC’s Resolution’s language concerning ‘Trojan
brand condoms and other products distributed or sold by
Church & Dwight’ does not include irrelevant non-condom
products such as toothpaste, cat litter, baking soda and
detergents.” The district court, finding the information on
products other than condoms in documents with information
pertaining to condoms was “reasonably relevant” to the
Commission’s investigation and the request was not “unduly
burdensome,” granted the petition for enforcement.
II. Analysis
Church & Dwight appeals the district court’s order
insofar as the subpoena and the CID relate to its products
other than condoms. The Company first contends the district
court departed from the legal standard prescribed in precedent
because it (1) did not interpret the scope of the Resolution, (2)
did not identify the materials sought in the subpoena and the
CID, and (3) required that the materials sought in the
subpoena and the CID be only plausibly, rather than
5
reasonably, relevant to the Commission’s investigation. It
also argues that, even if the district court applied the correct
legal standard, the court clearly erred when it found the
disputed materials were in fact reasonably relevant to the
investigation.
A. Standards of Review
Whether the district court applied the correct standard in
deciding an investigative subpoena should be enforced is a
question of law, which we decide de novo. See U.S. Int’l
Trade Comm’n v. ASAT, Inc., 411 F.3d 245, 253 (D.C. Cir.
2005); FTC v. Texaco, 555 F.2d 862, 876 n.29 (D.C. Cir.
1977) (en banc). We review the district court’s determination
of relevance, a question of fact, only for clear error. See FTC
v. Invention Submission Corp., 965 F.2d 1086, 1089 (D.C.
Cir. 1992).
In the last-cited case we explained “a district court must
enforce a federal agency’s investigative subpoena if the
information sought is ‘reasonably relevant’—or, put
differently, ‘not plainly incompetent or irrelevant to any
lawful purpose of the [agency]’—and not ‘unduly
burdensome’ to produce.” 965 F.2d at 1089 (brackets in
original) (internal citations omitted) (quoting Texaco, 555
F.2d at 872, 873 n.23, 881). We also reiterated a long-
established point quite pertinent to the dispute here: “[T]he
validity of Commission subpoenas is to be measured against
the purposes stated in the resolution ....” 965 F.2d at 1092
(quoting FTC v. Carter, 636 F.2d 781, 789 (D.C. Cir. 1980)).
B. Scope of the Resolution
The main dispute in this case is whether the
Commission’s inquiry, as defined by the Resolution, extends
6
to Church & Dwight’s products other than condoms. The
Resolution indicates the Commission is investigating various
of Church & Dwight’s practices, including its “conditioning
[of] discounts or rebates to retailers on the percentage of shelf
or display space dedicated to Trojan brand condoms and other
products ....” Despite the seemingly unqualified reach of the
phrase “and other products,” the Company argues we should
interpret it narrowly to mean “and other [condom] products.”
For its part, the Commission maintains the Resolution
comprehends an investigation into Church & Dwight’s
possible bundling of rebates based upon the retailer’s sales of
both its condoms and its other products. Under the
Commission’s interpretation, the information concerning
products other than condoms is unquestionably relevant to its
investigation, and the district court was correct to enforce the
subpoena and the CID.
As an initial matter, Church & Dwight is incorrect in
claiming the district court “failed to interpret” the Resolution;
the district court simply interpreted the Resolution as being
more broad than Church & Dwight had argued. The question
properly before us is whether the district court correctly
interpreted the Resolution to include an inquiry that
implicated Church & Dwight products other than condoms.
Contrary to the Company’s urging, we defer to the
Commission’s interpretation of its own Resolution. Cf. FTC
v. Ken Roberts Co., 276 F.3d 583, 586 (D.C. Cir. 2001)
(“courts of appeals have consistently deferred to agency
determinations of their own investigative authority”); EEOC
v. Lutheran Social Servs., 186 F.3d 959, 965 (D.C. Cir. 1999)
(“agency’s interpretation of relevance of subpoena deserves
deference because the scope of the investigation is very much
dependent on the agency’s interpretation and administration
of its authorizing substantive legislation” (internal quotation
7
marks, alterations, and citation omitted)). So long as the
material the Commission seeks is “relevant to the
investigation—the boundary of which may be defined quite
generally,” Invention Submission, 965 F.2d at 1090, see also
Texaco, 555 F.2d at 874 n.26 (“resolutions of [a broad] sort
are not uncommon in the investigative process”), the district
court must enforce the agency’s demand.
The Commission maintains its Resolution contemplates
an investigation into the possibility Church & Dwight is
engaged in exclusionary practices in which products other
than condoms may play a role. Such practices include
bundling discounts, as in LePage’s Inc. v. 3M, 324 F.3d 141
(3d Cir. 2003) (en banc), and tying sales, as in Eastman
Kodak Co. v. Image Technical Services, Inc., 504 U.S. 451
(1992). Church & Dwight replies that, because the initial
clause of the Resolution authorizes an investigation into
illegal monopolization “in the distribution or sale of condoms
... through potentially exclusionary practices including, but
not limited to, [shelf-space discounts] on Trojan brand
condoms and other products,” the last two words must refer
only to Church & Dwight’s condom brands other than Trojan.
There is, however, a reasonable interpretation of the
Resolution that is less narrow than the one Church & Dwight
favors. Although we will not interpret the scope of the
Resolution so broadly as to enable the agency to investigate a
matter beyond the reach of the laws it enforces, see Invention
Submission Corp., 965 F.2d at 1089, we note that an inquiry
into the bundling of rebates on condoms and other types of
products with the purpose of sustaining market power in the
market for condoms is arguably within the condemnation of
the Sherman Act as the Third Circuit construed it in
LePage’s, 324 F.3d at 154–57 (concluding 3M’s practice of
bundling rebates for multiple products in order to maintain its
8
monopoly in one of them was an exclusionary practice in
violation of § 2 of the Sherman Act). *
Church & Dwight suggests we should reject this
interpretation of the Resolution because the Commission’s
subpoena and CID are too narrowly focused to support a case
premised upon a theory of bundling that includes products
other than condoms. The Company reasons the Commission,
had it wanted to pursue such a theory, would have requested
information on products other than condoms even when that
information appears in documents that contain no information
on condoms. This argument fails because we do not require
the Commission to seek in one document request all the
information it might need in order successfully to establish a
violation at trial.
LePage’s is of course not the law of this circuit, and it
has been roundly criticized, see, e.g., Antitrust Modernization
Comm’n, Report and Recommendations 94 (2007) (“The lack
of clear standards regarding bundling, as reflected in
LePage’s v. 3M, may discourage conduct that is
procompetitive or competitively neutral and thus may actually
harm consumer welfare”); Bruce H. Kobayashi, The Law and
Economics of Predatory Pricing, in ANTITRUST LAW AND
ECONOMICS 116, 148 (Keith N. Hylton ed., 2009) (“The
*
The Commission’s contention its Resolution also comprehends an
investigation into potential tying is less than persuasive. In a tying
case, the plaintiff must allege the defendant company used market
power in the tying product to gain market power in the tied product.
See Eastman Kodak, 504 U.S. at 464 & n.9. Here, however, the
Commission indicated in its Resolution it is investigating only the
acquisition or maintenance of a monopoly in the condom market;
that is the only product market in which the FTC has alleged
Church & Dwight has market power, and the Commission has not
identified any potentially tied product.
9
potential for liability will result in [firms with sufficient
market power and multiple product lines] being deterred from
using bundling that would have led to reduced prices for
consumers and higher welfare”); Richard A. Epstein,
Monopoly Dominance or Level Playing Field? The New
Antitrust Paradox, 72 U. CHI. L. REV. 49, 71 (2005) (“highly
unlikely that 3M would tailor practices that cover six of its
departments solely because of the effects that it would have
on” the one product market in which it competed with
LePage’s); Daniel L. Rubinfeld, 3M’s Bundled Rebates: An
Economic Perspective, 72 U. CHI. L. REV. 243, 254–56, 262–
64 (2005) (by not following test for predatory conduct from
Brooke Group Ltd. v. Brown & Williamson Tobacco Corp.,
509 U.S. 209 (1993), or some similar standard for predatory
conduct, LePage’s condemns behavior that does not
obviously reduce, and may even promote, consumer welfare).
We need not, however, pass upon the merits of the rule in
LePage’s in order to resolve this case.
Because LePage’s is the law in the Third Circuit, and
because Church & Dwight sells both condoms and other
consumer products within the Third Circuit, the Commission
may lawfully investigate whether the Company’s practices
would constitute a violation of the law in that circuit.
Although this court might someday reach a different
resolution of the issue presented in LePage’s, “a subpoena
enforcement action is [generally] not the proper forum in
which to litigate disagreements over an agency’s authority to
pursue an investigation. Unless it is patently clear that an
agency lacks the jurisdiction that it seeks to assert, an
investigative subpoena will be enforced.” Ken Roberts, 276
F.3d at 584. We hold, therefore, the Resolution lawfully
encompasses an investigation into whether Church & Dwight
has bundled discounts for condoms and other products in
10
order to acquire or maintain a monopoly in the market for
condoms in the United States.
C. Church & Dwight’s Remaining Contentions
We can dispose of Church & Dwight’s other contentions
in short order. First, we reject the Company’s contention the
district court “never described” the materials sought in the
subpoena and the CID; in fact, the district court described the
disputed materials the Commission sought and the Company
“seeks to redact” as “information from the documents
[Church & Dwight] produce[d] regarding proprietary and
confidential information on non-condom products ….” FTC
v. Church & Dwight Co., 747 F. Supp. 2d 3, 8 (D.D.C. 2010)
(internal quotation marks omitted). In any event, the
Company does not actually dispute the identity of the
materials at issue.
Second, Church & Dwight claims the district court’s
finding of relevance was based upon both a legal and a clear
factual error. As for the legal error, the Company contends
the district court was satisfied with mere “plausibility” instead
of demanding the “reasonable relevance” required under
Texaco. It bases this claim upon the following statement in
the opinion of the district court: “[I]t is entirely plausible that
information [concerning other products] appearing in the
same document with relevant information concerning ...
condoms would itself be relevant to the investigation.” That
statement is not inconsistent, however, with the correct legal
standard, viz., that the “requested materials ... be reasonably
relevant to the investigation,” which appears in the next
sentence of the court’s opinion, followed by a citation to
Invention Submission.
11
As for the factual error, the Company erroneously argues
Texaco requires the district court to “perform an independent
review” of the information sought and “articulate the reasons
underlying a finding of relevancy” to the investigation. Again
the Company would demand of the district court a more
searching probe of the relation between the Commission’s
inquiry and the information sought than our precedents
require or even allow. As we said in Invention Submission,
the Commission has no obligation to establish
precisely the relevance of the material it seeks
in an investigative subpoena by tying that
material to a particular theory of violation. See
Texaco, 555 F.2d at 877. ... [I]n light of the
broad deference we afford the investigating
agency, it is essentially the respondent’s
burden to show that the information is
irrelevant. Cf. id. at 882 ....
965 F.2d at 1090.
The present Resolution, as we have explained,
contemplates an investigation into Church & Dwight’s sales
not only of condoms but also of other products. The
information the Commission is seeking concerning those
other products is obviously relevant to that investigation; * the
district court had no obligation to belabor the obvious.
*
The Commission also suggested at oral argument that the
Company is required to produce information on products other than
condoms even if that information is not directly relevant to its
investigation because the Commission requested unredacted
versions of documents containing at least some relevant
information. We need not, however, reach the question whether the
Commission’s anti-redaction policy is permissible because we
conclude the subpoena and CID at issue here are directed entirely
12
III. Conclusion
Church & Dwight’s claims fail because they rest upon an
unduly narrow interpretation of the Resolution, one that is
inconsistent with the principles laid out in Texaco and more
recently applied in Invention Submission. The Commission
contemplates an investigation into the bundling of rebates to
retailers on sales of condoms and of other products, which
may violate the Sherman Act as interpreted by the Third
Circuit in LePage’s. Therefore the district court did not err in
finding that the information concerning products other than
condoms was reasonably relevant to the Commission’s
inquiry. Accordingly, the order of the district court granting
enforcement of the Commission’s subpoena and the
associated CID is in all respects
Affirmed.
toward information reasonably relevant to the Commission’s
investigation.