Early Antitrust Litigation: Federal Trade Commission v. Ruberoid

1924 Ruberoid Roofing Advertising Brochure Pamphlet (Folded Front)

The Standard Paint Company was founded in 1887 by Julius Livingstone and Ralph J. Shainwald. Five years later in 1892, a young chemist and employee of Standard Paint named William Griscom developed rolls of ready-to-lay asphalt roofing by impregnating felt with soft bitumen and then coating both sides with coarse-grain or flaked aggregate. The product was termed Ruberoid and was such as success that by 1921 Standard Paint had changed its name to The Ruberoid Company. 

In the 1940s and 50s, Ruberoid was investigated and ultimately sued by the Federal Trade Commission (FTC) for violating Section 2 of the Clayton Antitrust Act. Antitrust laws such as the Clayton Act are designed to benefit consumers by regulating the conduct and organization of businesses to ensure fair competition in the marketplace, which ultimately results in a higher quality product or service for the consumer. Section 2 of the Clayton Act specifically prohibits sellers from engaging in price discrimination that would reduce market competition. Generally, this entails charging consumers different prices for the same product when the two consumers are competing in the same market. It is, however, permissible for a seller to charge consumers different prices for the same product when the costs associated with each consumer transaction are different, and thus justify different prices. The logic of Section 2’s prohibition against price discrimination was articulated in a 1948 Supreme Court case involving Morton Salt. In that case, the FTC discovered that Morton sold its salt to certain large chain grocery stores for a lower price than it offered to smaller non-chain grocery stores, and that these price disparities were not a result of differing costs among Morton’s consumers. The Supreme Court concluded that offering lower salt prices to large chain stores gave those stores an unfair advantage and disadvantaged smaller stores, ultimately injuring competition in the overall grocery store marketplace. 

In the case of Ruberoid, the FTC investigated and filed a formal complaint against the company in July of 1943. Through the FTC’s investigation, it was determined that on numerous occasions, Ruberoid had charged different prices for the same roofing products to consumers that were in competition with one another, and Ruberoid did not attribute these price disparities to differing costs among their consumers. Thus, the FTC concluded that Ruberoid’s conduct was in violation of Section 2 of the Clayton Act because the conduct may, “lessen competition in the line of commerce in which those customers are engaged, and may injure, destroy or prevent competition between those customers.” To this end, the FTC released a decision in January of 1950 ordering Ruberoid to cease and desist from, “selling products of like grade and quality to any purchaser at prices lower than those granted to other purchasers,” when the two purchasers were in competition with one another. 

A year later in 1951, Ruberoid petitioned the Second Circuit Court of Appeals in the hopes that it would overturn the FTC’s cease and desist order. Instead, the Court of Appeals upheld the FTC’s order, but refused to enforce it on rehearing. Because of this, both Ruberoid and the FTC petitioned the Supreme Court to review the order and decide whether it could be enforced. The Court, citing the Morton Salt case as a basis for its decision, concluded that the FTC’s order was proper, and could be enforced with the penalty of contempt. 

A number of years later in 1965, Ruberoid was acquired as a subsidiary by the General Aniline and Film (GAF) Corporation. In 1967, a Ruberoid engineer developed the Timberline Shingle, which continues to be widely used in the North American roofing industry today. In 1968, GAF and all subsidiaries, including Ruberoid, collectively changed their name to The GAF Corporation.