EstabJishment of buying corporation by broker

No. 23. EstabJishment of buying corporation by broker. An advisory opinion rendered recent1y by the Federal Trade Commission notified a broker-distributor of fresh fruits and vegetables that either of his proposed alternative plans to establish a buying corporation would involve grave risk of iUegaJity. The businessman had inquired whether or not under the Perishab1e Agricultural Commodities Act and FTC 1aw he may lawful1y:

(1) establish a corporation as an exclusive buying company for a purchaser for resa1e, this corporation to buy and be bil1ed in its own name. The purchaser for resale would own one or more shares of the common stock of the buying company and would participate in the brokerage received by that company, or (2) establish a corporation as above for the above described purposes, the difference being that shippers would directly invoice and be paid by the purchaser for resale rather than the proposed corporation.

The Commission advised him that it had no comment on the Perishable Agricultural Commodities Act because it does not administer this 1aw.

The immediately applicab1e statute is " continued the advisory opinion as you know, Section 2 (c) of the Clayton Act as amended by the Robinson-Patman Act, which makes unlawful the payment or receipt of brokerage or al10wances in jieu thereof in certain commercial contexts.

In the Commission s view, either of the plans you propose

if adopted, wou1d carry with them grave risk that the statute wi1 be violated.

Absent any indication to the contrary, they appear to amount merely to a means whereby both the letter and the spirit of the statute are to be avoided. " (File No. 663 7002, released Apr. 1 1966.