Tripartite promotional plan in the grocery field

Tripartite promotional plan in the grocery field. (File No.

703 7106)
Opinion Letter
August 3, 1970
Dear Mr. Miller:

This is in response to your further request in behalf of Mobile Advertising, Inc. for an advisory opinion. The Commission has carefully studied your letter of April 16, 1970,, as amended by your letter of April 22 and 27, 1970, and as further amended by your letter of June 12, 1970.

With the understanding that the alternatives, as proposed in the revised plan, must be truly of equivalent value and appropriately communicated to the retailers, the Commission is of the view that implementation of tue proposed course of action in the manner described would not violate the laws administered by the Commission.

By direction of the Commission.
Third Supplement to Letter of Request
June 12, 1970
Attention: Henry Williams, Esq.

Re: Mobile Advertising, Inc. File No. 703 7106 Honorable Sir:

Reference is made to the application for an advisory opinion set forth in the letter of the undersigned dated April 16, 1970 (as amended by the letters of the undersigned dated April 22, 1970 and April 27, 1970) and the response to said application contained in the recent letter of the Secretary of the Commission. In light of the comments of the Commission, the applicant has reformulated the portion of its plan found to be objectionable and hereby amends its plan in the following respect:

Retailers who elect to participate in the applicant’s plan shall be required initially to select one of two available methods for determining the amount of payment to which they shall be entitled. Under the first alternative, participants with an annual gross volume over $150,000 will receive an aggregate per annum payment from the applicant at the rate of $43 per $100,000 of the participant’s annual gross volume and participants with an annual gross volume of $150,000 or less will receive an aggregate per annum payment from the applicant at a rate of $60 per $100,000 of the participant’ $s annual gross volume, with a minimum payment of $60. Under the second alternative, payments to participants.shall be computed on the basis of the case purchases made by the participant of the products advertised (e.g. $.10 per case). A different value shall be assigned to each particular product advertised ; however, the value shall be consistently applied to determine payments to retailers clecting this method of computation, subject to one exception: retailers w hose annual gross volume is $150,000 or less shall have a value assigned to the products which they purchase which shall be 40% greater than that applied to the purchases of partic ipants whose annual gross volume is over $150,000 (e.g. $.14 per case). In all instances, retailers which have trucks available to be utilized under the plan shall earn their payments by carrying the applicants advertising frames thereon. In all other instances (in which trucks are not available), the participants shall earn its payments by performing alternative services referred to in the plan as originally submitted which it is able to perform; the amount of such services to be propor-tionally comparable with those performed by truck operators. The applicant’s plan, as previously submitted, shall in all other respects remain unchanged.

At this time I respectfully request that the applicant’s plan, as modified, be examined by the Commission and that an advisory opinion be rendered.

I offer you any assistance which I may be able to render in facilitating this matter.

Respectfully submitted,
Michael Miller
Second Supplement to Letter of Request
April 27, 1970
Attention: Henry Williams, Esq.
‘Re: Mobile Advertising, Inc.
‘Honorable Sir:

Ags General Counsel to the above captioned corporation and on their ‘behalf, the undersigned hereby submits this additional amendment to its letter of request for an advisory opinion dated April 16, 1970 (as ‘previously amended by letter dated April 22, 1970). In the last paragraph of page two of the aforementioned letter of request, the applicant states that in the instance of an operator who is a wholesaler, the revenue to be distributed will equal 35% of the evoss advertising revenue generated by the frames viz: 10% to be retained by the wholesaler-operator and 25% to his customers 1e., independent retailers. Please be advised that the 25% figure is a maximum allowance and is to be disbursed only in exchange for services rendered by such independent retailers, such as in-store signs, handbills, local advertising, -ete. The amount of services to be performed will be comparable to those performed by competing retailers who operate trucks and participate in the plan. The nature of the services to be performed will be those which a retailer is able to provide. The disbursement is to be made only on proof that the required services have been rendered.

Respectfully submitted,
Michael Miller
1746 FEDERAL TRADE COMMISSION DECISIONS
First Supplement to Letter of Request
April 22, 1970
Attention: Henry Williams, Esq.
Re: Mobile Advertising, Inc.
Honorable Sir:

As General Counsel to the above captioned corporation and on their behalf, the undersigned hereby submits, at your request, this amendment to its letter of request for an advisory opinion dated April 16, 1970.

In the first paragraph of page three of the aforementioned letter, the applicant refers to cash allowances to be paid to entities desiring to participate in the applicant’s proposed plan who are unable to do so. It is not stated in the letter how the ¢otal amount of the cash allowance is to be computed.

Where the entity desiring to participate in the plan is an operator of leased trucks whose lessor will not consent to the operators’ participation in the plan, applicant will give such operator a cash allowance (for services rendered) equal to the amount such operator would have received had it participated in the plan. To compute such figure, applicant will assume that the rate of “fill” (i.e. number of signs with advertising thereon) for the entity’s trucks is equal to the rate of fill in the marketing area in which such entity is located. Where the entity desiring to participate in the plan is a retailer whose wholesaler does not participate, applicant. will give such retailers a cash allowance (for services rendered) equal to the amount they would have received had the wholesaler participated. Once again, the computation of such figure will be based upon the number of trucks the wholesaler operates and assuming a rate of fill experienced in the wholesaler’s marketing area.

The relative distributions of such cash allowance will be made as stated in the April 16th letter and will be in exchange for the services

enumerated therein.
Respectfully submitted,
Michael Miller
Letter of Request
April 16, 1970
Attention: Henry Williams, Esq.
Re: Mobile Advertising, Inc.
Honorable Sir:

As General Counsel to the above captioned corporation and on their: behalf, the undersigned hereby submits this request, in lieu of letters. of request submitted to you dated March 20, 1970 and March 80, 1970,. for an advisory opinion with respect to a proposed plan of said corporation. © a — I. THE PROPOSED PLAN The applicant: proposes to lease rights from operators of food store: chains and grocery product wholesalers to install advertising frames: on their trucks. The leases are to be for a period of five years. It is intended that each truck involved be equipped with eight frames, four’ on each side of the truck.

The advertising frames will each measure 2’6’’ in height by 6’ im width. The applicant will install, maintain and service (change ad~vertisements) the frames which are to be supplied by the applicant.. If the operator so elects, he will install, maintain and service the: frames, which will be supplied by the applicant, and the operator will be reimbursed for the expenses of such services up to the following’ maxima: , Installation__------------- eee $100 per truck. Maintenance and servicing.__---------------------- $30 per truck per month:. Advertising will be sold to food and grocery store products manu~ facturers. The rate for advertising will be a uniform $30 per frame: per month.

_ The applicant intends to offer the benefits of this plan to every food’ products distributor, including chain stores, cooperative wholesalers,. voluntary wholesalers and unaffiliated independent groceries. The participating operators of trucks will be paid for the lease’ of the rights they grant to the applicant in the form of a percentage of the gross advertising revenue generated from the frames on its’ trucks. In the instance of an operator which owns its own retail food outlets, such operator will receive 25% of the gross advertising: revenue from the frames installed upon its trucks. Since the rate of advertising will be $30 per month per frame, such operator will receive $7.50 per frame per month ($30x25%) as his revenue for permitting’ the installation upon his trucks of the frames. Clearly, this rate will be utilized by the chain stores and the cooperative wholesalers since: in each instance the operator of the truck is also the owner of the retail outlets. Each such operator will be required to verify that it does not receive any benefits of the Plan in the form of payments: from participating wholesalers with whom it deals. . In the instance of an operator who is a wholesaler selling products: to retail food outlets which it does not itself own, the revenue to such’ operator will be 35% of the gross advertising revenue generated from: the frames on his truck, or $10.50 per frame per month ($30x35%).. In this case the operator of the trucks will be required, as part of his contract with the applicant, to covenant and certify to the applicant that he will distribute an amount equal to 25% of the gross advertising revenue from the frames on his trucks to his customers (independent retailers). In other words, such operator retains 10% of the gross advertising revenue for administering the plan and distributed 25% of the gross advertising revenue to the retailers who are in competition with the chain stores and cooperative wholesalers who are also receiving 25% of the gross total revenue from frames for their participation in the plan. In distributing the proceeds to his customers, the wholesaler will be required to make such distribution upon the basis of the relative dollar amounts of purchases by the independent retailers from the operator to be computed upon the basis of a period to be deter‘mined and consistently applied and limited to purchases of the products advertised. . In instances where a potential participant communicates to appli‘cant a desire to participate in the plan but cannot because either it is a retailer whose wholesaler does not participate or it is an operator whose truck lessor will not consent, such entity will be given a cash allowance to be utilized for services it is able to provide, such as instore signs, handbills, local advertising, etc. The relative amounts of ‘such allowances will be based upon the relation of each recipient’s volume in the products advertised to the total volume of all partici“pants in such products. Assignments of advertising to the. participants’ trucks will be in the exclusive control of the applicant. In instances where the advertiser has not purchased complete market coverage (i.e., his ad is not -on every truck in the market) the applicant will apportion the advertising among the participants’ trucks to be utilized by allotting each ‘participant the percentage of the trucks needed for the ad that his trucks bear to all participating trucks in the market. Upon. approval of this plan by the Commission, the applicant intends to implement the plan throughout the United States on a region -by region basis. In each region the applicant will engage specialized direct mail houses to distr ibute announcements to the headquarters of -every food chain, every cooperative wholesaler, every voluntary wholeSaler, every grocery wholesaler, and each and every individual independent grocery retail outlet and their owners which have been in existence for six months or more. Further, the applicant will advertise in appropriate trade journals and shall also release publicity state“ments to appropriate trade and financial publications. ’ JI. DISCUSSION t is clear from the above-proposed plan that payments received by the: applicant from manufacturers which are disbursed by applicant