From Alterman s request, it appears that Alterman proposes to reinstate an in-store broadcasting program in…

From Alterman s request, it appears that Alterman proposes to reinstate an in-store broadcasting program in 101 Big Apples, K-Marts and Food Giants, which are Alterman s retail subsidiary supermarkets. This in-store broadcasting program has been described as a "powerful promotional package" whose specially programmed music and announcements would help a supplier sell more of his products in Alterman s supermarkets. The in-store broadcasting program would offer Alterman s suppliers six 40-word announcements a day, six days a week in each of the 101 stores. The proposed contract between Alterman and the suppliers would provide for a 16 week minimum advertising period and the rate paid by the supplier to Alterman would be $180.00 a week. The proposed contract breaks the 16 week period into four 4-week periods and requires the supplier to list two products for broadcast advertising each 4-week period. The contract would contain a warranty whereby the supplier would warrant that the

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payments he was making under the contract for in-store broadcasting were also made available by the supplier to all competing retailers in the marketing area on a proportionally equal basis. The order in Docket No. 8844 inter alia prohibits Alterman from:

1. Inducing and receiving, receiving or contracting for the receipt anything value from any supplier as compensation or in consideration for services or facilities furnished by or through respondent in connection with the processing, handling, sale or offering for sale of such supplier s products, when respondent knows or should know that such compensation or consideration is not affirmatively offered and otherwise made available by such supplier on proportionally equal terms to all of its other customers , including retailer customers who do not purchase directly from such supplier, who compete with respondent in the distribution of such supplier s products.

On the basis of the facts submitted, you are advised that the Commission is of the opinion that advice as to the program proposed cannot be given since it cannot be determined in advance and without lengthy investigation, whether you would have actual or imputed knowledge that payments under the progTam are available to all competing customers on proportionally equal terms. You are further advised that a warranty of the type referred to above would not be a defense to a violation of the order nor would the existence of such a warranty tend to negate a shO\ving of knowledge required to establish a violation of the order.

By direction of the Commission.

Letter of Request*'

January 30, 1975 Dear Mr. Hickey:

Pursuant to the Order of the Federal Trade Commission of February , 1974 , affirmed by the United States Court of Appeals for the Fifth Circuit on July 22, 1974 , the following is the report of Alterman Foods setting forth the manner and form in which the corporation is complying with the terms of the Commission s Order: Introd' ucNon, Alterman Foods, Inc. , while a publicly owned corporation, is primarily family owned and operated business. Isadore Alterman is the President and Chairman of the Board; Sam Alterman is the Executive Vice

. The exhibitsreferred to are not reproduced herein but are available for inspection in the Public Reference Branch Room 130 of the FTC Bldg., Washington , D, ADVISORY OPINIONS 1021

President; George Alterman is the Executive Vice President in charge of buying and merchandising; Dave Alterman is the Senior Vice President in charge of the wholesale division; Max Alterman is the Senior Vice President in charge of Store Operations; Malcolm Alterman is the Vice President in charge of the institutional division; Richard Alterman is the Director of New Store Planning and Development, Retail Supermarket Division; Robert Alterman is the Director of Advertising and general merchandising, Retail Supermarket Division; Stephen Alterman is the Assistant to the Vice President of Store Operations, Retail and Wholesale Divisions; and Paul Alterman is the Director of Meat Merchandising, Retail Supermarket Division. Because of the family nature of the business, all planning and decision making is conducted on an informal basis, without the use of operational manuals inter-office memoranda, bulletins or the like. All decisions affecting company policy in general, including those of a general promotional nature, are made by the officers and disseminated throughout the corporate structure orally. All decisions affecting any particular division are made by the respective division heads and disseminated in the same manner as general corporate decisions, either at meetings of the officers and division heads or by simply walking across the hall to another s office.

As indicated above, the operation of Alterman Foods, Inc., is by means analogous to the large national chains which maintain national headquarters from which manuals, bulletins, memoranda and the like issue forth to regional offices, to be further disseminated by letter bulletin or memoranda to local offices and eventually individual retail stores. With the exception of its institutional division, the management of Alterman Foods, Inc., its wholesale and retail divisions, are housed under one roof and all communications are handled as heretofore set forth.

Accordingly, there is no documentation, letters, bulletins, memoranda manuals, or notifications to division heads or promotional program changes resulting from the Order of the Commission in Docket 8844. As will be set out hereinafter in this report, no changes other than those respecting the Food Show, which was the subject matter of Docket 8844, and one other progTam, to be more fully discussed and explained hereinafter, were made or necessitated in Alterman s promotional programs.

Ge' neral Cmnpl iance Immediately upon receipt of the Opinion of the Court of Appeals, a

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meeting of the officers and operating personnel of Alterman Foods was held on Thursday, August 1 , 1974, to discuss with the corporation attorneys, Arnall, Golden & Gregory, the general impact and effect the Order on Alterman Foods, Inc., and its divisions, and specifically its impact on the Alterman Food Show. At that meeting the attorneys went through the Order explaining in detail its significance and effect. The entire promotional program was reviewed, and, with the exception of the Food Show and one additional promotional program to be more fully discussed hereinafter, all was found to be in full compliance with the Order. * Upon the recommendation of counsel, a second meeting was held on August 13, 1974. In attendance at that meeting were the principal officers of Alterman Foods, Inc., and principal management personnel directly involved in the procurement of products from suppliers. The Order of the Commission was again reviewed in detail, and pursuant to the Order, copies were distributed to representatives of each operating division. All personnel present were advised that the law requires that promotional allowances or services received by Alterman Foods, Inc. from suppliers must be offered and otherwise made available by such suppliers on proportionately equal terms to its other customers competing with Alterman Foods in the distribution of grocery products. Personnel present at that meeting were advised to take special precaution to insure to the best of their ability and by the use of common business judgment that suppliers offering promotional allowances were making such allowances proportionately available to the corporation s competitors. Personnel present were further advised to pass these suggestions on to their subordinates. Additionally, those present were instructed that if a supplier offered to them or any of their subordinates a promotional allowance or service which they felt, through their experience in the food business, could not feasibly be made available on a proportionately equal basis to competitors of the corporation, they should advise the officers as to such promotional offer in order that the officers could either make further inquiry to assure that said promotional allowance was being offered on a proportionately equal basis or to present the terms of the promotional program to counsel for Alterman Foods for further advice with respect to the legality of..the promotional progTam. It was also

. It should be noted that one part of the Commission s complaint in Docket 8844 dealt with allowances being received by Alterman from an individual supplier, Sweet Sue Products. With respect to the receipt of these allowances Alterman s was found by the Administrative Law Judge to be in compliance with Sect. 5 of the FTC Act and the Clayton Act, as amended by the Robinson-Patman Act. This finding was affirmed by the full Commission. Using the opinion of the Administrative Law Judge, the opinion of the full Commission, the Order of the Commission, and the dictates of Sect. 5 of the FTC Act and the Clayton Act. as amended, as guidelines, this conclusion was reached. ADVISORY OPINIONS 1023

agreed that, should the corporation or any of its divisions desire to accept a promotional offer from one of its suppliers which counsel was not fully convinced could be feasibly made available by the supplier to Alterman s competitors, counsel would be requested under such circumstances to seek an advisory. opinion of the Federal Trade Commission.

As an example of the promotional programs in which Alterman Foods Inc. , is presently engaged and the types of promotional allowances presently being received, attached hereto and made a part of this report, and marked as Exhibits 1 through 6, are exemplary copies of letters and circulars received by Alterman Foods, Inc., from various of its suppliers offering promotional allowances of different sorts. These attachments are representative of the promotional progTams in which Alterman Foods now participates and the types of allowances it is presently receiving. These allowances are offered to Alterman Foods by the suppliers and not induced by Alterman.

Also attached hereto and marked Exhibit 7 is a copy of the weekly bulletin put out by the Alterman wholesale division and distributed to the independent grocers, known as the ABC Stores, who buy from Alterman at wholesale. This bulletin, sent out weekly, exemplifies the manner in which Alterman Foods passes the promotional allowances received (per Exhibits 1 through 6) on to its retailer customers. With the aforementioned plans and concepts for assuring continued compliance with the Commission s Order in mind, counsel reviewed the corporation s general promotional programs, as set out in the Exhibits attached, and found them to presently be in compliance. In-StOl'e Broadcasting One promotional program which was being conducted by Alterman Foods, Inc., is called in-store broadcasting. The program was introduced to Alterman by General Broadcasting Company, Inc. (See Exhibit 8). The program is gaining wide-spread attention and aceeptance throughout the country. At a substantial cost to Alterman, in-store broadcasting equipment was leased from General Broadcasting Company, Inc. and placed in 101 Big Apples, K-Marts and Food Giants, the Alterman retail subsidiaries. In coordination with General Broadcasting Company, Inc., the program was introduced to Alterman s suppliers (See Exhibit 9). Suppliers \vere given the opportunity to present selling messages or announcements over the in-store broadcasting system to the shoppers right in the supermarket. Each participant is entitled to a 40-worcl announcement, which is broadcast six times a day in each

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store, or six hundred and six times a day. A copy of the written agreement between participating suppliers and Alterman is attached as Exhibit 10. The agTeement contains a warranty, which had to be executed by each supplier in order to participate in the program attesting to the fact that the participating supplier was making a vailable to all competing retailers in the marketing area promotional payments on a proportionately equal basis.

In view of the nature of the progTam; the coordination of the program by General Broadcasting Company, Inc., an independent advertising concern; the benefit to the supplier; the substantial cost to Alterman; and the warranty of proportionally equivalent payments being offered by participating suppliers, Alterman feels that the program complied with the Clayton Act, as amended, and the Order of the Commission in Docket 8844. However, in a good-faith effort to comply with the letter and the spirit of the Commission s Order, Alterman has terminated this program. Alterman would, however, respectfully request the Commission to issue an advisory opinion respecting the propriety of the program as outlined herein and in the Exhibits attached, so that Alterman might reinstate the program if the Commission agreed with the afore stated conclusion of compliance.

Food Show As of the writing of this report, Alterman has not yet decided whether or not to continue to conduct a food show. If it is determined that Alterman will continue to conduct a food show, prior to the organizasuch a tion , direction, sponsorship, or participation by Alterman in show Alterman wiII supply the Commission with the names and addresses of the prospective invitees and copies of all correspondence and enclosures used in the invitations. Additionally, in the event Alterman should decide to continue with its food show, Alterman will seek an advisory opinion of the Federal Trade Commission as to whether the format of the show and the manner in which participants are invited to participate in the show and the manner in which any profits, surplus or funds remaining at the conclusion of the show are to be distributed are in compliance with the Order of the Commission. Additionally, at such time as a decision to organize, direct, sponsor, or participate in any such show is made, Alterman will supply all details to the Commission as to the manner to be utilized in delivering a copy of the Order to each invitee and as to the accounting methods to be followed to assure the Commission that Alterman will bear its proper ADVISORY OPINIONS 1025

share of the show s operating expenses and distribute any profits surplus or funds remaining at the conclusion of such food show. Conclusion Alterman Foods, Inc., is complying with the Order of the Commission and intends to continue to do so in the future. If any further information is desired by the Commission to supplement this compliance report in general or as it specifically relates to the food show, the Commission is invited to notify Alterman Foods, Inc., or its attorneys Arnall , Golden & Gregory, 1000 Fulton Federal Building, Atlanta Georgia 30303, of any such information or documentation desired.

Respectfully submitted
ALTERMAN FOODS, INC.
By:
Isl David Alterman