United Rendering Co.

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COlli'LAINT IN THE .!\latter OF THE ALLEGED VIOLATIO:N OF SECTION II OF AN ACT OF CONGnESS APl'ROVED SEl'TElLBER 26, 1914. Docket 150.-February 5, 192L SYT.T,ARUS.

Where concern! engaged in the rendering buslnl'ss ln or near T'hllarlclphla, acting through a corporation organized by them tor that purpose, paid prohibitive and unwarranted prices tor raw materials In Trenton and Asbury Park, N. J., in order to punish a Trenton competitor which had begun purchasing raw materials in the Philadelphia market, with resulting loss of money to said competitor and to the successor to which It was forced bY said loss to sell; and Where a corporation, through Its employee!!, Interfered with the business of a competitor by causing its automobiles to follow snld competitor's trucks for the purpose of spying upon Its business and customers In order to, and with the elect of, hindering, delaying, and embarrassing snld competitor In the conduct of Its business:

Held, That such practices, under the circumstances set forth, constituted unfair methods of competition.

COMPLAINT.

The Federal Trade Commission, having reason to believe from a preliminary investigation made by it that the United Rendering Co., 1\I. L. S~oemaker & Co. (Inc.), the Berg Co., the D. B. 1\fartin Co., Consolidated Dressed Beef Co., Baugh & Sons Co., Winfield S. Allen, Nathan Berg, F. W. English, and Christopher Ofl'enhauser, hereinafter referred to as the respondents, have been and are using unfair methods of competition in interstate commerce in violation of the provisions of section 5 of an act of Congress approved September 26, 1914, entitled "An act to create a Federal Trade Commission, to define its power and duties, and for other purposes," and it appearing that a proceeding by it in respect thereof would be to the interest of the public, issues this complaint, stating its charges in that respect on information and belief as follows:

PARAORAPII 1. That the respondent the United Renllering Co. is a corporation organized, existing, and doing business under and by virtue of the laws of the State of New Jersey, with its principal office nnd factory located at the city of Trenton, in said State; that :M. I.. UNITED RENDERING CO. ET AL. 285 284 Complaint. Shoemaker & Co. (Inc.) is a corporation organized, existing, and doing business under and by virtue of the laws of the State of Pennsylvania, with its principal office and factory located at the city of Philadelphia, in said State, and the respondent Winfield S. Allen is the vice president and general manager of said company; that the Derg Co. is a corporation organized, existing, and doing business under and by virtue of the laws of the State of Pennsylvania,. with its principal office and factory located at the city of Philadelphia, and the respondent Nathan Berg is an officer and stockholder of said company; that the respondent the D. D. Martin Co. is a corporation organized, existing, and doing business under and by virtue of the laws of the State of Delaware, with its principal office and factory nt the city of Philadelphia, in the State of Pennsylv:min, nnd the respondent F. W. English is secretary of the said company; that the respondent Consolidated Dressed Beef Co. is a corporation organized, existing, and doing business under and by virtue of the laws of the State of Pennsylvania, with its principal office and factory at the city of Philadelphia, and the respondent Christopher Offenhauser is a director and stockholder in said corporation; that tqe respondent Baugh & Sons Co. is a corporation organized, existing, and doing business under and by virtue of the laws of the State of Pennsylvania, with its principal office and factory at the city of Philadelphia; that the respondent the D. D. l\Iartin Co. is a stockholder in the respondent the United Rendering Co., and the respond· ents Winfield S. Allen, Nathan Berg, F. ·w. English, and Christopher Oifenhauser are each and all of them stockholders and officers of the respondent the United Rendering Co.; that the respondent corporations are now and for more than one year last have been engaged in the business of refining animal fats and selling their products throughout the States of the United States and the Territories thereof in direct competition with other persons, firms, copartnerships, and corporations similarly engaged. PAR. 2. That in the conduct of their business the respondent corporations purchase large amounts of raw materials in different States of the United States and cause the same to be transported through other States to their refineries, where they are made or manufactured into the finished product and then sold and shipped to purchasers in various States and Territories of the United States and the District of Columbia; that after such products are so manufactured they are continuously moved to, from, and among other States of the United States, and there is continuously, and has been at all times hereinafter mentioneLl, a constant current of trade in commerce in saitl 286 FEDERAL TRADE COMMISSION DECISIONS. Findings. SF.T.C.

products between and among the various States of the United States, and especially to and through the cities of Philadelphia, State of Pennsylvania, and Trenton, State of New Jersey, and therefrom to and through other States and Territories of the United States. PAR. 3. That the respondents, while conducting their business gen· erally at a profit, are now, and for more than one year last past have been, wrongfully and unlawfully engaged in a combination of con· spiracy among themselves entered into, carried out, and continued with the intent, purpose, and effect of discouraging, stifling, and sup· pressing competition in the business of refining animal fats and the sale of their other products in interstate commerce by purchasing and offering to purchase raw materials necessary in the manufacture of their products in certain local areas, to wit, in and about the city of Philadelphia, State of Pennsylvania, and the city of Trenton, State of New Jersey, at and for prices unwarranted by trade conditions, and so high as to be prohibitive to small competitors in such areas; that such prices were calculated and designed to and did punish cer· tain competitors in such areas who refused to become a party to a 'Working arrangement offered by respondents to such competitors whereby competition in bidding for such raw materials was to ~e eliminated in and about the said city of Philadelphia. PAR. 4. That the respondent M. L. Shoemaker & Co. (Inc.), through and by their agents, servants, and employees, for more than one year last past have interfered with the business of certain of their competitors by causing certain of said respondent's automobiles to follow the trucks of certain of its competitors for the purpose of spy· ing upon the business and customers of said competitors; that such spying upon the business and customers of said competitors was calculated and designed to and did, hinder, delay, and embarrass said competitors in the conduct of their business. REPORT, FINDINGS AS TO THE FACTS, AND ORDER. Pursuant to the provisions of an act of Congress approved Sep· tember 26, 1!>14, the Federal Trade Commission issued and served its complaint upon the respondents, United Rendering Co., M. L. Shoe· maker & Co. (Inc.), the Derg Co., the D. D. Martin Co., Consoli· dated Dressed Dee£ Co., Baugh & Sons Co., Winfield S. Allen, Nathan Derg, F. ,V. English, and Christopher Offenhauser, charging them, and each of them, with the use of unfair methods of competition in commerce in violation of the provisions of said act. The respond· ents having entered their appearance by their respective attorneys UNITED RENDERING CO. ET AL. 287 284 Findings. and having filed their answers herein (except that the United Rendering Co., respondent, did not file an answer, but entered its appearance), hearing's were had and evidence was thereupon introduced in support of the allegations of said complaint before Everett M. Hawley, an examiner of the Federal Trade Commission theretofore duly appointed, all of the respondents having waived the introduction of evidence in denial of the charges in said complaint. And thereupon this proceeding came on for final hearing, and the Commission, having heard argument of counsel, and having duly considered the record and being now fully advised in the premises, makes this its findings as to the facts and conclusions. FINDINGS AS TO THE FACTS.

PARAGRAPH 1. That the respondent 1\f. L. Shoemaker & Co. (Inc.) is a corporation organized under the laws of the State of Pennsylvania, with its principal office and factory located in the city of Philadelphia, and the respondent Winfield S. Allen is the vice president and general manager of said company. That the respondent the Derg Co. is a Pennsylvania corporation, with its principal office and factory located in the city of Philadelphia, and the respondent Nathan Derg is an officer and stockholder in said company. That the respondent the D. D. Martin Co. is a Delaware corporation, with its principal office and factory located in the city of Philadelphia, and the respondent F. W. English is the secretary of said company~ That the respondent Consolidated Dressed Deef Co. is a Pennsylvania corporation, with its principal office and factory located in the city of Philadelphia, owning three-fourths of the capital stock of a corporation known as the Philadelphia Animal Products Co., which lastnamed company conducts a rendering business in the city of Philadelphia and purchases raw materials for such business in the name of the respondent Consolidated Dressed Beef Co., and that the respond- E>nt Christopher Offenhauser is an officer of the Consolidated Dressed Beef Co. and is manager of the said the Philadelphia Animal Products Co. and owns one-fourth of the capital stock of the said the Philadelphia Animal Products Co. That the respondent Daugh & Sons Co. is a Pennsylvania corporation, with its principal office and factory located in the city of Philadelphia. That all of the aforementioned respondent corporations are now and havt been for more than one year last past engaged in the business of refining animal fats and . selling their products throughout the States of the United States in competition with other persons, firms, copartnerships, and corporations similarly engaged, and that in the conduct of their 288 FEDERAL TRADE COMMISSION DECISIO:XS, Findings. SF.T.C.

!,usincss the aforementioned corporations purchase large amounts of mw materials in different States of the United Stat6s and cause the &ame to be transported to their refineries where 'tht-y are made or manufactured into the finished product and then sold and shipped to purchasers in various States of the United States, and that after such products are so mamifactured they are continuously moved to und from and among other States of the United States and there is continuously and has been at all times mentioned in the complaint (excepting as tom. L. Shoemaker & Co. (Inc.)! which wns not incorporated until March 27, 1917, from which time it has purchased raw materials in different States of the United States and caused the E>ame to be transported to its refinery where they are made or manu-. factured into the finished product and then sold and shipped to purchasers in various States of the United States) a constant current of trade in commerce in said products between and among the various Statps of the United States and especially to and through the city of Philadelphia, State of Pennsylvania, and the city of Trenton, State of New Jersey, and therefrom to and through other States and Territories of the United States.

PAn. 2. That for a number of years prior to September, 1915, all of the individuals, respondents, named in the foregoing paragraph, together with representatives of respondent llaugh & Sons Co., had been holding and attending meetings in the city of Philadelphia for the purpose of fixing and maintaining prices to be paid butchers in the city of Philadelphia and the surrounding territory for their fats, bones, suet, and similar materials, and for the purpose also of agreeing upon divisions of 'territory in which there would Le no competition in the purchase of raw materials. That for the purpose of carrying out agreements made at these meetings the corporation respondents mentioned in the foregoing paragTu ph (excepting M. L. Shoemaker & Co. (Inc.), which did not become a corporation until Mar. 271 1917), and M. L. Shoemaker & Co. (Ltd.), of which the respondent, Winfield S. Allen, was an officer and which wns dissolved December 15, 1916, refused to take customers from each other and pnid practically the same prices for the various materials purchased, and that they purchnsed only in certain agreed territories, the effect of all of which wus to keep down the price of raw materials. .

P A.R. 3. That the Drown Co. was a corporation organized under the laws of New Jersey in 1912, with its principal factory and place of business located at Trenton, N. J. It commenced business in 1912 with a pnid-in capital stock of $25,000, o.nd its president was David G. w· eil, of the firm of Sternfeld & W eil, hide dealers in Phil a- UNITED RENDERING CO. ET AL. 289 284 Findings. d.elphia, Pa., carrying on its business of rendering fats, bones, suet, and kindreu materials at its factory in Trenton, N. J., securing its raw materials from which it rendered its finished products from butcher shops located in the dty of Trenton, aforesaid, and in the surrounding territory in New Jersey. After its raw materials were manufactured into the finished products, such products were sold and shipped to purchasers in various States of the United States and were sold in competition with other persons, firms, copartnerships, and corporations similarly engaged. In September, 1915, it Was decided by the officers of the Brown Co. to increase the volume of its raw materials by sending a wagon into Philadelphia, Pa., for the purpose of purchasing from butcher shops in that city fats, bones, and suet and kindreu materials, which were to be transported from Philadelphia, Pa.., to the factory of the Drown Co. at Trenton, N.J., to be rendered into finished products. This was done, and during the month of September, 1915, the Brown Co. acquired 70 customers in Philadelphia, Pa., from whom it purchased raw materials which it transported from Philadelphia, Pa., to its factory in Trenton, N. J ., where those materials were rendered into the finished products. PAR. 4. That when the Brown Co. first sent its wagon into Philadelphia the individuals, respondents, held a meeting and decided to unite their efforts and the efforts of the rendering companies they Were respectively identified with against the Brown Co. to compel it to cease buying raw materials in the city of Philadelphia. This meeting was attended by a representative of Baugh & Sons Co. Efforts were made to induce the Brown Co. to withdraw from the Philadelphia field. F. W. English, in behalf of the persons who attended the above-mentioned meeting, and in behalf of the firms represented at that meeting, asked David G. Weil, president of the Drown Co., to withdraw the wagon of the Drown Co. from Philadelphia and cease collecting raw materials in the city of Philadelphia. When Weil w·ould not accede to that request, English said that the Brown Co. would be compelled to cease buying raw materials in Philadelphia because the corporations for which he was spokesman Would compete with the Brown Co. by way of purchasing raw materials in Trenton, N.J., whereby the Brown Co. would be compelled to withdraw from Philadelphia.

PAn. 5. That the respondent, the United Rendering Co., was then organized, its charter being dated October 8, 1915. The amount of Paid-in capital stock was $10,000, which was paid as follows: M. L. Shoemaker & Co. (Ltd.) paid $2,500, for which two stock certificates, one for 20 and the other for 5 shares of the par value of $100 each, \Were issued to Winfield S. Allen, respondent; the D. B. Martin Co., 74036°--22----19 290 FEDERAL TRADE COMMISSION DECISIONS. Findings. 3 F. T. C. · respondent, paid $2,500, for which two stock certificates, one for 20 and the other for 5 shares o£ the par value o£ $100 each, were issued to F. W. English, respondent; the Berg Co., respondent, paid $2,500, for which two stock certificates, one· for 20 and the other for 5 shares of the par value of $100 each, were issued to Nathan Berg, respondent; the Consolidated Dressed Bee£ Co., respondent, paid $2,500, for which two stock certificates, one for 20 and the other for 5 shares of the par value of $100 each, were issued to Christopher Offenhauser, respondent. While Daugh & Sons Co. did not contribute to the paid-in capital stock of the United Rendering Co., it agreed that it would pay one-fifth of the loss of the United Rendering Co. up to an amount equal to one-fifth of the paid-in capital stock of $10,000 of the United Rendering Co., respondent. That the said persons, respondents, in whose names certificates for shares of stock in the United Rendering Co., respondent, were issued were the officers of the· United Rendering Co., respondent, and continued to be oilicers of that company until June 4, 1918. PAn. 6. That Winfield S. Allen, respondent, president of the United Rendering Co., respondent, called on Randolph H. Miller, a stockholder and director of the Drown Co., who lived at Asbury Park, N. J., and tried to induce the said Miller to use his influence to have the Brown Co. withdraw from Philadelphia. Allen told Miller that he, Allen, was not making any threats, but that the Drown Co. would not make any money in Philadelphia. On this occasion Allen requested the assistance of Miller to obtain for him, Allen, the control of the Drown Co.'s capital stock, which request was refused. This visit of Allen's to Miller took place at about the time of the organization of the United Rendering Co.

P.m. 7. That on November 1, 19HS, the United Rendering Co. begun purchasing raw materials in the city of Trenton, N. J., under the supervision o£ one Milton Wylie Brown, a former employee of the Brown Co., and who by reason of having been a former employee of that company, was acquainted with the Brown Co.'s. customers. In purchasing these raw materials the United Rendering Co., through Milton Wylie Brown, paid prices which were higher than the Brown Co. was paying, unwarranted by trade conditions, and prohibitive to competitors. Dy paying such prohibitive and unwarranted prices during the month of November, 1915, the United Rendering Co. secured 32 customers who had immediately previously sold their raw materials to the Brown Co. From December 1, 1915, to April 1, 1916, 11 other customers of the Brown Co. were taken by the United Rendering Co. As a direct result of the loss UNITED RENDERING CO. ET AL. 291 284 Findings. of .customers (by reason of which the amount of tonnage of the Brown Co. was decreased), and because of the high prices which it was compelled to pay to the customers it kept, the Brown Co. sustained a financial loss, which loss finally forced it to sell out to one Edward T. l\furphy in December, 1916. The raw materials collected by the United Rendering Co. were not rendered at Trenton, but were shipped to Philadelphia by boat, railroad, or truck, and there refined into the finished products by the Consolidated Dressed Beef Co., the Berg Co., the D. B. l\fartin Co., and M. L. Shoemaker & Co. (Ltd.). For a short time after the United Rendering Co. commenced business, the corporations last above mentioned in turn rendered the raw materials collected by the United Rendering Co., but later the said raw materials were sold to the highest bidder among the Berg Co., Consolidated Dressed Beef Co., the D. B. Martin Co., and M. L. ·shoemaker & Co. (Ltd.). The bids were made at meetings of the board of directors of the United Rendering Co. held in the Bellevue-Stratford Hotel, Philadelphia, and attended by a representative of Baugh & Sons Co. The prices bid and paid by the respondents for the materials collected by the United Rendering Co. were, from November, 1915, to November, 1916, in excess of the prices the respondents were paying for similar materials in the city of Philadelphia.

PAR. 8. That the purpose of the respondents in organizing the United Rendering Co. and in paying through it prohibitive prices for raw materials in Trenton, N. J., was to punish the Brown Co. for continui.rg the purchase of raw materials in Philadelphia. PAn. 9. That in April, 1916, the United Rendering Co. purchased the fat route of one Levy, who had been purchasing raw materials in· the city of Asbury Park, N. J., in competition with the Flavell Co., of which Randolph H. 1\filler, a stockholder and director of the Brown Co., was a stockholder and officer. The United Rendering Co. thereupon purchased rMv materials in .Asbury Park at prices unwarranted by trade conditions, and ns 11. result the Flavell Co. lost to the United Rendering Co. a number of customers, and as a further result the Flavell Co. did not make any profit from the business it conducted. That the purpose of the United U.endering Co. in going to Asbury Park was to compel the Brown Co. to cease buying raw materials in Philadelphia. That in September, 1916, after Randolph II. Miller had sold his interest in the Brown Co., the Flavell Co., of which he was then President, paid the United Rendering Co. $5,000, for 'which the United Rendering Co. agreed to cease buying raw materials in the territory covered by the Flavell 292 FEDERAL TRADE COMMISSION DECISIONS, Findings. 3 F. T. C. Co. That the only physical assets received by the Flavell Co. in the above-mentioned transaction were a horse and wagon. PA?. 10. That the Brown Co. was dissolved and its business continued by a new corporation organized December 1, 1916, and known as the Brown Co, (Inc.). The chief stockholder of the Brown Co. (Inc.), was Edward T. ;Murphy. That in December, 1916, the re· spondents (excepting M. L. Shoemaker & Co. (Inc.), which was not organized until March 27, 1n7), through Nathan Berg, attempted to induce Murphy to withdraw the Brown Co. (Inc.) from the Philadelphia territory and offered the J3rown Co. {Inc.) in return $35,000 cash, and in addition, all the trade which the United Rendering Co. had acquired in Trenton, N. J., and vicinity. That when Murphy refused this off~r, the respondents then raised the prices they were paying butchers in the city of Philadelphia for raw ma· terials by reason of which the Brown Co. (Inc.), suffered a loss of $30,000 in the period from December 1, 1916, to .April1, 1917, when Murphy sold his holdings in the Brown Co. (Inc.) to the American Agricultural Chemical Co.

PAn. 11. That when the United Rendering Co. was organized on October 8, 1915, the president thereof, Winfield S. Allen, was also the vice president and general manager of }.f. L. Shoemaker & Co. (Ltd.), n limited partnership engaged in the rendering business, with its factory and principal place of business located in Phila· delphia. That the said Allen continued as president of the United Rendering Co, until June 4, 1918. That he remained vice president and general manager of M. L. Shoemaker & Co. (Ltd.), until its dis· solution in December, 1916. Upon the dissolution of ".M. L. Shoe· maker & Co. (Ltd.) the assets of the firm became the assets of a new corportation known as M. L. Shoemaker & Co. (Inc.), which was organized March 27, 1917, under the ll\WS of the State of Pennsylvania, and which commenced busin<'ss on April 1, 1917. That the said Allen, on March 27, 1917, became a stockholder and officer of M. L. ·Shoemaker & Co. (Inc.), and at the time testimony in thi,; proceeding was concluded, was an officer and stockholder of M. L. Shoemaker & Co. (Inc.), That after April1, 1917, M. L. Shoemaker & Co. (Inc.) wns represented by the said Allen at meetings of the United Rendering Co., and purchased raw materin.ls from the United Uendering Co.

PAR. 12. That the president of M. L. Shoemaker & Co. (Ltd.) knew of the connection between that company and the United Rendering Co. After the dissolution of M. L. Shoemaker & Co. (Ltd.), and before the organization of M, L. Shoemaker & Co, (Inc.), the trustees for the winding up of the business of l\1. L. Shoemaker UNITED RENDERING CO. ET At... 293 284 Conclusions. & Co. {Ltd.) sold to Winfield S. Allen the shares of stock held by Winfield S. Allen for M. L. Shoemaker & Co. (Ltd.) in the Unit.ed Rendering Co. That these shares of stock were sold at private sale to Winfield .S. Allen, who was one of the trustees in the winding up of the business of M. L. Shoemaker & Co. (Ltd.). Another of the trustees was William D. Adamson, who had been president of M. L. Shoemaker & Co. (Ltd.), and who became on :March 27, 1917, the president of 1\f. L. Shoemaker & Co. (Inc.). That the stock so sold by the trustees to said Allen at private sale was the only part of the assets of M. L. Shoemaker & Co. (Ltd.) disposed of by the trustees at private sale.

PAn. 13. That while the respondents, from November 1, 1915, to September 1, 1916 (excepting M. L. Shoemaker & Co. {Inc.), lvhich had not then been organized), were paying prohibitive prices in Trenton and prices unwarranted by trade conditions and prohibitive to competitors, the respondents, Consolidated Dressed Beef Co., the · D. n. Martin Co., the Berg Co., and Baugh & Sons Co., were doing business generally at a profit.

PAn, 14. That the United Rendering Co., from November 1, 1915, to January 1,1917, sustained a substantial loss in the purchase of rnw materials.

PAR. 15. That on or about June 4, 1918, Winfield S. Allen, respondent; Christopher Ofi'enhauser, respondent; and Nathan De1g, respondent, resigned their respective offices in the United Rendering Co.

· PAn. 16. That during the month of June, 1917, servants and em· ployees of respondent, l\1. L. Shoemaker & Co. (Inc.), interfered 1With the business of a competitor, the Drown Co. (Inc.), by causing certain of said respondent's automobiles to follow the trucks of the llrown Co, (Inc.) for the purpose of spying upon the business 11nd customers of the said the Brown Co. (Inc.); that such spying upon the business and customers of said the Drown Co (Inc.) was cah~u­ lated, designed to, and did hinder, delay, and embarrass the said Drown Co. (Inc.), a competitor of M. L. Shoemaker & Co. (Inc.), in the conduct of its business.

CONCLUSIONS.

The practices of the said nspondents, under the conditions and circumstances described in the foregoing findings, are unfair method.ls of competition in interstate commerce and constitute a violation of section 5 of an act of Congress approved September 26, 1914, entitlec.l "An act to create a Federal Trade Commission, to defint~ its powers and duties, ~nd for other purposes." --------- I 294 FEDLnAL trade: Cmtl\ttsStON DEC1StONS. Order. SF.T.C.

ORDER TO CEASE AND DESIST, This proceeding having been heard by the Federal Trade Commission upon the complaint of the Commission, the answers of the respective respondents (excepting that the United Rendering Co., respondent, which did not file answer, entered its appearance), the testimony and evidence, and the argument of counsel, and the Commission having made its .findings as to the facts with its conclusions that the respondents have violated the provisions of the act of Congress approved September 26, 1914, entitled "An act to create a. Federal Trade Commission, to define its powers and duties, and for other purposes,"

It i8 now ordered, That the respondents, the United Rendering Co., the Derg Co., the D. B. Martin Co., Consolidated Dressed Deef Co., Daugh & Sons Co., Winfield S. Allen, Nathan Derg, F. ,V, English, and Christopher Ofi'enhauser, do cease and desist from engaging in a combination or conspiracy among themselves or with others, with the intent and purpose of discouraging, stifling, and suppressing com~ petition in the business of refining animal fats and the sale of their other products in interstate commerce, by purchasing and offering to purchase raw materials necessary in the manufacture of their products, in certain local areas, to wit, in and about the city of Trenton, N.J., or elsewhere, at and for prices unwarranted by trade conditions and so high ns to be prohibitive to competitors in such areas. And it is further ordered, That the respondent, M. L. Shoemaker & Co. (Inc.), do cease and desist, through nnd by their agents, servants, and employees, from interfering with the business of any of their competitors in the purchase of raw materials used in the refining of animal fats by causing said respondent's automobiles to follow the trucks of such competitors for the purpose of spying upon the business and customers of such competitors, when calculated nnd designed to hinder, delay, and embarrass said competitors in the conduct of their business.

And it i8 further ordered, That the respondents make and file with the Commission, within 30 days from the date of service hereof, a. report in writing setting forth in detail the manner and form in lt which this order has been conformed to. BAYl\!OND BROS.-CI...A.RK CO. 295 Complaint.

FEDERAL TRADE CO:MJ.fiSSION v.

RAYMOND BROTHERS-CLARK COMPANY.

COlll'I..AINT IN THE li£ATTF.R OF Tile ALLEGED VIOLATION OF SECTION G OF .AN .ACT OF CONGRESS APPROVED SEl'TElfllER 26, ·1914, Docket 4GQ-February 23, 1021.

SY"Lt.ABUS.

Where a corporation dealing in groceries at wholesale, (a) Failed to Inform a competing concern, which was eng-aged al1-1o In retnll- 1ng, of the arrival of a much-need('() shipment in a "pool" ear com;lgnetl to It by a manu!acturl.'r, although It promptly informed other concerns whose shipments arrived In said car;

(b) Kept the shipment belonging to such .competitor In its possession more than a month, meanwhile protesting to the manufacturer against llls sell- Ing directly to ~>aid competitor and trying to secure a jobber's commission on the transaction; and · (c) TllreatenPd to return to the manufacturer all gootls of his manufacture which It hnd In stock If the commission claimed were not allowed or 11' further sales were made directly to said competitor, anll to cease buylnr :Crom him in :Cuture, and did so cease;

With the effect of hindering competition between the competing concern and its competitors, and with the intent and tendency to limit the manufacturer In the selection or his customers, in restraint or his trade, anti to restrict the competing concern In its purchases o:t commodities in competition with other buyers :

lield, That such practices, untler the circumstances set forth, constituted unfair n1ethods ot competition.

COMPLAINT.

The Federal Trade Commission, having reason to believe from a. preliminary investigation made by it that Raymond Dros.-Clark Co., hereinafter referred to as the respondent, has been and is violating the provisions of section 5 of an act of Congress approved September 2G, 1914, entitled "An act to create a Feueral Trade Commission, to define its powers and duties, and for other purposes," and it appearing that a proceeding by it in respect thereof would be to the interest of the public, issues this complaint, stating its charges in that respect, upon information and belief, ns follows: PAMGRAPII 1. That the Dasket Stores Co. is a corporation organized under the laws of Nebraska, having its principal place of business at Omaha, in the State of Nebraska., and also having branch 29G FEDERAL Tr.ADE COMMISSION DECISIONS. Complaint. SF.T.C.

stores and places of business at other places, including Lincoln, in said State of ·N ebrnska; that the said company is engaged in the . business of buying and selling in wholesale quantities groceries and food products such as are bought and sold generally by persons, firms, and corporations engaged in the business generally known as that of a wholesale grocer; that in the course of its said business the Basket Stores Co. purchases the products dealt in by it in the various States and Territories of the United States and transports the same through other States and Territories to the cities of Omaha and Lincoln, in the State of Nebraska, where such commodities nrc resold, and there is continually and has been at all times here~ after mentioned a constant current of trade and commerce in the commodities so purchased by the said Basket Stores Co. between and among the various States and Territories of the United States; that the said Basket Stores Co. is in active competition with the respondent, Raymond Bros.-Clark Co.

PAn. 2. That the respondent, Raymond Bros.-Clark Co., is a corporation organized under the laws of the State of Nebraska, having its principal place of business at Lincoln in said State, and is engaged in the business known generally as that of wholesale grocer; that the said respondent purchases the commodities dealt in by it in the various States and Territories of the United States and transports the same through other States and Territories to said city of Lincoln, in said State of Nebraska.

PAR. 3. That the T. A. Snider Preserve Co. is a corporation manufacturing certain food products which are sold and transported in the various States and Territories of the United States. PAR. 4. That in or about the month of September, 1918, the said T. A. Snider Preserve Co. caused to be shipped and transported from Marion, in the State of Indiana, to the city of Lincoln, in the State of Nebrn.ska, certain products manufactured by it which had been sold to and were intended for delivery to the said Basket Stores Co. at said city of Lincoln, Nebr.; that the said products w.cre shipped and transported in n car which also contained certain products of the said T. A. Snider Preserve Co. which had been ordered by and were intended for delivery to the respondent at said Lincoln, N' ebr.; that when the said car arrived the respondent took possession of said products int~ndcd for delivery to said Dasket Stores Co. and de· clined to allow clelivery of the same to the said llasket Stores Co. unless the said T. A. Snider Preserve Co. paid to the respondent the ~tum of $100 as and for a jobber's profit upon the sale of said goods; that thereafter the said respondent at divers times attempted to RAYMOND BROS.-CLARK CO. 297 29~ Findings. coerce and compel the said T. A. Snider Preserve Co. to·refuse to Iecognize said Basket Stores Co. as a jobber and t<1 refuse to sell to said Basket Stores Co. at prices regularly charged to recognized jobbers, and at divers times has represented td said T. A. Snider Preserve Co. that the said Basket Stores Co. was not a.legitimate jobber and had never been such, but was engaged in the retail grocery business; and said respondent bas at divers times since the month of September, 1918, threatened to withdraw its patronage from said T. A. Snider Preserve Co. if said company sold to. or recognized said Basket Stores Co. as a jobber and refused to pay to said respondent said sum of $100 aforesaid; that the purpose and efiect of the afore- ~aid acts and practices of the respondent were and are to cut off the supplies of its said competitor, said Basket Stores Co., to stifle, suppress, and prevent competition. between respondent and said Basket Stores Co., and to interfere with the right of said Basket Stores Co. and said T. A,. Snider Preserve. Co. to deal freely with each other in interstate commerce upon terms mntual1y agreed upon between them. ! REPORT, FINDINGS AS TO THE FACTS, AND ORDER. I>ursuant to the provisions of an act of Congress, approved September 26, 1914, the Federal Trade Commission issued and served a complaint upon the respondent, Raymond Bros.~Clark Co., charging it with the use of unfair methods' of competition in commerce in violation of the provisions of said act.

The respondent having enter~ed its al'pcarance by its attorneys and filed its answer herein, thereupon witnesses were examined and evidence received in support of the alfegntions of said complaint nnd on behalf of the respondent before nn e:raminer of the Federal Trade Commission, theretofor~ duly appointed, and the testimony so taken Was reduced to writing and filed in the office ~f the Commission, whereupon the proceeding came on for final hearing by said Commission, an<.l it hating heard argumimt' of counsel,' and having duly considered the complaint, the answer thereto, and the evidence adduc:ed, and being fully advised in the premises, and being of the opinion that the method of ct>mpetition in question is prohibited by said act, makes this its report, stating its findings as to the facts: l 0 I FINDINGS ..lS TO 'Tile l'..lCTB.) I l r P ARJ.muru 1. .t{espopdent is a corl?oration organized .under and existing by virtue of the laws of the State of Nebraska. Its principal place of busine..c;s is at Lincoln, Nebr. Respon<.lent's business is that of a wholesale grocer, buying groceries~ provi~ions, and the like com~ . . 298 FEDERAL TRADE COMMISSION DECISIONS, 1"indings. 3F.T.O.

modities iu wholesale quantities from the manufacturers thereof througho~1t the United States,· which commodities are transported from points outside the State of Nebraska to the warehouse of 'the respondent at Lincoln, Nebr., and are resold and transported to customers in and beyond the State of Nebraska. The business opera· tions of the respondent include sales and deliveries in Nebraska, Colo• rado, Kansas, Wyoming, South Dakota, and Montana, and its antiual volume of business is approximately $2,500,000. In the conduct of its business the respondent is in competition, among others, with the Basket Stores Co.

PAn. 2. The Basket Stores Co. is a corporation organized under and existing by virtue of the laws of the State· of Nebraska. Its ·principal place of business is at Omaha, Nebr. '111e Basket Stores Co. conducts two lines of business-one, that of a wholesale grocer, and that of retail selling through a chain or organization of retail stores. As a wholesale grocer, the Basket Stores Co. maintains a warehouse at Omaha and a branch warehouse at Lincoln, Nebr. It buys groceries, provisions, and tho like commodities in wholesale quantities from the lnanufacturers thereof throughout the United States, which commodities are transported from points outside the State of Nebraska to the warehouse of the Basket Stores Co. at Omaha and Lincoln, Nebr., and are resold in part imd transported to customers within and outside of the State of Nebraska. This part of the Basket Stores Co.'s business is about 10 per cent of the total. The Basket Stores Co. was licensed as a wholesale grocery house by the United States Food Administration, which fact .was known to the respondent.' The Basket Stores Co. also operates a series or chain of retail stores, 72 in number, 4 of which are in Iowal the remainder being located in Nebraska. There were, at this time, 18 stores operated by the Basket Stores Co. in Lincoln. The groceries, provisions, and like commodities' distributed through these stores were supplied from the Basket Stores Co.'s warehouses. About 00 per cent of the company's business was done through these retail stores. The total annual volume of the Basket Stores Co.'s business is approximately $2,500,000. • . PAn. 8. In the month of September, 1018, a represcntati~e of F. A. Snider Preserve Co. solicited from the Basket Stores Co.'s officials, at its head office at Omaha, and obtained an order for commodities produced by the Snider Co., to be shipped to the 'varehouse of the Basket Stores Co. at Lincoln. The Snider Co. also secured orders from the respondent and other customers in neighbori~g communities. The commodities sold in and around Lincoln were placed by the Snider Co. in one car, consigned to respondent· at Lincoln, mak· EAYMOND BROS.-CLARK CO. 299 295 Findings. ing up what is known as a "pool" car to get the benefit of the freight rate on a car-lot ~hipment. The Snider Co. sent to respondent a stateme~t of the car contents, showing the various business .houses for which~ certain specified goods were intended, the Basket Stores Co. and its purchase from Snider Co. being shown on this statement, PAn. 4. This pool car consigned to respondent reached Lincoln, Nebr., on October 10, 1918, and was promptly ~nloaded and the contents distributed by respondents. Its own commoditi~s were placed in its warehouse, the commodities belonging to business houses outside of Lincoln were reconsigned to them by local freight, and the other purchasers in Lincoln were notified of the arrival of their goods, and promptly obtained the same, except the Basket Stores Co. The commodities belonging to this company were stored in .respondent's warehouse, the Basket Stores Co. was not notified of the arrival of these goods in Lincoln or of their presence in respondent's. warehouse, and no opportunity to obtain its gooda was afforded the Basket Stores Co. until November 1!S, 1918, when respondent notified the Basket Stores Co. of the presence of its property. PAR. 5. The Basket Stores Co. was in need of these commodities for its trade, its stock of these goods was low, and the delay in receipt due to the actions and failure of the respondent to extend to· the Basket Stores Co. the same course of dealing that it used with all the other owners of commodities contained in the pool car was a hindrance and an obstruction to the Basket Stores Co. in the conduct of its business in competition with the respondent and others in the wholesale trade and with its competitors in the retail trade. · 1,AR. 6. On October 8, 1918, prior to the arrival of the pool car at Lincoln, the respondent, having received the statement from F. A. Snider Preserve Co. regarding the contents of the car and the distribution to be made thereof, in writing protested to the Snider Co. against the sale direct to the Basket Stores Co., and asked for· the allowance of the regular jobber's profit on the sale, as though made through respondent. The Snider Co: did not reply to this letter. Subsequent to the arrival of the car at Lincoln, the distribution of its contents to the owners thereof, except as to the Basket Stores CO., and while the goods purchased by that company were in respondent's custody, respondent wrote the Snider Co., on October 22, 1918, referring to the unanswered letter and asking what it was to charge the Snider Co. for checking out, unloading, and reshipping the other jobbers' goods. It likewise wrote the Snider qo. on the same, day with reference to damage to goods in transit. In response' to' a 'request from the Snider Co. for payment, re~pondent wrote, on :Novem: her 16, declining to make payment to the Snider Co.' for· goods pur- ; ' . . .. ~ 300 FEDERAL TRADE COMMISSION DECISIONS. Order. 3 F. T. C!. chased from it by the respondent mitil reply was made by the Snider Co. to respondent's letters (of October 8 ·and 22) and until allowance was made respondent for the jobbers' commission on the sale to the Basket Stores Co. The Snider Co. suggested that respondent remit, taking credit for amounts claimed, and explaining fully the reasons therefor. The respondent complied, deducting, among other amounts, the sum of $100 as commission on the sale to the Basket Stores Co. This deduction, among others, the Snider Co. refused to allow, and returned the remittance. 'Vhereupon, on December 16, respondent wrote the Snider Co., insisting upon the allowance of this commission, protesting against the action of the Snider Co. in selling direct. to the Basket Stores Co., and threatening the Snider Co. with the cessation of respondent's business and return of nll the goods produced by the Snider Co. then in respondent's stock, if this commission were not allowed and the Snider Co. continued direct sales to the Basket Stores Co.

PAR. 7. Early in January following, the Snider Co. sent a representative to Lincoln, who interviewed the president of the respondent in an attempt to obtain a settlement of the controversy, which was not successful. The respondent, in accordance with the statements in its letter of December 16th, ceased to purchase from the Snider Co. CONCLUSIONS.

The conduct of the respondent ttnded to, and did, unduly hinder competition between the Basket Stores Co. and others similarly en· gaged in business, and the intent and purpose of the respondent was also·.to press the F~ A. Snider Co. to a: selection of customers, in restraint of its trade, and to restrict the Basket Stores Co. in the purchase of commodities in competition with other buyers, and the con· duct of the respondent tended to th~ accomplishment of the intent and purpose of respondent. . . 1 . The acts and practices of the respondent; ns hereinbefore set out, ~onstitute unfair methods of competition in commerce among the States of the United States, and violate the act of Congress approved September 261 1914, entitled "An act to create 11 Federal Trade Commission, to define its powers and duties, and for other purpose_s." ORDER TO CEASE AND DESIST.

This proceeding :having been heard by the Federal Trad~ Com• mission upon the complaint of the Commission, the answer of the respondent, the testimony and, evidence, nnd the argument of counsel, and the Commission being of opinion that the method of RAYMOND BROS.-CLARK CO. 801 Order.

competition in question is prohibited by the act of Congress approved September 26, 1914, entitled "An act to create a Federal Trade Comlnission, to defin~ its powers and duties, and for other purposes," and having made its report in which it stated its findings as to the facts with its conclusions that the respondent has violated the provisions of said act:

It is therefore ordered, That the respondent Raymond Bros.-Clark Co., its officers and agents, forever cease and desist from directly or indirectly- (!) Hindering or preventing any person, firm, or corporation in or from the purchase of groceries, provisions, or the like commodities direct from the manufacturers or producers thereof, in interstate commerce, or attempting so to do.

(2) Hindering or preventing any manufacturer, producer, or dealer in groceries, provisions, and the like commodities, in or from the selection of customers in interstate commerce, or attempting so to do.

(3) Influencing or attempting to influence any manufacturer, producer, or dealer in groceries, provisions, and the like commodities not to accept as a customer any firm or corporation with which the manufacturer, producer, or dealer in the exercise of a free judgment, has or may desire to have such relationship. And it is further ordered, That the respondent Raymond Bros.- Clark Co. shall, within 60 days of the service upon it of a copy of this order, file with the Commission a report in writing, setting forth in detail the manner a.nd form in which it has complied with the order to cease and desist hereinbefore set out. 802 FEDERAL TRADE COMMISSION DECISIONS. Complaint. SF.T.C.

FEDERAL TRADE COMMISSION v.

ALU:MINUl\1 COMPANY OF AMERICA.

COliPI.AINT IN THE lJATTER OF Tile ALLEGED VIOLATION OF SECTION 7 OF AN ACT OF CONGRESS APPROVED OCTOBER 111, 1914. Docket !:.!.48-March 9, 1921, Syllabus.

Where a corporntlon enjoying a monopoly In the manufacture and sale of pig aluminum and aluminum Ingot, and also engaged, through tts subsldlnrles, In the manufacture and sale of sheet aluminum and products manufactured of aluminum, entered Into ami carried out ar. agreement with one of Its cblef competitors in the manufacture aud sale of sheet alnrntnnm, for the :formation of a new corporation (the directorate of which, when formed, lt controlled) to take over and operate said competitor's aluminum rolling mlll, 1t to take two-thirds of the outstanding stock, a device successfully aimed at the acquisition of the control of said rolling mill and Its products without direct acquisition of stock ln said competing corporation and equivalent thereto In eflect, and a device which (1) eliminated actual competition behveen 1t and Its competitor in the manufacture and sale of sheet aluminum and aluminum cooking utensils, (2) prevented the new company f1·om becoming Its competitor ln the maouracture and sale or shpet aluminum, (3) gave It a complete monopoly ln the production and sale o:f certain much-used and Important sizes or sheet aluminum manu· fuctured ln the United States, an\l tended to give It a complete monopoly ot all sizes of sheet aluminum manufactured In the United States, and ( 4) was followed bJ the dlsoppeu·ance of a market In the United States tor the sal~ of Ingot or pig aluminum to aluminum rollln~: mllls: Held, That the acqul!dtlon and continued ownership or such stock, under the circumstances set forth, constituted a violation of section 7. COMPLAINT.

The Federal Trade Commission, having reason to believe from a preliminary investigation made by it, that the Aluminum Co. of America, horeinaiter referred to as the respondent, has, during the year last past, violated and is violating section 7 of the act of Con· gress approved October Hi, 1914, entitled "An net to supplement existing laws against unlawful restraints and monopolies, and for other purposes," issues this complaint, stating its charges in this respect on information and belief as follows: I) ARAOilAl'II 1. That the respondent, Aluminum Co. of America, is a corporation organized, existing, and doing business under and Ly virtue of the laws of the State of Pennsylvania, with its principal ALUMINUM: CO. OF AMERICA. 303 802 l Findings. office and place of business located at the city of Pittsburgh, in said State, now and at all times hereinafter mentioned engaged in the business of manufacturing and selling aluminum and aluminum products throughout the States of the United States, the Territories thereof, the District of Columbia, and foreign countries, in direct competition with other persons,· firms, copartnerships, and corporations similarly engaged.

PAR. 2. That the respondent, Aluminum Co. of America, in the conduct of its business, manufactures the aluminum and aluminum products so sold by it in its factory located at the city of Pittsburgh, State of Pennsylvania, and after such aluminum and aluminum products are so manufactured they are continuously moved to, from, and among other States and Territories of the United States, the District of Columbia, and foreign countries, and there is continuously1 and has been at all times hereinafter mentioned, a constant current of trade and commerce in the said aluminum and aluminum products between and among the various States and Territories of the United States, the District of Columbia, and foreign countries, and especially to and through the city of Pittsburgh, State of Pennsylvania, and therefrom to and through other States and Territories of the United States, the District of Columbia, and foreign countries. PAR. 3. That the respondent, Aluminum Co. of America, a corporation engaged jn commerce, as aforesaid, did, during the year 1918, in violation of s~ction 7 of the Clayton Act, acquire a large part of the.stock and share capital of the Aluminum Rolling 1\Iill Co., a corporation also engaged in commerce, and that the said respondent, Aluminum Co, of America, ever since the time of said acquisition of said' stock, has owned, and still does own, a large part of the stock and share capital of the said Aluminum Rolling Mill Co.; and that the effect of the acquisition of said stock and share capital, and the ';ISC of the Same, either by voting or granting of proxies or otherwise, znay be, and is to substantially lessen competition between the respondent, Aluminum Co. of America, and the Alumimun Rolling Mill Co., or to restrain such commerce, as aforesaid, in certain sections and communities, or tend to create a monopoly in such line of ~commerce.

REPORT, FINDINGS AS TO THE FACTS, AND ORDER. Pursu:mt to the provisions of an net of Congress approved Octobc>r lls, 1914, entitled "An act to supplement existjng laws against unlawful restraints and monopolies, and for other purposes," the l~'edernl Trade Commission issued and served a complaint upon the J ' 304 FEDEr.AL TRADE COMMISSION DECISIONS. Findings. SF.T.C.

respondent, Aluminum Co. of America, charging it with a violation of section 7 of said act.

The respondent having entered its appearance by its attorneys, .Messrs. Gordon & Smith, and ha-ving filed its answer herein, hearings were had and evidence wus thereupon introduced in support of the allegations of said complaint and on behalf of respondent before Mr. William A. Sutherland, an examiner of the Federal Trade Commission, theretofore duly appointed.

And thereupon this proceeding came on for final bearing, and the Commission having beard argument o£ counsel and b:tving duly considered tho record, and being now fully adviserl in the premises, makes this its findings as to the facts and conclusion: FINDINGS .AS TO Tile !'ACTS.

PAnAGRAPII 1. The respondent Aluminum Co. of America is a corporation organ.nized, existing, and doing business since 1888 under the laws of the State of l'ennsylvania, with its principal office in the city of Pittsburgh in said State. The authorized capitalization of respondent is $201000,000 (all common stock), $18,000,000 of which is outstanding.~ It is now and for many years since its organization. has been engaged in the business of ma~ufacturing and selling crude or pig aluminum and aluminum ingot throughout the various States of the United States, the Territories ther~of, the District of Columbia, nnd foreign countries. The respondent h;1s now and for many years lias hn.d n monopoly in the United States in said business~ the competition which it has met in the United States coming from foreign companies importing crude or pig aluminum and aluminum ingot into this country. The rcsponuent produces in the United States npproximately one-half of the pig alnminum and aluminum ingot produced in the world. Pig aluminum and aluminum ingot arc used for two general purposes, namely, for casting and for rolling into sheet. There is now and hns'been for many years in the United Stntrs a market for aluminum ingot known as secondary ingot, which is made from remelted aluminum, but such secondary ingots are not ndnptnblc for conversion into aluminum sheet. Virgin ingot, of which the Aluminum Co. of America is now and has been for many years the only producer in the United States, is the only kind of aluminum ingot convertible into sheet aluminum. Respondent now, and for many years prior to 1918, has as a. part of its business Hold throughout the various States of the United States, the Territories thereof; the District of Columbia, and foreign countries all of the sheet aluminum manufactured by its subsidiaries for sale, and since the taking O\'er by the Aluminum Rolling Mill Co. of the ALUMINUM CO. OF Al\ierica. 305 • 302 Findings. aluminum-rolling mill of the Cleveland Metal Products Co., it has sold throughout the various States. of the United States, the Territories thereof, the District of Columbia, and foreign countries all of the sheet aluminum produced by that mill. One-half of all of the sheet aluminum produced in the world is produced by the subsidiaries of the respondent, and the sale of the sheet aluminum produced by such subsidiaries has been and is controlled by respondent. Respondent now and fc;~r many years has had subsidiary corporations in the United States which fabricate aluminum in the form of wire, tubing, cooking utensils, nnd into general fabricated forms, and such subsidiaries nnd the respondent now and for many years have engaged in the business of selling suc:P wire, tubing, cooking utensils, and general fabricated forms throughout the various States, Territories of the United States, the District of Columbia, and forei:,111 countries.

· PAn. 2. There are and have been since prior to 1918, in the United ~states, corporations in competition with tJ1e respondent and its .subsidiaries in the manufacture and sale of aluminum cooking utensils, all of which companies~ together with the respondent and its said sub-sidiaries, require sheet aluminum in the manufacture of their finished products. The sources of supply for sheet aluminum in the .United States, prior to the outbreak of the European war in Hl14, Were from foreign companies and the respondent and its subsidi:iries. In :March, 1915, the Cleveland Metal J:>roducts Co., as hereinafter Inentioned, became the only competitor of the respondent and its subsidiaries in the manufacture of sheet aluminum and in the sale thereof throughout the various States of the United States, the Territories thereof, and the District of Columbia, and in the latter part of 191G the Drcmer· 'Valtz Corporation, as hereinafter mentioned, became u competitor of the respondent and its subsidiaries in the manufacture of sheet aluminum and in the sale thereof throughout the nrious States of the United States, the Territories thereof, and the District of Columbia, and at or about the time that the Cleveland l\Ietnl Products Co. entered into negotiations with respondent for tho sale of the former company's aluminum rolling mill, the United Stutes Smelting & Aluminum Co. became a competitor of the rcsponuent tnd its subsidiaries in the manufacture of sheet aluminum nnd in the sale thereof throughout the various States of the United States, the Territories thereof, and the District of Columbia. The Clevebnu Metal Products Co., the Uremer-Wnltz Corporation, and the United States Smelting & Aluminum Co. were the only competitors in Axnerica of the respondent and its subsidiaries in the manufactur~ · and sale of shrct nJ11minum at the timo the Cleveland Metal Products 306 FEDERAL TRADE COMMISSION DECISIONS • • Findings. SF.T.C Co. disposed of its aluminum rolling mill as hereinafter mentioned, and the United States Smelting & Aluminum Co. was an inconsiderable factor in the trade.

PAn. 3. The Cleveland 1\fetal Products Co. is a corporation organized, existing, and doing business under and by virtue of the laws of the State of Ohio since 1910; and from 1!>10 to March 8, 1!)15, was engaged in the business of manufacturing enameled stove parts and enamel parts for other manufacturers using the same and in selling such parts throughout the various States and Territories of the United States and the District of Columbia. The Cleveland Foundry Co., an Ohio corporation with its principal office in Cleveland, Ohio, for many years up to January, 1917, was engaged in the business of manufacturing oil cooking stoves and oil heaters in which aluminum is used. Doth of these companies, namely, the Cleveland Metal Products Co. and the Cleveland Foundry Co., used aluminum in crude and semicrude form and in the form of sheet. In January, 1!>17, the Cleveland Foundry Co. and the Cleveland Metal Products Co. were consolidated, the business of both companies being con· tinned under the name of the Cleveland Metal Products Co., which by the consolidation had an authorized capitalization of $5,000,000 in common stock and $5,000,000 in preferred stock, $4,000,000 of each class being issued. In 1912 the Cleveland Metal Products Co. conceived the idea of going into the business of manufacturing aluminum cooking utensils, and in the autumn of 1913 Fred W. Ramsay, president of the company, went to Europe, where he con· !erred with officinls of various foreign companies importing aluminum ingot into this country, for the purpose of determining whether the Cleveland Metal Products Co. could obtain from sources other than respondent and its subsidiaries a supply of aluminum ingot in the event that it erected an aluminum rolling mill for the purpose of converting aluminum ingot into aluminum sheet, which aluminum sheet is the form of aluminum from which nluminu!11 cooking utensils are made. If the Cle,·eland Metal Products Co. went into the business of manufacturing aluminum cooking utensils, it would be competing with subsidiaries of the Aluminum Co. of America in the sale of such utensils and with the respondent and its subsidiaries in the sale of sheet aluminum, nnd if it erected an aluminum rolling mill for the purpose of manufacturing its own aluminum sheet its only sources of supply of aluminum pig and alu· minum ingot were from the Aluminum Co. of America or from for· eign companies. The purpose of the president of the Cleveland Metal Products Co. in ascertaining whether he could buy uluminum ingot from foreign companies was to determine whether the Cleve- · ALUMINUM CO. OF A!t!ERICA. 307 802 Findings. land Metal Products Co. could be free and independent from the Aluminum Co. of America in the source of supply of aluminum ingot, and could compete with that company and its subsidiaries in the production and sale of aluminum sheet and in the manufacture and sale of aluminum cooking utensils. The president of the Cleveland Metall)roducts Co. having received assurances in Europe that his company could obtain ingot from foreign companies on satisfactory terms, returned to the United States, and in 1914 the Cleveland :Metal Products Co. commenced the construction of nn aluminum rolling mill. .The mill was completed in 1916 and was put into operation in March of that year. It was a well-planned, well-designed, and "Well-working unit.

PAn. 4. The capacity of this aluminum rolling mill of the Cleveland Metal Products Co. was 250,000 pounds of aluminum sheet per month, and the mill was equipped to roll sheets of all sizes up to 60 inches in width by 120 inches in length. Twenty-seven per cent of the output of this mill was used by the Cleveland :Metal Products Co. in the manufacture of its aluminum cooking utensils and other Products in which sheet aluminum was necessary, and the balance of the output, 73 per cent, was sold in the open market to dealers in and users of sheet aluminum. The Cleveland Metal Products Co. thereby became and was until its rolling mill passed to respondent, in competition with respondent and its subsidiaries in the manufacture and sale in commerce of sheet aluminum and aluminum cooking utensils. A considerable part of the sheet-aluminum intlustry has been and is in the sale of sheet aluminum to the manufacturers of automobile bodies, in which aluminum sheet greater than 30 inches in width is necessary. The only sources of supply for such sheet in the United States from the time this rolling mill was built until shortly after the signing of the armistice of the World 'Var on November 11, 1918, were from the respondent and its subsidiaries, the Cleveland Metal Products Co., and from small stocks of foreign companies on hand in this country when the Great 'V ar in Europ& ?roke out. The only companies in the United States mnnufactur· Ing aluminum sheet over 30 inches in width were the subsidiaries of the Aluminum Co. of America. (respondent) and the Cleveland Metal :Products Co., all which companies from 1915 until January of ll>lS were confronted with a demand in excess of the supply. The total cost of the rolling mill erected by the Cleveland Metal Products Co., including :>,516 acres of land, the site of the mill, wns $227,- 154.()4:, From June 30, 1915, to December 31, 1015, the net profits of the Cleveland :Metal Products Co. in the manufacture and sale of sheet aluminum was $231629.4!. The riet profits of the Clevelanel -=- • --!!:!0---- SQ8 FEDERAL TP.ADE COMMISSION DECISIONS. Findings. 3F.T,C.

Metal Products Co. in the manufacture and sale of sheet aluminum for the calendar year 1916 were $211),009.25, and the net profits for the calendar year 1917 in the manufacture and sale of sheet aluminum were $52,120.01. In addition, the Cleveland Metal Products Co. made a substantial profit in its general business. The sheet which it manufactured in excess of its own fabricating requirements it sold to various automobile-body builders, manufacturers of cooking utellSils, and manufacturers of other products in which sheet alumi· num is used. In the latter part of 1916 the Bremer-,Valtz corporation, having completed a. .rolling mill at St. Louis, :Mo~, commenced the business of selling sheet aluminum which it rolled, but the largest sized sheet which its mill was capable of turning out ·was 30 inches in width. The United States Smelting & Aluminum Co., hereinbefore referred to, rolled alu,minum sheet of a maximum width of 30 inches. In November, 1919, the Bremer-Waltz Corpo· ration sold a part of its physical assets, consisting of its aluminum rolling mill, to the Alumin~ Goods Manufacturing Co., 36 per cent of whose stock is owned by the Aluminum Co. of America and on whose directorate the Aluminum Co. of America is represented by two members. The Aluminum Goods Manufacturing Co. prior to the purchase by it of the rolling mill of the Bremer-"\Valtz Corpo· ration had and still hd two rolling mills, all of the output of which, together with all of the output of the mill purchased from the Bremer-"\Valtz Corporation, is used by the Aluminum Goods Manu· facturing Co. itself in the manufacture of the finished products made by it, consisting principally of cooking utensils. PAR. 5. Since 1917 the supply of aluminum sheet imported into this country and that manufactured in this country has not been equal to the demand.

PAil. 6. On February 17, 1918, the Aluminum Co. of America (re• spondent) and the Cleveland Metal Products Co. agreed to organize a third corporation under the laws of the State of Ohio, which:third corporation was to 'purchase the ltluminum rolling' mill and the nluminum rolling-mill business of the Cleveland Metal Products Co. This· corporation was not organized until March 20, 1918, although the rolling mill of the Cleveland Metal Products Co. was operated by the respondent, Aluminum Co. of America, for the new company from February 23, 1918, until and since the date of the incorporation of the new company, which new company was incorporated under the name" The Aluminum Rolling Mill Co." During the negotiations for the sale by the Cleveland Metal Products Co. of its aluminum rolling mill to the Aluminum Rolling<Mill Co., the president of the Cleveland Metal Products Co. expressed to officel'i ALUMINUM CO. OF AMERICA. 309 302 ·· Findings. of tl:ie respondent a wish for an assurance that if the Cleveland Metal Products Co. went out of business of rolling sheet aluminum, it, the Cleveland :Metal Products Co., would have a source of supply from the respondent for its own needs in the manufacture of cooking uten ... sils and such other things requiring sheet aluminum as it made, which assurance was given to the Cleveland Metal Products Co. during the negotiations aforesaid. The Aluminum'Rolling Mill Co. has an nu- ~horized capitalization of $1,000,000, all common, $GOO,OOO of which Is outstanding; $400,000 of the outstanding capital stock was acquired by the respondent, the Aluminum Co. of America, at the formation of the Aluminum Rolling Mill Co., at which time 'the Cleveland Metal Products Co, acquired $200,000 worth of said stock: Both the Cleveland :Metal Products Co. and the Aluminum Co. of America still own the stock acquired by them at the organization of the Aluminum Rolling :Mill Co. The Aluminum Rolling Mill Co. Paid to the Cleveland Metal Products Co. $34,890.70 ·over and above. the original cost of the land and buildings purchased by it, ;no depreciation having been deducted from the original cost of the buildings and equipment. The board of directors of the Aluminum Roll-. ing Mill Co. consists of seven members, four of whom have at all times represented the Aluminum Co. of America, and three of whom have represented the Cleveland Metal Products Co. The qualifying shares of stock for the four directors representing the Aluminum Co. of America, although standing in the names of those respective directors, have been assigned in blank to, have been paid for, and are and have been in the custody of the Aluminum Co. of America. PAR. 7. Fred W. Ramsay, president of the Cleveland Metal J;>rod- Ucts Co., is president also of the Aluminum Rolling Mill Co., .and although the Aluminum Tiollin~ :Mill Co, has produced more sheet aluminum than the Cleveland. Metal Products Co. needs, the latternamed company, because of the control by the respondent of the A.luminum Rolling Mill Co., has. not been able to secure from the A.lmninum Rolling·l\Iill Co. all of the sheet aluminum which it, the Cleveland Metal Products Co., has needed for the manufacture of aluminum cooking utensils and similar products. PAR. 8. When the Cleveland Metal Products Co. commenced· the operation of its aluminum rolling mill .in 1915, jts supply of ingot::! Was obtained from stocks of foreign companies .on hand in this country, and when that source of supply was exhausted, it was c9m~ Pelled to and did purchase ingot from the Aluminum Co. of America, because that was the. only. source of :supply. .All of the pig aluminum and aluminum ingot used by the Aluminum Rolling Mill Co. has been purchased from the Aluminum Co. of America. -==--- ..

310 FEDERAL TRADE COM:P.USSION DECISIONS. ~d~~ s~~a par. 9. After the sa.le by the Cleveland Metal Products Co. to the Aluminum Rolling Mill Co. of the rolling mill of the former it (the Cleveland Metal Products Co.) continued in and is still in the business of manufacturing and selling aluminum cooking utensils, enameled stove parts, enameled parts for oil stoves and heaters, but has since the sale of said rolling mill ceased purchasing aluminum ingot for the purpose of rolling the same into aluminum sheet, and since the sale of said rolling mill the Cleveland Metal Products Co. has ceased manufacturing and selling sheet aluminum. PAR. 10. While the supply of sheet aluminum since 1917, and par· ticularly since the signing of the armistice on November 11, 1918, has been inadequate for the demand there has been, particularly since the early part of 1919, no market in this country for the sale of ingot or pig aluminum to aluminum rolling mills because all of them with the exception of one, namely, the United States Smelting & Aluminum Co., an inconsiderable factor in the trade; are owned or controlled by the respondent, the Aluminum Co. of America. PAR. 11. The rolling mill of the Cleveland :Metal Products Co. sold to the Aluminum Rolling Mill Co., being located in Cleveland, Ohio, was close to large automobile manufacturing companies using large amounts of sheet aluminum, and it was an advantage to the Aluminum Co. of America to have a rolling mill in Cleveland, be.' cause it had none in that territory prior to the formation of tho Aluminum Rolling Mill Co.

P.4.R. 12. The creation of the Aluminum Rolling Mill Co., by agree· ment between the respondent and the Cleveland Metal Products Co., and the acquisition by respondent of a controlling interest in the Aluminum Rolling Mill Co., and the transfer to the latter company by the Cleveland Metal Products Co. of its rolling mill and business in the products thereof, was a device for the accomplishment of the purpose of the respondent to obtain control of the said rolling mill and business in its products instead of the direct acquisition of stock in the Cleveland Metal Products Co., and was in effect equivalent thereto j the result of the use of this device, as completely as though the respondent had obtained a controlling stock interest in the Cleve· land Metal Products Co., was to eliminate the actual, existing ~compe· tition between the respondent and the Cleveland Metal Products Co. in the manufacture and sale in interstate commerce of sheet aluminum and aluminum cooking utensils, to prevent the Aluminum RoUing Mill Co. from becoming a competitor of the respondent in the manu· facture and in the sale in interstate commerce of sheet aluminum, and tended to and did create in' the respondent a monopoly in the manu· facture nnd sale in interstate commerce of sheet aluminum. ALUMINUM CO. OF AMERICA. 311 802 Order. PAR. 13. The acquisition and continued ownership by respondent of the controlling interest in the stock of the Aluminum Rolling Mill Co. tended to and did bring about a complete monopoly in the respondent of the production and sale of sheet aluminum of certain much-used and important sizes manufactured in the United States, and tended to bring about a complete monopoly.in the respondent of the sale, in -interstate.commerce1 of all Sizes of sheet aluminum manufactured in the United States.

CONCLUSION.

J • ·. The acquisition and ;the continued ownership by the respondent, ~he Aluminum Co. of America, of two-thirds of the outstanding capital stock of the Aluminum Rolling Mill Co., under the conditions and circumstances described in the foregoing findings constitute a violation of section 'J o~ the act of Congress approved October 15, 1914, entitled "An act to supplement existing laws against unlawful restraints and monopolies, and for other purposes." ORDER TO DlVEST STOCK, t·.This' proceeding having been heard by the Federal Trade Commission on 1the complaint of the Commission, the answer of the respondent, the testimony and evidence and the argument of counsel, and the Commission having made its findings as to· the facts with its conclusion that the respondent has violated section 7 of the provisions of the act of Congress, approved October 15, 1014, entitled, "An act to supplement existing laws against unlawful restraints and monopolies, and for other purposes,"

It is now ordered, That the respondent, Aluminum Co. of America, shall within one year from the day of the date hereof divest itseH in good faith of all the stock in the Aluminum Rolling l\Iill Co. owned by it by selling and by absolutely disposing of the same; but such stock or any part thereof shall not be sold to: (1) Any stockholder, or officer, director, or agent of, or nnyone otherwise directly or indirectly connected with or under tho control or influence of the respondent.

(2) Any stockholder in, or officer or director or agent of, or anyone otherwise directly or indirectly connected with or under tho! control or influence of any of the subsidiaries of or any of the corporations associated with the respondent. (3) Any stockholder in, or officer, director, or agent of, or anyone otherwise directly or indirectly connected with or under the control of any corporation in which the respondent, or in which any sub- ~idiary or associate company of respondent owns stock. 312 FEDEru.L TRADF.: ·VOMMISSTON DEGISIONS. .Order. 3F.T.O.

(4) Any corporation ·in which the respondent, or in which any ot the subsidiary or. associate companies of the respondent owns stocl{, or to any corporation· which owns stock in any corporation owned or controlled directly or indirectly by or under the influence directly or indirectly of the respondent. (;5) Any corporation engaged in any branch of the aluminum industry in which any; stockholder, officer, director or agent of, or anyone directly or indirectly under the control or influence of the respondent owns stock. .

{6) Any corporation engaged in any branch of the aluminum industry in which any stockholder, officer, director, or agent of, or anyone directly or indirectly under the control or influence o£ any of tho respondent's subsidiary or ·associate companies own stock: Provided, That nothing herein 1 contained shall; prohibit the respondent from selling the said stock or any part thereof to the.Cleveland Metal Products Co., its officers, directors, 'stockholders, or agents.

It is further ordered, That the respondent, Aluminum Co. of America, shall within 13 months after the day of the date of the serv· ice upon it of this_ order, file ;with the Commi~ion a report in writ· inti setting forth in detail the maqne:r and form in which this order has been conformed to. · . I •' UNITED STATES COLOR & CHEMICAL CO., INC. 313 Con1plaint.

FEDERAL TRADE COMMISSION "· UNITED STATES COLOR-& CHEMICAL CO., INC.