Wholesale Tobacco & Cigar Dealers Association of Philadelphia

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COl\IPLAINT, FINDINGS AND ORDER IN THE 1\IATTER OF THE ALLEGED VIOLA- TION OF SECTION II OF AN ACT OF CONGRESS APPROVED SEPTEMBER 26, 1014, Docket 886-February 16, 1924.

SYLLABUS.

Where an association composed of tobacco wholesalers, and the officers and members thereof;

(a) .Agreed upon a schedule of fixed prices at which the members should thereafter resell the products dealt In by them to their dealer customers, and, In accordance with a system adopted by them and directed to the maintenance and enforcement of such prices;

(b) Undertook to maintain and maintained the same; (c) Caused the fixing of such prices to appear as the formal action of the association by appropriate resolution;

(d) Notified all members of such actions; (e) Sought by persuasion and intimidation to cause all dealers In the territory concerned to maintain such prices;

(f) Sought and secured the cooperation of a tobacco manufacturer, the products of which constituted a large portion of those dealt lu by them and were 80 essential to a tobacco dealer that without them his business would be substantially crippled and he would be placed at a competitive dlsad· vantage with oth£>rs so suppliro, In Its aforesaid persuasion and Intimidation, In the notifying of the trade by circular letters and otherwise that such manufacturer, the notltler, would refuse further to supply price cutters, and In the taking of such action by said manufacturer ; (g) Caused reports of price cutting to be reported to the aforesaid manufacturer for action as above set forth;

(h) Employed a special agent to spy on members and other dealers In order to ascertain and report Instances of price cutting as above described; and Where the aforesaid manufacturer, In pursuance of Its general policy to assist groups of its jobbers who had fixed uniform resale prices on Its products, by refusing shipments of Its goods to price cutters, (l) .Assisted the aforesaid association and members In making effective their plan of resale price maintenance, as above set forth; With the tendency and capacity to constrain all wholesalers doing business In the territory concerned uniformly to sell their products to their dealer customers at the prices fixed as above described and to hinder and suppress all competition In the wholesaling of such products In said territory and likewise to hinder and restrict competition between retailers therein; and with a tendency thereby to unduly hinder nnd obstruct the free and natural fiow of commerce:

Ueld, That such practices, under the circumstances set forth, constituted unfair methods of competition, 256 FEDERAL TRADE COMMISSION DECISIONS, Complaint. 7F.T.C.

Mr. Edward L. Smith and 11/r. E. B. IIaas for the Commission. Mr. Joseph II. Taulane of Philadelphia, Pa., for respondent Wholesale Tobacco & Cigar Dealers Association of Philadelphia, and the officers, directors, and members thereof. 11/r. John Walsh and 11/r. L.A. Spiess of Washington, D. C., and Mr. Junius Parker of New York City, for respondent American Tobacco Company.

Mr. II. II. Shelton of 'Vashington, D. C., ancl11fr. Charles Caldwell of New York City, for respondent P. Lorillarcl Company. COMPLAINT.

Acting in the public interest pursuant to the provisions of an 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," the Federal Trade Commission charges that the Wholesale Tobacco & Cigar Dealers Association of Philadelphia, Pennsylvania, its Officers, Directors, Members and the various individuals, partnerships and corporations named in the caption hereof,1 hereinafter referred to as Respondents, have been and are using unfair methods of competition in interstate commerce in ~io­ lation of the provisions of Section 5 of said Act, and states its charges in that respect as follows:

P ARAGnArn 1. Respondent, 'Wholesale Tobacco & Cigar Dealers Association of Philadelphia, Pennsylvania, is a voluntary unincorporated association organized in the Year 1920 by and composed of various individuals, partnerships and corporations engaged in the business of selling at wholesale to wholesale and retail dealers cigars, cigarettes and other tobacco products in the State of Pennsylvania and in neighboring States, in some instances doing a retail business in said commodities in addition to said wholesale business, said Associ11tion is hereinafter ealled the Association. Respondents, Nelson F. Eberbach, Harvey D. Narrigan, James Murphy, Herman Krull and Paul L. Brogan were the original officers of the Association, holding the respecti re official positions set out in the caption hereof.t They and their successors have continuously bern and are now such officers administering the affairs of the Association. Arthur Shipton, Frnnk Kuhn, William Cohen, llennett Ilollard, Frank Blatt, II. Stewart Moorhead~ Philip Godeski, William D. Shepherd and l\Iorris Hochman were the original Directors of the Association and together constituted the original noard of Directors. They and their successors have continuously been and still are the Directors and llo:rrd of Directors of the Association, controlling and directing its ~affairs.

1 See recital on p. 262 et seq.

WHOLESALE TOBACCO & CIGAR DEALERS ASS'N OF PHILADELPHIA. 257 255 Complaint. Group I.

The following-named respondents with their several principal places of business in the city of Philadelphia, State of Pennsylvania, were at all times hereinafter mentioned and still are engaged in selling one or more of the aforesaid tobacco products at wholesale to wholesale and retail dealers in several States of the United States. They cause said products when so sold to be transported from their respective places of business in said city of Philadelphia to said purchasers at various points in various States of the United States: Nelson F. Eberbach, John S. Eberbach and Joseph H. Eberbach, partners doing business under the name and style of A. B. Cunningham & Company;

Dusel, Goodloe & Company, Incorporated, a corporation organized under the laws of the State of New Jersey; Philip Godcski and Sidney G. Godeski, partners doing business under the name and style Franklin Tobacco Company; Peter J. Murphy and John Murphy, partners doing business under the name and style Peter F. Murphy Company; Charles A. Krull and Herman Krull, partners doing business under the name and style Charles A. Krull; William D. Shepherd and John G. Shepherd, partners doing business under the name and style of S. Shepherd's Sons; T. H. Hart and A. I. Mitchell, partners doing business under the name and style T. II. Hart & Company; Yahn & McDonnell Company, Incorporated, a corporation •organized under the laws of the State of Pennsylvania; M. Blumenthal;

John 'Vagner and Joseph W. 'Vagner, partners doing business under the name and style of John 1Vagncr & Sons; Harvey D. N arrigan, an individual doing business under the trade name II. D. N arrigan & Company;

Victor Fermani;

Bennett Hollard;

B. Hochman;

M. J. Dalton Company, a corporation organized under the laws of the State of Pennsylvania;

Brucker & Boghien, Incorporated, a corporation organized under the laws of the State of Pennsylvania; S. T. Banham and A. L. Banham, partners doing business under the name and style S. T. Dunham & Brothers; E. Cohen and William Cohen, partners doing hm1iness under the name and style E. Cohen & Sons.

~- FEDERAL rn.Ab:E co:M::Missi6N :b:Ecisions, Comptaint 7F.T.C.

The following-named respolldents with their several places of busihess in the city of Philadelphia, State of Pennsylvania, were at all liin~s hereinafter mentioned and still are· engaged in the business of selling one or more of aforesaid tobacco products at wholesale to wholesale and retail dealer:s wholly within the State of Pennsylvania: Frank Kuhn, George Kuhn and John Kuhn, partners doing business under the name and style of F. Kuhn & Brothers; Baum & Neely, Incorporated, a corporation organized under the laws of the State of Pennsylvania;

Anna E. Bechtold, an individual doing business under the trade name of James S. Bechtold;

Frank Blatt;

Arthur Shipton and Thomas F. Cooper, partners doing business under the name and style of Shipton & Payne Company; II. S. Moorhead, an individual doing business under the trade name of Duncan & Moorhead;

Fred G. II. \Voerner, an individual doing business under the trade name of Fred G. II. Woerner & Sons; Group Ill.

The following-named respondents with their several principal places of business in the city of Camden, State of New Jersey, were at all times hereinafter mentioned and still are engaged in selling one or more of aforesaid tobacco products at wholesale to wholesale and retail dealers in several States of the United States. They cause ~;aid products when so sold to be transported from their several places of business in said city of Camden to said purchasers at points !u various States of the United States:

F. Hartmann & Son, a corporation organized under the laws of the State of New Jersey;

John Murphy and James Murphy, partners doing business under the name and style Murphy Brothers. All the foregoing respondents whose names are set out in Groups I, II, and III above were at all times hereinafter mentioned and still are Members of the Association and are hereinafter collectively referred to as the Members. In the absence of the acts and things: done by them ns more particularly hereinafter set out, they werannd are naturally and normally in unrestricted competition witru each other and with other dealers in aforesaid territory. Respondent, American Tobacco Company is a corporation or• ganized under the laws of the State of New Jersey, with its prin- WHOLESALE TOBACCO & CIGAR DEALERS ASS 'N OF PHILADELPHIA, 259 255 Complaint. cipal office in the city of Jersey City in said State and with factories in several of the United States. It was at all times hereinafter mentioned and still is engaged in the manufacture of cigars, cigarcues and other tobacco products and the sale thereof to wholesale and retail dealers throughout the United States. It causes its products when so sold to be transported from the point of manufacture to said purchasers at points in other States of the United States. Amongst said purchasers are all the respondents set out in Groups I, ll, and III above.

Respondent, P. Lorillard Company is a corporation organized under the laws of the State of New Jersey, with its principal office in the city of Jersey City, in said State and with factories in several of the United States. It was at all times herein:rfter mentioned and still is engaged in the manufacture of cigars, cigarettes, and other tobacco products and the sale thereof to wholesale and retail dealers throughout the United States. It causes its products when so sold to be transported from the point of manufacture to liiaid purchasers at points in other States of the United States. Amongst said purl'hasers are all the respondents set out in Groups I, II, and III above. ' Said manufacturers at all times hereinafter mentioned were and still are in competition with each other and with other individuals, partnerships and corporations similarly engaged in the manufacture and/or sale of tobacco products in interstate commerce except jn so far as the 3ame has been limited, prevented or suppressed by the acts and things done by them and the other respondents herein as more particularly hereinafter set out. PAR. 2. At the time of the organization of the association, the prices at which said manufacturers sold their products were fixed R!o follows: Said manufacturers severally supplied the members with a schedule of prices denominated "list prices" which were the prices severally suggested by said manufacturers at which their products should be resold by the members to the retail trade. Tho prices at which said products were sold to the members were fixed by certain uniform discounts off said list in each instance, whereby the members paid to said manufacturers for said products said list {1rices minus said discounts. Wholesale and retail dealers in tobacco products throughout the United States, including respondent dealers set out in Groups I, II, and III above, then were and still are dependent upon respondent manufacturers for their supply of a large portion of the products in which they deal. The extent of this dependence is such that when any such dealer is unable to secure the products of respondent manufacturers or either of them 260 FEDERAL TRADE COMMISSION DECISIONS, Complaint. 7F.T.O.

his business is substantially crippled, and he is placed at a competitive disadvantage with dealers supplied with said products. In the year 1920 the association and its members acting through the association and cooperating and conspiring with it, and with each other, agreed upon a schedule of fixed prices at which the members should thereafter resell to their dealer-customers the products dealt in by the members, including the products of respondent manufacturers, and having thus fixed said uniform resale prices, adopted a system for the maintenance and enforcement of said resale prices by the members and by all other wholesale dealers in the trade who did business within the territory served by the members. Respond~ ent manufacturers cooperated and ·conspired with the association aud its members and participated in said price maintenance system as is more particularly hereinafter set out. In the course of afore~ baid cooperative enforcement of said system, the members, and the association through its officers and directors, did, amongst others, and still do, the following acts and things: (a) Undertook among themselves to maintain said resale prices, and did maintain same;

(b) Caused the fixation of said resale prices to appear as the formal action of the association by an appropriate resolution in that behalf;

(c) Caused the association to notify all members of said action;

(d) Sought by persuasion and intimidation to cause all dealers in the territory above referred to including those members of the association who discontinued the maintenance of said resale prices in violation of their aforesaid undertakings so to do, to maintain said resale prices;

(e) Sought and secured the cooperation of respondent manufacturers in such persuasion and intimidation, which each said manufacturer rendered by notifying the trade in aforesaid territory, by circular letters and otherwise, • that the notifier would refuse to furnish further supplies of his products to any wholesale dealer who failed to resell such products at the prices fixed in aforesaid schedule, or implying the same in veiled language;

{f) Caused reports of the names of said dealers who failed to maintain said resale prices to be reported by the members and their salesmen, either directly to the association, or through the respective members in each instance to the association, and upon receiving such repor,s, in turn, reported the names of such offending dealers to respondent manufacturers requesting WHOLESALE TOBACCO & CIGAR DEALERS ASS 'N OF PHILADELPHIA. 261 255 Complaint. the assistance and cooperation of respondent manufacturers in the enforcement of said system by having said manufacturers refuse to further supply said offending dealers with any of their products;

(g) As a result of reporting said names to the respondent manufacturers and requesting their cooperation, as set out in specification (f) hereof, secured the cooperation and assistance of said manufacturers in that behalf and each said manufacturer upon receiving such information proceeded to investigate said instances of price cutting, and upon finding that the offending dealer was cutting prices, and refusing and failing to maintain aforesaid resale prices, refused to furnish said offending dealer with further supplies of its, the manufacturer's products, until the offender gave such promises and assurances of maintaining said resale prices in the future as were satisfactory to said manufacturers and the association in that regard; (h) Employed special agents to spy upon the members and other dealers in the aforesaid territory in order to ascertain if any of them were or was failing to maintain said resale prices, and upon discovering that a member or a dealer was so doing, to report the name of such offender to the association. Upon receiving such report, sought and secured the cooperation of the manufacturers with regard to said offenders in like manner and with like results as set out in specifications {f) and (g). I> AR. 3. The aforesaid acts and things done by respondents and each of them had and still have the tendency and capacity to constrain all wholesale dealers doing business in the territory above mentioned to uniformly sell the aforesaid products to their dealercustomers at the prices fixed by the association and its members as hereinbefore set out, and hence to hinder and suppress all competition in the wholesaling of said products in said territory, particularly among the members of the association and further to hinder and restrict competition between all retail dealers in said territory. Respondents' said practices thus tended and still tend to unduly hinder and obstruct the free and natural flow of commerce in the channels of interstate commerce.

PAn. 4. The above acts and things done by respondents and by each of them constitute unfair methods of competition in commerce, within the intent and meaning of section 5 of an act of Congress, entitled "An act to create a Federal Trade Commission, to define its powers and duties, and for other purposes," approved September 2G, 1914.

88231 • -2G-vol 7-18 262 FEDERAL TRADE COMMISSION DECISIONS, Findings, 7F.T.C.

REPORT, FINDINGS AS TO THE FACTS, AND ORDER. Pursuant to the provisions of an Act of Congress approved September 26, 1914, entitled "An Act to Create a Federal Trade Commission, defining its powers and duties and for other purposes," the Federal Trade Commission issued and served a complaint upon the respondents, the 1Vholesale Tobacco & Cigar Dealers Association of Philadelphia, Pennsylvania, its Offtcers, directors and members as follows: Nelson F. Eberbach, President, Harvey D. N arrigan and James Murphy, Vice Presidents, Herman J. Krull, Treasurer, Paul L. Brogan, Secretary, respectively, Arthur Shipton, Frank Kuhn, William Cohen, Bennett Bollard, Frank lllatt, II. Stewart Moorhead, Philip Godeski, William D. Shepherd and Morris Hochman, its directors, and the following members: Nelson F. Eberbach, John S. Eberbach and Joseph II. Eberbach, partners doing business under the name and style A. B. Cunningham & Company; Dusel, Goodloe & Company, Incorporated, a corporation, Philip Godeski and Sidney G. Godeski, partners doing business under the name and style Franklin Tobacco Company, Frank Kuhn, George Kuhn and John Kuhn, partners doing business under the name and style F. Kuhn & Brother, Peter J. Murphy and John Murphy, partners doing business under the name and style Peter J. Murphy Company, Charles A. Krull and Herman Krull, partners doing business under the name and style Charles A. Krull, Baum & Neely, Incorporated, a corporation, William F. Shepherd and John G. Shepherd, partners doing business under the name and style S. Shepherd's Sons, T. H. Hart and A. I. Mitchell, partners doing business under the name and style T. II. Hart & Company, F. Hartmann & Son, a corporation, Yalm & McDonnell Company, a corporation, M. Blumenthal, John Wagner and Joseph W. 1Vngner, partners doing business under the name and style of John 1Vagner & Sons, Harvey D. Narrignn, an individual doing business under the trade name II. D. Narrigan & Company, Victor Fermani, Anna E. Bechtold, an individual doing business under the trade name James S. Bechtold, :Frank Blatt, Arthur Shipton and Thomas F. Cooper, partners doing business under the name and style Shipton & Payne Company, II. S. Moorhead, an individual doing business under the trade name Duncan & Moorhead, Bennett Hollard, P. Hochman, M. J. Dalton Company, a corporation, Brucker & Boghien, Incorporated, a corporation, Fred G. H. Woerner, an individual doing business under the trade name Fred G. H. Woerner & Sons, S. T. Banham and A. L. llanham, partners doing business under the name and style S. T. Banham & Brothers, E. Cohen and 1Villiam Cohen, partners WHOLESALE TOBACCO & CIGAR DEALERS ASS 1N OF PIIILADELPHIA, 263 2::15 Findings, doing business under the name and style E. Cohen & Sons, John Murphy and James Murphy, partners doing business under the name and style Murphy Tirothers, American Tobacco Company, a corporation, and P. Lorillard Company, n corporation, charging them and each of them with the use of unfair methods of competition in commerce in violation of the provisions of said net. Respondents John ·wagner and Joseph ·w. Wagner, trading as John ·w ngner & Sons, filed their joint answer denying the use of the methods of competition charged in the complaint; respondent M. J. Dalton Company filed its answer averring that for at least four months prior to the service of said complaint the ·wholesale Tobacco & Cigar Dealers Association of Philadelphia had been practically abandoned and that from that time to the filing of said answer ther9 had been no associated action, agreement, resolution, or understanding between said Association and the officers and among members thereof, or any of them in connection with the business of buying arid selling cigars, cigarettes and other tobacco products; excepting Yahn & McDonnell Company, Tiaum & Neely, Inc., John Murphy and James Murphy, partners doing business under the name and 8style of Murphy Tirothers (none of whom filed answers), all the other respondent members, officers and direct(')rS of the \Vholesale Tobacco & Cigar Dealers Association of Philadelphia and the said Wholesale Tobacco & Cigar Dealers Association of Philadelphia, fi.led their joint answer averring that for at least four months prior to the filing of the complaint the Whol~ale Tobacco & Cigar Dealers Association of Philadelphia had been practically abandoned and that since that time to the filing of said joint answer there had been no associated action, agreement, resolution, or understanding between said Association and the officers and members thereof, or among the members thereof, or any of them in connection with the business of buying and selling ·cigars, cigarettes and other tobacco products, respondents American Tobacco Company and P. Lorillard Company filed their separate answers denying the use of the methods of competition charged in the complaint.

That·eupon hearings were had and evidence was thereupon introduced in support of the allegations of said complaint and on behalf of the respondents before George McCorkle, Esq., an examiner of the Federal Trade Commission theretofore duly appointed and thereupon this proceeding came on for final hearing and the Commission having heard argument of counsel and having duly considered the record (the testimony having heed:. reduced to writing nnd filed in the office of said Commission) and being now fully advised in the premises, makes this its findings as to the facts and 264 FEDERAL TRADE COMMISSION DECISIONS. Findings. 7F.'r.c. conclusion (except that the proceeding having been dismissed as to the P. Lor·illanl Company, the Federal Trade Commission does not make any findings as to the facts as against P. Lorillard Company):

FINDINGS AS TO THE FACTS.

PARAGRAPH 1. Respondent, Wholesale Tobacco & Cigar Dealers .Association of Philadelphia, Pennsylvania, was a voluntary, unincorporated Association organized in the year 1920 and existing until at least June 9, 1!>22. It was composed of various individuals, partnerships and corporations engaged in the business of selling tobacco and tobacco products at wholesale to wholesale and retail dea)ers in the State of Pennsylvania and in the neighboring States, and, in some instances, doing a retail business in said commodities in addition to said wholesale business. Said association will be hereinafter referred to as the association.

The original oflicers of the association elected on September 2, 1920, were the following respondents: Nelson F. Eberbach, President, Harvey D. N arrigan, Vice !>resident, James Murphy, Vice President, Herman J. Krull, Treasurer, Paul L. Brogan, Secretary, nnd Arthur Shiptou, Frank Kuhn, William Cohen, Dennett Hoilard, Frank Blatt, II. Stewart Moorhead, Philip Godeski, William D. Shepherd, and. M. Hochman, Dit:ectors. Such respondents remained and continued as such oflicers of the association from September 2, 1920, until at least January G, 1922, except that respondent . William Fink, on June G, 1921, was elected Second Vice Presid.ent in place of respondent James Murphy, and said respondent ·william Fink continued as such Vice President from June G, 1921, until at least January 6, 1922.

At a meeting of the association held September 2, 1920, the following committees were appointed, viz., Executive Committee: Ucspondcnts II. Stewart 1\Ioorhead, chairman, Frank Kuhn, John Murphy, Philadelphia, Philip Godeski, and William Cohen;

Finance Committee: Respondents M. Hochman, chairman, L. Fink, and James Bechtold;

Membership Committee: Uespondents Arthur Shipton, chairman, F. Hartmann, and Myer Blumenthal.

These respondents continued as members, respectively, of the executive committee, finance committee and membership committee until at least January 6, 1922.

The membership of the association comprised all of the wholesale tobacco and cigarette dealers in Philadelphia and Camden, N. J., except Charles Seider and Fringes Sons.

'VHOLESALE TOBACCO & CIGAR DEALERS ASS'N OF PHILADELPHIA, 265 2::i5 Findings. The following named respondents with their several principal places of business in the city of Philadelphia, State of Pennsylnnia, were at all times hereinafter mentioned and still are engaged in selling cigarettes and other tobacco products at wholesale to wholesale and retail dealers in the several States of the United States. They caused said products when so sold to be transported from their respective places of business in the said city of Philadelphia to purchasers thereof in the various States of the United States:

(a) Nelson F. Eberbach, John S. Eberbach and Joseph H. Eberbach, partners doing business under the name and style of A. B. Cunningham & Company; Dusel, Goodloe & Company, Incorporated, a corporation organized under the laws of the State of New Jersey; Philip Godeski and Sidney G. Godeski, partners doing business under the name and style Franklin Tobacco Company; Peter J. Murphy and John 1\furphy, partners doing business under the name and style Peter F. :Murphy Company; Charles A. Krull and Herman Krull, partners doing business under the name and style Charles A. Krull; William D. Shepherd and John G. Shepherd, partners doing business under the name and style of S. Shepherd's Sons; T. II. Hart and A. I. 1\fitchell, partners doing business under the name and style T. H. Hart & Company; Yahn & l\fcDonnell Company, Incorporated, a corporation organized under the laws of the State of Pennsylvania; 1\f. Blumenthal; John Wagner and Joseph 1V. 1Vagner, partners doing business under the name and style of John 1Vagner & Sons; Harvey D. Narrigan, an individual doing business under the trade name II. D. N arrigan & Company; Victor Fermani; Dennett llollard; P. Hochman; 1\f. J. Dalton Company, a corporation organized under the laws of the State of Pennsyl vnnia; Drucker & Doghien, Incorporated, a corporation organized Under the laws of the State of Pennsylvania; S. T. Danham and A. L. Danham, partners doing business under the name and style S. T- Banham & Brothers; E. Cohen and William Cohen, partners doing business under the name and style E. Cohen & Sons. The following named respondents with their several places of business in the city of Philadelphia, State of Pennsylvania, were at all times hereinafter mentioned and still are engaged in the business of selling cigarettes and other tobacco products at wholesale to wholesale and retail dealers wholly within the state of Pennsylvania:

(b) Frank Kuhn, George Kuhn and John Kuhn, partners doing business under the name and style of F. Kuhn & Brothers; Daum & Neely, Incorporated, a corporation organized under the laws of the State of Pennsylvania; Anna E. Bechtold, an individual doing 266 FEDERAL TRADE COMMISSION DECISIONS. Findings. 7 F. T. C. business under the trade name James S. Dechtold; Frank Dlatt; Arthur Shipton and Thomas F. Cooper, partners doing business under the name and style Shipton & Payne Company; H. S. Moorhead, an individual doing business under the trade name of Duncan & Moorhead; Fred G. H. Woerner, an individual doing business under the trade name Fred G. II. Woerner & Sons. The following named respondents with their several principal places of business in the city of Camden, State of New Jersey, were at all times hereinafter mentioned and still are engaged in the business of selling cigarettes and other tobacco products at wholesale to wholesale and retail dealers in the several States of the United States, particularly in Camden, N. J., and Philadelphia, Pennsylvania. They caused, and at all times hereinafter mentioned caused, such cigarettes and tobacco products, when so sold by them, to be transported from their respective places of business in the city of Camden, N. J., to purchasers in various states of the United States, particularly in the states of New Jersey and Pennsylvania: (c) F. Hartmann & Son, a corporation organized under the laws of the state of New Jersey; John Murphy and James Murphy, partners doing business under the name and style Murphy Drothers. All of the foregoing respondents whose names are set out in subparagraphs (a), (b) and (c) were at all times during the existence of the association, members thereof and are hereinafter collectively referred to as the members, excepting that respondents John Murphy and James Murphy, trading as Murphy Drothers, were expelled from the Association in April, 1!>21, and ,John Wagner and Joseph ,V. Wagner, partners trading as John ·wagner & Sons, Yahn & McDonnell Company and Daum & Neely, Inc., withdrew from the Association some time after June, 1!)21. During the period of the existence of the Asso~iation the members were naturally and normally in unrestricted competition with each other and with other dealers in· the territory in which they sold, excepting insofar as such competition was limited, prevented and suppressed by the acts and things done by them as more particularly hereinafter set out. Respondent, American Tobacco Company, is a corporation organized, existing and doing business under the laws of the State of New Jersey with its principal office in Jersey City in said state and with factories in several states of the United States. It wa.<> at all times hereinafter mentioned and still is engaged in the manufacture of cigarettes and other tobacco products and in the sale thereof to wholesale dealers throughout the United States. It caused, during the period hereinafter mentioned, and still causes, its products, WHOLESALE TOBACCO & CIGAR DEALERS ASS 1N OF PIIILADELPillA. 267 255 Findings. when so sold, to be transportad from the point of manufacture to purchasers at points in other states of the United States. Among said purchasers were all of the respondents named in subparagraphs (a), (b) and (c). The said American Tobacco Company was at all times hereinafter mentioned and still is in competition with indi~ viduals, partnerships and other corporations similarly engaged in the manufacture and sale of tobacco products in interstate commerce. PAR. 2. During the period of the existence of the association the prices at which the respondent American Tobacco Company sold its products were fixed as follows: It supplied each of the members with a schedule of prices, denominated List Prices, which were the prices suggested by said American Tobacco Company at which its products should be re~sold by the members to other wholesalers and to the retail trade. The prices at which such products were sold to the members were fixed by certain uniform discounts off said list in each instance, whereby the members paid the manufacturers for said products said list prices minus said discounts. Wholesale and retail dealers in tobacco products throughout the United States, in~ eluding the members, were, during the existence of the association, and still are, dependent upon the American Tobacco Company for their supply of the American Tobacco Company's products, which constitute a large portion of the tobacco products dealt in by such wholesale and retail dealers. The extent of this dependence is such that when any dealer is unable to secure the products of the Ameri~ can Tobacco Company, his business is substantially crippled and he is placed at a competitive disadvantage with dealers supplied with said products.

On September 16, 1020, the association and its members, acting through the association and cooperating with it and with each other, agreed upon a schedule of fixed prices at which the members should thereafter resell to their dealer-customers the tobacco products dealt in by the members, including the products of the American Tobacco Company and, having thus fixed such uniform resale prices, adopted n system for the maintenance and enforcement of said resale prices by the Members and by all of the wholesale dealers in the trade Who did business in the territory served by the members. In the course of said cooperative enforcement of said system the members and the association, through its officers and directors, did, among other things, during the period from September 16, 1920, until the end of 1021, the following acts and things: (a) Undertook among themselves to maintain said resale prices and did maintain same;

268 FEDERAL TRADE COMMISSION DECISIONS. Flndlngs. 7 F. T. C. (b) Caused the fixation of said resale prices to appear as the !ormal action of the association by an appropriate resolution in that behalf;

(c) Caused the association to notify all members of said acts; (d) Sought by persuasion and intimidation to cause all dealers who sold in the general selling territory of the members, including those members who discontinued the maintenance of said resale prices in violation of their aforesaid undertaking so to do, to maintain said resale prices;

(e) Sought and secured the cooperation of the American Tobacco Company in such persuasion and intimidation, which said American Tobacco Company rendered by notifying its trade in the territory of the members, by circular letters and otherwise that the notifier would refuse to furnish further supplies of its products to any wholesal~ dealer who failed to resell such products at the prices fixed in the aforesaid letter, or implying the same in veiled language;

(f) Caused reports of the names of said dealers who failed to maintain said resale prices to be reported by the members and their salesmen, either directly to the association, or through the respective members in each instance to the association, and upon receiving ::mch reports, in turn, reported the names of such offending dealers to the American Tobacco Company, requesting its assistance in the enforcement of said system by having said American Tobacco Company refuse to further supply said offending dealers with any of its products;

(g) As a result of reporting said names to the American Tobacco Company and requesting its cooperation as set out in specification (f) hereof, secured the cooperation and assistance of the American Tobacco Company in that behalf and said American Tobacco Company, upon receiving such information, proceeded to investigate said instances of price-cutting and upon finding that the offending dealer was cutting prices and refusing and failing to maintain the said resale prices, refused to furnish said offending dealer with further supplies of its products;

(h) Employed a special agent to spy upon the members and other dealers in the aforesaid territory in order to ascertain if any of them were failing to maintain said resale prices, and upon discovering that a member or dealer was so doing, to report the name of such offender to the Association, which, upon receiving such reports, sought and secured the cooperation of the American Tobacco Company with regard to such offenders in like manner and with like results as set out in specifications (f) and (g). WHOLESALE TOBACCO & CIGAR DEALERS ASS 'N OF PHILADELPHIA. 269 255 Findings. PAR. 3. During the period aforesaid in which the association adopted and maintained uniform resale prices for said American Tobacco Company~ products in the manner and by the means set out in paragraph 2 hereof, it was the general policy of said American Tobacco Company to assist groups of its jobbers who would fix or who had fixed by cooperation among themselves uniform resale prices on its products, by refusing shipments of its goods to such of its jobbers who had resold or who would re-sell at prices lower than those fixed by such jobbers by cooperation among one another. Such was the policy of said American Tobacco Company with respect to respondent association and its members. The representatives of said American Tobacco Company in the territory in which the members resold its products were instructed by their superiors to carry out such policy in Philadelphia and vicinity and because of such instructions such representatives carried out such policy. Said American Tobacco Company knew of the price agreements made by the association and its members as described in paragraph 2 hereof and agreed with the said association and its members to help them maintain the price agreements described in paragraph 2 hereof.

Charles Seider, one of said American Tobacco Company's distributors in Philadelphia and a competitor of the members, having declined an invitation of the president and treasurer of the respondent association to join its membership, was urged by the division rnana~er of the American Tobacco Company in charge of its Philadelphia territory, to join the association. Said division manager requested said Seider to join the association and not to sell at prices below those fixed by it and its members, but to comply with the uniform prices put into effect by the members and by the association as described in paragraph 2 hereof. Said Seider refused to join the association, or to abide by its prices, and the said American Tobacco Company, after investigating a complaint made to it by the association and its members that the said Seider was reselling its products at prices less than those fixed by the association and its members, discontinued selling to said Seider in the period from April 20, 1!>21, to August 13, 1!>21, for the purpose of assisting the association and its members to maintain the price agreements as described in paragraph 2 hereof. After said Seider, following the suggestion made to him by the said division manager that if he joined respondent association, it would help him gct the shipments that had been withheld from him by said American Tobacco Company, applied to the vice president of the respondent association for membership therein, the said American Tobacco Company reinstated him 270 FEDERAL TRADE COMMISSION DECISIONS. Conclusion 7F.T.C.

as one of its customers and forwarded to him shipments that had been withheld in the period from April 20, 1921, to August 13, 1921. Respondents John Murphy and James Murphy, partners doing business under the name and style Murphy Brothers, were expelled from the association in April, 1921, because they were accused by said association of reselling at prices less than those fixed by the association. The American Tobacco Company, after investigating complaints made to it by the association that said Murphy Brothers were reselling its products at prices less than those fixed by the as· !'iociation and its members, discontinued selling said Murphy Brothers in the period from August 29, 1921, to October 4, Hl21, for the purpose of assisting the association and its members in maintaining the prices which had been fixed as set out in paragraph 2 hereof.

For the purpose of assisting the association and its members in maintaining the prices fixed by them as set out in paragraph 2 hereof, the American Tobacco Company in 1021, because of complaints made to it by the association and its members that respond· ents Fermani and Dlumenthal were reselling its products at prices less than those fixed by the association and its members, withheld f.'hipments of its products to said Fermani and Dlumenthal while it was investigating the prices at which Fermani and Blumenthal wert! r<'selling its products.

PAn. 4. The aforesaid acts and things done by said respondents and each of them had the tendency and capacity to constrain all whole.c;ale dealers doing business in the territory above mentioned to nniformly sell the aforesaid products to their dealer-customers at the prices fixed by the association nnd its members as hereinbefore set out and hence to hinder and suppress all competition in the wholesaling of said products in said territory, particularly among the members of the association and further to hinder and restrict competition between all retail dealers in said territory. Said respondents' practices thus tended to unduly hinder and obstruct the free nnd natural flow of commerce in the channels of interstate <:commerce.

CONCLUSION.

The pract:ices of said respondents under the conditions and cir· cumstances described in the foregoing findings are unfair method3 of competition in interstate commerce and constitute a violation of the Act of Congress apf'roved September 2G, 1914, entitled "An Act to Create a Federal Trade Commission, to define its powers and duties and for other purposes."

WHOLESALE TOBACCO & CIGAR DEALERS ASS'N OF PIIILADELPHIA, 271 255 Order. ORDER TO CEASE AND DESIST, This proceeding having been heard by the Federal Trade Commission upon the Complaint of the Commission, the answers of respondents, the testimony and evidence and the argument of counsel, and the Commission having made its findings as to the facts and having reached its conclusion that the respondents hereinafter named have violated the provisions of the Act of Congress approved September ~6, 1914, entitled "An Act To create o. Federal Trade Commission, to define its powers and duties and for other purposes," Now, therefore, it is ordered, That the Wholesale Tobacco & Cigar Dealers Association of Philadelphia, Pennsylvania, and its Officers, Directors and l\Iembers as follows: Nelson F. Eberbach, President, Harvey D. Narrigan and James Murphy, Vice Presidents, Herman J. Krull, Treasurer, Paul L. Brogan, Secretary, respectively, Arthur Shipton, Frank Kuhn, 'Villiam Cohen, Bennett Hollard, Frank lllatt, II. Stewart l\Ioorhead, Philip Godeski, William D. Shepherd and l\Iorris Hochman, its directors, and the following members: Nelson F. Eberbach, John S. Eberbach and Joseph II. Ebcr·bach, partners doing business under the name and ~>style A. ll. Cunningham & Company; Dusel, Goodloe & Company, Incorporated, a corporation, Philip GoJeski and Sidney G. Godeski, partners doing business under the name anJ style Franklin Tobacco Company, Frank Kuhn, George Kuhn and John Kuhn, partners doing business under the name and style F. Kuhn & llrother, Peter J. Murphy and John Murphy, partners doing Lusiness under the name and style Peter J. l\Iurphy Company, Charles A. Krull and Herman Krull, partners doing business under the name and style Charles A. Krull, Baum & Neely, Incorporated, a corporation, Wilfiam F. Shepherd and John G. Sht-pherd, partners doing Lnsiness under the name and style S. Shepherd's Sons, T. II. Hart and A. I. Mitchell, partners doing business under the name and style T. II. Hart & Company, F. Hartmann & Son, a corporation, Yalm & McDonnell Company, a corporation, M. Dlumenthal, John 'Vagncr and Joseph ,V, 'Vngner, partners doing business under the name and style of John 'Vagner & Sons, Harvey D. Nnrrigan, an individual doing business under the trade name II. D. N arrigan & Company, Victor Fermani, Anna E. Bechtold, an individual doing business under the trade name James S. Bechtold, Frank Blatt, Arthur Shipton and Thomas F. Cooper, partners doing business under the ?nme and style Shipton & Payne Company, II. S. Moorhead, an llldividual doing business under the trade name Duncan & Moor- 272 FEDERAL TRADE COMMISSION DECISIONS, Dissent. 'iF.T. 0. head, Bennett Hollard, P. Hochman, M. J. Dalton Company, a corporation, Brucker & Boghien, Incorporated, a corporation, Fred G. II. \Voerner, an individual doing business under the trade name Fred G. II. Woerner & Sons, S. T. Ban ham and A. L. Banham, partners doing business under the name and style S. T. Banham & Brothers, E. Cohen and \Villiam Cohen, partners doing business under the name and style E. Cohen & Sons, John Murphy and ,Tames Murphy, partners doing business under the name and style Murphy Brothers, cease and desist from fixing, enforcing and maintaining and ft·om enforcing and maintaining, by combination, agreement, or understanding among themselves, or with or among any of them, or with any other' wholesaler of cigarettes or other tobacco products, resale prices for cigarettes or other tobacco products dealt in by such respondents, or any of them, or by any other wholesaler of cigarettes or other tobacco products;

And it is further orde·red, That The American Tobacco Company cease and desist from assisting and from agreeing to assist any of its dealer-customers in maintaining and enforcing in the resale of cigarettes and other tobacco products manufactured by the said The American Tobacco Company, resale prices for such cigarettes and other tobacco products, fixed by any such dealer-customer by agreement, understanding or combination with any other dealercustomer of said The American Tobacco Company. It is further ordered, That all of said respondents and each of them shall file with the Federal Trade Commission, within sixty (GO) days from the date of the service upon them of this order, a report in writing stating the manner and form in which this order has been conformed to.

ORDER OF DISMISSAL AS TOP. LORILLARD COMPANY, This proceeding having come on for hearing before the Federal Trade Commission upon the complaint of the Commission, the answers of the respondents and the testimony and evidence, and the Commission being fully advised in the premises, It is ordered, That the complaint herein be and the same is hereby dismissed as against respondent P. Lorillard Company. Dissent by Commissioner Van Fleet.

I dissent in this case as to the order against the American Tobacco Company. The charge is that said company conspired witn the Wholesale Dealers Association to maintain prices. The association was interested in maintaining the price that its members might WHOLESALE TOBACCO & CIGAR DEALERS ASS'N OF PHILADELPHIA. 273 255 Dissent. obtain more for their goods. The object of the American Company was not the same as the Association. The American Company sold its goods upon a ten per cent discount to the members of the association and its price was in no wise affected by the cutting of dealers. Of course this did not necessarily prevent the American Company from conspiring with the association but it is a fact to be considered whether there was such conspiracy. If dealers were cutting prices and demoralizing the trade which at the time charged had proceeded to the extent of ruin if continued the American Company had a legal right to refuse to continue btLsiness dealings with such concerns. It is evident that a concern can not stay in business if it sells at no profit as the evidence shows was the case here. The mere fact that the acts of the American Company were contemporaneous with those of tho association is not determinative. • Of course conspiracy is often incapable of direct proof, but when resort is had to circumstantial evidence as in this case the proof should rise above the dignity of mere suspicion. Some of the evirlence relied upon to sustain the order hardly ever rises to that dignity. Without summarizing the evidence to my mind it appears that the truth is that the American Company had nothing to do with the organization of nor conduct of the association and I know of no proof to the contrary. Also I believe its acts were taken independ- E-ntly of the association and no real proof to the contrary appears. The Commission dismissed the case against the Lorillard Company for lack of proof and I believe that eliminating evidence of acts of others for which the American Company was in no wise responsible and discarding mere conjecture there is not proof to ·war· rant an order against the American Company. 274 FEDERAL TRADE COMMISSION DECISIONS. Complaint. 'iF.T.O. FEDERAL TRADE COMMISSION v.

ATLANTIC COl\lll WORKS.