Pittsburgh Tile & Mantel Contractors' Association

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IN Tile MATI'ER OF PITTSBURGH TILE &l MANTEL CONTRACTORS' ASSOCIATION ET AL.

COMPLAINT AND ORDER IN REGARD TO THE ALLEGED VIOLATION Oil' SEC. 5 Oil' AN ACT OF CONGRESS APPROVED SEPT. 26, 1914 Docket 1979. OompZalnt, Oct. 19, 1981-order, Aug. 11, 1983 Consent order requiring respondent association, its members and other agents, representatives, servants, and employees to cease and desist "from directly or indirectly making appUcatlon of any resolution, rule, by-law, understanding, or agreement, having for its purpose or effect interference with, or restriction upon the purchase, sale or importation into the State of Pennsylvania from any other State of the United States of tiles or similar materials, including a vitreous enamel tile on a steel base heretofore designated and known as 'Porstelain ', manufactured and sold in Interstate commerce by the Porcelain Tile Company, and particularly from giving any further force and effect to that certain resolution adopted by respondent Pittsburgh Tile & Mantel Contractors' Association on the 9th day of July A.D. 1929, making it an offense for member concerns to deal in said product formerly known as 'Porstelain ', Prwided, That this order shall not be construed as restricting the respondent Pittsburgh Tile & ~Iantel Contractors' Association in determining the bona fide eligibility requirements for membership therein." lllr. PGad B. Morehouse for the Commission. Davies, Jones, Beebe &: Busick, of Washington, D.C., and Alter, Wright & Barron, of Pittsburgh, Pa., for respondents. . Col\IPLAINT 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 respondents named in the caption hereof have been and are using unfair methods of competition in interstate commerce in violation of the provisions of Section 5 of said Act, and states its charges in that respect as follows:

PARAGRAPll 1. Respondents, Pittsburgh Tile & Mantel Contractors' Association, Certified Tile Corporation, Beach view Mantel & Tile Co., Dormont :Mantel & Tile Co., Highland Mantel & Tile Co., Lincoln Mantel & Tile Co., Starr Tiling Co., and Twin City Tiling Co. are all Pennsylvania corporations having their respective places of business in Pittsburgh. Respondent Frank J. Haggerty Mantel Co. is a Pennsylvania corporation with its principal place of business at Complaint lsf.T.C.

Homestead, Pa. Respondents David Morris, Frederick Lawrence Gruf, and Fred L. Graf constitute a limited partnership formed under the laws of Pennsylvania, doing business under the style of Morris, Graf & Co., Ltd., and having their principal place of business at Wilkinsburg, Pa. Respondent Edward M. Aiken, doing business under the firm style of Aiken & Co., has his principal place of business in Pittsburgh. Respondent R. E. Logan, doing business under the style of R. E. Logan & Co., has his principal place of business in Pittsburgh. Respondents Hettie A. McNeilly, Thomas McCutcheon, James McNeilly, and Louis McNeilly are copartners doing business under the firm style of McNeilly Mantel & Tiling Co. with their principal place of business at McKeesport, Pa. Respondents Mary A. Spellman and James J. Spellman are copartners doing business under the firm style of M. J. Spellman & Co. and having their principal place of business in Pittsburgh. Respondent E. J. Hubbert does business under the firm style of Standard Mantel & Tile Co. and has his principal place of business in Pittsburgh. Respondent Pittsburgh Tile & Mantel Contractors' Association will be hereinafter referred to as the, "Association". Respondents, other than the Association and Certified Tile Corporation, are members of the Association and are hereinafter referred to as " member concerns". There are other tile and mantel dealers in Allegheny County, Pa., who are, or were recently, members of the Association, but are not joined herein as respondents. They are under suspension from the Association pursuant to Ction taken as described in paragraph 10.

PAR. 2. 'fhe Association was formed, as a corporation not for profit, in 1904, under the name Mantel & Tile Dealers' Credit Association o£ Allegheny County. A change o£ corporate name to the present title was authorized in 1919. The Association is not_ engaged in the sale or purchase of any commodity. It is a trade Association. It has no capital stock. The member concerns of the Association are dealers in tile and mantel in Allegheny County, Pa. They not only sell tile and mantel and related materials, but contract with purchasers for the installation o£ tile and mantel. In the regular course of their business member concerns purchase the commodities in which they deal from manufacturers thereof and others located both in Pennsylvania and other States, and cause the same to be transported from the said various States to their respective places of business in the county aforesaid. Member concerns are in competition in their said described trade, both among themselves and with nonmember corporations, partnerships, and individuals engaged in the purchase, sale, and installation of mantel, tile and PITTSBURGH TILE & MANTEL CONTRACTORS' ASS'N ET AL. 25 23 Complaint similar materials. Member concerns have the major part of the tile and mantel trade in said county.

PAR. 3. The Certified Tile Corporation was formed as a corporation for profit, in 1928, with 500 shares of stock of $100 par value each. It is engaged in buying and selling tile and mantel and related materials, purchasing the same, in the regular course of its trade, both in Pennsylvania and in other States, and causing the said materials to be transported from the various States of manufacture to the warehouses of said corporation in Pittsburgh. Sales of the materials so purchased by the Certified Tile Corporation are by it made to member concerns of the Association exclusively. The Certified Tile Corporation is in competition with other vendors of the same or similar materials in the said county who cause the materials so purchased to be transported from other States into Pennsylvania for resale to member concerns and to others competing with member concerns, as in paragraph 2 hereof alleged. The member concerns of the Association are subscribers to the stock of the Certified Tile Corporation. The said stock and certificates thereof are held by the Association in escrow as partial security for the adherence of member concerns to the policies of the Association hereinafter set forth. The Association controls the Certified Tile Corporation. The president, treasurer and secretary of the Association are respectively the president, treasurer and secretary of the Certified Tile Corporation. Suspension from the Association is deemed by the respondents to work a forfeiture of the stock in the Certified Tile Corporation, owned by any member, during the period of any member's suspension.

PAR. 4. The avowed purposes of the Association as set forth in article II of its charter are as follows:

That the purpose for which the corporation is formed is the encouragement and protection of trade and commerce among those engaged in the business of dealing in mantels and tile in the County of Allegheny, in said Commonwealth of Pennsylvania, by inculcating among them just and equitable principles; by establishing and maintaining uniformity in commercial usages; by acquiring, preserving, and disseminating valuable business information; by avoiding and adjusting, as far as practicable, the controversies and misunderstandings which are apt to arise between individuals engaged in trade when they have no ackno,vledged rules to guide them; and by these means, to attain to the end that membership in this corporation may be an assurance to the public of skill, honorable reputation and probity.

PAn. 5. The member concerns have mutually bound themselves to follow a uniform and concerted course of action on all matters, both such as may be deemed to be within the purview of the charter provision of the Association set forth in paragraph 4 hereof, and on any 26 FEDERAL TRADE COliiMISSION DECISIONS Complaint lsf.T.O.

other rule of action which the Association may adopt, subject to penalties, by the express terms of article VI, section 3, of the Association's bylaws, in manner following:

The members of this corporation shall be bound to abide by the decision or the corporate body in all matters coming within the purview of the second article of the charter of incorporation, and of the general policy of the corporation adopted pursuant to said second article, and the violation or departure from. or willful disregard of either the general rules laid down by the corporation in furtherance of the purpose of its creation, or of any particular rule of action adopted and laid down by the corporation in any given case, shall upon conviction by the corporation, subject the party so violating, departing from or disregarding the rulings and general policy of the corporation, to the payment of a fine in such sum as the corporation may, by resolution, fix. In case of the nonpayment of any fine imposed upon any memberconcern, it is provided by article VIII, section 2, of the bylaws, that the delinquent member shall be suspended from membership in the- Association.

PAR. 6. All concerns joining the Association after the formation thereof, have agreed, by the express terms of article IV, section 4, of the bylaws, to abide by the policy adopted by the Association, as to the conduct of the business in which they are engaged. Applicant concerns, under article VI, section 7, of the bylaws, do not become members in good standing in the Association until they have caused signature to be duly authorized and made of the charter and bylaws of the Association. The duty of reporting violations of the Association's policies, committed by member concerns, is expressly assumed by all members under the terms of article VIII, section 1, of thebylaws.

PAR. 7. It is also agreed by the member concerns of the Association, by the express terms of article VI, section 1, of the bylawst that no member shall resign from the Association so long as it is engaged in the mantel business, the tile business, or both. PAR. 8. Membership in the Association confers upon member concerns great advantages not enjoyed by nonmember competitors. Among the said advantages are the following: (a) The exchange of trade and credit information with other members; (b) Credit prestige in the trade;

(c) Prestige in the trade as to the quallty of materials and workmanship~ (d) Tbe certification or guarantee of materials and workmanship by the- Certified Tile Corporation, which are only available to member concerns; (e) The prlvllege of buying certain materials which the Certl:ll.ed Tile Corportation has secured the exclusive right to sell in the aforesaid county and which It sells to member concerns only;

(f) The privilege of buying certain materials through the Certified Tile Corporation at discounts greater than those obtainable by nonmember competing_ mantel and tile dealers;

PITTSBURGH TILE & MANTEL CONTRACTORS' ASS 'N ET AL. 27 23 Complaint (g) 'lhe right to participate ln the dividends of the Certified Tile Corporation;

(h) The good will and cooperation of other member concerns; and ( i) The rights and privileges in general of membership in both the Association and the Certified Tile Corporation, and of stock ownership ln the latter -corpora tlon.

PAR. 9. In 1929, certain of the member concerns of the Association, not parties respondent herein, made contracts for purchasing and importing into said Allegheny County, Pa., from the State of. Mis- -souri, that certain enameled metal product known as "porstelain ", which product said members were then installing and selling in competition with the materials installed and sold by other member con- -cerns and by nonmembers engaged in said county in the business described in paragraph 2 hereof.

PAR. 10. On July 9, 1929, a resolution was adopted by the Asso- ·ciation, wherein it was declared that dealing in said " porstelain " was an offense within the provisions of the bylaws set forth in paragraph 5 hereof, and further, it was therein declared that member concerns continuing thereafter to deal in " porstelain " would become subject to the said bylaw provisions. Thereafter, the said member concerns which had dealt in said "porstelain ", as in paragraph 9 herein set forth, having failed or omitted to discontinue their trade therein, were by this Association fined in substantial sums, were suspended from membership in this Association and were excluded from the advantages of such membership set forth in paragraph 8 hereof; and they are still deprived of said membership and its said advantages.

PAn. 11. Among the purposes of the understandings and activities set forth herein in paragraphs 4 to 10, inclusive, are the following:

(a) To prevent, insofar as possible, the purchase and importation into Penn- -sylvania, and the sale of said "porstelain ", and completely to prohibit such purchase, importation and sale by member concerns of the Association; (b) To coerce certain member concems to break their contracts, previously made, for the said purchase, importation and sale of said "porstelain"; (c) To diminish the confidence of the trade ancl of consumers in said •• porstelain" and to prevent the establishment of such confidence; (d) To damage and, Insofar as possible, to destroy the trade of both the producers and the dealers in the said "porstelain" from other States Into Pennsylvania and in that State;

PAn. 12. The effect of the understandings and the activities of respondents as alleged above in paragraphs 4 to 10, inclusive, has been and is as follows :

(a) To diminish and restrict the purchase, the importation from other States toto Allegheny County, Pa., and the sales in said county, of said "porstelain "; Order lsf.T.C.

(b) To close to the producers and shippers of said " porstelain " numerous outlets for interstate trade therein;

(c) To bring to bear the coercive influences of ostracism, trade isolation and the loss of the business and monetary advantages, hereinabove in paragraph 8 set forth, upon member concerns neglecting or refusing to adhere to the policies and agreements of the Association as respects said " porstelain "; (d) To impress upon member concerns against which action, as described in puragt·aph 10, has not been taken by the Association, that they cannot deal In said "porstelain" without Incurring serious penalties; (e) To deprive dealers in tile and mantel of the free and unobstructed conduct and control of their respective businesses in such manner as the managers of each concern rna~· deem fit, anu to intimidate and prevent dealers from trading in said "porstelain ";

(f) To deprive the buying public of Alleg!;eny County, Pa., of the benefit of the free and unobstructed competition between said "porstelain " and other materials sold and used for the same or similar purposes; (g) To substantially lessen, hinder, restrict and restrain interstate trade in said "porstelain ", with resulting benefits to the trade of manufacturers of and dealers in competing materials;

(h) To conduce to a monopoly in Allegheny County, Pa., in favor of the materials approved by the Association.

PAn. 13. The practices and methods of competition hereinabove described have the capacity and a dangerous tendency to substantially lessen competition in interstate trade in tile and mantel and allied materials and to create a monopoly in favor of certain materials approved by the respondents, in an important market for these materials, and said practices and methods have actually lessened such competition in the said market. The said practices and methods of competition of respondents are against the public interest and constitute unfair methods of competition in commerce between the States, in violation of Section 5 of the aforesaid Act of Congress known as the Federal Trade Commission Act. OllDER TO CEASE AND DESIST This proceeding having come on for final hearing by the Federal Trade Commission upon the respondents' answer waiving all further procedure and consenting that the Commission may make, enter and serve upon them and each of them an order to cease and desist from the methods of competition charged in the complaint and the Commission being fully advised in the premises, and it having been stipulated and agreed by and between counsel for respondents and counsel for the Commission that the names and designations of certain of the respondents as they appear in the caption and body of the complaint hereinbefore entered and served upon all of the following respondents, may be considered by the Commission as having been amended to conform to the proper names and designations of said respondents as they hereinafter appear. PITTSBURGH TILE & MANTEL CONTRACTORS' ASS'N ET AL, 29 23 Order It is now m'dered, That said stipulation and agreement be and the same is hereby approved, that the complaint be so amended, and that the respondents, Pittsburgh Tile & Mantel Contractors' Association, Certified Tile Corporation, Beechview Mantel & Tile Co., Dormont Mantel & Tile Co., Highland Mantel & Tile Co., Lincoln Mantel & Tile Co., Starr Tiling Co., all corporations formed under the laws of Pennsylvania; W. P. Ramsey, doing business as Twin City Tiling Co.; David Morris, Frederick Lawrence Graf, and Fred L. Graf, doing business as a Pennsylvania limited partnership association under the style of Morris, Graf & Co., Ltd.; Edward M. Aiken, doing business under the style of Aiken & Co.; R. E. Logan, doing business under the style of R. E. Logan & Co.; James Louis McNeilly, Hattie A. McNeilly, and Thomas McCutcheon, copartners, doing business under the style of Men eilly Mantel & Tile Co.; Mary A. Spellman and James J. Spellman, copartners doing business under the style of M. J. Spellman & Co.; and E. J. Huber doing business under the style of Standard Mantel & Tile Co., and the agents, representatives, servants, and employees of each of them cease and desist from directly or indirectly making application of any resolution, rule, bylaw, understanding or agreement, having for its purpose or effect interference with, or restriction upon the purchase, sale, or importation into the State of Pennsylvania from any other State of the United States of tiles or similar materials, including a vitreous enamel tile on a steel base heretofore designated and known as " Porstelain " manufactured and sold in interstate commerce by the Porcelain Tile Co., and particularly from giving any further force and effect to that certain resolution adopted by respondent Pittsburgh Tile and Mantel Contractors' Association on the ·9th day of July A.D. 192D, making it an offense for member concerns to deal in said product formerly known as "Porstelain ", Provided, That this order shall not be construed as restricting the respondent Pittsburgh Tile & Mantel Contractors' Association in determining the bona .fide eligibility requirements for membership therein.

It is further ordered, That the respondents and each of them shall within 60 days after service upon them of a copy of this order, file with the Commission a report in writing setting forth in detail the manner and form in which they have complied with the order to cease and desist hereinabove set forth. Syllabus 18F.T.C.