California Rice Industry, et al.

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IN THE l\1.-\ TTER OF CALIFORNIA RICE INDUSTRY, ET AI...

COMPLAINT, FINDINGS, AND ORDER IN REGARD '£0 Tile ALLEGED VIOLATIO::-f OF SEC. 5 OF AN ACT OF CONGRESS APPROVED SEPT. 26, lih Docket 3090, Complaint, Mar. 26, 1931-Deciaion, Mar. 26, 1938 Where an unincorporated trade association, which included individuals and concerns and corporate cooperative organization of some 300 rice growers of northern California, engaged in said State in purchasing, processing. milling, and selling and distributing, in aforesaid and other States and a! below set forth, the "California-Japan type," pt·oduced, substantially, only in said State and sl1ipped, largely, to Hawaii and Puerto Rico; associu· tlon officers, including individual who, as chairman of its marketing uonrd and member of its crop board, was dominant factor in its organization and directing executive of its pmctices and those of (1) its said marlwting board, membership of which, excepting said chairman (neither miller nor grower), constituted all the rice millers in said State, and of (2) its said crop board, which had come to be dominated, likewise, by millers, rather than, in accordance with original plan and fact, the independent growers; and association members; acting under and in pursuance of the "Intra· state Marketing .Agreement" to which they became signatories shortly pre· ceding termination by Secretary of .Agriculture of the theretofore effective "Interstate Marketing .Agreement," and under which intrastate agreement said association, and its said marketing and crop boards, were set up-- (a) Fixed prices, terms of sales, quantity discounts, and brokerage fees for sale of processed rice in interstate commerce through actions of its mar· keting board from time to time in (1) fixing at weekly meetings, with con· currence of crop board, industry price for extra-fancy clean rice, througll which, by formula adopted by former, base price, producer's price ar~d trade prices for all grades of processed rice were computed, and 1ll (2) fixing, through former alone, prices for screenings and brewers; (b) Listed, published, and distributed, through said association and roarke~ ing board members, said prices, and uilifot·mly ob~served and maintaiue same, both in purchase of paddy from growers, and on all sales of processed rice, whether sold in aforesaid State or sold and shipped to cus· tomers in Hawaii or other points, and charged trade, with rare exception. prices which, for given time and grade, were uniform; d (c) Acting in agreement with Hawaiian Rice Importers .Association, organize t by aforesaid interstate agreement's marketing bo1ud, and composed 0 islands' largest rice importet·s, to monopolize rice markets thereof to~ benefit of its own miller members, and membership of which importers association board determined and classified, fixed discount to purchasers on so large a minimum, that no single buyer was able to take ndvantuge thereof, made available to and enjoyed by said importers' associa foil~ 11 through pooling member requirements and placing pooled orders vnt miller members, and submitted to audit, in behalf of said importers' asso; elation, to guarantee such discounts, and deducted from sales to importee members, as dues to and for benefit of said importers' association, cbarg CALIFORNIA RICE INDUSTRY, ET AL. 969 Complaint of cent a uag; with result that said importer members, as sole recipients through such membership, obtained monopoly, practically, of rice industry in said islands, and nonmembers were unable to purchase said preferred "California-Japan type" rice from said miller members at competitive price, and only negligible sales were made to them; (d) Fixed percentages, under aforesaid Intrastate Marketing Agreement, of total annual rice crop which each miller member of marketing board might process, and determined, through said board, monthly processing quota for each miller, and required payments of miller members on each 100-pound bag processed, with additional 10 cents for each bag processed in excess of allotted quota for preceding month, for said board's expenditures and for dh;tribution thereafter among the membership, and provided for imposition of a penalty against auy miller member for violating board's ·provisions; and (e) Employed, through said board, certified public accountnnts to check records and invoices of members, and to ascertain compliance with board's prices, terms of sale, quantity discounts, and brokerage rates, and made monthly rt"ports of said accountants, following audits, and test checks of all records of invoices of members, irrespective of where rice was shipped, subject of discussion at board's meetings, and thus checked observance of said prices, He., and payments of discounts on sales to Ilawali, and calculation of aforesaid dues payable to said Importers' Association in behalf of its members, and pmper remission thereof;

With result that competition in sale of rice and rice products was restricted and suppressed, and said association and members, etc., acquired a monopoly in sale of said ';California-Japan type" rice, as above set forth: 1Field, That such purposes, pt·actices and policies constituted an unlawful agreement to fix and maintain prices of rice and rice products in commerce, and constituted unfair methods of competition. Before Mr. Charles F. Diggs, trial examiner. llfr. Daniel J. ll!urphy for the Commission. lllr. Harry AI. Creech, of San Francisco, Calif., for respondents. Col\! PLAINT Pursuant to the provisions of an Act of Congress, approved September 26, 1914, entitled "An Act to create a Federal Trade Comltlission, to define its powers and duties, and for other purposes," the ~ederal Trade Commission having reason to believe that the associahon, the individuals, and the corporations hereinafter described and llamed as respondents have been and are now using unfair methods of competition in commerce, as "commerce" is defined in said Act of ~ongi"Pss and it appearing to said Commission that a proceeding by lt in respect thereof would be in the public interest, hereby issues its complaint stating its charges in that respect as follows: PARAGRAPH 1. California Rice Industry hereinafter referred to as !he asso<.<iatiou, is a voluntary unincorporated trade association, with lts offices in the Balfour Building in the city of San Francisco, State Complaint 26F.T. C.

of California, and is composed of the firms hereinafter named and described and its acts, practices and policies are controlled and directed by the individuals hereinafter named, and the acts, practices, and methods hereinafter alleged to have been used by the respondents herein were initiated through and made effective by the association. PAR. 2. Respondent Harry M. Creech is an individual and is the chairman of the marketing board and a member of the crop board of the respondent association, and is the executive controlling, directing, and dominating the association and its members in planning and carrying on the practices and methods as hereinafter alleged. Respondents George W. Brewer, 'William Crawford, Florence }-f. Douglas, Charles S . .Morse, J. S. Ritterband, W. T. '\Velisch, I. Yama· kawa, 0. F. Zebal, are members of the marketing board of the re· spondent association; respondent R. A. Renaud is chairman, and respondents Hugh Baber, Leon Brink, N. F. Dougherty, Ernest Grell, Lewis Manor, and A. E. Scarlett are members of the crop board of the respondent association. Said respondents and their predecessors and successors in office through said marketing and crop boards for· mulate, dominate, control, and direct the policies and practices of the respondent association and its members, and did so during all of the times hereinafter mentioned and in doing the acts and things hereinafter alleged to have been done and performed and in planning and carrying out the practices and methods hereinafter described .. The individuals named in this paragraph are hereinafter referred to as the individual respondents.

PAR. 3. Respondents Charles S. Morse, Allen A. Morse, Nelson }3. Morse, Clarence G. Morse, and Gertrude Morse are individuals trad· ing as the Capital Rice Mills and own and operate a rice mill in th8 city of West Sacramento in the State of California and have their principal offices and place of business at 310 California Street in th6 city of San Francisco, State of California. Respondents Ellen S. Grosjean and Eileen Callaghan are individuals trading as C. E. Grosjean Rice Milling Company and o\1'11 and operate a rice mill, and have their offices and principal place of business, at 3230 20th Street in the city of San Francisco, State of California.

Respondent William Crawford is an individual trading as Wood· land Rice Milling Company and owns and operates a rice mill, and has his office and principal place of business, in the city of 'Woodland in the State of California.

Respondent Growers Rice Milling Company is a corporation or· ganized and existing under the laws of the State of California and owns and operates a rice mill in the city of South San Francisco, CALIFORNIA RICE INDUSTRY, ET AL. 971 968 Complaint State of California and has its office and principal place of business at 503 l\Iarket Street in the city of San Francisco, Calif. Respondent Pacific Trading Company, Inc., is a corporation organized and existing under and by virtue of the laws of the State of California and owns and operates a rice mill in the city of Sacra.. mento, State of California, and has its office and principal place of business at 460 Battery Street in the city of San Francisco, State of California.

Respondent Phillips Milling Company is a corporation organized and existing under and by virtue of the laws of the State of California and owns and formerly operated a rice mill in the city of Sacramento, State of California and has its office and principal place of business at 38 Drumm Street, in the city of San Francisco, State of California.

Respondent Rice Growers Association of California is a corporation organized and existing under and by virtue of the laws of the State of California and owns and operates a rice mill, and has its office and principal place of business, in the city of West Sacramento, State of California.

Respondent Rosenberg Brothers and Company is a corporation organized and existing under and by virtue of the laws of the State of California and owns and operates rice mills in the cities of Biggs, .San Francisco, and South San Francisco in the State of California, and has its office and principal place of business at 334 California Street, San Francisco, State of California. The respondents named in this paragraph are hereinafter referred to as the member respondents.

PAR. 4. All of the said member respondents are, and, at all times :mentioned herein, were, engaged in the milling or processing of rice and rice products as more fully hereinafter described, and in the sale and distribution of said products to customers located in the several States other than the State of California and in the respective Ter- :itories of the United States and in the District of Columbia, and 1n foreign nations, and cause said products when milled, processed, and sold to be transport.e0 from the place of milling, or processing, to the purchasers thereof located as aforesaid, and there now is, and has been at all times herein mentioned, a constant and recurring current of trade and commerce in said products beginning at the places of milling, or processing, in the. State of California and flowing through and into the several States and Territories of the United States and the District of Columbia, and foreign nations. Prior to the adoption and use of the acts, practices, and methods heteinafter alleged, these member respondents were in active and sub- 972 FEDERAL TRADE COl\Il\IISSION DECISIONS Complaint 26 F.T. C. stantial competition with each other in making and seeking to make sales of their said products in said commerce, and, but for the facts hereinafter alleged, such active and substantial competition would have continued to the present time and said member respondents would now be in active and substantial competition with each other. The member respondents constitute all of the rice millers located in the State of California, and mill, sell, and distribute substantially all of the rice produced in that State. The rice produced in the State of California is of the short plump grain variety, commonly known as the Japan type or, on occasions, as the California-Japan type, and is often referred to as the round grain rice as distinguished from the long or medium grain rice produced in other sections of the United States. Substantially all of the round grain or Japan type rice produced in the United States is produced in the State of California and is milled, sold, and distributed by the member respondents. Consumers of rice located in the Territory of Hawaii, Puerto Rico, Japan, and in other territories, insular possessions and foreign nations, and in various parts of the United States prefer round grain or Japan type rice of the type produced in California and sold and distributed by the member respondents to the long grain rice produced in other parts of the United States. Because of this preference for round grain or Japan type rice there is practically no competition as to price between sellers of the two types of rice in those sections where said preference exists. The member respondents occupy such a posi· tion in the milling, selling, and distributing of the round grain or Japan type rice produced in the United States that they control, direct, and dominate the industry in the United States and control, direct, and dominate purchasers of such rice for resale throughout the world.

PAR. 5. Prior to August 28, 1935, the member respondents and the individual respondents caused the organization of the association respondent for the promotion and protection of the interests of the said member respondents. On or about August 28, 1935, said member respondents entered into and thereafter carried out an understanding, agreement, combination, and conspiracy, hereafter, at times, referred to as an undertaking, for the purpose and with the effect of restricting, restraining, and monopolizing, and suppressing and eliminating competition in, the sale of milled rice, of both the round and long grain type, and in the sale oi milled rice products in trade and commerce between, among, in and with the several States of tl~e United States, the District of Columbia, foreign nations, and Terrlt,ories of the United States.

PAR. 6. Pursuant to said understanding, agreement, combinatiotlr and conspiracy, and in the furtherance thereof said respondents have CALIFORNIA RICE INDUSTRY, ET AL. 973 9GS Complaint done and performed, and still do and perform, the following acts and things:

1. Said member respondents agreed to fix and have fixed and maintained1 uniform pr]ces in the sale of all grades of rice milled, sold, and distributed by them.

2. Said member respondents agreed to fix and have fixed and maintained uniform terms and conditions, including, but without limitation, discounts, brokerage fees, freight, and other allowances, which Were to apply and have applied to all grades of rice. 3. Said member respondents agreed to allocate and have allocated among the member respondents the percentage of the total annual rice crop which each of said members could process or mill and have Processed or milled monthly annually.

4. Said member respondents agreed to curtail and have curtailed the production of processed or milled rice and rice products. 5. Said member respondents agreed to refuse and have refused to n1ake sales of rice and rice products to others than the parties to said tmdertaking except at prices substantially in excess of those which they agreed would apply and which have applied to sales between the Parties to said undertaking.

6. Said member respondents agreed that the respondent association could and it does assess and collect penalties from said member respondents for violating the terms and conditions of agreements made in furtherance of said undertaking.

7. Said member respondents agreed that respondent association could and it did through agencies therein set up, select, appoint, and employ accountants to check, and they have checked, the books and records of the member respondents to determine whether the member respondents were complying with the terms and conditions of agree- 111ents made in furtherance of said undertakings and with rules and regulations adopted and announced by the said marketing and crop boards.

8. Said member respondents agreed to pay and have paid a sum certain in money for each bag of rice processed by them into a fund deposited with the respondent association, and agreed that pennJties assessed ag!linst members for violations of the terms and conditions of the agreements made in furtherance of said undertaking could be d~ducted from the respective sums so deposited by said members and distributed among the other members, and penalties have been so deducted and distributed.

. 9. Said respondents, through said respondent association, entered Into and carried out an agreement with the Hawaiian Rice Importers A.association, an association of rice importers in the Territory of 160i5tm--39--VOL.26----6' Complaint 26 ~·. T. C. Hawaii, whereby they agreed that they would not and they did not sell to importers located in Hawaii who were not members of said association.

10. Said respondents organized within the respondent association the marketing board and the crop board mentioned in paragraph 2 hereof, for the administration of the affairs of the member respond· ents in carrying out said undertaking. Among others said boards have done and performed and still do and perform the following acts and things:

(a) The marketing board and the crop board meet from time to time and jointly fix the prices to be observed and maintained, and which are observed and maintained by the member respondents in the sale of rice and rice products, as aforesaid.

(b) Said marketing board meets from time to time to determine, and has determined, the business policies, terms of sale, brokerage fees, discounts and freight and other allowances to be observed and maintained by said member respondents in the sale of rice and rice products, as aforesaid.

(c) Said marketing board, acting by and through its said chairman, individual respondent Harry M. Creech, promulgates the said market· ing board's rules and regulations concerning the policies and terms of sale mentioned in sub-paragraph "b" of this paragraph, among thb member respondents through and by the circulation of its so-called "Policy Memoranda," and through and by this means regulates the business and sales policies of the said respondent members in the sale of rice and rice products, as aforesaid.

(d) Said marketing board, through its said chairman, said indi· vidual respondent Creech, regularly and period.ically collects frolll and disseminates among said member respondents information regard· ing the acts, practices and policies of said member respondents in carrying out said undertaking, to determine whether or not said meJll· her respondents have violated or are violating the terms u:u.d conditions of agreements made in furtherance of said undertaking; and from ti1~10 to time fixes and collects penalties, as more particularly described l!l paragraph 6 herein, from said member respondents for violating t~e terms and conditions of the agreements made in the furtherance of sald undertaking.

11. Said respondents have used and are now using other metho.ds and means designed to suppress and prevent competition and restrict and restrain the sale of rice and rice products in said commerce. PAR. 7. Each of the said respondents acted in concert and coopera· tion with one or more of the other respondents in doing and perfor~~ ing the acts and things hereinabove alleged in furtherance of sal understanding, agreement, combination and conspiracy. CALIFORNIA RICE INDUSTRY, ET AL. 975 Findings PAR. 8. Said understanding, agreement, combination, and conspiracy and the things done thereunder and pursuant thereto and in furtherance thereof, as hereinabove alleged, have had and do have the effect of unduly and unlawfully restricting and restraining the sale of said rice and rice products in trade and commerce between, among, in and with the several States of the United States, the District of Columbia, foreign nations, and Territories of the United States; of unduly and unlawfully restricting and restraining trade and commerce in said rice and rice products in said commerce; of 'substantially enhancing prices to the consuming public and maintaining prices at artificial levels and otherwise depriving the public of the benefits that Would flow from normal competition among and between the member respondents in said commerce; of eliminating competition, with tendency and capacity of creating a monopoly, in the sale of said rice and rice products in said commerce. Said understanding, agreement, combination, and conspiracy and the things done thereunder and pursuant thereto and in furtherance thereof, as above alleged, constitute unfair methods of competition in commerce within the intent and meaning of Sectio~1 5 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," and are to the prejudice of the public.

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, to define its powers and duties, and for other purposes," the Federal !trade Commission, on March 26, 1937, issued and served its complaint ln this proceeding upon the respondents California Rice Industry, ~tal., charging them with the use of unfair methods of competition ln commerce in violation of the provisions of said act. After the issuance of said complaint, and the filing of respondents' answer thereto, testimony and other evidence in support of the allegations of said complaint were introduced by Daniel J. :Murphy, attorney for the Commission, before Charles F. Diggs, an examiner of the Commission theretofore duly designated by it, and in opposition to the allegations of the complaint by Harry M. Creech, attorney for the respondents; and said testimony and other evidence were duly recorded and filed in the office of the Commission. Thereafter, the proceedings regularly came on for final hearing before the Commission on the said complaint, the answer thereto, testimony and other evidence, briefs in support of the complaint and in opposition thereto, and the oral arguments of counsel aforesaid; and the Commission having duly considered the Findings 26F.T.C.

same, and being now fully advised in the premises, finds that this proceeding is in the interest of the public, and makes this its findings as to the facts and its conclusion drawn therefrom: FINDINGS AS TO THE FACTS PARAGRAPH 1. The respondent California Rice Industry is a voluntary unincorporated trade association with its offices in the Balfour Building in the city of San Francisco, State of California. The said association does not have officers or directors, neither does it have articles of organization, constitution, or by-laws, except the Intra.state :Marketing Agreement which created it.

PAR. 2. Organized within the association and controlling and administering its policies and activities are the marketing board and the crop board. Respondent Harry l\L Creech, the chairman of the marketing board and a member of the crop board, was the dominant factor in the organization of the association and is the directing executive of the practices of said association and its marketing and crop boards.

PAR. 3. The respondent members of the marketing board, with the exception of its chairman who is neither a rice grower nor a miller, constituting all the rice millers located in the State of California, are as follows:

Charles S. Morse, Allen A. Morse, Nelson B. l\Iorse, Clarence G. l\Iorse, and Gertrude l\Iorse are individuals trading as the Capital nice l\Iills and own and operate a rice mill in the city of "\Vest Sacramento in the State of California, and have their principal offices and place of business in the city of San Francisco, State of California. Ellen S. Grosjean and Eileen Callaghan are individuals trading as C. E. Grosjean Rice Milling Company and own and operate a rice mill1 and have their offices and principal place of business in the city of San Francisco, State of California.

William Crawford is an individual trading as \Voodland Rice .Milling Company and oms and operates a rice mill, and has his office and principal place of business in the city of 'Voodland, State of California.

The Growers Rice Milling Company is a corporation organized under the laws of the State of California and owns a rice mill in the city of South San Francisco, State of California. Said corporation has not processed any rice since 1933 and its mill is leased to respol~d­ ent Rosenberg Brothers & Company, which now operates the said null· Pacific Trading Company, Inc., is a corporation organized under the laws of the State of California and owns and operates a rice mill in tl~e city of Sacramento, State of California, and has its office and princl- CALIFORNIA RICE INDUSTRY, ET AL. 977 Findings pal place of business in the city of San Francisco in the said State of California.

Phillips Milling Company is a corporation organized under the laws Qf the State of California and owns a rice mill in the city of Sacramento, State of California. The said corporation since 1933 has not milled or processed any rice except rice flour. Said corporation has no Yote in the meetings of the marketing board because on October 1, 1935, it leased its mill to the marketing board. The marketing board has never operated said mill.

Hice Growers Association of California is a corporation organized under the laws of the State of California and owns and operates a rice lllill, with its principal place of business at 'Vest Sacramento in the State of California. It is a cooperative organization comprised of approximately 300 rice grow£>rs of northern California, and the said ·corporation mills and processes the rice of its members. The said Association also buys paddy rice from nonmembers thereof and mills and sells said rice at a profit.

Rosenberg Brothers & Company is a corporation organized under the laws of the State of California and owns and operates rice mills ·in Biggs and San Francisco in the State of California, and also <>perates a rice mill in the city of South San Francisco, State of California, which is leased from the respondent Growers Rice Milling Company.

PAR. 4. Respondents George ,V. Brewer, 'Villiam Crawford, Flor- -ence l\I. Douglas, Charles S. Morse, J. S. Ritterband, and 0. F. Zebal are representatives on the marketing board of the several miller respondents.

Respondent I. Yamakawa formerly was the representative of the respondent Pacific Trading Company, but has not represented said {:company on said marketing board since October 6, 1936. Since December 8, 1936, said company has been represented on said lnarketing board by J. S. Ritterband.

Respondent W. T. Welisch up to aoout July 1, 1936, was a representative of the respondent Phillips Milling Company on said :marketing board but since that date has not been identified or affiliated with the respondent California Rice Industry or its marketing board.

PAR. 5. The respondent members of the crop board are N. F. Dougherty, its secretary; R. A. Renaud, Hugh Baber, Ernest Grell, A... E. Scarlett, Leon Brink, and Louis Manor. • PAR. 6. The original intention was that the representatives of the Independent rice growers should constitute the membership of the crop board and dominate its affairs in order to safeguard and pro- Findings 26 F. T. C. feet the interests of the growers. This plan was carried out until about a year and a half ago; since then four of the eight members of the crop board became and are now identified with the respondent Rice Growers Association of California, which is a miller organ· ization and a member of the marketing board. The miller respond· ents, therefore, dominate the activities of both the marketing and the crop boards.

PAR. 7. Substantially all of the rice produced in the State of California is a short, plump grained variety, commonly known as the "Japan type" or as the "California-Japan type," and is often referred to as the "round grain rice" as distinguished from the long or medium grain rice produced in other sections of the United States. Substantially all of the round grain or the "Japan type" rice produced in the United States is produced in California, and is milled, sold, and distributed in interstate commerce by the miller respondents, members of the Marketing Board of the Californil' Rice Industry.

PAR. 8. The average annual crop of Japan type rice grown in California is about 3 million 100-pound bags of paddy rice, which is equivalent to a million and one-half bags of clean rice. Of this latter, approximately 50 percent is shipped to Hawaii, where there is a preference for the Japan type rice.; approximately 25 percent of the remainder is shipped to Puerto Rico, and the balance is sold in California and in various other States of the United States. PAR. 9. On September 28, 1933, all the respondents entered into what has been termed an "Interstate Marketing Agreement.'' This agreement or program was in force until terminated by the Sec· retary of Agriculture on September 14, 1935. PAR. 10. On August 28, 1935, all the respondents became signa· tories to what is termed an "Intrastate Marketing Agreement,'' which agreement became effective on said date; the marketing board, however, did not begin to function till October 1, 1935, the begin· ning of the crop year; said agreement has been since continually administered.

PAR. 11. Since October 1, 1935, the respondents, under the Intra· state Marketing Agreement, fixed prices, terms of sales, quantity dis· counts, and brokerage fees in the sales of processed rice in inter· state commerce. At meetings held on Tuesday of each week the marketing board from time to time, and with the concurrence of the crop board, fixes an industry pric.e for extra-fancy clean rice, and from this price, by use of a formula adopted by said marketing board, the base price, producer's price, and trade prices for all grades of processed rice are computed. The marketin~ board alone fixes the prices for screenings and brewers. Lists of said prices, frolll CALIFORNIA RICE INDUSTRY, ET AL. 979 Fin flings time to time, were published and distributed by the California Rice Industry and the members of the marketing board. The miller respondents, members of the marketing board, uniformly observe and maintain the prices so fixed by the marketing board, not only for the purchases of paddy from the growers but also on all sales of processed rice, whether the rice is sold in the State of California or sold and shipped to customers in Hawaii or various other points. 'With rare exceptions, the trade prices charged by the miller respondents are uniform at any given time for the same grade of rice. PAn. 12. Prior to 1933 the respondents were engaged in open competition in the purchase of paddy and in the sale of processed rice; since September 1933 there has been practically no competition, as the prices paid for paddy to the growers and the prices charged by the millers for processed rice have been uniform and fixed by agreement.

PAR. 13. The marketing board of the Interstate Marketing Agreelnent organized the Hawaiian Rice Importers Association in· the Territory of Hawaii, which association is composed of the largest ilnporters of rice in the Hawaiian Islands. The marketing board determined the membership and classified the members of said association as island importers. The purpose of the organization of said association was to monopolize the rice markets in the Hawaiian Islands for the benefit of the respondent millers. PAR. 14. The marketing board under the Intrastate Marketing Agreement, and in agreement with the Hawaiian Rice Importers Association, fixed a discount of 22 cents a bag to purchasers of a lninimmn of forty thousand 100-pound bags of rice a month. This \Vas later changed to 25 cents a bag on a minimum of 50,000 bags Per month. No single purchaser is able to take shipments sufficiently large to entitle him to this discount. The members of the ltawaiian Rice Importers Association pool their requirements anq. the said association places the pooled orders with the respondent lnillers and the rice is shipped and billed to the association, which thus becomes the sole recipient of the above described discount for the benefit of its members. Because of this advantage, nonmembers of the Hawaiian Rice Importers Association are unable to purchase rice from the respondent millers at a competitive price, and only negligible sales are made to them. The members of the said ~association have thus obtained practically a monopoly of the rice 1lldustry in the Hawaiian Islands.

PAn. 15. The marketing board fixes the price of rice for Hawaii at 15 cents per 100-pound bag over the domestic price, and this 15 cents Per 100-pound bag became a deferred discount which was deducted from the price of rice sold to the Hawaiian Rice Importers Associa- ~80 :FEDERAL TRADE CO::\fl\IISSION DECISIONS Findings 26 F. T. <l tion and deposited by the miller vendor respondents in the Wells· Fargo Bank and Union Trust Company in San Francisco, Calif., as a credit to the said association. This 15 cents thus deducted accounted for part of the 22 cents discount referred to above as allowed to the Hawaiian Rice Importers Association. The remainder of 7 cents was quantity discount which in some cases was deducted from the face of the invoice when presented for payment, and in other cases was deposited to the credit of the Hawaiian Rice Importers Associa· tion.

PAR. 16. The Hawaiian Rice Importers Association employed a firm of auditors, to wit, Logan & Logan of San Francisco, Calif., to examine the invoices of the miller members of the marketing board and to check the deposits at the banks in order to determine that the above described discounts were properly given and deposited in the banks to the credit of the said association. PAR. 17. The respondent miller members of the marketing board made an additional charge of 1 cent per bag on all sales intended for the members of the Hawaiian Rice Importers Association. This 1 cent per bag, so deducted, was remitted by the miller respondents to the Hawaiian Rice Importers Association as the membership dues of its members.

PAR. 18. The Intrastate l\Iarketing Agreement fixes the percentages of the total annual rice crop which each miller member of the n1ar· keting board may process, and the marketing board determines monthly the processing quota for each miller. The miller members are required to pay into the "l\Iillers' Trust Fund" 10 cents for each 100-pound bag of rice processed during 'the preceding month, and an additional 10 cents for each bag of rice processed by them in excess of their quota for the preceding month. After the expenditures of the marketing board are paid from the said l\Iillers' Trust Fund, the remainder of the said fund is distributed among the miller members. The intrastate agreement further provides that a penalty shall be imposed upon a miller member for any violation of its provisions, and the amount of the penalty to be deducted from his share of the · trust fund.

PAR. 19. The marketing board employs a firm of certified public accountants, to wit, Hood & Strong of San Francisco, to check each month the records and invoices of the miller members in order to as· certain the compliance of said millers with the prices, terms o£ sale, quantity discounts, and brokerage rates as fixed by said marketing board. The accountants in their audits make test checks of all rec· ords and invoices of the miller members of the marketing board, ~e­ gardless of whether the said reeords or said invoices refer to rice CALIFORNIA RICE INDUSTRY, ET AL. 981 !JGS Order shipped to Hawaii, Puerto Rico or any other destination. :Monthly reports are submitted by the accountants to the marketing board, and said reports are discussed at its meetings. The monthly reports from November 1, 1935, to April 1, 1937, show, except for a very few instances which were later corrected, that the miller members maintained the said prices, terms of sale, discounts, and brokerage rates, as fixed by the marketing board, in the sale of processed rice in interstate commerce. The accountants check the sales invoices of the miller members not only to determine that the discounts on sales to Hawaii were properly maintained, but also to calculate the dues payable to the Hawaiian Rice Importers Association, in behalf of its J:nembers, and to verify the remission of same. CONCLUSION 1. The purposes, practices, and policies of the respondents as set forth in the aforesaid findings of facts constitute an unlawful agreelnl'nt to fix and maintain prices of rice and rice products in com- J:nerce as defined in Section 4 of an Act of Congress approved Septernber 26, 1914, entitled "An Act to create a Federal Trade Com- J:nission, to define its powers and duties, and for other purposes." 2. As a result of the respondents entering into and making effective the agreement as above described, competition in the sale of rice. and rice products in commerce as hereinabove referred to has been restricted and suppressed.

3. As a further result, respondents thereby have acquired a lllonopoly in the sale of California-Japan type rice in commerce as hereinabove referred to.

4. The acts and practices of the respondents, as set forth in the foregoing findings as to the facts, and the circumstances therein set forth, constitute a combination and conspiracy to engage in and to further unfair methods of competition in commerce as hereinabove referred to within the intent and meaning of Section 5 of an Act of Congress, approved September 26, 1914, entitled "An Act to create a F'eueral Trade Commission, to define its powers and duties, and for Other purposes."

ORDER TO CEASE AND DESIST .1'his proceeding having been heard by the Federal Trade Comtn.lssion upon the complaint of the Commission, the answer of reti_ondents, testimony and ot.her evidence taken before Charles F. b 1 ~gs, an examiner of the Commission theretofore duly designated / lt, in support of the allegations of said complaint and in opposi- 1011 thereto, briefs filed herein, and oral arguments by Daniel J. Order 26 F. T. C. Murphy, counsel for the Commission, and by Harry M. Creech, coun· sel for the respondents, and the Commission having made its findings as to the facts and its conclusion that said respondents have violated 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." It is ordered, That the respondents, California Rice Industry; Harry M. Creech, George "\V. Brewer, Florence M. Douglas, J. S. Ritterband, W. T. "\Velisch, I. Yamakawa, 0. F. Zebal, R. A. Renaud, Hugh Baber, Leon Brink, N. F. Dougherty, Ernest Grell, Lewis Manor, and A. E. Scarlett; Charles S. Morse, Allen A. Morse, Nelson B. Morse, Clarence G. Morse, and Gertrude Morse, trading as Capital Rice Mills; Ellen S. Grosjean and Eileen Callaghan, trading as C. E. Grosjean Rice Milling Company; William Crawford, trading as ·woodland Rice Milling Company; Growers Rice Milling Company, Pacific Trading Company, Inc., Phillips Milling Company, Rice Growers Association of California, and Rosenberg Brothers & Com· pany; their successors, officers, agents, and employees, do forthwith cease and desist, in connection with offering for sale, sale, and dis· tribution of rice and rice products in commerce as defined in Section 4 of the Federal Trade Commission Act, from doing and performing by agreement, combination, or conspiracy between or among any two or more of said respondents, or with others, the following acts a no things:

1. Fixing and maintaining uniform prices.

2. Compiling, publishing, and distributing any joint or unifor!U list or compilation of prices.

3. Adopting any joint or uniform price list or other device which fixes prices. . 4. Discussing through the medium of meetings of the Californlll Rice Industry or its marketing and crop boards, or in any si1nilaf manner, uniform prices, terms, discounts, agreements upon prices, by resolution or otherwise, or employing any similar device which fises or tends to fix prices, or which is designed to equalize or make unifor!U the selling prices, terms, discounts, or policies of respondent millers. 5. Fixing or determining the quotas or percentages of the rice crop that the miller respondents may mill or process which, thereby, u~· lawfully restricts or hinders the sale of rice or rice products lil interstate commerce.

It is further ordered, That the respondents shall, within 60 days after the service upon them of this order, file with the Commissio~ ~ report in writing setting forth in detail the manner and form in which they have complied with this order.

ROCKY MOUNTAIN LABORATORIES, INa., ET AL. 983 Syllabus