Badger-Brodhead Cheese Company

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IN THE MATTER OF BADGER-BRODHEAD CHEESE COMPANY, KRAFT-PHE- NIX CHEESE CORPORATION, NATIONAL DAIRY PROD~ UCTS CORPORATION, THE BORDEN COMPANY, J. S. HOFFMAN AND COl\fP ANY, AND TRIANGLE CHEESE COMPANY COMPLAINT, FINDINGS, AND ORDER I,:\1 REGARD TO THE ALLEGED VIOLATION OF Sl~C. :; OF AN ACT OF CONGRESS APPROVED SEPT. 2G, llh Docket 4071. Complai~tt, Mar. 2.~. 1940-Decision, Oct. 1, 1940 Where three corporations which were engaged in purchase, as sole source o! supply for the controlling and parent corporations, of Swiss and Limburget· cheese in the lllonroe area of the State of Wisconsin, source of substantially more than half of all such cheese produced in the United States, and in transporting, grading, inspecting, sorting, curing, selling, and distributing such products, and which, as dealer-purchasers of the output of some 200 of the 2.'i0 chiefty farmer-owned cheese factories in said area, constituted, along with such other relatively small dealer-purchasers in market in ques· tion, sole marketing mediums or outlets through which such factories could offer and dispose of their said product, and, pt·ior to and but for acts and practices below set forth, In competition with one another in purchase in said area of said product for processing, packing, inspection, grading, sorting, and curing for subsequent sale to and through their principals, without State largely, and sale and distribution l!y latter in competition with one another, except as hindered by acts and practices herein ; Acting in response to situation fit·st arising out of low price prevailing for cheeses in question and producers' dissatisfaction therewith, and intervention of State Department of Agriculture and suggestion for periodical meetings of dealer-purchasers and producers in area in question, and directed to securing for latter fair price for their said product- Entered into and thereafter carried out an understanding, agreement, and combination with intent and effect of restricting and restraining competition in purchase of Swiss and Limburger cheese made and produced by such factories in said area, and, through such restricted and restrained competition, of suppressing and eliminating competition in sale of such cheese in trade and commerce between and among the several States and in the District of Columbia; and in pursuance of said agreement, etc., and acting for and in behalf of themselves and their said respective principals and parent companies- (!) Agreed to and did hold monthly meetings sponsored by and under the supervision of the Department of Agriculture of said State, and over which representative of said department presided, to afford, in response to conferences called by said department and attended by its representatives and those of producers and dealers, and resulting interchange and di,..cussion, opportunity for attempt to reach agreement as to fair prices to be paid by the dealers for cheese produced and made in factories in question, and Syllabus 31 F. '.r. C. agreed to and did there fix, along with other representatives of other dealers and those of producers in said area, prices which would be and were paid to cheese factories therein for the Swiss and Limburger cheese which they produced and made;

(2) Acted, during such meetings and in furtherance of aforesaid understanding, agreement, and combination, and along with representatives of other dealers in said area, as a unit in offering representatives of the factories the p1·ices which they, the dealers, would pay on cheese produced and made by such factories;

(3) Held, as aforesaid indicated, and prior to such meeting>~, separate nwetings among themselves at which they agreed upon the initial price which they would offer at such meetings with representatives of the producer;;; ( 4) Held, also, separate meetings among themsel•es in the course of thpir said meetings with representatives of producers, at which they agreed to and did set upper limits as to the prices which they would agree to pay the cheese factories at their meetings with the producers' representatives; and (5) Acceded in very few instances at such meetings to request of producers' representatives for increased prices for their Swiss and Limburger che>ests, but, in such instances, required such represe>ntatives either to accept the lower prices offered by the dealers' representatives for said products produced by factories in question in said Monroe area, or to receive same prices therefor as were paid by dealers for said cheese for preceding month;

With result that capacity, tendency, and effect of such nnderstonding, agreement, and combination, and acts, practices, and things done pursuant thereto by said dealer-purchasers and their principals and varent companies, were to materially affect and influence prices at which Swiss and Limburger cheese were sold in commerce as aforesaid, influence at least in part prices at which some other dairy products were sold and distributed in such commerce, unreasonably lessen, eliminate, restrict, and hinder competition in purchase of said cheeses produced and made by cheese factories in Monroe area, and unreasonably lessen and restrict competition in resale thereof to purchasers in the several States and in said District: II eld, That such acts and practices of soid subsidiary dealer-purchasers and their principals and parent companies, for which they acted as afore>~aid, under the circumstances set forth, were all to the prejudice of the public and constituted unfair methods of competition. Mr. Fletcher G. Oohn :for the Commission.

Niclwlson, Snyder, Chadwell & Fagerburg, of Chicago, Ill., :for Badger-Brodhead Cheese Co. and Kraft-Phenix Cheese Corp. Mr. Roberts. Gordon and Mr. 1V. L. Keitt, of New York City, for National Dairy Products Corp.

11/ilbanlc, Tweed & Hope, of New York City, for The Borden Co. Levinson, Becker, Peebles & Swiren, of Chicago, Ill., for J. S. Hoffman & Co. and Triangle Cheese Co.

BADGER-BRODHEAD CHEESE CO., ET AL. 1019 1017 Complaint COMPLAINT Pursuant to the provisions of the Federal Trade Commission Act, and by virtue of the authority vested in it by said act, the Federal Trade Commission, having reason to believe that Badger-Brodhead Cheese Co., Kraft-Phenix Cheese Corp., National Dairy Products Corp., The Borden Co., J. S. Hoffman & Co., and Triangle Cheese Co., hereinafter referred to as respondents, have been, and are now using unfair methods of competition in commerce as "commerce" is defined by said act, and it appearing to the Commission that a proreeding by it in respect thereof would be in the public interest, hereby issues its complaint, stating its charges in that respect as follows: PARAGRAPH 1. Respondent Badger-Brodhead Cheese Co. is a corporation organized and existing under the laws of the State of '\Visconsin, with its principal office and place of business located in Monroe, 'Wis. In the course of its business, it is engaged in the buying, and then the selling and distributing of Swiss, Brick, Limburger, and Munster cheese (hereinafter referred to as "foreign type theese"), which are manufactured in cheese factories located in the State of Wisconsin.

Respondent Kraft-Phenix Cheese Corp. is a corporation organized, and existing under the laws of the State of Illinois, with its principal office and place of business located at 500 Peshtigo Court, Chicago, Ill. It owns all the stock, except the qualifying shares, in respondent Badger-Brodhead Cheese Co., and directs and controls the business policies of its said subsidiary, Badger-Brodhead Cheese Co. Respondent National Dairy Products Corp. is a corporation organ· ized and existing under the laws of the State of Delaware with its principal office and place of business located at 120 Broadway, New York, N, Y. It has as one of its solely owned subsidiaries, respondent Kraft-Phenix Cheese Corp., and directs and controls the business policies of said subsidiary.

Respondent The Borden Co., is a corporation organized and existing under the laws of the State of New Jersey, with its principal office and place of business being located at 350 Madison .A. venue, :New York, N.Y. As part of its business it operates a division known as Carl Marty & Co., which division is located in .Monroe, Wis., and is engaged in the business of buying and then selling and distributing foreign types of cheese, which are manufactured in the State of Wisconsin.

nespondent J. S. Hoffman & Co. is a corporation organized and ('Existing under the laws of the State of Illinois, with its principal Complaint 31F.T.C.

office and place of business being located at 320 West Illinois Street, Chicago, Ill. It is a dealer in American and foreign type cheese; it owns all the stock in respondent Triangle Cheese Co., and directs :md controls the business policies of said respondent. Respondent Triangle Cheese Co. is a corporation organized anJ uisting under the laws of the State of Wisconsin, with its principal (J:ffice and place of business being located in Monroe, 'Wis. It buys foreign types of cheese manufactured in Wisconsin, which cheese is then sold and distributed by its parent corporation, respondent J. S. Hoffman & Co.

PAR. 2. Of the four varieties of foreign type cheese, Swiss and llrick constitute the bulk of the production. Approximately twothirds of all the Swiss cheese produced in the United States is made in the State of 1Visconsin, with approximately 90 percent of that amount being produced in an area comprising four southern counties of 'Visconsin, i. e., Green, Lafayette, Dane, and Iowa, with the city of Monroe located in Green County, 'Vis., being the center of this foreign type cheese area (said area is hereinafter referred to as tho "Monroe area"). There are located in said Monroe area approxi· mately 250 factories making Swiss cheese, 90 percent of which are owned by the farmers in this locality on a cooperative basis, with the farmers gene.rally being patrons of the factories in which they are interested. The manager of each factory is styled the cheese maker. About one-third of the factories operate on a year around basis with the rest operating only during the flush season, shutting down during the winter months.

The average cheese factory handles a comparatively small amount d cheese; it has no facilities for storing cheese for an appreciable length of time; and it has little, if any, financial reserve. The owners of a given cheese factory-generally the farmer patron, choose one of their number as a business representative who sells the ('heese produced at the factory to the dealers in cheese, which dealers :tre either located, or have representatives, in the Monroe area. There is no marketing agency for the selling of the cheese produced by the factories other than through these cheese dealers. PAR. 3. Until 1921, there were many cheese dealers who were nctively competing for the output of the various cheese factories in the Monroe area. However, in the last 15 years, there has been a gradual consolidation, of these cheese dealers and a centralized control in the sale of the output of the various factories. In 1911, the first merger of any consequence of dealers in the Monroe area took place, when seven independent cheese dealers, located in said area, merged and organized the Dadger Cheese Co., a 'Visconsin cor· BADGER-BRODHEAD CHEESE CO., ET AL. 1021 lOli Complaint poration. In 1920, Kraft Cheese Co. bought 51 perecent of the stock in this concern and in 1925 became the full owner. In 1926, Phenix Cheese Co. began operating in the Monroe area but shortly thereafter the Kraft and Phenix interests merged as the respondent Kraft-Phenix Cheese Corp. In 1928 this respondent bought the stock and assets of the Brodhead Cheese & Cold Storage Co., which was an active cheese dealer in the Monroe area, and formed a new corporation, respondent Badger-Brodhead Cheese Co., which was a merger of the Badger Cheese Co., which had been nn active cheese buyer in the Monroe area and the aforementioned Brodhead Cheese & Cold Storage Co. Respondent Badger-Brodhead Cheese Co. is one of the largest, if not the largest, buyer of foreign type cheese in the United States. In 1929, respondent Kraft-Phenix Cheese Corp. secured the business of Charles Zweifel Co., Brodhead, 'Vis., which was then one of the largest cheese dealers in the Monroe area.

In 1938, Carl Marty & Co. of Monroe, Wis., a large cheese buyer of foreign type cheese in the Monroe area, purchased the assets and good will of a partnership known as Ackerman & A"bplanalp, which was the third largest buyer of foreign type cheese in the Monroe area. Then on January 1, 1939, respondent The Borden Co., which theretofore had not been represented in this territory, purchased the stock and assets of the said Carll\Iarty & Co., which next to respondent Badger-Brodhead Cheese Co., was the largest cheese dealer in the Monroe area. Thus, respondents Kraft-Phenix Cl1eese Corp., acting for and on behalf of respondent National Dairy Products Corp., of which it is a subsidiary, and respondent The Borden Co., have gradually, by means of mergers and purchases eliminated practically all of the independent cheese dealers in the Monroe area.

Approximately 75 percent of the foreign type cheese produced in 'Visconsin is purchased by the respondents, all dealers in this type of cheese, said purchases being made either directly by said respondents, cr through their subsidiaries. None of the dealers in foreign type of che.ese own any factories, but they purchase the output of certain (·heese factories; out of the approximately 250 cheese factories making foreign types of cheese in the aforementioned Monroe area, respondent Badger-Brodhead Cheese Co., acting for and on behalf of respondents, Kraft-Phenix Cheese Corp. and National Dairy Products Corp., buys the annual output of from 40 to 60 of the cheese factories in said area; respondent The Borden Co., through its division, Carl Marty & Co., buys on an avera~re the annual output of 75 of these factories; and respondents, J. S. Hoffman & Co., with its subsidiary, Triangle Cheese Co., annually purchase the output of approximately 60 of these 1022 FEDERAL TRADE COMMISSION DECISIOXS Complaint 311!'. '1'. c. factories. Consequently the respondents herein purchase the annual output of approximately 200 of the 250 cheese factories located in the Monroe area.

PAR. 4. All the respondents, either directly or through their subsidiaries, assemble the foreign types of cheese, which they purchase from the cheese factories in the Monroe area, at their various warehouses located in the State of "Wisconsin, and in the course and conduct of their business, they, or their subsidiaries, which they control and direct, ship, or cause to be shipped, said cheese from these warehouses located in the State of 'Visconsin, to purchasers of the cheese located in States of the United States other than the State of Wisconsin, and in the District of Columbia. The said cheese, which respondents purchase from the cheese factories in the Monroe area, does not come to rest in the State of 'Visconsin, but is sold and distributed either directly or indirectly, by the respondents or their subsidiaries, in commerce between and among the various States of the United States and in the District of Columbia, and the purchasers of said cheese by the respondents or their subsidiaries, from the cheese factories in the State of Wisconsin are an integral part of the interstate trade in commerce of said cheese. Respondents have maintained, and still do maintain, a course of trade, in foreign types of cheese, in commerce between and among the several States of the United States and in the District of Columbia.

PAR. 5. Respondents are in competition with one another in the purchase of foreign types of cheese from the cheese factories which manufacture same in the aforementioned Monroe area, and in the sale of said cheese in commerce between and among the several States of the United States and in the District of Columbia, except insofar as said competition has been hindered, lessened, restrained, or restricted or potential competition among them forestalled by the unfair practices and methods hereinafter set forth. PAR. 6. The prices at which respondents, acting directly or through their subsidiaries, sell and distribute the aforesaid foreign types of cheese in commerce between and among the several States of the United States and in the District of Columbia, are fixed and determined by, and dependent upon, the prices at which the respondents purchase said cheese from the cheese factories in the aforementioned 1\fonroe area.

PAR. 7. In 1938, respondents, Badger-Brodhead Cheese Co., acting for itself and also for and on behalf of respondents, Kraft-Phenix Cheese Corp. and National Dairy Products Corp., J. S. Hoffman & Co., acting both for itself and its subsidiary, Triangle Cheese Co.~ and Carl Marty & Co., acting for and on behalf of respondent The BADGER-BRODHEAD CHEESE CO., ET AL. 1023 1017 Comphint Borden Co., which through its later purchase of the said Carl Marty & Co., did ratify and affirm the actions of the said Carl Marty & Co., -entered into, and thereafter carried out, an understanding, agreement, combination, and conspiracy, for the purpose and with the intent and effect of restricting and restraining competition in the pur- -chase of foreign types of cheese, and of monopolizing, and suppressing and eliminating competition in the sale of such cheese in trade and ·commerce, between and among the several States of the United States and in the District of Columbia.

PAR. 8. Pursuant to this understanding, agreement, combination, anrl conspiracy, entered into by and between the respondents, and in furtherance thereof, said respondents, among other acts and things -did:

1. Agree to fix, and did fix the prices which they would pay to the cheese factories in the Monroe area for the foreign types of cheese produced by said factories.

2. Agree to holding monthly meetings in conjunction with representatives of the cheese factories in the Monroe area, at which they and said representatives of the cheese factories, would fix the price,; to be paid to the cheese factories in the Monroe area for foreign types of cheese produced by said factories. 3. Hold, and since October 27, 1938, ha,·e held, such monthly meetings, at which the prices to be paid, and which were paid, for said cheese moving into the warehouses of said respondents were fixed, determined, and established.

4. Have their representatives hold separate meeting-s among them .. selves prior to the meeting of said representatives with the representat.ives of the cheese factories; at these meetings among the representatives of the respondents, the said rl'presentatives set the upper limits as to pric.es they would agree to pay to the cheese factories in their meetings with the representatives of said cheese factories. PAR. 9. Each of the respondents, at the times mentioned herein, acted in concert with one or more of the other representatives in doing and performing the> acts and things hereinabm·e alleged in furtherance of the understanding, agreement, combination, and conspirac.y hereinbefore set forth.

PAR. 10. The capacity, tendency, and effect of said understanding, agreement, combination, and conspiracy nnd the acts and things done by the respondents pursuant thereto, are, and have been: 1. To control the prices at which foreign types of cheese are sold in commerce between and among the various States of the Unitt>d States and the District of Columbia.

Findings 31 F.T. C. 2. To determine, at least in part, the prices at which dairy products, other than foreign types of cheese, are sold and distributed in said commerce.

3. To monopolize in the the respondents the entire supply of foreign types of cheese, which are purchased by the respondents for the purpose of selling and distributing the same in said commerce. 4. To unreasonably lessen, eliminate, restrict, stifle, hinder, and suppress competition in the purchase of foreign types of cheese from: the cheese factories in the aforementioned Monroe area. 5. To unreasonably lessen, eliminate, restrict, stifle, hinder, an(l suppress competition in the resale of the foreign types of cheese, purchased by the respondents from the cheese factories in the Monroe area, to the purchasers thereof located in the several States of the United States and in the District of Columbia. PAR. 11. The understanding, agreement, combination, and conspiracy of the respondents, and the acts and things done by sai<l respondents, thereunder and pursuant thereto, as above alleged, are all to the prejudice of the public, and constitute unfair methods of competition in commerce within the intent and meaning of the Federal Trade Commission Act.

REPORT, FINDINGS AS TO THE FACTS, AND ORDER Pursuant to the provisions of the Federal Trade Commission Act, the Federal Trade Commission, on the 23d day of l\farch 1940, issued and served its complaint in this proceeding upon respondents named in the caption hereof, charging them with the use of unfair methods of competition in commerce in violation of the provisions of said act. Answers were filed by all of the respondents to this complaint. Thereafter, a stipulation was entered into whereby it was stipulated and agreed that a statement of facts signed and executed by all of the respondents herein and ,V. T. Kelley, chief counsel for the Federal Trade Commission, subject to the approval of the Commission~ may be taken as the facts of this proceeding and in lieu of testimony in support of the charges stated in the complaint, or in opposition thereto, and that the said Commission may proceed upon said statement of facts to make its report, stating its findings as to the facts and its conclusion based thereon, and enter its order disposing of the proceeding without the presentation of argument, the filing of briefs, or the filing of a report upon the evidence by a trial examiner. Thereafter, this proceeding regularly came on for final hearing before the Commission on said complaint, ans,vers, and stipulation, saifl ~tipulation having been approved, accepted, and filed, and the Com- BADGER-BRODHEAD CHEESE CO., ET AL. 1025 1017 Findings mission having duly considered the same and being now fully advised in the premises, finds that this proceeding is in the interest of the public and makes its findings as to the facts and its conclusion drawn therefrom.

FINDINGS AS TO THE FACTS PARAGRAPH 1. Respondent, Badger-Brodhead Cheese Co. is a corporation organized and existing under the laws of the State of Wisconsin, with its principal office and place of business located in Monroe, Wis. In the course of its business, it is engaged in buying, transporting, grading, inspecting, sorting, curing, selling, and distributing Swiss and Limburger cheese manufactured in cheese factories in the State of Wisconsin.

Respondent Kraft-Phenix Cheese Corporation is now named Kraft Cheese Co., and will be so designated hereinafter. It is a corporation organized and existing under the laws of the State of Delaware, with its principal office and place of business located at 500 Peshtigo Court, Chicago, Ill. It owns all of the stock, except the qualifying shares, in the respondent Badger-Brodhead Cheese Co., which respondent, in purchasing Swiss and Limburger cheese manufactured in the Monroe area in the State of 1Visconsin, which area is hereinafter defined in paragraph 3, acts as the sole source of supply of said cheese for respondent Kraft Cheese Co., a substantial amount of the cheese thus purchased by respondent Badger-Brodhead Cheese Co. being sold and distributed by respondent Kraft Cheese Co. Respondent Badger-Brodhead Cheese Co., in purchasing said Swiss and Limburger cheese manufactured in the Monroe area of the State of W'isconsin, acts as the agent for the respondent Kraft Cheese Co., so that respondent Kraft Cheese Co. is legally responsible for the acts and practices of said respondent Badger-Brodhead Cheese Co., as hereinafter found, in purchasing said cheese. Respondent The Borden Co. is a corporation organized and existing under the laws of the State of New Jersey, with its principal office and place of business located at 350 Madison Avenue, New York, N. Y., and as part of its business, it operates a division known as Lakeshire-Marty Division of the Borden Co. (referred to in the complaint as Carl l\Iarty & Co.), located in Monroe, 'Vis. In the course of its business it is engaged in buying, transporting, grading, inspecting, sorting, curing, selling, and distributing Swiss and Limburger cheese manufactured in cheese factories located in the State of 'Visconsin.

Respondent J. S. Hoffman Co. (referred to in the complaint as J. S. Hoffman & Co.), is a corporation organized and existing under ·-1026 FEDERAL TRADE COMMISSION DECISIONS Findings 31F.T.C.

the laws of the State of Illinois, with its principal office and place of business located at 322 West Illinois Street, Chicago, Ill.; it owns all the· stock in respondent Triangle Cheese Co. Respondent Triangle Cheese Co. (referred to in the complaint as Triangle Cheese Co.), is a corporation organized under the laws of the State of Wisconsin, with its office and principal place of business located in Monroe, 'V'is. Said respondent is engaged in the business of buying, transporting,· grading, inspecting, sorting, cudng, and selling the Swiss and Limburger cheese manufactured in the cheese :factories of the State of 'Visconsin, and in the purchasing of said cheese, acts as the sole source of supply of same for respondent J. S. Hoffman Co.; all of said cheese, thus purchased by respondent Triangle Cheese Co., being sold and distributed by respondent J. S. Hoffman Co. On or about June 1, 1940, respondent Triangle Cheese Co. ceased purchasing Limburger cheese.

Respondent Triangle Cheese Co., in purchasing said Swiss and Limburge.r cheese manufactured by the factories in the Monroe area o:f the State of 'Visconsin, acts as the agent for respondent J. S. Hoffman Co., so that said respondent J. S. Hoffman Co. is legally responsible for the acts and practices of respondent Triangle Cheese Co. as hereinafter_ found, in purchasing said cheese. Respondent National Dairy Products Corporation is a corporation organized and existing under the laws of the State of Delaware, with its principal office and place of business located at 75 East Forty-fifth Street, New York, N. Y. It has as one of its solely owned subsidiaries respondent Kraft Cheese Co. PAR. 2. Respondent National Dairy Products Corporation did not, directly or indirectly, engage in any of the acts or practices of the other respondents named in the caption herein as hereinafter found. PAR. 3. Approximately two-thirds of all the Swiss cheese produced in the United States is made in the State of 'Visconsin, with approximately 90 percent of the amount being produced in an area comprising four southern counties of 'Visconsin, i. e., Green, Lafayette, Dane, and Iowa, with the city of Monroe, located in Green County, 'Vis., being the center of the area producing these cheeses, which area is referred to in this stipulation as the "Monroe area." There are located in said Monroe area approximately 250 factories making and producing Swiss cheese, 90 percent of which are owned by the farmers in this locality on a cooperative basis, with the farmers gem•rally being patrons of the factories in which they are interested. There is selected by said patrons, a manager of each factory, who is styled the cheese-maker. About one-third of the factories operate on a year-round basis, with the rest operating only during the flush BADGER-BRODHEAD CHEESE CO., ET AL, 1027 1011 Findings season and shutting llown during the winter months. The average cheese factory handles a comparatiwly small amount of cheese; it has no facilities for storing cheese for any appreciable length of time; and it has little, if any, financial reserve. The owners of a given cheese factory-generally the farmer patrons---choose one of their number as a business representative who sells the cheese produced at the factory to dealers in cheese, which dealers are either located, or have representatives, in the :Momoe area .

.Approximately 60 percent of the Limburger cheese produced in the United States is manufactured by cheese factories in the Momoe area, and the greater proportion of said cheese is purchased by respondents, Badger-Brodhead Cheese Co. and The Borden Co.; prior to on or about June 1, 1940, respondent Triangle Cheese Co. likewise purchased Limburger cheese in this area.

Each cheese factory makes but one type of cheese.· There is no marketing agency for either the Swiss or the Limburger cheese manufactured and produced by the factories of the Monroe area, other than through dealers in said cheese. PAR. 4. In the year 1911, seven independent cheese dealers located in the Monroe area, organized the Bn,dger Cheese Co., a 'Visconsin corporation. In the year 1924, Kraft Cheese Co., a predecessor of the respondent Kraft-Phenix Cheese Corporation, bought 51 percent of the common stock of said Badger Cheese Co., and became the full owner of the common stock in 1928. The preferred stock of the Badger Cheese Co. remained outstanding in the hands of the general public until 1932, when it was retired. In the year 1926, Phenix Cheese Co. began operating in the l\Ionroe area. In the year 1928, there was a merger of Kraft Cheese Co. and Phenix Cheese Co., resulting in the organization of a predecessor corporation of the respondent Kraft-Phenix Cheese Corporation. In the year 1928, said predecessor of respondent Kraft-Phenix Cheese Corporation purchased the capital stock of Brodhead Cheese & Cold Storage Co., which was then an active cheese dealer in the Monroe area. Some of the assets of the Brodhead Cheese & Cold Storage Co. were acquired by the Badger Cheese Co. from the predecessor of respondent Kraft-Phenix Cheese Corporation, and in 1929, the name of Badger Cheese Co. was changed to the present name of the respondent Badger-Brodhead Cheese Co. The latter-named respondent is one of the largest buyers of foreign type cheese in the United States. Snl>sequently respondent Kraft-Phenix Cheese Corporation changed its name Kraft Cheese Co.

Findings 31F.T.C.

In 1938, Carl Marty & Co., of Monroe, "'Wis., a large cheese dealer in foreign type cheese in the l\Ionroe area, purchased the assets and good will of a partnership known as Ackerman & Abplanalp, which was one of the larger buyers of foreign type cheese in the Monroe area. On or about January 1, 1939, respondent The Borden Co., which theretofore had not been represented in the Monroe area, acquired the business of Carl Marty & Co., which business, since January 1, 1939, respondent The Borden Co. has operated as a part of the Lakeshire-l\Iarty Division of The Borden Co. Approximately 75 percent of the Swiss and Limburger cheese manufactured and produced in 1Visconsin is purchased by the respondents Badger-Brodhead Cheese Co., The Borden Co. and Triangle Cheese Co., all dealers in these types of cheese, but since J anuary 1, 1940, Triangle Cheese Co. has discount.inued purchasing Limburger cheese. .

None of the dealers in Swiss and Limburger cheese, including the aforementioned respondents, own any factories, but they purchase the output of certain cheese factories; out of approximately 250 cheese factories in the l\Ionroe area the respondent Badger-Brodhead Cheese Co. buys the annual output of from 40 to 60 of said factories; respondent The Borden Co., through its Division, Lakeshire-Marty Co., buys, on an average, the annual output of 75 of these ftictories; and the respondent Triangle Cheese Co. annually purchases the output of approximately 60 of these factories. Consequently, these respondents purchase the annual output of approximately 200 of the 250 Swiss cheese factories located in the l\lonroe area. The purchases of Swiss and Limburger cheese, manufactured and produced in this area, by the remaining dealers in the Monroe area, are relatively small.

PAn. 5. In the last 15 years there has been a gradual consolidation of the dealers in Swiss and Limburger in the Monroe area, with the resultant effect that approximately 80 percent of the Swiss cheese factories and a majority of the Limburger cheese factories located in the.l\Ionroe area have sold their output of such cheese to respondents Badger-Brodhead Cheese Co., The Borden Co., or Triangle Cheese Co. PAn. 6. Each of the respondents, Badger-Brodhead Cheese Co., The Borden Co., and Triangle Cheese Co., assemble the Swiss and Limburger cheese which they purchase from the cheese factories, which produce and manufacture said cheeses in the Monroe area, at the respective plants of said respondents located in the State of Wisconsin. It is there graded, reinspected, sorted, and thereafter dealt with in the manner hereinafter described.

BADGER-BRODHEAD CHEESE CO., ET AL. 1029 1017 Findings Limburger cheese is held at the factory, where it is manufactured and produced, for some 12 to 14 days after manufacture, although there is no State law requiring this to be done with respect to Limburger cheese. The cheese is manufactured in 1- and 2-pound blocks. At the end of the customary holding period, at which time the clwese is purchased by said respondents, it is wrapped at the factory in a parchment, manila, and foil wrapper, and packed tightly in large wooden boxes containing from 1 to 200 blocks of cheese, and after being so packed, is transported to said respondents' plants. The manila or wax paper is used because of the necessity of curing the cheese after wrapping in an anaerobic seal in order to secure the proper Limburger flavor and consistency. After receipt in said respondents' plants, the cheese ordinarily is held at suitable temperatures for a period required for it to reach the flavor and consistency of the more desirable grade of said cheese. The combination of temperature controls and anaerobic seal serves to promote bacteriological action, changing the character but not the content of the product. 'With reference to Swiss cheese, the laws of the State of \Visconsin require it.to be held on curing shelves in the factories for G weeks in the summer and 8 "·eeks in the winter after manufacture. At the end of the holding period, the cheese is graded by State graders at the factories and placed in skids furnished by the respondents Badger-Brodhead Cheese Co., The Borden Co., and Triangle Cheese Co. in which it is transported from the factory to the various plants of said respondents in 'Visconsin. There the cheese is again inspected, graded, and sorted according to the moisture content, grade, and condition of the cheese. The weakbodied eheese is sorted out, and that which will improve with further curing is set aside in said respondents' plants in 'Viseonsin, in curing rooms for that purpose, where the eye development and flavor improve, Lut the texture and composition remain unchanged. The cheese is placed in the curing rooms of said respondents' plants, of Yarying temperatures according to the condition of the body and the size of the eyes of the cheese.

The best grade of Swiss cheese is that of a firm body, not too high in moisture content, and with fully de\·eloped eyes. Cheese of this classifieation is placed in curing rooms at said respondents' plants at a relatively cool temperature which arrests further de,·elopment of the eyes. nnd causes improvement in the Swiss cheese flavor, but does not alter the texture or content thereof. The Swiss cheese which has a firm body, but relatively small eyes, is placed in curing rooms at higher temperatures according to the body and size of the eyes. This permits further eye development, along -ivith the improvement of the flayor, but does not alter the texture or content of the cheese. Findings 31 1<~. T. C. The occasional wheel of Swiss cheese with poor body and high moisture content, is subjected to a firming process by being placed in a cool temperature room for a short period, but the texture and content of the cheese is not changed.

All of the cheese held at said respomlents' plants is grade1l, stenciled v.·ith the grade in accordance with State requirements, and is placed in tubs containing three or four wheels each, which is necessary for Bhipment, the cheese not being stenciled or tubbed in the factories. More than 90 percent of the Limburger and Swiss cheese purchased by said respondents is sold by them directly, or through affiliated companies, to be shipped, and is shipped, to points outside of the State of ·wisconsin. It is kno\vn by said respondents, at the time they acquire the cheese from the factories, that this substantial percentage 'vill ultimately be shipped out of the State. No shipments of che~se are made by said respondents from their plants in 'Visconsin, exact•pt as the result of sales made upon orders received by said respondents. Purchases are not made by said respondents for the purpose of filling previous o-r:ders, but in the usual course of the business of said respondents, the orders received by said respondents will require shipment of at ]east 90 percent of said cheese to points outside the State of 'Visconsi11, which fact is known by said respondents at the time of said purchases. P .AR. 7. Respondents Badger-Brodhead Cheese Co., Kraft-Cheese Co. (referred to in the complaint as Kraft-Phenix Cheese Corporation), The Borden Co., J. S. Hoffman Co. (referred to in the complaint as J. S. Hoffman & Co.), and Triangle Cheese Co., in the manner. and by the methods hereinbefore found, have maintained, and still do maintain, a course of trade in commerce between and among the several States of the United States and in the District of Columbia, of the Swiss and Limburger cheese, which was, and is, purchased by them either directly or indirectly, from the cheese factories in the Monroe area which manufacture and produce said cheese. Respondents, Badger-Brodhead Cheese Co., The Borden Co., and Triangle Cheese Co. were and are, in competition with one another, in the purchase of Swiss and Limburger cheese from the cheese factories which manufacture and produce same in the l\Ionroe an•a (howe,·er, since on or about June 1, 1940, respondent Triangle Cheese Co. has ceased to purchase Limburger cheese manufactured and produced in said factories) and respondents The Borden Co., Kraft Cheese Co. (referred to in the complaint as Kraft-Phenix Cheese Corporation), acting directly or through its subsidiary, respondent Badger-Brodhead Cheese Co., and respondent J. S. Hoffman Co. (referred to in the complaint as J. S. Hoffman & Co.), acting directly or through its subsidiary, Triangle Cheese Co., are in competition with each other in the BADGER-BRODHEAD CHEESE CO., ET AL. 103~ 1017 F'indiugs Fale and distribution of said Swiss and Limburger cheese, manufactured and produced by the factories in the l\Ionroe area, in commerce~ between and among the several States of the United Stutes and in the District of Columbia, except insofar as said competitions have been hindered, lessened, restrained, or restricted, or potential competitiom~ among them forestalled, by the unfair practices and methods hereinafter found.

PAR. 8. The prices at which responde.nts 13adger-Brodhen.d Cheese Co., Kraft Cheese Co. (referred to in the complaint, as Kraft-Phenix Cheese Corporation), The Borden Co., J. S. Hoffman Co. (referred to in the complaint as J. S. Hoffman&., Co.), and Triangle Cheese Co. bell and di~tribute the Swiss and Limberger Cheese, manufactured and produced in the cheese factories in the Monroe area, in commerce between and among the several States of the United States and in the District of Columbia, are materially affected and influenced by the prices at which the respondents, Badger-Brodhead Cheese Co., Tlll Borden Co., and Triangle Cheese Co. purchase said rlwese from said chl'ese factories in the aforementioned Monroe area. PAR. 9. In August 1938, as more fully set forth in paragraph 10 hereof, respondents Badger-Brodhead Cheese Co., acting both for itself, and also for and on behalf of respondent Kraft Cheese Co. (referred to in the complaint as Kraft-Phenix Cheese Corporation), J. S. Hoffman Co., (referred to in the complaint as J. S. Hoffman & Co.), acting both for itself and for and on behalf of respondent Triangle Cheese Co., and Carl Marty & Co., acting for and on behalf of re- Fpondent The Borden Co., which through its later purchase of the said Carl Marty & Co., did ratify and affirm the actions of the said Carl Marty & Co., entered into, and thereafter carried out, an understanding, agreement, and combination, for the purpose, and with the intent and effect of restricting and restraining competition in the purchase of the Swiss and Limburger cheese manufactured and produced by the factories in the Monroe area, and through such restricted nnd restrained competition, of suppressing and eliminating competition in the sale of such cheese in trade and commerce between and among the several States of the United States and in the District of Columbia.

PAR. 10. In August 1938, prices for Swiss and Limburger cheese "·ere unusually low, resulting in the producers of same becoming very dissatisfied. Under these circumstances, an appeal was made by the producers, that is, the farmers who produce the milk used in the factories for the manufacture of such cheese, to the department of agriculture of the State of Wisconsin, for relief. Conferenc('S were called by the said department of agriculture, and attended by representatives 2961116 00-41-vol. 31-68 .1032 FEDERAL 'trade COMMISSION DECISIONS Findings 31 F. '1'. C. of the department, of the producers and of the dealers, at which the representatives of the producers suggested that monthly meetings be held under the sponsorship of the department of agriculture of the State of 'Visconsin, between representatives of the cheese factories and of the dealers, at which an attempt would be made to reach an agreement as to fair prices to be paid by the dealers for cheese produced .and manufactured in the factories. The request was acquiesced in by representatives of the dealers. Beginning in October 1938, the. .respondents, Badger-Brodhead Cheese Co., and Triangle Cheese Co., together with other cheese dealers in the :Monroe area, began attending such meetings; then in February 1939, respondent, The Borden Co., which acquired the business of Carl Marty & Co. on or about January 1, 1939, joined said dealers in sending a representative to such meetings. These meetings were sponsored by, and were held under the :;upervision of, the department of agriculture of the State of 'Viscon- .sin, and a representative of said department attended and presided over all such meetings. The meetings were open to the attendance of Swiss and Limburger dealers and producers in 'Visconsin and were :attended by many of them. At these meetings, the representatives ·of the respondents, Badger-Brodhead Cheese Co., The Borden Co., and Triangle Cheese Co., and of the other Swiss and Limburger dealers and the representatives of the producers, interchanged market information, discussed and agreed upon the prices to be paid for 'Swiss and Limburger cheese at the factories according to the grade. These prices were then generally charged by the producers and paid by the dealers in the l\Ionroe area, including respondents Badger- Brodhead Cheese Co., The Borden Co., and Triangle Cheese Co., for the current month's Swiss and Limburger cheese. PAR. 11. Pursuant to the agreement, understanding, and combination, hereinbefore found in paragraph 9, and as a part thereof, the ~aid respondents Badger-Brodhead Cheese Co., acting both for itself :and also for anu on behalf of respondent Kraft Cheese Co. (referred to in the complaint as Kraft-Phenix Cheese Corporation), the Boruen Co. and Triangle. Cheese Co., acting both for itself and also for and •on behalf o£ respondent J. S. Hoffman Co. (referred to in the complaint as J. S. Hoffman & Co.), did agree to hold and did hold, the ·monthly meetings, hereinbefore found in paragraph 10, and in said meetings, said respondents did agree to fix, and did fix, along with the wpresPntatives of the other dealers and th6se of the producers in the Monroe area, the prices which would be paid, and were paid, 1o the cheese factories in said area, for the Swiss and. Limburger cheese produced and manufactured by said factories; also during said meetings, in furtherance o£ the aforefound understanding, agreement and 1·combination, the representatives of respondents Badger-Brodhead BADGER-BRODHEAD CHEESE CO., ET AL. 1033 1.017 Findings Cheese Co., The Borden Co., and Triangle Cheese Co., with the representatives of the other dealers in the Monroe area, acted as a unit in offering to the representatives of the factories the prices which the dealers would pay for the cheese produced and manufactured by said factories; and furthermore, said representatives of the aformentioned respondents and those of the other. dealers in the Monroe area, did, prior to their meetings with the representatives of the producers, hold -separate meetings among themselves at which they agreed upon the initial prices they would offer at these meetings with the representatives of the producers, and during their meetings with said reprefentatives of the producers, did also hold separate meetings among themselves to which they agreed to set, and did set, the upper limits as to the prices they would agree to pay the cheese factories at their meetings with the representatives of the producers; likewise, at the said meetings with the representatives of the producers, which meetings were held in the manner heretofore found in paragraph 10 the representatives of the cheese dealers, including the representatives of the respondents Badger-Br~dhead Cheese Co., The Borden Co., and 'Triangle Cheese Co., in very few instances acceded to the request of the representatives of the producers for increased prices for Swis!! and Limburger cheese, said representatives of the producers, in most instances, being required to either accept the lower prices offered by the representatives of the dealers for the Swiss and Limburger cheese 11produced by the cheese factories in the Monroe area, or else receive the same prices for said cheese as were paid by th; dealers for said ·eheese for the preceding month.

PAR. 12. The capacity, tendency, and effect of the understanding, agreement, and combination hereinbefore found in paragraph 9, and the acts, practices, and things done by the respondents Badger-Brodhead Cheese Co., Kraft Cheese Co. (referred to in the complaint as Kraft-Phenix Cheese Corporation), The Borden Co., J. S. Hoffman Co. (referred to in the complaint as J. S. Hoffman & Co.), and Triangle Cheese Co. pursuant thereto, as hertofore found in paragraphs 10 and 11, have been, and are, to materially affect and influence the prices at which Swiss and Limburger cheese are sold in commerce between and among the various States of the United States and in the District of Columbia, to influence, at least in part, the prices at which some other dairy products are sold and distributed in said ·commerce; to unreasonably lessen, eliminate, restrict, and hinder competition in the purchase of said Swiss and Limburger cheese produced and manufactured by the cheese factories in the :Monroe nrPa; and to unreasonably lessen and restrict competition in the rer-;ale of said cheese to the purchasers thereof located in the several 'States of the United States and in the District of Columbia. 1034 federal TRADE COMMISf:\ION DECISIOXS Ol'(ler 31 F.T. C. CONCLUSION The aforesaid acts and practices of the respondents, Badger-Brodhead Cheese Co., Kraft Cheese Co. (referred to in the complaint as Kraft-Phenix Cheese Corporation, the Borden Co., J. S. Hoffman Co. (referred to in the complaint as J. S. Hoffman & Co.), and Triangle Cheese Co., as hereinbefore fountl, are all to the prejudice of the public and constitute unfair methods of competition within the intent und meaning of the Federal Trade Commission Act. ORDER TO CEASE AND DESIST This proceeding having been heard by the Federal Trade Commission upon the complaint o£ the Commission, the answers of the respondents, and a stipulation as to the facts entered into between the respondents herein and ,V. T. Kelley, chief counsel for the Commission, which provides, among other things, that without further evidence or other intervening procedure, the Commission may issue and serve upon respondents herein findings as to the facts and conclusion based thereon and an order disposing of the proceeding, and the Commission having made its findings as to the facts and conclusion that said res·pondents have violated the provisions of the Federal Trade Commission Act.

It is ordered, That the respondents, Badger-Brodhead Cheese Co., a corporation, Kraft Cheese Co. (referred to in the complaint as Kraft-Phenix Cheese Corporation), a corporation, The Borden Co., a corporation, J. S. Hoffman Co., (referred to in the complaint as J. S. Hoffman & Co.), a corporation, and Triangle Cheese Co. (referred to in the complaint as Triangle Cheese Co.), a corporation, and their respective officers, directors, representatives, agents, and employees, together with the successors or assigns of each of said respondents, directly, indirectly, through any corporate or other device or through or by means of any wholly or partially owned subsidiary, in connection with the offering to purchase or the purchase in commerce, as "commerce" is defined in the Federal Trade Commission Act, of Swiss or Limburger cheese, which is sold, or offered for sale, by the producers or manufacturers thereof or by an agent or representative of such a producer or manufacturer, forthwith cease and desist from fixing or maintaining, or attempting to fix or maintain, pursuant to agreement, understanding, or combination between or among themselves, or between or among any two or more of them, or between or among any one or more of them and any other competing corporation or corporations or any compet- BADGER-BRODHEAD CHEESE CO., ET AL. 1035 1017 Order ing person or persons, the prices offered to be paid, or paid, for such cheese.

It is further ordered, That the case growing out of the complaint herein be, and the same hereby is, closed as to the respondent, National Dairy Products Corporation, but without prejudice to the right of the Commission, should future facts so warrant, to reopen the same and resume prosecution thereof in accordance with its regular procedure.

It is further ordered, That the respondents, Badger-Brodhead Cheese Co., a corporation, Kraft Cheese Co. (referred to in the complaint as Kraft-Phenix Cheese Corporation), a corporation, The Borden Co., a corporation, J. S. Hoffman Co. (referred to in the complaint as J. S. Hoffman & Co.), a corporation, and Triangle Cheese Co. (referred to in the complaint as Triangle Cheese Co.), a corporation, and each o£ them, shall, within 60 days after service upon them 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 this order.

Syllabus 31F.T .. C.