American Lecithin Co., Inc

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IN THE MATTER OF AMERICAN LECITHIN COMPANY, INC., ET AL.

COMPLAINT, FINDINGS, AND ORDER IN REGARD TO THE ALLEGED VIOLATION OF SEC. 5 OF AN ACT OF CONGRESS APPROVED SEPT. 26, 19;1.4 Docket 4173. Complaint, July 5, 1940-Decision, May "/, 191,1 'Vhere four domestic and two foreign corporations, and various officers and directors thereof, interested in the production, sale, and distribution of lecithin and lecithin products, in the United States; Acting on tbe Initiative assumed by the president of one of said domestic corporations, manufacturer of soybean oil and desirous of developing and exploiting uses for the lecithin bypt·oduct resulting from such manufacture, and confronted with a situation in which competitive and diffused control of essential patents and patent rights In this country and abroad Imposed obstacles to its proceeding under certain patented foreign processes relative to extracting lecithin from soybean oil- ( a) Entered into and carried out an agreement directed to the formation of a new corporation In which were merged their various theretofot•e competitive and conflictin~ interests with respect to employment of patents and patent rights In production and sale of lecithin and lecithin products in the United States and possessions and Canada, and under which, in consideration of various agreements, obligations, payments, etc., they 1. Undertook, as respects American interests involved, to refrain from exporting the products concerned;

2. Undertook, as respects German and Danish corporations concerned, to refrain from Importing such product;

3. Undertook to assign to said new corporation all their rights and intere~t in the secrets concerning apparatus, devicl'S, and processes, and letters patent and patent applications for the United States find Canada relating to the manufacture, use, and sale of lecithin and its prOlluets, and to acknowledge validity of such patents, and not to contest those thereafter acquired or developed by said new corporation;

4. Made said new corporation exclnsivl' distributor of the lecithin to be produced by aforesaid American manufacturer and by a Sl'cond domestic corporate manufacturer, with which former shared exclusive domestic manufacturing rights under various patents thereby pooled and controlled; and 5. Made a fourth dome:<tic corporation, theretofore engaged in the sale of products involved under certain patents or patent rights, exclusive agent of said new corporate exclusive distributor; With result that through said agrel:'ment and concert of artion they eliminated potential competition bl'tween aforesaid domestic manufacturers and foreign ronrerns for bu~inl'SS In ll'rithin In the Vnited States and Canada and In fot·eign countries, restruinPd eueh other from rontestlng patents govern- Ing the production, processing, or use of lecithin, and monopolized trade and commerce therein and in products thereof in themselves; and W'here said new exclusive distributing corporation, to promote the ends which aforesaid arrangement was designed to reach- AMERICAN LECITHIN CO., INC., ET AL. 1401 -400 Syllabus (b) Threatened pt·ospecth·e pureha,.;ers of leeithin over a period of time with suits for patent infringement should they use lecithin purchased from a competitor to pmctice its patented Invention without obtaining a license from it when, in truth ami in fact, it did not intend to foilow up such threats by snit in all instances;

(c) Attempted to extend Its monopoly under its Working patent, relating to chocolate am! the !llelhod of making same and other patent~ owned by it, to promote sale of its own unpatented lecithin for use in processes, and in making products, covered by aforesaid patents; (d) Attempted to, and did, mislead purchasers and prospective pm·ehasers of lecithin into the mistaken belief that the United Statt>s Governmt>nt had promulgated rules nnd regulations governing the labeling of products containing lecithin and lecithin compounds through representing to pro~pective> purchasers by correspondence and through its agent the requirements for labeling prescribed by the United States Departnwnt of Agriculture and Food and Drug Administration, ns it lmderstood them, on the basis of nn official letter and an article; advising them that its purified cocoa butter lecithin would not t·equit·e declaration of the cocoa butter used as the carrier on the label of the packaged product, whereas soybean oil lt>cithin would require declaration of soybean oil content; with intent and etreet of inducing prospective purehasers to bn~· its purified cocoa butter lecithin and refrain from purchasing the ordinar~· soy lecithin from either it or its competitors ;

(e) Disparaged competitor's products through asserting to prospective purchasers that certain of them contained substances such as aluminum cleute, mineral oil, 140° -melting-point stearine, soybean meal, excess water, and excess fatty acids, to the extent and degree disclosed by chemical analyses, without explanation, in many cases, except when r(!quested, of the significance of such ingredients, thus taking unfair advantage of competitors by unfairly representing and describing their products; (1) W'ith Intent of creating the erroneous belief in the minds of purchasers that use of its product "Lexin" was recommended- by the Government unqer, the Food, Drug and Cosmetic Act of 1939, published and disseminated a scientific treatise entitled "Viscosity of Chocolate" in which the statement was made that "the use of a refined and purified lecithin in the carrier of pure cocoa butter (Lex in) is recommended under the new Act," facts being that the act in question did not reconunend the use of any particular product; and \Vhere said two domestic manufacturers-- (g) Followed the practice of selling exclusively to afore!'aid exclusive distributing corporation and refrained from entering into competition with one another in the sale of lecithin produced by them under patented processes owned by it; and Where said exclusive distributor, excepting recently and with the consent of said foreign corporutlons, following the outbrPnk of war nhroad- (h) Refrained from exporting ! :!thin to tPrritorit>s where said GPrman and Danish concerns were engaged in sale thereof, and prevented and restricted importation into the Unitf'd Stutes of lecithin produced by said coucPrns In foreign countries under procef;S patent owned hy it; and Complaint 32 F. T.'C. ( i) Acquired, subsequent to agreement hereinbefore described, various unexpired United States patents relative to production and use of lecithin, and instituted and prosecuted suits against alleged infringements, both direct and contributory, of its aforesaid Working patent: lleld, That said acts and practices were all to the prejudice of the public, had H d tt gc1·uus tendency to, and actually did, hinder and prevent com· petil.on l·ctwPPII ami unwJ,g themselves ln sale of lecithin and lecithin products in cumutuce, placed in themselves power to control and enhance prices, and hat.dic<lpped eumpPtiturs eJ!gnged in production and sale of lecithin in the United Stutes, in the conduct of their respective businesses; and ·further tended to and did: (1) vest in them control over sale and distribution of products involved, Including terms and conditions thereof in interstate trade and commerce; (2) diminish mhi eliminate importation of lecithin from abroad, and exportation of lecithin and products thereof from the United States; (3) create false and mistaken beliefs and understandings regarding nature and use of competitor's products, the functions of the Government with regard to the labeling of food products and its rules and regulations concerning the labeling of lecithin and products con· taining same, and unduly restrained trade and competition in interstate commerce in said products, and constituted unfair methods of competition ln commerce.

Mr. Lynn 0: Paulson for the Commission.

Strange, llfy~r8, Hinds & Wight, of New York City, for respondents, with the exception of Hansa-Muehle and Aarhus Oliefabrik which were represented by Shaffer & Pierson, of New York City. 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 the American Lecithin Co., Inc., a corporation, its officers, Joseph Eichberg, president, Armand May, vice president, 'Vhitney D. Eastman, vice president, Clifton M. Kolb, secretary, Richard H. Horsburg, treasurer, its directors, Adrien Joyce, chairman; Ross & Rowe, Inc.; The Glidden Co., a corporation; Archer-Daniels-Midland Co., a corporation, its president, Shreve Archer; Hansa-Muehle, a German corporation; Aarhus Oliefabrik, a Danish corporation; and American Lecithin Corporation, a corporation, all hereinafter referred to as respondents, have been and are using unfair methods of competition in commerce as commerce is defined in said act; and it appearing to the Commission that a proceeding 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 American Lecithin Co., Inc. (hereinafter referred to as American Lecithin Co., Inc.) is an Ohio cor- AMERICAN LECITHIN CO., INC., ET AL. 1403 - 1400 Complaint poration with a principal office and place of business at the Durkee Building, Elmhurst, Long Island, N. Y.

Said American Lecithin Co., Inc. was organized pursuant to an agreement entered into by and between respondents Hansa-Muehle, Aarhus Oliefabrik, American Lecithin Corporation, Archer-Daniels- Midland Co., The Glidden Co. and Ross & Rowe, Inc. (hereinafter in subsequent paragraphs of this complaint referred to as Rimsa- Muehle, Aarhus Oliefabrik, American Lecithin Corporation, Archer- Daniels-l\Iidland Co., The Glidden Co. and Ross & Rowe, Inc., respectively). This said agreement (hereinafter more fully described) was entered into on December 5, 1934.

Prior to and until the time when this said agreement was entered into the American Lecithin Corporation was distributing lecithin in the United States manufactured by Hansa-l\Iuehle in Germany; Ross & Rowe, Inc. was distributing lecithin in the United States produced in Denmark by Aarhus Oliefabrik; Archer-Daniels-Midland Co. and The Glidden Co. were producing lecithin at their respective plants in the United States and were the only producers of lecithin in the United States; each party to the agreement owned or controlled one or more patents regarding the production and use of the product lecithin; and each party was directly or indirectly in competition with each other patty and with other individuals, firms, corporations, and partnerships importing into and distributing lecithin in the United States. · Pursuant to the aforesaid agreement: Americ.an Lecithin Co., Inc. Was organized with a nominal common capital consisting of 1,000 shares without par value, which said shares were nlloC!lted to the aforesaid organizers on an agr•eed basis; each of the organizers assigned to the said American Lecithin Co., Inc., upon its incorporation, all their right, title, and interest in and to their secret knowledge, concerning apparatus, devices and processes, also all their right, title and interest in and to letters patent and patent application for the United States and possessions and the Dominion of Canada, which relate to the manufacture, use, and sale of lecithin and lecithin products which they owned at the time the agreement was entered into, or which they thereafter might develop or acquire; each of the organizers have received benefits in a manner stipulated to and agreed upon, and have participated jn the management of the said corporation through representation on its board of directors, which said board consists of six members-two appointed by The Glidden Co., two by Arclwr-Daniels-1\Iidland Co., one by Ilansa-l\Iuehle and Aarhus Oliefabrik, and one by American Lecithin Corporation. Complaint 32 F. T. C. Respondents Joseph Eichberg, Armand May, Whitney D. Eastman, Clifton M. Kolb, Richard.H. Horsburg, and Adrien Joyce, individuals, are president, vice president, vice president, secretary, treasurer and chairman of the board of directors, respectively, of American Lecithin Co., Inc., and have their principal offices and place of business at the Durkee Building, Elmhurst, Long Island, N. Y. Respondent Ross & Rowe, Inc. is a New York corporation with its principal office and place of business at 75 Varick Street, New York, N.Y.

The Glidden Co. is an Ohio corporation with its principal office and place of business at 1396 Union Commerce Building, Cleveland, Ohio.

Archer-Daniels-Midland Co. is a Delaware corporation with a principal office in the Roanoke Building, Minneapolis, Minn. Respondent Shreve Archer, an individual, is president of Archer- Daniels-Midland Co. and has his principal office and place of business at the offices of the Archer-Daniels-Midland Co. in the Roanoke Building, Minn~apolis, Minn.

Hansa-1\fuehle is a corporation duly organized and ·existing under the laws of Germany and having a place of business at Hamburg, Germany.

Aarhus Oliefabrik is a corporation duly organized and existing under the laws of Denmark and having a place of business at Aarhus, Denmark.

American Lecithin Corporation is a Delaware corporation, having its principal office and place of business at Atlanta, Ga. PAR. 2. Lecithin is a chemical product used in the manufacture and making of candy, paints, petroleum products, shortening, margarine, rubber, leather, oils, fats, waxes, biscuits, crackers, and other commodities. It is a natural, organic substance occurring in small amounts in practically all living cells and in considerable quantities in egg yolks and in the seeds of most plants. It is not a patented commodity, but th.ere are several patents outstanding on its utilization and on the methods of combining it with other materials. One of the more common functions which lecithin performs is that of preventing graying in products in the manufacture of which cocoa or chocolate is used. It also advantageously affects fluidity. PAR. 3. In the course and conduct of their respective businesses respondents produce, buy, sell, ship, and distribute, or cause to be produced, bought, sold, shipped, and distributed, substantial ctnantities of lecithin in commerce among and between the States of the United States, the Territories thereof, and the District of Columbia, as fol- AMERICAN LECITHIN CO., INC., ET AL.· 1405 1400 Complaint lows: American Lecithin Co., Inc., buys quantities of lecithin produced by Archer-Daniels-Midland Co. and The Glidden Co. at their respective places of business, and causes same to be shipped to it at its principal place of business, which it in turn sells and distributes to purchasers locah'd in the several States of the United States or resells in quantitiL•s to Ross & Rowe, Inc. Ross & Rowe, Inc., purchases substantial quantities of lecithin from the ·American Lecithin Co., Inc., for resale and distribution to purchasers located in the several States of the United States and in the District of Columbia. Each of the other respondents named in this complaint and not specifically referred to in this paragmph 3, participate in the operation and management of the said American Lecithin Co., Inc., and in the management of their respective firms, corporations, partnerships, and proprietorships as described in the preceding paragraphs hereof. Ross & Rowe, Inc., sells and distrilmtes lecithin under the trade name of "Yelkin." American Lecithin Co., Inc., sells and distributes lecithin under ihe trade name of "Lexin."

In the aforesaid manner each and all of the respondents riamed herein ar.e and have for more than 4 years last past, and at all times mentioned herein, engaged in commerce in lecithin in, between, and Utnong the several Stutes of the United States, the Terril orjes thereof, and the District of Columbia.

PAn. 4. On or about December 5, 1934l respondents entered into an agreement, understanding, combination, and conspiracy to monopolize trade and commerce in lecithin in, among, ·and between the several States of the United States, the Territories thereof and the District of Columbia, and to suppress, lessen, restrain, and eliminate competition in the purchase, sale, and distribution of the said product lecithin in said commerce.

Pursuant to this agreement, understanding, combination, and con- "Piracy, and in furtherance thereof, Hansa-Muehle, American Lecithin Corporation, Aarhus Uliefabrik, Archer-Daniels-Midland Co., The Glidden .Co., and Ross & Rowe, Inc., as a.alleged in paragraph 1 hereof, entered. into an agreement on December 5, 1934, providing for the formation of the American Lecithin Company, Inc. In addition, it Was provided in this said agreement, amongst other things, that: (a) The American Lecithin Co., Inc., should grant to Archer- Daniels-J\Iidlnnd Co. and The Glidden Co. an exclusive lic£'nse covering the manufacture of ll'cithin aiHllecithin products and that lecithin and lecithin products should he sold exclusively to the said American Lecithin Co., Inc., by the sai(l Archer-Daniels-Mitlland Co. und The Glidden Co.

32~t1!l:l 111 41 vor .. 32 SU Complaint 32 F.T.C.

(b) Ross & Rowe, Inc., should act as selling agent of the said American Lecithin Co., Inc., on condition that Ross & Rowe, Inc., would not handle any lecithin competitive with that sold by the s~id American Lecithin Co.

(c) Hansa-Muehle, Aarhus Oliefabrik, American Lecithin Corporation, Archer-Daniels-Midland Co., The Glidden Co., and Ross & Uowe, Inc., should acknowledg€' all of the patents assigned to the said American Lecithin Co. as good and valid patents and should agree that they would not directly or indirectly contest the validity of the same or the validity of any patents which might be developed or acquired by the said American Lecithin Co. in the future. (d) Alf the parties to the agreement should cancel and terminate all agreements or arrangements then existing which would in any way interfere with the carrying out of the principles and plan outlined in the agreement, and Hansa-Muehle and Aarhus Oliefabrik should specifically agree not to sell lecithin, or products made with the same, in the United States and the Dominion of Canada, with the exception of Newfoundland, during the life of the patents covered by the said agreement, and'American Lecithin Co., Inc., The Glidden Co., Archer- Daniels-Midland Co., and Ross & Rowe were likewise to agree not to sell such products outside of the United States, its poss€ssions, and Canada.

PAR. 5. Pursuant to the agreement, understanding, combination, conspiracy, and the agreement entered into in pursuance thereof as alleged in paragraph 4 hereof and in furtherance of their purposes and aims as alleged in paragraph 4 hereof, respondents have, during ull times since 1935, done and performed many acts and things and engaged in many practices and methods and they are continuing to do and perform many acts and things and engage in many practices and methods as follows :

(a) Hansa-Muehle and Aarhus Oliefabrik have refrained from exporting lecithin to the United States, and have attempted to discourage, impede, restrict, and hinder the importation of lecithin into the United States from other producers thereof located in countries of Europe.

(b) The American· Lecithin Co., Inc., has refrained from exporting lecithin from the United States, and has refrained from purchasing lecithin from any other sources .than Archer-Daniels- 1\Iidland Co. and The Glidden Co.

(c) The American Lecithin Co., Inc., and the parties to the agre£>ment aforesaid have, by means of letters, circulars, pamphlets, and advertisements in trade papers and otherwise, published, diss£>mi- AMERICAN LECITlliN CO., INC., ET AL. 1407 1400 Complaint nated, and circulated and caused to be disseminated through tlle United States mails and brought to the attention of purchasers and prospective purchasers of .the product lecithin, false and misleading statements and representations concerning lecithin manufactured, sold, and distributed by competitors, concerning "Yelkin" and "Lexin" (brands of lecithin distributed by John E. Rowe, Laura ,V. Rowe, and 'Vm. F. Schlesinger and the American Lecithin Co., Inc., ~-espectively) and concerning lecithin generally and patents perta~n­ lng to it and its use; and by the aforesaid means and by other hke and similar methods have unfairly sought and attempted to dis~ Parage competitors' lecithin products and obtain a monopoly for themselves in the sale and distribution of lecithin in commerce in the U11ited States, the territories thereof, and the District of Columbia. ~d) Respondents have pooled interests (patents, secrets, patent applications, etc.), shared earnings and allocated profits, granted and accepted reciprocal benefits, established and maintained exclusive dealing contracts, agreed upon a division of sales rights, and have cooperated in the doing and performing of other acts and things for the purpose and with the effect of controlling the production of lecithin in interstate commerce in the United States. (e) Respondents have sought and attempted, and do seek and attempt, by personal contact and communication with purchasers and Users, or prospective purchas~rs and prospective users of lecithin and by other means, to convey tlle impression and create the belief that lecithin produced and distributed by their competitors is not approved by the Food and Drug Administration of the United States Department of Agriculture, and have threatened to cite said purchasers and Pr.ospective purchasers :for investigation to the Food and Drug Admmistration for failure to properly advertise and label their products when, in truth and in fact, the threats and accu~ations could ~r cannot be sustained and were and are not warranted by the facts In many instances; and by the aforesaid and similar means have sought and attempted, and do seek and attempt, to discourage sales and purchases of competitors' lecithin.

PAn. 6. Among and typical of the representations made and being made as referred to in paragraph 5 (c) and (e) hereof is a printed s~atement circularized by the said American Lecithin Co., Inc., entitled "Viscosity in Chocolate," in which the following claim in respect to "Lexin" is made~ In this connection we might mention that the new Food, Drug and Cosmetic Act of 1938 requires the le-gend "artificial flavor" when any Pynthetic flavor ts Complaint 32 F. T. C. used ln chocolate. By synthetic flavor (or color) the law means any flavor (or color) made by chemical synthesis or other artifice. The use of a refined and purified lecithin in the carrier of pure cocoa-butter (LEXIN) is recommended under the new Act. If lecithin in a carrier of soya oil is used, both the soya oil as well as the lecithin have to be listed on the label. · Dy this claim respondents have sought, and seek, to create the belief that "Lexin" has the endorsement of the Food and Drug Administration of the United States Department of Agriculture. In truth and in fact, the said Food and Drug Administration has not endorsed the product "Lexin" and respondents' claim is false and deceptive.

PAn. 7. Said agreement, understanding,· combination, and conspiracy, and the things done thereunder and pursuant thereto and in furtherance thereof, as hereinabove alleged, have had, and do have, the capacity and tendency and effect (a) of unduly and unlawfully restricting and restraining competition in the sale and use of lecithin in commerce between, among, and in the several States of the United States and in the District of Columbia, and with foreign nations and outlying territories of the United States, and of thereby restricting and restraining the use thereof in the manufacttm'. production, and making of numerous and sundry articles, products, and commodities comprising a substantial body of the nforesaid trade in interstate commerce; (b) of preventing the gro\\~th and Llevelopment of new uses and additional outlets for the product lecithin and for products in the manufacture of which the use of lecithin is necessary or helpful; (c) of restraining competition among domestic manufacturers of lecithin and between domestic manufacturers of lecithin and distributors of imported lecith.in; (d) of prejudicing respondents' competitors in the conduct and pursuit of their respective businesses; (e) of creating false and erroneous beliefs in the minds of purchasers and users, prospective purchasers, and users of lecithin; (f) of substantially enhancing prices for lecithin to the consuming public; (g) and of eliminating competition, with the capacity and tendency to create a monopoly in the hands of respondents in the production, sale, and i listribution of lecithin in commerce within the United States: the territories thereof, and the District of Columbia. PAR. 8. The aforesaid acts and practices of the rel'pomlents, ns herein allege<l, are all to the prejudice of the public arHlrespondents' competitors and constitute unfair methods of competition in commerce within the intent ancl meaning of the Federal Trade Commis· sion Act.

AMERICAN LECITHIN CO., INC., ET AL. 1409 1400 Findings REPORT, FINDINGS AS TO THE FACTS, AND ORDER Pursuant to the provisions of the Federal Trade Commission Act, the Federal Trade Commission on the 5th day of July 1940, issued and served its complaint in this proceeding upon the 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. On August 17, 1940, respondents American Lecithin Co., Inc., Joseph Eichuerg, Armand May, Whitney D. Eastman, Clifton l\[, Kolb, Richard H. Horsburg, Adrien Joyce, Ross & Rowe, Inc., 1l1e Glidden Co., Archer-Dan_iels-Midland Co., Shreve Archer, and American Lecithin Corporation filed a joint answer in this proceeding by their attorney, Roger Hinds, and on October 31, Hl40, filed an amendment to their said answer by their attorney, Roger Hinds. On September 14, 1940, respondents Hansa-Muehle and Aarhus Oliefabrik filed a joint answer in this proceeding by their attorney, Howard 0. Pierson. Thereafter, a stipttlation was entered into whereby it was stipulated and agreed that a statement of facts signed and executed by respondents American Lecithin Co., Inc., Joseph Eichberg, Armand May, Whitney D. Eastman, Clifton M. Kolb, Richard H. Horsburg, Adrien Joyce, Ross & Rowe, Inc., The Glidden Co., Archer-Daniels- Midland Co., Shreve Archer, and American Lecithin Corporation, and W. T. Kelley, chief counsel for the Federal Trade Commission, subject to the approval of the Commission, might be taken as the facts in this proceeding, as to the aforesaid respondents, 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 as to them without the presentation of further testimony, argument, filing of briefs, or other intervening procedure. Thereafter, this proceeding regularly came on for final hearing be.fore the Commission on said complaint, answers, and stipulation, said stipulation having bE:'en approved, accepteel, and filed, and the Commission 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 1lrawn therefrom.

FINOINOS AS TO Tile FACTS PARAGRAPH 1. Respondent American Lecithin Co., Inc. (so named in the complaint), is the American Lecithin Co. ("Inc." not being part 1410 FEDERAL TRADE COl\Il\:USSION DECISIONS Findings 32 F. 'f. C. of its corporate name), an Ohio corporation with its principal office and place of business in the Durkee Building, Elmhurst, Long Island1N., Y. . , Respondent Joseph Eichberg is president of respondent American Lecithin Co.

Respondent Armand l\fay is vice president of respondent American Lecithin Co.

Respondent 'Vhitney D. Eastman (so named ~n the complaint) is 'Vhitney H. Eastman, a vice president of respondent American Lecithin Co.

Respondent Clifton 1\f. Kolb is secretary of respondent American Lecithin Co.

Respondent Richard H. Hoosburg (so named in the complaint) is Richard H. Horsburgh, treasurer of respondent American Lecithin Co.

Respondent American Lecithin Co. has a board of directors consisting of six members as follows: Respondent Adrien D. Joyce (so named in the complaint) is Adrian D. Joyce, chairman of the board of directors; Armand May, '\Vhitney H. Eastman, Richard H. Hoursburgh, ,V, H. Morris, and Harold H. Fries are the other five directors. Respondent Ross and Rowe, Inc., is a New York corporation with its principal office and place of business at 75 Varick Street, New York,N. Y.

Respondent The Glidden Co. is an Ohio corporation with its principal office and place of business at 1396 Union Commerce Building, Cleveland, Ohio.

Respondent Archer-Daniels-Midland Co. is a Delaware corporation with its principal office in the Roanoke Building, Minneapolis, Minn. Respondent Shreve Archer, an individual, is president of respondent Archer-Daniels-Midland Co.

Respondent Hansa-Muehle is a corporation duly organized and existing under the laws of Germany and having a place of business at Hamburg, Germany.

Respondent Aarhus Oliefabrik is a corporation duly organized and existing under the laws of Denmark and having a place of business at Aarhus, Denmark.

Respondent American Lecithin Corporation was organized as a Delaware corporation having its principal office and place of business at Atlanta, Ga.

For convenience, hereinafter the aforesaid respondents will be referred to by their names without the designation "respondent" and at all times hereinafter when any one of the aforesaid names appears it is the respondent of that name to whom reference is made. AlHERICAN LECITHIN CO., INC., ET AL. 1411 1400 Findings PAR. 2. Lecithin, the chemical compound, is a natural organic substance of complex composition occurring in practically all living cells and in relatively larger proportions in egg yolks and in the seeds of certain plants. The lecithin of commerce, which is the product hereinafter meant when the term "lecithin" is used, is a mixture of soy lecithin and related chemical compounds (totaling about 65 percent to 70 percent) and a fatty carrier (about 30 percent to 35 percent), the most common fatty carriers being soybean oil in soy lecithin, and cocoa butter in cocoa butter lecithin. Commercial lecithin is produced in quantity as a byproduct in connection with at least two known methods of processing soybeans, namely, the expeller method and the extraction method. Both involve separation of the lecithin from mixtures of oils, fats, proteins, moistme, etc. There are a number of unexpired United States patents covering steps of process in recovering lecithin. Those owned by American Lecithin Co. are listed in numbered paragraphs 4 and 7 below. There are numerous United States pate.nts covering inventions wherein lecithin is added to other materials either as a useful step in new procedure, or to produce a new article of manufacture. A number of such patents listed in numbered paragraphs 4 and 7 below ,and including the Working pat. ent No. 1,781.672 which claims both the addition of lecithin to chocolate and the chocolate product so produced are owned by American Lecithin Co. As so used in chocolate, the most important purposes of the lecithin are to reduce the viscosity of the chocolate (thereby to facilitate coating), to retard greying of the chocolate, and to produce a finished chocolate containing a reduced quantity of coca butter, which is equal in appearance to a finished chocolate containing a greater amount of cocoa butter. Commercial lecithin is also used in the manufacture of candy, paints, petroleum products, shortening, margarine, rubber, leather, oils, fats, waxes, biscuits, crackers, .and other commodities.

Lecithin is produced in the United States as a byproduct in the recovery and processing of soybean oil and to a minor degree from corn oil. It is sold in various grades and in different stages of refinement. In 1930 the total annual consumption of lecithin in the United States did not exceed 50,000 pounds, all of which was imported and sold by respondents and their predecessors. In 1939 the total annual consumption of lecithin in the Unit~d States was about 1,500,000 pounds, of which American Lecithin Co. sold about GG percent. Of the remaining 34 percent about half was imported and half was produced in the United States. Imports of lecithin have dropped from 350,000 pounds in 1934 (approximately 340,000 pounds of which Were imported and sold by respondents, American Lecithin Corpora- Findings 32 F.T. C. tion and Ross & Rowe, Inc.) to about 260,000 pounds in 1939, of which latter amount none was imported or sold in the United States by any of the respondents. For a time in 1935 and 1936 American Lecithin Co. imported substantial amounts of lecithin purchased from Aarhus Oliefabrik and Hansa-Muehle incidental to destruction of the Glidden plant.

On July 2, 1940, an act of Congress went into effect entitled ''An Act to Limit the Importation of Products Made, Produced, Processed or .Mined Under Process Covered by Unexpired Valid United States Patents and for Other Purposes."

In or about the month of September 1939, American Lecithin Co., first with the acquiscence, and thereafter with the express consent, of Aarhus Oliefabrik and Hansa-Muehle, began to export lecithin to Europe, Asia, Africa, Australia, and North and South America and has continu.ed to do so and is now doing so. From 1934 down to the present time the prices of lecithin in the United States have ranged downwaru.

PAR. 3. The American Lecithin Co. is, and has been for more than 4 years last p~st, engaged in interstate trade and commerce in lecithin, in that it buys lecithin produced in the plants of Archer- Daniels-Midland Co. and The Glidden Co., located in the State of Illinois, and sells at h:•ast a part of the lecithin so purchased to purchasers in that State and the other States of the United States, and ships, or causes to be shipped, the lecithin so purchased and sold to the purchasers thereof in the several States of the United States. Respondent officers and directors of the American Lecithin Co. participate in the conduct of the affairs of the At.nerican Lecithin Co. Ross & Rowe, Inc., is engaged in interstate commerce in that it sells lecithin for the account of American Lecithin Co. in the several States of the United States as the selling agent of American Lecithin Co.

The Glidden Co. is engaged in interstate commerce in that it manufactures lecithin in the State of Illinois and sells and ships it to · the American Lecithin Co. located in the State of New York. The Archer-Daniels-Midland Co. is engaged in interstate commerce in that it manufactures lecithin in the State of Illinois and sells and ships it to the American Lecithin Co. in the State of New York. Shreve Archer, as president of the Archer-Daniels-Midland Co., participates in the condu~t of the affairs of that company. American Lecithin Corporation has not engaged in interstate commerce since the formation of American Lecithin Co.; but prior to that time the .American Lecithin Corporation sold and distributed AMERICAN LECITHIN CO., INC., ET AL; 1413 1400 Findings lecithin to purchasers thereof located in the several States of the United States and in the District of Columbia. PAR. 4. Prior to December 5, 1934, the situation with respect to the sale and distribution of lecithin in the United States was substantially as follows:

(a) Hnnsa-l\iuehle owned United States patents for the production and use of lecithin. It was shipping lecithin to the American Lecithin Corporation, to whom it had granted exclusive selling rights in the United States aml had agreed not to grant licenses to manufacture lecithin without the consent of .American Lecithin Corporation. (b) The American Lecithin Corporation sold and distributed lecithin under an arrangement with Hansa-1\iuehle. It owned several United States patents relative to the use of lecithin, including one known as the ·working patent, No. 1,781,672 issued November 11, 1930, 'thich concerned the use of lecithin in the manufacture of <:hocolate and chocolate products.

(c) Aarhus Oliefabrik produced lecithin in Europe and exported it to the United States to be sold by its agents Fries Bros., whose subagent was Ross & R,owe, Inc., a. corporation, Ross & Rowe, Inc., sold lecithin obtained from Aarhus Oliefabrik in competition with the American Lecithin Corporation and other persons, partnerships, and corporations in the United States. They owned a United States paten~ No. 1,859,240, issued :May 17, 1932, on the use of lecithin in connection with the manufacture of candy. In 1932, Ross & Rowe, Inc., granted to American Lecithin Corporation sales rights under said patent, and American Lecithin Corporation granted to Ross & Rowe, Inc., sales rights under said 'Vorking chocolate patent conditioned upon the payment of royalties. . (d) Other European producers of lecithin sold and shipped lecithin in the United States through brokerage or commission merchants in competition with Ross & Rowe., Inc., and the American Lecithin Corporation. One American firm selling lecithin of foreign manufacture is the J. C. Ferguson Manufacturing Co. of Providence, R.I., which began selling in 1935.

(e) The Archer-Daniels-Midland Co. obtained information relative to a manufacturing process in use in Europe from a competitor of Hansa-1\Iuehle, one Brinkman and l\fergell of Hamburg, Germany, and began producing lecithin in Chicago in 1934 in small quantities on an exploratory basis. They made an arrnng(.'ment with Ross & Rowe, Inc., in June of 193-1, cov~,>ring the sale of lecithin domestically. Archer-Daniels-1\Iidlnnd Co. had developed a process subordinate to professes pat<>ntt•d by Ilansa-:Muehle before the agreement of Decem}Jt>r Findings 32 F'. 'f. C. 5, 1934, hereinafter described and covering the use of hexane in the separation of the phosphatide from soybean oil. The application was filed December 4, 1934, and United States patent No. 2,024,398 issued December 17, 1935. · (f) The Glidden Co. is a large manufacturer of paints, varnishes, lacquers, and food products and is also engaged in the business of producing and refining large quantities of vegetable oils. In December of 1934 The Glidden Co. commenced operations in a plant which it had constructed at Chicago, Ill., for the extraction of soybean oil :from soybeans by the solvent method through the use of equipment purchased in Germany. Knowing that the soybean oil contained lecithin and that some of the lecithin would have to be removed from the soybean oil to make such oil conform to the specifications under which the oil was to be. sold, it occurred to The Glidden Co. that new and substantial commercial uses might be found for lecithin and thereby increase the value of soybean products produced in the United States to the benefit of growers and processors of soybeans. In early. l934, The Glidden Co. consulted Brinkman and Mergell, a German concern, thoroughly experienced in the extraction of soybean oil from soybeans by the solvent method and in the recovery of lecithin from soybean oil, and secured detailed information as to the recovery of lecithin from soybean oil. Brinkman and Mergell advised The Glidden Co. that the processes relative to extracting lecithin from soybean oil used in Germany could be used in the United States without interference from Hansa-Muehle because patent litigation in Germany covering German patents had turned out favorable to Brink~ man and Mergell. Brinkman and Mergell overlooked the fact, how-· ever, that German court decisions did not apply to United States patents owned by Hansa-Muehle covering the recoyery of lecithin from soybean oil, and The Glidden Co. found upon inve~tigating said United States patents and all other United States patents relative to lecithin that it could not extract lecithin from soybean oil on a commercial and practical basis without infringing United States patents owned by Hansa-l\fuehle, and that the use of the lecithin as sold would be covered by other United States patents owned by American Lecithin Corporation and others.

The Glidden Co. decided to protect itself by securing licenses to manufacture and use lecithin from owners of United States patents and in August of 1934, endeavored to work out an arrangement with American Lecithin Corporation and Hansa-MuehJe, but this was not consummated.

AMERICAN LECITHIN CO., INC., ET AL. 1415 1400 Findings About August of 1934, The Glidden Co. learned for the first time that Archer-Daniels-Midland Co. was experimenting with the production of lecithin as a byproduct of the processing of soybeans and contemplated the use of the processes covered by the United States patents owned by Hansa-Muehle, believing that it could do so because of E>rroneous information given to Archer-Daniels-Midland Co. by Drinkman and Mergell of Germany. The Glidden Co. notified Archer-Daniels-Midland Co. that it contemplated the production of lecithin under the United States patents of Hansa-l\Iuehle on an exclusive basis and that it would protect its rights under said patents by suit, if necessary.

Archer-Daniels-Midland Co. investigated the patent situation and became convinced that its production and sale of lecithin in the United States could not be made practicable, economical, or successful unless it obtained licenses under said patents.

The Glidden Co. expressed a willingness to give up its attempts to secure an exclusive license for the United States under said patents to the extent that Archer-Daniels-Midland Co. should have the same exclusive right as The Glidden Co. to produce lecithin in the United States under said patents and arranged the meeting between all of the respondents which resulted in the execution of the agreement dated December 5, 1934. The Glidden Co. was not producing and selling lecithin at the time the agreement of December 5, 1934, was entered into. In April of 1935, The Glidden Co., completed a plant in Chicago for the refining of lecithin and has continued to refine lecithin in said plant since that date with the exception of the period when the plant Was out of commission, due to an explosion which occurred in October 1935, (g) Prior to December 5, 1934, when the memorandum between respondents hereinafter described was signed, Hansa-Muehle, American Lecithin Corporation and Ross & Rowe, Inc., one or another, owned the following unexpired United States patents relative to the Production and use of lecithin:

Patent No. Inventor Issue date 1• 464, 557 Bollman ____________________ --------------------------- 8/14/23. 1, 575, 529 Bollman----------------------------------------------- 3/2/26. 1, 606, 052 Bollman----------------------------------------------- ll/9/2G. 1, 660, 541 Bollman----------------------------------------------- 2/28/28. 1, 667, 767 Bollman ____________________ --------------------------- 5/1/28. 1, 673, 615. Bollman----------------------------------------------- 6/12/28. 1,702,077 Revvald----------------------------------------------- 6/3/30. 1, 77G, 720 Bollman---------------------------------------------- 9/23/30. 1, 776,721 Bollman----------------------------------------------- 9/23/30. Findings 32 }<"'. T. C. Patent No. Inventor Issue d!lte 1, 779, 012 Rewal1L----------------------------------------------- 10/21/30. 1, 781,672 ~working---------------------~---:--------------------- 11/ll/30. 1,831,728 'Vorking----------------------------------------------- 11/10/31. 1, 843, 051 Thiele----------------------------·--------------------- 1/26/32. 1,859,240 Jordan------------------------------------------------- 5/17/32. 1, 884, 809 Bollman_______________________________________________ 10/25/32. 1, 8!)2, 588 Schwieger---------------------------------------------- 12/27/32. 1, 823,393 Bollman & Schwieger __________ _'________________________ 1/3/33. 1, 895, 424 Rewald________________________________________________ 1/24/33. 1, 903, 307 Rewald_______________________________________________ 4/4/33. 1, 917, 734 Rewald------------------------------------------------ 7/11/33. 1, £'34, 005 Rewald________________________________________________ 11/7/33. 1,936,718 Jordan------------------------------------------------- 11/28/33. 1, 938, 804 Rewald _____________________ --------------------------- 12/12/33. 1, 946,332 Rewald________________________________________________ 2/6/34. 1, 965,490 Conway & 1\I:iY-------------·--------------------------- 7/3/34. 1, 977, 940 Frank----------------------·--------------------------- 10/23/34.1, 982, 186 ~working _______________________________________________ 11/27/34. (h) Prior to December 5, 1934, when the agreement between the respondents hereinafter described was entered into, the. following unexpired United States patents covering the production and use of lecithin were owned by parties other than the respondents: Patent No. Inventor Issue dH.te 1,277,336 Moskovits & Jacobson _______ ·-------------------------- 8/27/18- 1,200,071 Girard----------------------·--------------------------- 1/14/19. 1,297,668 Ersler------------------------------------------------- 3/18/19. Posternak __________________ ,__________________________ _1,313,014 8/12/19. 1,371,546 Bollman----------------------------------------------- 3/15/21. 1,411,154 Bollman----------------------------------------------- 3/28/22. 1,417,477 Dollrnan __________________________ ~-------------------- 5/23/22. Baker ______________________ .__________________________ _1,553,294 9/8/25. 1,555,517 Posternak--------------------------------------------- 9/29/25. l)engler _______________________________________________ _1,586,145 5/25/26. 1,631,887 l'osternak-------------------------------------------,.- 6/7/27. 1,653, {)1'){) G rum & Limpacher ------------------------------------- 12/27/27. 1,815,739 Reynolds & Epstein _________ --------------------------- 7/21/31. 1,872,913 l)reyfus & Whitehead---------------------------------- 8/23/32. 1,917,253 Epstein & Harris-----------··-------------------------- 7/11/33. Rewald _______________________________________________ _1,946,333 2/6/34. Schlack _______________________________________________ _1,953,438 4/3/34. 1,972,764 Engelmann-------------------------------------------- 9/4/34. (i) Prior to Decembpr 5, 1934, no lecithin produced in the United States had been exported.

(j) It follows from the foregoing facts, (in the light of the other facts found herein), that, in the sale and distribution of lecithin and lecithin products in trade and commerce in the United States ' AMERICAN LECITHIN CO,, INC.,· ET '-Al... 1417 1400. Findings and between parties in the United States and parties in foreign countries, competition existed between respondents prior to December 5, 1934; that Archer-Daniels-Midhind Co. and The Glidden Co. were potential competitors of one another and o:f Hansn.-Muehle and Aarhus Oliefabrik; that there was actual and potential competition between respondents located in the Uniteu States and respondents and others located in foreign countries; that there was competition and potential competition between respondents over the development, use and ownership of patents and patent processes relating to the prouuction and/or use o:f lecithin and lecithin products; and that ownership and interest in existing patents governing the production and Use o:f lecithin and lecithin products were divergently held. PAn. 5. (a) In December o:f 193-t, Adrian D. Joyce, president of The Glidden Co., arranged a meeting.g between all o:f the respondents for the purpose, among others, of forming the American Lecithin Co.; and of December 5, 193-!, the following memorandum of agreement was signed by the authorized representatives of the respondents liansa-Muehle, Aarhus Oliefabrik, Archer-Daniels-Midland Co., The Glidden Co., American Lecithin Corporation, and Ross & Rowe, Inc. (as further appears at the end o:f said memorandum), viz: Memot·andum of the general principles concerning a plan for the manufacture, use and sale of lecithin and lecithin products In the United States and Canada, With the exception of Newfoundland, and the disposition of all patents, secret devices and SPcret processes now owned or hereafter invented or. acquired relative to the manufactm·e, u~e and sale of lecithin and lecithin products, resulting from a conference held on December 3 and 4, 1034, at the office of The Glidden Company, 1063 Union Trust Ba<lding, Cleveland, Ohio, at which the following corporations we1·e represented by the persons nameu: Dr. von Siebert, repi·esenting llansa-111uehle G. m. b. H. and Hanseatische l\Iuehlenwerke .Aktlengesellschaft, two affiliated corporations uuly organizeu and existing under the laws of Germany, having a place of business fit Hamburg, Germany, hereinafter referred to as "IIansa"; l\lr. Cht-. Rnge, representing Aarhus Oliefabrik, a corporation duly organized anu existing under the laws of Denmark, and having a Place of business at Aarhus, Denmark, hereinafter referred to as "Aarhus"; l\lr. Joseph Eichberg and l\Ir. Armand May, representing American Lecithin Corporation, a Delaware corporation of Atlanta, Georgia, hereinafter referred to as "Alco"; :Ir. Whitney H. Eastman and 1\Ir. W. H. Morris, representing Archer-Daniels- Iidland Company, a Delaware corporation of Minneapolis, Minnesota, hereinafter referred to as "Archer"; 1\Ir. Adrian D. Joyce and Mr. Clifton l\1. Kolb, reprPst>nting The Glidden Company, an Ohio corporation of Cleveland, Ohio, hPreinufter referred to us "Giid!len"; and 1\lr. J. Edward Rowe, representing Hoss & Rowe, Inc., a New York corporation, of New York, New York, hereinafter referred to as "Rowe."

I. Glidden shall coure a corporation to be formed, for the purpose of owning nnu gJ'antlng licenses under patents and using and selling lecithin or phosphatl•les and products containing the 1011me under the laws of the State of Delaware, 1418 FEDERAL TRADE CO.MJMISSION DECISIONS Findings 32 F. T.C.

or such other State as Glidden and Archer may deem advisable, to be known as American Lecithin Co., hereinafter referred to as "American", with a nominal common capital consisting of 1,000 shares without par value, and sufficient paid-in capital to meet the requirements o:f the corporation laws o:f the State o:f Incorporation, to be supplled by Glidden and Archer. The affairs o:f said corporation shall be managed by a Board o:f Directors con· slstlng o:f six members. Glidden shall elect and be represented by two of said members: Archer shall elect and be represented by two o:f said members; Hansa and Aarhus shall elect and be represented by one member; Alco shall elect and be represented by one member.

The stock of American shall be allocated on the :following basis: 30% thereof to Glidden; 30% thereof to Archer; 15% thereof to Hansa; 15o/'o thereof to Aarhus; and 10% thereof to Alco, :for the account of Mr. Armand May and/or Mr. Joseph Elchberg.

There shall be no restriction upon the sale o:f the shares o:f stock o:f American between the parties mentioned herein, but i:f any o:f the parties mentioned herein shall decide to sell all or any part o:f their interest In the stock o:f American to any other person, firm or corporation llot mentioned herein, they shall grant to American the option to buy said stock for n period of six days, at the then book value as shown by the books o:f American. II. Hansa, Aarhus, Alco, Glidden, Archer and Rowe shall immediately assign to American upon its incorporation all their right, title and interest in and to the secrets concerning apparatus, devices and processes and Letters Patent and patent applications :for the United States and possessions, and Dominion o:f Canada, which relate to the manufacture, use and sale of lecithin and lecithin products which they now own or may hereafter develop or require, and shall receive In consideration therefor the co;nmon stock of American above mentioned and/or such other considerations as are hereinafter mentioned. American shall grant to Hansa and Aarhus an exclusive license outside of the United States and possessions, and Canada, to use the processes and uses o:f lecithin and phosphatldes which lt develops. III. American shall grant to Archer an:l Glidden an exclusive license covering the manufacture o:f lecithin and lecithin products, which lecithin and lecithin products shall be sold to American exclusively by Glidden and Archer in equal proportions, or on such other basis as Glidden and Archer may agree upon, at the cost thereof which shall conform to any Federal Code which may apply to the industry and shall include all Items which are ordinarily included in determining manufacturing costs by public accountants. American shall have the right to grant such sub-licenses covering the use aud sale o:f lecithin and lecithin products as its Boat·d of Directors may d0termine, and shall grant a nonexclusive license to Rowe for the sale of lecithin for uHe according to said patents, and for the life of such pat!•nts, and as long as Rowe conforms to the terms o:f said license agt·eement; said license not to be aRsigncd or transferred by Rowe without the npprovnl of American; and no license shall be granted to manufacturers other than Gllclden and Areher without the appt·oval o:f more than seventy-five percent of the issued Common Stock. IV. Rowe shall act as selling agent of American unrlpr the above-nwntloued license agreement, and shall sell lecithin and lecithin products at prlccs stipulated in said license agreement, and from time to time fixed by American, and shall receive as compensation therefor 30% of said selling prirPs, which ~hall AMERICAN LECITHIN CO., INC., ET AL. .1419 1400 Findings cover all selling expense and profit. Rowe agrees not to handle any lecithin or phosphatide products competitive with those sold by American, and not to divulge to others, any information regarding the business of Amer·icau. No other selling agents shall be appointed or granted a license to sell under said patents without consulting Howe. This shall not apply to ordinary bi'Okers and salesmen. V. IIansa, Aarhus, Alto, Archer, Glidden and Rowe jointly and severally acknowledge all of the patents assigned to American are good and valid patents and that they will not directly or indirectly contest the Yaliuity of the same, or the validity of any patents which may be de>eloped or ncquireu by American in the future.

VI. Glidden and Archer will supply such funds as are required for carrying on the operations of American as advances. Such ad>ances shall bear interest at G% and be returned to Glidden and Archer when the financial condition of American justifies such actloro.. Credit shall be supplied to American by Glidden and Archer on an equal basis, covering American's requirements of lecithin and lecithin products, for a sufficient length of time for American to sell said products and collect the funds from the sale thereof. VII. Glidden anu Ai·cber shall purchase lecithin and lecithin products from American for their own use at 70% of the ordinary price paid by outside customers for approximately corresponding grades and quantitil.'s, but the price in all cases shall be at least 2tlo/o above the cost of said lecithin and le<>within products to American.

VIII. All the parties hereto shall cancel and terminate all agreements or arrangements now existing which will in any way interfere with the carrying out of the principles and plan herein outlined, and Hansu and Aarhus specifically agree not to sell lecithin or phospbatides or products made with the same in the United· Stutes and the Dominion of Canada with the exception of Newfoundland, during the life of the patents covered by this arrangement, and American, Glidden, Archer, and Rowe likewise agree not to sell such products outside of United States, its possessions, and Canada.

IX. Glidden and Archer agree that they will pay to Hansa and Aarhus up to 8Y:z% of the annual net profits of American for the purpose of assisting Hunsa and Aarhus in paying obligations under their cartel arrangements, which Hansa und Aarhus agree to pay in full each year. Hansa and Aarhus also agree to use their best efforts to terminate said obligations under said cartel arrangements at the earliest possible date that they will cooperate with Archer Rod Glidden and AmPricaiJ. in determining the advisability of working out the details of such cancellation. As said obligations .are reduced the said 8%% shall be reduced In the same proportion.

X. It is gener·ally understood that Rowe will continue to purchase its supply of lecithin from Aarhus and Archer until such time as American Is organized and is in a position to supply Rowe with lecithin and lecithin products. It is also generally understood that Alco will continue to secure its supply of lecithin from llansa until such time as American is organized, at which time American will take o-ver stocks of lecithin owned by Alco and will assume all the contracts of Alco relative to the sale of lecithin and lecithin products which are determined to be fair and reasonable. None Of the parties hereto shall have the right to investigate the ~;ecret process of Aarhus without obtaining permission from Aarhus. XI. It h1 genetally understood that the terms of tbls arrangement shall apply to the fully owned subsidiaries of Glidden and Archer, and that it ~ball be binding upon the EOnccessors and assigns of all the parties hereto. Findings 32 F. T. C. XII. It is understood that Hansa has granted a license to Juugmitnn for the; United States and Canada covering the rubb<'r industry. · XIII. It is understood that all profits iu excess of the amount required for supplying the company with a reasonable amount of capital for its operation shall be distributed in dividends nt leu~t yearly. Dated december 5, 1!)34.

IIANSA-1\IUEHLE G. m. b. II. and IL\NSEAUScl!E l\lupus:NWI,RKI•; AKTIENGELSELLSCHAFT Hy 8n:BERT. By W. II. 1\lon&rs, Su. AARHUS 0LIE~'ABHIK, 'lhe Gr.u·m-:N Company, lly CHR. RUGEJ. By CLIFTON l\1. KOL!l. AMERJOAN LECITHIN Corporation, Ross & Rowe, INc., By A. 1\IAY, Chairman. By J. EDWAI!D Rowe. ARcin:R-DANIELS-l\IroLAND COMPANY, (b) The respondents who signed as aforesaid the foregoing memorandum together with the respondent American Lecithin Co. which was organized as contemplated therein, thereafter carried . out the course of action .contemplated in and by said memorandum, except as otherwise stated in this stipulation, and except that on or about the 14th day of March, 1941, the respondents American Lecithin Co., The Glidden Co., Archer-Daniels-Midland Co., and Ross & Rowe, Inc., entered into a written agreement, of which the following is a copy:

1\IE~JOR \NDUM OF AGHEE~IENT lwtwt><'n Ameril'an Lecithin Comvauy ("Amer- Ican"); The Glidden Company ('"Glidden"); Archer-Daniels-Midland Company ("Archer"); Ross and Rowe, Inc. ("Rowe"); IIansa-l\Inehle G. m. b. II. and IIanseatieSC'he Muehlenwerke Atkienge~ellschaft (two affiliated corporations collectively referred to herein as (''IIamm"); and Aarhus Oliefabrik ("Aarhus"). 'VITEBEAS on December 5, 1934, representatives of the above parties (except American) signed a memorandum setting forth a proposed course of action, the essentials of which were (1) that a new corporation (American) should be formed; (2) that C('rtaln patent and other rights should be tran:'<ferred to American in consideration of the issuance, with certain restrictions, of American stock to said parties; and (3) that Glidden, Archer, Rowe, Hansa and Aarhus should each enter into certain mutual obligations with American, which essentials of said course of action were thereupon fully consurunu1ted and executed; and 'VHEREAS said memorandum contemplated, in addition to all of the foregoing, certain conl inuing obligations hy aml between the aforesaid parties (including American), some of which have been expressly wah·ed, twill<' of which have become acauemic by reason of subsequently enacted ~;statute, some of which ore hPlievcd to be legally unenforceable om! have never been insisted UJJOn, some of whkh WPre inadvertently phrnsed and uot intE'tHled, and none of wl1kh are or have been at any time t·egaruetl as essential; and WHEREAS American Ledthin Corporation, of Delaware, one of the part.fes whose representath·es sig-ned sall memoran<lum, hns gone out of business, wound up its offnirA, and is no longer in existence; AMERICAN LECITHIN CO., INC., ET AL. 1421 1400 Findings Now, THEREFOUE, in consideration of the mutual benefits of this present action, the aforesaid parties mutually agree as follows: I. In so far as the coun;e of action contemplated by said memorandum of December 5, 1934 has, as afot·esaid, been fully consummated and executed by the Incorporation and organi7.ation of American, and its i!isuance cf stock to saiu parties with said restrictions, and by the mal~ing of a separate agreement between American and Rowe, and the making (simultan~>om·ly herewith) of revised separate a~reemPll~'l between American and Glilltll'n and between American and Archer, respectively, said memorandum Is here!Jy confirmed. II. In all other respects said memorandum ami all agreements and m:derstanuings, if any, expressed therein and contemplated thereby, are hereby cancellrd, leaving no continuing obligation whatsoevet· binding or affecting nny of the aforesaid parties with respect to any of the other of mi<l partlrs. III. This agreement shall become fully binding uvon American, Glidden, At·cher and Rowe, if and when it shall bP duly executed in behalf of all of them, and without (In view of practical diflkultiPs ari~in~ from the wur situation) procuring the execution thereof in behalf of Hansa and Aarhus. Hegardless of whether or when this agreement shall be executed in behalf of Hansa or Aarhm;, or both, American, Glidden, At·c:her and Rowe hereby relieve Hansa and Aarhus, however, of any and all continuing contractual obligations, if any there be, o.rh;ing out of their execution of said memorandum of December 5, 1034, pro- Videtl, boweYer, t!Jat the foregoing shall not be construed os a ~onsent to the iruportation into the United States in violation of AmPrican's statutory rights' by 1-Iansa ot· Aarhus of lecithin or other pt·nducts manufactured under American's sa:d patented processes; and the rights of Hansa and Aarhus to said American stock and divillemls thereon, and all the other rights lawfully extrcisrd by stockl1olders, are lwrehy confirmetl. (c) It follows from the foregoing facts (in the light of the other facts found herein), that respondents entered into an agreement and understanding on or about December 5, 1934, and thereafter carried out said agreement and understanding, to suppress, eliminate, lessen, and restrain competition between them in the production, sale, and distribution of lecithin and lecithin products in interstate trade and commerce in the United States and in trade and commerce between the United States and foreign countries; that respondents, by agreement and concerted action, through combination, attempted to and did: eliminate potential competition between The Glidden Co. and Archer- Daniels-Midland Co. and between The Glidden Co. and Archer-Daniels-Midland Co. and Aarhus Oliefabrik and Hansa l\fuehle for busihles..<; in, Iecithin in the United States and in foreign countries; restrained each other from contesting patents governing the prcduction, processing, or use of lecithin; and monopolize-d tmde anll commerce in lecithin nnd lecithin products in them~elres. PAn. G. In furtherance of the aforesaid agrl'('ment of Decemlwr 5, 193!, and punmant to the purpose nnd plan of the respondents 322()9:-im-41-vor•. 32--!lO Findings 321~. 1'. c. provided for thereby, and to promote the ends which the arrangement set forth in the agreement was designed to reach, the American Lecithin Co., and the other parties respondent, have engaged in the acts and practices as hereinbelow described: (a) The American Leeithin Co., for the purpose of making sales of lecithin, has, over a period of time, made threats to prospective purchasers of lecithin that said prospective pl.-chasers would be sued for infringement of a patent or patents held by the American Lecithin Co. should they use lecithin purchased from a competitor to practice such patented invention without obtaining a license from American Lecithin Co., when in truth and in fact American Lecithin Co. did not intend to follow up such threat with a suit in all instances; and has attempted to promote the sale of its lecithin, a commodity not the subject matter of the "'Working patent No. 1,781,672 relating to chocolate and the method of making same, owned by American Lecithin Co., by using. said patent for that purpose; and it has attempted to extend its n1onopoly under said ·working patent No. 1,781,672 and other patents to promote the sale of its own unpatented .commodity, lecithin, for use in processes, and in making products, covered by respondents' patents.

(b) The .\american Lecithin Co. has, at various times by corre!Opondt>nce Hnd by personal contact, through its agents, with prospective purchasers, attempted to, and has, represented to the said prospective purchasers the facts regarding requirements for labeling prescribed by the United States Department of Agriculture and the United States Food and Drug Administration, as it understood them by calling their attention to a letter dated April 5, 1930, addressed to American Mills Co., Atlanta, Ga. (a predecessor in business of respondent, American Lecithin Corporation), on the letterhead of the United States Department of Agriculture, signed by L. D. Elliott, Acting Chief, Interstate Supervision, wherein the following was Rtated:

In our opinion, the uesignntion "PurifiPil VPgPtnble Fat'' or ''Purified Vt>ge· table Oil" nre not properly descriptive of the Soya bean lecithin product which is added to the chocolate coating. We are not ndvi~ed of the exact colllposi· tion of the product to be added to the coating but pre>:ume that it consists of pcrhap!' 30 to 60 pt>r cent of phosphnti<les and 40 to 70 pN' cent of soya bean oil. Such a mixture cannot be regnrdt>d as purified \'egctable oil of fat. A wording should be c!Josen which will clearly !Show the true character of the Ingredient aud moreov!'r will show that the lngi'edient In qul'stlon Is an added Ingredient. If the pro1luct hns the above lmlicnted composition,. a statement such as ''-% ~;oya bean l!'clthln and oil lidded" or "Soya beau lecithin nud oil added" would probably he acceptable, hut final !'Ommeut on the wording used will lll't'!'!'Sarily nwait further advi!'e from yon as to the composition of the article. AMERICAN LECITHIN CO., INC., ET AL. 1423 1400 Findings And by calling their att€ntion to un article entitled "Cacao Products Under the Federal Food and Drugs Act," appearing in ".Manufacturing Confectioner," volume 11, No.2, pages 34: to 36 (1931) wherein the author J. "\V. Sale, then and now of the Food and Drug Administration and in charge of chocolate, stated, under the subtitle, "Use of Lecithin,'' as follows:

The definitions and standards fur chocolate uno. cocoa (promulgated under the Food and Dl'llgs Act of 1906) in their various fo1·ms do not provide for the presence of added lecithin. It therefore this ingredient is added iu any proportion, its pre!<ence and the prest•nce of the solv!'ut or ,·ehicle if tile latter is not a normal ingredient, should ·be plainly declared in the ltthPliug, If the addition of the lecithin results in the concealment of damage or inferiority, its nse would not be permissible even though its presence is declared in the labeling. An article in which a deficiency in cacao butter is concealed by the use of lecithin Will be classed as adulterated under the Act (Food and Dt·ugs Act of 1906). And American Lecithin Co. has advised said prospective purchasers on the basis of the aforesaid letter and article, that, in the opinion of American Lecithin Co., the use of said company's purified cocoa butter lecithin (sold under the trade names "Lexin" and "Yelkin") would not require declaration in the label on the packaged product of the fatty substance (cocoa butter) used as the carrier; whereas the use of soybean oil lecithin, including as a carrier the fatty subf'.tance, soybean oil, would require the declaration of said soybean oil content on the label; that American Lecithin Co. made such representations and rendered such opinions for the purpose and with the effect of inducing prospective purchasers to purchase its purified cocoa butter lecithin and, to that extent, to refrain from purchasing the ordinary soya lecithin from either American IA>cithin Co. or its competitors.

It follows from the foregoing facts, (in the light of the other facts found herein), that the American Lecithin Co., pursuant to and in furtherance of the agreement and understanding of December 5, 1934, as aforesaid, for the purpose of diverting trade in lecithin and lecithin products to itself and away from competitors, has attempted to and has misled purchasers and prospective purchasers of lecithin into the mistaken belie£ that the United States Government has promulgated rules and regulations governing the labeling of products containing lecithin and lecithin compounds nnd has required labeling which the United States Government has not promulgated or required; and has unfn irly attempted to promote the sale of its lecithin in competition with competitors of lecithin and lecithin protlucts. (o) American Lecithin Co. has disparaged competitors' protlucts in that it has asserted to prospective purehasers of lt>cithin that 1424 FEDERAL TRADE COMMISSION; D:ll;CISIONS Findings 321<'. T. C. certain competitive products contained substances such as1 aluminum cleate, mineral oil, 140°-melting-point stearine, soybean meal, excess water, andjor excess fatty acids, to the extent and degree disclosed by chemical analyses without explanation, in many cases, except when requested, of the significance of such ingredients, and for the purpose of inducing prospective purchasers to purchase its lecithin an<.l lecithin pro<.lucts insterrd of competitors' lecithin and lecithin products.

It follows from the foregoing facts, (in the light of the other facts found herein), that the American Lecithin Co. has attempted to and has taken unfair advantage of competitors by unfairly representing and describing competitors' lecithin and lecithin products. (d) On or about May 22, Hl39, American Lecithin Co. published a scientific treatise entitled "Viscosity of Chocolate" by l\Ir. Joseph Stanley, and disseminated it to purchasers and prospecti,·e purchasers of lecithin, in which the following statement appears: In this connection, we might mention that the new Food, Drug and Cosmetic Act of 1D3U requires the legend "artifiral flavor" when any synthetic flavor is used in chocolate.' By "~synthetic flavor'' (or color) the Jaw means any flavor (or color) made by <"chemical synthesis or other artifi<"e. The use of a refined and purified )Pcithin in the carrirr of pure cocoa butter (Lexin) Is recommended under the nrw Act. If lecithin in u can·iet· of soya oil is used, both the soya oil as well us the lecithin has to he listed on the label.

The act referred to in the above article does not recommend the use of any particular product.

It follows from the foregoing facts, (in the light of the other facts found herein), that the publication and dissemination of the aforesaid treatise in the manner aforPsaicl was intended to create and had the capacity and tendency to create the erroneous and mistaken belief in the minds of purchasers and pro~pecti\·e purchaoers of lecithin and lecithin products that the use of the American Lecithin Co.'s lecithin and lecithin products was recommended by the United States Government under the United States Food, Drug, and Cosmetic Act of 1939, aml had the capacity and tendency to divert trade in lecithin and lecithin products to the American Lecithin Co. and away from competitors.

(e) The Glidden Co. and the Archer-Daniels-Midland Co. have followed the practice of selling exclusively to the American Lecithin Co. and have refrained from entering into competition with one another in the sale of lecithin produced by them under prrtented proc- PRses owned by America:~ Lecithin Co.

AMERICAN LECITHIN CO., INC., ET AL. 1425 1400 Conclusion (f) Except as herein otherwise stated, the American Lecithin Co. has refrained from exporting lecithin to territories where Aarhus Oliefabrik and Hansa-1\Iuehle are engaged in the sale of lecithin, and have prevented aml restricted and attempted to prevent and restrict importation into the United States of lecithin produced by Hansa and Aarhus in foreign countries under process pat~:>nts owned by American Lecithin Co.

PAR 7. Suh!,;equent to December 5, 193-t:, American Lecithin Co. acquired the following unexpired United Stat~:>s patents relative to the production and use of lecithin:

Patent No. Inventor Issue date 1,986,300 Rewald-------------------------------------------------- 1/1/35. 2,019,494 J onln n ____________________ ------____ ------------------- 11/5/35, 2,029,406 Dolen ____________________________________________________ 11/12/35. 2,020,517 Rewald ------------------------------------------------- 11/12/35. 2,020,6G2 Schwieger---------------------------------------------- 11/12/35. 2,024,308 Sorenson & ileal--------------------------------------- 12/17/35. 2,039,739 Rewald ------------------------------------------------- 5/5/36. 2,057 ,G95 Sell wieger ________ ------____ -----------__ ---------------- 8/10/361 2,115,088 Schwieger----------------------------------------------- 4/26/38., 2,181,129 Heberer------------------------------------------------- 1lj28/39. 2,194,842 Wiesehahn_______________________________________________ 5/26/40. Since December 5, 1934, 77 or more individuals and corporations have secured United States patents covering the production and use of lecithin.

PAR. 8. The American Lecithin Co. has instituted and prosecuted suits against alleged infringers, both direct and contributory, of its Working patent No. 1,781,G72.

CONCLUSION Respondents have combin.:>d, conspired, agreed, and cooperated to I·restrain, hinder, suppress, lessen, and eliminate competition between them in interstate trade and commerce in lecithin and lecithin products in the United States and between the United States and foreign countries and to that end have Pngaged in many acts and practices as herein found.

The acts and practices of respondents as herein found are all to the pr('\judice of the public; have a dangerous tendency to and hn.ve actually hindered and prevented competition between and among respondents in the sale of lecithin anrl lecithin products in commerce within the intent and meaning of the Federal Trade Commission Act; have placed in respondents the power to control and enhance prices; hav~ hanrlicappell competitors pngaged in the production and sale of lecithin Order 32F.T.C.

in the United States in the conduct of their respective businesses; have tended to and have vested in Tespondents control over the sale and distribution of lecithin and lecithin products, including the terms and conditions thereof, in interstate trade and commerce in the United States; have tended to and have diminished, lessened, and eliminated importation of lecithin from foreign countries to the United States and the exportation of lecithin and lecithin products from the United States to foreign countries; have tended to. and have created false and mistaken beliefs and understandings regarding the nature and usefulness of competitors' products; han tended to and have created false and mistaken interpretations and understandings in the minds of purchasers and prospective purchasers of lecithin of the functions of the United States Government with regard to labeling of food products and of the rules and regulations promulgated by the United States Government concerning the labeling of lecithin and products containing lecithin; have unduly restrained trade and competition in interstate commerce in lecithin and lecithin products and constitute unfair methods of competition in commerce within the intent and 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 of the Commission, the answers of the respondents, and a stipulation as to the facts entered into between the respondents herein-Pxcept Hansa-Muehle and Aarhus Oliefabrik-with W. T. Kelley, chief counsel of the Federal Trade Commission, approved by the Commission, which proviues, among other things, that, without the presentation of further testimony, arguments, filing of briefs, or other intervening procedure, the Commission may issue and serve upon the respondents herein finuings as to the facts and conclusion based thereon, and an order disposing of the proceeding; and the Commission, having made its finuings as to the facts and its conclusion that said respondents have violated the provisions of the Federal Trade Commission Act; It is ordel·ed, That the respondents, American Lecithin Co., Joseph Eichberg, Armand. May, Whitney II. Eastman, Clifton M. Kolb, Richard II. Horsburgh, Adrian D. Joyce, Ross &: Rowe, Inc., The Glidden Co., Archer-Daniels-Midland Co., Shreve Archer, anu American Lecithin Corporation, their officers, directors, representatives, agents, anu employees, directly or indirectly, or through any corporate or other device, shall forthwith cease and desist from engag- AMERICAN LECITHIN CO., INC., ET AL. 1427 . 1400 Order ing in or doing, in commerce, as ''commerce" is defined in the Federal Trade Commission Act, either in combination or individually, the following acts or practices.

(a) Using unlawfully any patent or patents which may be held by them or any of them concerning the use, production, or processing of lecithin to divert trade in lecithin to themselves or away from rom pet.itors.

(b) Threatening to sue purchasers or prospective ·purchasers of competitors' lecithin for infringement of patents held by the American Lecithin Co., or any of them, but not in good faith, to enforce any patent rights which they may have, for the purpose of compelling or inducing such purchasers or prospective purchasers not to purchase lecithin from competitors.

( o) Threatening to sue agents, jobbers, or sellers or other distributors of competitors' lecithin for contributory infringement of ~ny patents held by the American Lecithin Co., or any of them, not In good faith, to enforce any patent rights which they may have. (d) Representing that lecithin sold by the American Lecithin Co., or by Ross & Rowe, Inc., or by any of the other respondents, is recommended for use by the Food and Drug Division of the United States Department of Agriculture, or any other branch of the Federal or State Governments, if in truth and in fact such is not the case. (e) Disparaging competitors' products by creating or attempting to create in the minds of purchasers or prospective purchasers of lecithin the belief or understanding that lecithin produced, sold, or distributed by competitors contains deleterious or foreign matter, requires labeling not required by respondents' product, lacks refinement, is less efficacious, and is otherwise inferior to the lecithin products of the respondents unless in truth and in fact such be the case. (f) Unlawfully using any patent or patents held by them or any of them in such a manner as to obtain income from the sale of unpatented lecithin rather than from the monopoly expressly granted by the patent or patents.

(g) Combining, conspiring, agreeing, or cooperating between themselves or anyone or more of them, or with others, to eliminate, restrain, or lessen competition between them in the sale of lecithin or lecithin products, by employing a common selling agency or otherwise; pro- ~ided, that nothing herein shall prevent respondents from entering Into or carrying out lawful arrangements for the exercise of rights under patents.

1428 FEDERAL TRADE COMMISSION D~CISIONS Order 32F.T.C.

. (h) Carrying out or entering into any agreement or doing any acts Ill pursuance of an agreement or understanding, that the American Lecithin Co. or any of the respondepts connected with the production or sale of lecithin in the United States should refrain from sellin(J"b or e~porting lecithin to foreign countries. ' (i) Entering into or carrying out any agreement or understandir1g with foreign producers ~r sellers of lecithin for the purpose of lessening, restricting, or curtailing importation of lecithin into the United States or the territories thereof.

{j) Carrying out or entering into any agreement or understanding to refrain fr·om challenging or contesting patents, rights, or privileges concerning the production or use of lecithin or lecithin products held by any of them jointly or individually, which said respondents are not legally precluded from challenging or contesting. (k) Combining, conspiring, or agreeing or cooperating, or entering into or carrying out any contracts to restrain trade or commerce in lecithin or lecithin products among the several States or with forei:,rn nations. .

(l) :Monopolizing or attempting to monopolize or combine or conspire with any other person or persons to monopolize any part of the tt·ade or commerce in lecithin among the several States or with foreign nations.

It is further o-rde1·ed, That the complaint herein be, and the same hereby is, dismissed as to respondents Aarhus Oliefabrik and Hansa- Muehle. ' It is furtlur 01'(lered, That the respondents shall, within GO 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.

GIMBEL BROTHERS, INC., ET AL. 1429 Order