American Button Mould Manufacturers Ass'N, Inc

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IN THE l\IATrEn OF AMERICAN BUTTON MOULD l\IANUF ACTURERS ASSO- CIATION, INC., ET AL.

COMPLAINT, FINDINGS, AND ORDER IN REGARD TO THE ALLEGED Violation OF SEC'. 6 OF AN ACT OF CONGRESS APPROVED SEPT. 26, 1914 Docket 1,728. Complaint, Uar. 11, 19-S~-Decision, July 10, 1943 Where six concerns, engaged in the manufacture of button and buckle molds and In interstate sale and distribution thereof to button or buckle manufacturers for conversion Into the finished product, making about 75 percent of all such molds manufactured in New York State and about 50 percent of all those made in the United States, and prior to and but for the acts and practices below set forth in active and substantial competition with one another and with other me.mbers of the Industry; acting during a somewhat demoralized condition In the Industry, during which it was the practice of customer manufacturers to make arbitrary deductions from bills rendered on the excuse that the manufacturer could obtain the goods elsewhere at the lower price- (a) Held meetings and carried on discussions among themselves with respect to the. stabilization of prices and particularly to ·fixing of discounts- to be allowed and, as a result of a definite agreement and understanding reached among themselves, distributed a price list, including ·uniform discounts, to which for a time there was general adherence; and later (b) Formed a corporate association to take the place of the loose organization which had theretofore existed, for the purpose, principally, of assisting the members in fixing and maintaining agreed prices and discounts; and Where said Association, following deviations on the part of some from established p1·lce and discount schedules, and the making of charges and counter-charges of "chiseling"- ( c) Employed a certified public accountant to examine the books of 'an of the · members, with one exception, to ascertain whether they had been maintaining established prices, and in the audit which revealed that some had not been doing so, set forth the amounts which should be paid by offending members to the other members by reason of such departures; and Where said Association and its members- ( d) Considered the question of requiring the posting of a bond or security by each member to guarantee compliance with agreement as to prices and discounts, and did agree that security should be given; and . (e) Sought, through concerted action, to drive out of business any competitors who were not members and did not maintain established prices and discounts, and, in certain Instances, drove competitors out or business through cooperatively reducing prices drastically on the particular types of molds sold by the competitor, with result that he found It Impossible to continue in business; Capacity, tendency and effect of which understandings, agreements, combinations and conspiracies, and acts and things done pursuant thereto, were unduly to restrain and suppress competition in the sale and distribution of A~fERICAN BUTTON MOULD MFRS. ASSN., INC., ET AL. 35 34. Complaint said button and buckle molds in commerce, and to deprive the trade and purchasing public of the advantages which would flow from normal and unobstructed competition:

Hela, That such acts and practices, under the circumstances set forth, were all to the prejudlce of the public and competitors, and constituted unfair methods of competition in commerce.

Before Mr. Webster Ballinger, trial examiner. Mr. Floyd 0. Oollim for the Commission.

Mr. Morris Adda, of New York City, for the officers and members of said association.

Colli PLAINT 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 individuals, ?orporations, and partnerships named in the caption hereof and here- Inafter described and referred to as respondents have violated the Provisions of section 5 of 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 in that respect as follows: PARAGRAPH 1. The respondent, American Button Mould Manufacturers Association, Inc., hereinafter referred to as respondent "Association," is a membership corporation, organized, existing and doing b~siness under and .by virtue of ~he laws of the State of New York, With its home address and principal place of business at 274 Madison Avenue, New York, N.Y .

.The membership of respondent Association is composed of manufacturers of button molds and buckle molds (button and buckle parts), located in the State of New York.

Respondent, Isidore A. 'Veidhorn of 274 Madison Avenue, New York, N. Y., is named respondent herein as an individual and as President of the respondent Association .

. Respondent, Sidney Baritz, is named respondent herein as an individual and as vice president of the respondent Association and his address is 274 Madison Avenue, New York, N. Y . . Respondent, Harry Chalfin, is named respondent herein as an individual and as treasurer of the respondent Association and his address is 274 Madison Avenue, New York, N.Y. ·Respondent, Samuel Luloff, is named respondent herein as an individual and as secretary of the respondent Association and his address is 274 Madison Avenue, New York, N. Y. PAR. 2. Respondent, Liberty Die and Button Mould Co., Inc., is a corporation, organized, existing and doing business under and by .36 FEDERAL TRADE COMMISSION DECISIONS Complaint 37F.T.C.

virtue of the laws of the State of New York with its home office and principal place of business at 438 'Vest Thirty-seventh Street, N;ew York,N. Y ..

The respondent, C & C Button & Trimming Co., Inc., is a conporation, organized, existing and doing business under and by virtue 'of the laws of the State of New York, with its homes office and principal place of business located at 318 'Vest Thirty-ninth Stre~t, New York,N. Y. . The respondent, Jacob Rabinowitz, Inc., is a corporation, organized, existing and doing business under and by virtue of the laws of the State of New York with its home office and principal place of business located at 336 'Vest Thirty-seventh Street, New York, N.Y. The respondents, Elias Jaffe, and Solomon Jaffe, are copartners ' trading and doing business under the partnership name of Jaffe & Jaffe. The address and principal place of business of said respondents is 249 'Vest Thirty-ninth Street, New York, N. Y. The respondent, Handy Button Machine Co. of New York, Inc., is a corporation, organized, existing and doing business under and by virtue of the laws of the State of New York with its home office and principal place of business located at 313 'Vest Thirty-seventh Street, New York, N.Y.

The respondent, Defiance Button Machine Co., is a corporation, organized, existing and doing business under and by virtue of the laws of the State of New York, with its home office and principal place of business located at 43 West Twenty-fourth Street, New York, N.Y.

All of the respondents named in this paragraph are members of the respondent Association and are hereinafter referred to as member respondents. Each of said respondents, individually and as members of said respondent Association, have taken and do now take an active part in all of the activities herein described. PAR. 3. The individual respondents named in paragraph 1 hereof direct and control the policies of the respondent Association and have taken an active part in all of the unfair methods of competition and the unfair acts and practices herein set out. The respondent, Samuel Luloff as secretary of respondent Association, planned and promulgated the acts and practices hereinafter tllleged and advised and counselled with the other respondents in formulating and carrying out said plans and has taken an active part in compiling and distributing the price and discount lists hereinafter described and referred to and in other ways perfected the carrying out of the agreements and understandings hereinafter set forth. AMERICAN BUTTON MOULD MFRS. ASSN., INC., ET AL. 37 31 Complaint PAR. 4. All of the said member respondents are now and have been for the past 3 years engaged in manufacturing button molds (button parts) and buckle molds (buckle parts) and sell said molds to button - and buckle manufacturers who make from said molds completed or finished buttons and buckles and all of said respondents named in paragraph 2 hereof have for more than 5 years last past engaged in the sale and distribution of button molds and buckle molds in commerce among and between the various States of the United States and cause said products when sold to be shipped from their respective places of business through and into other States of the United States to the purchasers thereof.

PAR. 5. The said member respondents now constitute and have during all the times mentioned herein constituted substantially all of the manufacturers of button molds and buckle molds in the United States. Said respondents manufacture approximately 95 percent of the button molds and buckle molds manufactured in the State of New York and in the territory adjacent thereto and manufacture approximately 80 percent of the button molds and buckle molds manufac- · tured in the United States. Prior to the adoption of the practices herein alleged said respondents were in active and substantial competition with each other and with other members of the industry and but for the acts herein alleged said respondents would be in actual and substantial competition with each other and with other members of the industry. . . PAR. 6. Respondents have entered into and, for more than 3 years last past, have carried out and are now engaged in carrying out an ltnlawful understanding, agreement, combination, and conspiracy to suppress, stifle and restrict competition in price and otherwise between and among said respondents to establish and maintain among themselves a common course of action in restraint of trade, and to create a monopoly in the interstate sale and distribution of button molds and buckle molds in the several States and territories of the United States and in the District of Columbia .

. Pursuant to and to effectuate said understanding, agreement, combmation, and conspiracy a~cl in furtherance thereof said respondents have cooperatively, concertedly and collusively adopted and carried out, among other methods, acts, and practices, the following things: , 1. Fixed the prices to be charged by member respondents for button 11.lld buckle molds and said member respondents have sold and dehvered said products at said prices.

2. Fixed identical or uniform discounts to be allowed by member l'~spondents to purchasers and said member respondents have con- Sistently allowed said discounts.

Complaint 37F.T.C.

3. In meetings held and through correspondence and personal contact respondents have advised, conferred, and consulted with one another in compiling price lists in which said prices and discounts were quoted, and said member respondents have directly or through the respondent, Luloff, and respondent association COB;lpiled, published, and circulated to purchasers and prospective purchasers said price lists containing said prices and discounts with the understanding or agreement that said prices and discounts would be adhered to by said member respondents and where price changes and discount changes were contemplated said member respondents would give to each other advance notice of the contemplated changes. 4. In order to insure that each member respondent would adhere to and perform said agreements the member respondents agreed to execute indemnifying bonds containing provisions tothe effect that if the maker of said bond should violate the terms of the price and discount agreement he should pay to any party or parties to the agreement who had suffered any loss of trade thereby an amount sufficient to compensate such party or parties for such loss. 5. Said member respondents further agreed that they would have their books audited by disinterested parties and if it should be determined that any one of them had violated the terms of said price or discount agreement and had sold their products for less than agreed upon, or allowed discounts greater than those agreed upon, the member respondent so violating said agreement would pay to any member respondent such damages as may have been sustained on account of such violation. · 6. Member respondents agree to cut prices and have cut prices on certain products which were comparable to products manufactured and sold by nonmember competitors, to a point where the competitors wou_ld be unable to manufacture and sell their products except at a loss.

1. Member respondents agree to refuse to sell and have refused to sell to button manufacturers and buckle manufacturers who purchase button molds and buckle molds from competitors of said member respondents.

PAR. 7. The capacity, tendency, and effect of such combinations, understandings, and agreements, and the methods, acts, and practices of the respondents set out herein, and many others similar thereto not specifically named, are and have been to monopolize the said business of manufacturing and selling button molds and buckle molds and to unreasonably lessen, eliminate, restrain, and suppress compefition in the manufacture and sale of said products in interstate comm<'rce; have been to enhance the price to the purchasers of said products; have AMERICAN BUTTON MOULD MFRS. ASSN., INC., E,T AL. 39 34 Findings been to deprive the purchasing public of the advantages of price, service, and other considerations which they would receive and enjoy under conditions of normal and unobstructed and free and fair competition in said industry; and have been to otherwise operate as a restraint of trade and a detriment to fair and legitimate competition in said trade and to obstruct the natural flow of trade into the channels of commerce in and among the several States of the United States and in the District of Columbia.

PAR. 8. The acts and practices of the responaents as herein alleged are all to the prejudice of the public, have a dangerous tendency to and have actually hindered and prevented price competition between ~ncl among respondents in the sale of Button molds and buckle molds In commerce within the intent and meaning of the Federal Trade Commission Act, and have placed in respondents the power to control and enhance prices, have unreasonably restrained such commerce in the manufacture and sale of button molds and buckle molds, and con- . stitute unfair methods of competition in commerce within the intent and meaning of Section 5 of the Federal Trade Commission Act. REPORT, FINDINGS AS TO Tile FACTS, AND ORDER Pursuant to the provisions of the Federal Trade Commission Act, the Federal Trade Commission, on March 11, 1942, issued and subsequently served its complaint in this proceeding upon the respondents inamed in the caption hereof, charging them with the use of unfair Inethods of competition in commerce in violation of the provisions of that act. After the filing of respondents' answer, testimony and ?ther evidence in support of the allegations of the complaint were Introduced by the attorney for the Commission, and in opposition thereto by the attorneys for the respondents, before a trial examiner of the Commission theretofore duly designated by it, and such testi- Inony and other evidence were duly recorded and filed in the office of the Commission. Thereafter, the proceeding regularly came on for final hearing before the Commission on the complaint, the answer thereto, testimony and other evidence, report of the trial examiner Upon the evidence and the exceptions to such report, and briefs in suprort of and in opposition to the complaint (oral argument not lJavmg been requested); and the Commission, having duly considered the matter nnd beinfl' now fully advised in the premises, finds that ~his proceeding is in the interest of the public and makes this its find- Ings as to the facts and its conclusion drawn therefrom: Findings 37F.T.C.

FINDINGS AS TO THE FACTS PARAGRAPH 1. Respondent, American Button Mould Manufacturers Association, Inc., hereinafter referred to as "respondent Association" or as "the Association/' is a membership corporation organized, ex· isting an<;l doing business under and by virtue of the laws of the State of New York, with its ofiice and principal place of business located at 274 Madison Avenue, New York, N. Y. The membership of the Association is composed of manufacturers of button molds and buckle molds (button and buckle parts) located in the State of New York. Respondent, Isadore A. 'Veidhorn, was from the date of the incorporation of the Association, in July 1937, until December 1940, president of the Association. In December 1940, respondent, 'Veid· born, resigned from his office and since that time has not been con· nected with the Association nor with any concern engaged in the manufacture of button or buckle molds.

Respondent, Sidney Baritz, was vice president of the Association from the date of its incorporation until December 1940, when he suceeeded to the presidency upon the retirement of respondent, vVeid· horn, and has continued in that office since that date. Respondent, Harry Chalfin, is now and at all times mentioned herein has been treasurer of the Association.

Respondent, Samuel Luloff, is now and at all times mentioned herein has been secretary of the Association. The following named respondents, hereinafter referred to as "member respondents," are and since July 1937, have been members of respondent Associa_tion, all of them having participated in the organization of the Association:

Respondent, Liberty Die and Tiutton Mould Co., Inc., is a corporation, organized, existing, and doing business under and by virtue of the laws of the State of New York, with its office and principal place of business at 438 " 7est Thirty-seventh Street, New York, N.Y. Respondent, C & C Button & Trimming Co., Inc., is a corporation, organized, existing, and doing business under and by virtue of the laws of the State of New York, with its office and principal place of business located at 318 'Vest Thirty-ninth Street, New York, N. Y. Respondent, Jacob Rabinowitz, Inc.,· is a corporation, organized, existing, and doing business under and by virtue of the laws of the State of New York, with its office and principal place of business located at 33G 'Vest Thirty-seventh Street, New York, N. Y. Respondents, Elias Jaffe and Solomon Jaffe, are copartners, trad· ing and doing business under the name of Jaffe & Jaffe, with their oflice and principal place of business located at 240 West Thirty-ninth Street, New York, N.Y.

AMERICAN BUTTON MOULD MFRS. ASSN., INC., ET AL. 41 34 Findings Respondent, Handy Button 1\Iachine Co., of New York, Inc., is a corporation, organized, existing, and doing business under and by virtue of the laws of the State of New York, with its office and principal place of business located at 313 'Vest Thirty-seventh Street, New York,N. Y.

Uespondent, Defiance Button 1\Iachine- Co., is a corporation, organized, existing, and doing business under and by virtue of the laws. of the State of New York, with its office and principal place of business located at 43 West Twenty-fourth Street, New .York, N.Y. The individual respondents named above, who are joined in this. proceeding both as individuals and as officers of the Association,. direct and control or have directed and controlled the policies and practices of the Association. Each of the member respondents has :rarticipated actively in the activities of the Association. PAR. 2. All of the member respondents are now and for a numberof years last past have been engaged in the manuf.acture of button rnolds and buckle molds, and in the sale and distribution of such products to button and buckle manufacturers, who cover the molds with. cloth or other material and otherwise convert the molds into finished buttons and buckles for use on wearing apparel and upholstery. Themember respondents cause and have caused their products, when sold,. to be transported from their respective places of business in the State of New York to purchasers thereof located in various other States of the United States. Each member respondent maintains and has maintained a course of trade in its products in commerce among and between the various States of the United States. PAn. 3. The member respondents constitute the major portion of· all of the manufacturers of button molds and buckle molds in the United States. They manufacture approximately 75 percent of all the button molds and buckle molds manufactured in the State of New York, and npproximately 50 percent of all of the button molds and buckle molds manufactured in the United States. Prior to the adoption of the policies and practices hereinafter described, the member respondents were in active and substantial competition with one another and with other members of the industry engaged in the sale and distribution of button molds and buckle molds in commerce among and between the various States of the United States, and but for such policies and practices the member respondents would now be in such active and substantial competition with one another and with other· members of the industry.

]?AR. 4. New York City is the center of the button and buckle mold industry in the United States. The molds are made of metal and are of various kinds and sizes. For a number of years preceding the yetn• 000637-44-G 42 FEDERAL TRADE . COMMISSION DECISIONS Findings 37F. T. C.

1937, the industry was in a somewhat demoralized condition. Many of the concerns engaged in the making of buttons and buckles were small and poorly financed, and it was frequently very difficult if not ·impossible to obtain reliable credit information regarding them. The list prices for button and buckle molds had become fairly uniform, and the customary or standard discount quoted by the manufacturers . to their customers was "2-10-EOl\I," which meant a discount of 2 percent if the account was paid within 10 days or at the end of the month. It was the practice of the button and buckle manufacturers, however, to apply arbitrary discounts or make arbitrnry deductions from the bill, and to tender to the mold manufacturer in full settlement of the account an amount which was substantially Jess than the amount Btipulated in the bill. Frequently, deductions amounting to as much as 20 percent would be made by the purchaser. The excuse given by the purchaser to the mold manufacturer for these arbitrary discounts or deductions was that the purchaser could obtain the goods from another mold manufacturer at the lower price. Because of the conditions prevailing in the industry and the aggressive competition which existed among the mold manufacturers, the seller found himself in the dilemma of having to accept the amount tendered or losing his customer to a competitor. Usually, the seller chose the first of these alternatives and accepted the amount offered. PAR. 5. In an effort. to meet this situation, the member respondents began early ii1 1937 to hold meetings and carry on discussions among themselves with respect to the stabilization of prices, and particularly with respect to the fixing of the discounts which should be allowed. Something in the nature of a loose organization or unincorporated association appears to have been formed by the member respondents at that time. Shortly thereafter, a price list was distributed among the button and buckle manufacturers either by the various member respondents direct or through their organization. This price list was effective March 1, 1937. It did not bear the name of any specific mold manufacturer but was a general list for the use of all of the member respondents. In addition to listing prices, the price list also fixed the discount at "2 percent 10 days, E. 0. :M." The evidence shows that after this price list was distributed, button and buckle manufacturers who made inquiry of the various member respondents with respect to prices and discounts were uniformly told by the member respondents to refer to the general price list. Salesmen of the member respondents who called on the trade carried no separate price lists of their respective houses but sold acco~ding to the general price list. There appears to be no doubt that this price list was the result of a definite agreement and 1mderstanding among the member respondents. AMERICAN BUTTON MOULD MFRS. ASSN:, INC., ET AL. 43 34 · Findings PAR. 6. ·The respondent Association was organized by the member respondents in July 1937, to take the place of the loose organization which had existed theretofore. The ostensible purposes of the Asso<;iation, as set forth in the articles of incorporation, were somewhat varied and numerous, but it seems clear from the record that its principal purpose, aside from the obtaining and supplying of credit information, was to assist the member respondents in fixing and maintaining agreed prices and discounts governing the sale of their products.

PAR. 7. During the year 1937 the member respondents adhered generally to the agreed prices and discounts, but in 1938 some of them began to deviate from the established schedules and to allow discounts in excess of those which had been agreed upon. Charges and countercharges of "chiseling" were made from time to time among the members of the Association until in February 1939, the Association employed a certified public accountant to examine the books of all of the member respondents except Defiance Button Machine Company for the purpose of ascertaining whether these concerns had been maintaining the established prices. This audit revealed that some of the member respondents had not been maintaining the prices and discounts, and the audit set forth the various amounts which should be paid by the offending members to the other members ~ecause of such departures. Insofar as the record discloses, however, these payments Were never made.

Consideration· was also given by the Association and its members, in the early part of 1939, to the matter of requiring the posting of a bond or security by each member to guarantee compliance with the agreement as to prices and discounts. The record indicates that it Was agreed that such security should be given, but it appears that the agreement was never consummated and the security was never actually posted.

PAR. 8. In addition to fixing prices and discounts, respondents also sought through concerted action to drive out of business any competitors who were not members of the Association and did not maintain such prices and discounts. In at least two instances, comp~titors were driven out of business or forced to sell out to certain of the member respondents. To bring about this result, the member respondents co- . operatively reduced prices drastically on these particular types of molds by the competitor and, in consequence, the competitor found it impossible to continue in business. .

PAR. 9. The Commission therefore finds that the' respondents entereu into understandings, agreements, combinations, and conspiracies to restrict and restrain competition in the sale of button and buckle Order . 37F. T. C.

molds, and that each of the respondents acted in concert and in cooperation with one or more of the other respondents in doing and carrying out the acts and practices herein described, in futherance of such understandings, agreements, combinations, and conspiracies. PAR. 10. The Commission finds further that the capacity, tendency, and effect of such understandings, agreements, combinations, and conspiracies, and of the acts and things done by the respondents pursuant thereto and in furtherance thereof, are and have been unduly to lessen, restrain, and suppress competition in the sale and distribution of button and buckle molds in commerce, as "commerce" is defined in the Federal Trade Commission Act, and to deprive the trade and the purchasing public of the advantages· which would flow from normal and unobstructed competition in the sale and distribution of such products in such commerce.

CONCLUSION The acts and practices of the respondents as herejn found are all to the prejudice of the public and of respondents' competitors, 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 answer of respondents, testimony and other evidence taken before a trial examiner of the Commission theretofore duly designated by it, report of the trial examiner upon the evidence and the exceptions to such report, and briefs in support of and in opposition to the complaint (oral argument not having been requested); and the Commission having made its findings as to the facts and its conclusion that the respondents have violated the provisions of the Federal Trade Commission Act. It is ordered, That the respondents, American Button Mould Manufacturers Association, Inc., a corporation, and its officers; Isidore A. 'Veidhorn, Sidney Baritz, Harry Chalfin, and Samuel Luloff, in· dividually, and as officers of said Association; Liberty Die & Button Mould Co., Inc., C. & C. Button & Trimming Co., Inc., Jacob Rabino· witz, Inc., Handy Button l\Iachine Co. of New York, Inc., and Defiance Button Machine Co., corporations, and their respective officers, and Elias Jaffe and Solomon Jaffe, individually, and as copartners trading us Jaffe and Jaffe, or trading under any other name (hereinafter referred to as member respondents); and re!"pondents' agents, repre- 1 Eentatives, and employees, directly or through any corporate or other AMERICAN BUTTON MOULD MFRS. ASSN., .inc., ET AL. 45 34 Order device, in connection with the offering for sale, sale, and distribution of button molds and buckle molds in commerce, as "commerce" is defined in the Federal Trade Commission Act, do forthwith cease and desist from entering into, continuing, cooperating in, or carrying out any planned common 'course of action, agreement, understanding, combination, or conspiracy between or among any two or more of said respondents, or between any one or more of said respondents and pthers not parties hereto, to do or perform any of the following acts or things:

1. Fixing, establishing, or maintaining prices, discounts, or terms of sale for button and buckle molds, or adhering to or promising to adhere to the prices, discounts, or terms of sale so .fixed. 2. Holding meetings for the purpose of agreeing upon prices to be charged or discounts to be allowed by the member respondents in the sale of their products.

3. Compiling or distributing price lists showing prices or discounts cooperatively .fixed or determined.

4. Executing or agreeing to execute indemnifying bonds guaranteeing or purporting to guarantee the observance by the member respondents of any agreement with respect to prices or discounts. 5. Causing the books of any member respondent to be examined for the purpose of ascertaining whether such member has adhered to prices or discounts theretofore agreed upon by respondents. 6. Cooperatively reducing prices or allowing discounts for the purpose of forcing competitors of the member respondents out of business or compelling such competitors to ·sell their business to any member respondent.

It is further ordered, That the respondents 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 37 F. T. C.