P. J. McBride and George B. McClennen

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IN THE ~ATTER OF P. J. ~cBRIDE AND GEORGE B. ~cCLENNEN, TRADING 1 AS DELTA EQUIP~ENT CO~PANY COMPLAINT, FINDINGS, AND ORDER IN REGARD TO THE ALLEGED VIOLATION OF SEC. II OF AN ACT OF CONGRESS APPROVED SEPT. 26, 1914 Docket 480S. Complaint, Feb. 19, 19441-Decision, Sept. 25, 1944 Where two partners engaged in the interstate purchase and sale of machinery, including motor-driven iron-shearing and punching machines and pumps, in com· petition with others except insofar as said competition had been restricted or forestalled, as below set forth;

Following (1) arrangements by the Navy with a shipbuilding company for the construction of naval vessels and the rehabilitation of said company's facilities, in· eluding office buildings and shipways, at its shipyards, and agreement to advance funds for the pu~chase of the materials and the performance of the work involved, with the understanding that their expenditure would be under the supervision and subject to the approval of officials of the Navy; and (2) agreement by said shipbuilding company in contracting for such materials to obtain competitive offers from not less than two-or three where specified-reputable firms and to award a contract to the firm quoting the minimum price, such bids to be opened by or in the presence of the Navy Supervisor of Shipbuilding or his representative, and to be subject to his approval- Cooperated, combined, agreed and conspired, together and with others, during a period of some fifteen months or more, to, and did, restrain and suppress com· petition in the purchase and sale of machinery, including motor-driven ironshearing and punching machines and pumps, in commerce; and pursuant to and as a part of said understanding, etc.- (a) Promoted, established and carried out a practice of maintaining a false appear· ance of competition between and among themselves and other sellers of such prod· ucts in their submission of price quotations and bids to buyers and prospective buyers;

(b) Conveyed to such buyers, including official awarding authorities of the United States Government, and others involved in the purchase of such products, the representation that they and other sellers were rival bidders and competitors when in fact they were acting collusively in preparing and submitting bids; (c) Avoided and prevented competition in the sale and distribution of such products, including aforesaid machines and pumps, and prevented quotation of genuine competitive bids on said commodities to purchasers; and Where said partners, on numerous occasions, with the cooperation of said shipbuilding company, its agents and employees including a certain two- (d) Secured from four certain sellers of machinery printed stationery bearing their respective letterheads, and made use thereof in the preparation, and submission l The i1111tant r.aoe io one of a group of eight having to do with the vreparation and oubmieoion of oham. !aloe. fictitiouo, fraudulent and non-competitive bido in connection with the Navy'• arrangement (or the conotruction of ohipo by the Cramp Shipbuilding Co. at ito ohipyardo in Philadelphia. For list of the•• calel, eee footnote to the cue of the Grater-Bodey Co., et a!., Docket 4799, p. 113. I Amended.

DELTA EQUIPMENT CO. 203 202 Complaint over the respective names of such sellers, of fictitious bids for the furnishing of machinery including that herein concerned, to said shipbuilding company, in which prices specified were higher than and non-competitive with those submitted in each comparable instance by said partners; and Where said shipbuilding company and its employees- (e) In turn submitted said bids, as and for genuine and competitive bids, to representatives of the Nayy Supervisor of Shipbuilding, who were thereby misled and deceived into considering and approving them as genuine and competitive; With the result that aforesaid partners enjoyed awards of contracts to them by said shipbuilding company, with the approval of its officials and representatives of the Nayy Supervisor of Shipbuilding, secured through deception as aforesaid, and with the effect of depriving buyers and prospective buyers of such machinery, the United States Government, and the public in general, of the benefit of competition in commerce between and among said partners, and others with whom they. normally would be in competition in making bids and price quotations: lleld, That such acts and practices, under the circumstances set forth, were all to the prejudice of the public, had a dangerous tendency to and did restrain and eliminate competition in the purchase and sale of machinery in question; unreasonably restrained such commerce in said products and tended so to do; had a dangerous tendency to create a monopoly in the purchase, sale, and distribution of said products; and constituted unfair methods of competition and unfair and deceptive acts and practices in commerce within the intent and meaning of Section 5 of the Federal Trade Commission Act.

Mr. Everette Macintyre and Mr. V. W. Summers for the Commission. Mr. Thomas D. McBride, of Philadelphia, Pa., for respondents. AMENDED 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 Comlnission, having reason to believe that the persons and partnership named ?r included by reference in the caption hereof, and more particularly herelnafter described and referred to as respondents, have violated the pro- Visions of Section 5 of the 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 amended complaint, stating its charges in that respect as follows:

PARAGRAPH 1. Respondents, P. J. McBride and George B. McClennen, are partners, trading as Delta Equipment Co., with office and principal Place of business located at 148 North Third Street, Philadelphia, Pa. Said respondents are sometimes hereinafter referred to as Delta Equipment Co. Throughout the period of time beginning on or about October 1, 1940, and continuing thereafter until subsequent to January 1, 1942, they ~ere engaged in the business of purchasing and selling machinery, includlng motor driven iron shearing and punching machines and pumps, and in the course of such business shipped and caused to be shipped such machinedry from locations in States other than the State of Pennsylvania to Philaelphia, Pa., and to locations in other States. Said respondents are in competition with others not named herein as re- Complaint 39 F. T. C.

• spondents in ,making and seeking to make sales of the aforesaid types of machinery in "commerce" (as "commerce" is defined in the Federal Trade Commission Act) between and among the various Stat~s of the United States, except insofar as said competition and commerce have been hin· dered, lessened, restricted or forestalled by the cooperation, concert or common course of 11ction, understanding, combination, agreement and conspiracy and the acts, things, practices, policies and methods done pur· suant thereto and, in furtherance thereof as hereinafter set forth. PAR. 2. :Ouring 1940, as a part of its work in the defense program of the United States of America, the United States Navy Department arranged with Cramp Shipbuilding Co., whose shipyards are located at Richmond and Norris Streets, Philadelphia, Pa., for the construction of naval vessels and the rehabi.litation of facilities including office buildings and shipways at said shipyards and in that connection agreed to advance funds for the purchase of the materials and the performance of the work involved, with the understanding that the expenditure of the said funds for such work would be under the general supervision and subject to the approval of offi· cials of the United States Navy Department. Thereupon, the said Cramp Shipbuilding Co. undertook to contract with various parties, including ref spondents, P. J. McBride and George B. McClennen, for the furnishing o materials for use in the construction of naval vessels and rehabilitation of the said shipyards, and in that connection also agreed with officials of the United States Navy Department that it would obtain competitive offers from as many as practicable but not less than two (not less than three where specified) reputable firms in a position to provide the material, equipment, or services as required at :a reasonable cost, and to award ll contract to that firm quoting the minimum price, and with the further understanding that the said offers, proposals, or bids were to be opened b~, or in the presence of, the Supervisor of Shipbuilding, U. S. Navy, or hts representative, and subject to his approval before award of the subcon· tract for materials or services.

In connection with the aforesaid contract the Cramp Shipbuilding Co. negotiated with and made awards of contracts directly and through agents to respondents, P. J. McBride and George B. McClennen, trading as Deltd Equipment Co., for machinery, including motor driven iron shearing an punching machines and pumps.

PAR. 3. Throughout a period of time beginning on or about the first day of October, 1940, and continuing thereafter until subsequent to January 1, 1942, the respondents as named in the caption hereof have, through under· standings together and with others, cooperated, confederated, combine~, agreed and conspired to frustrate, hinder, restrain and suppress compett· tion in the purchase and sale of machinery, including motor driven iron shearing and punching machines and pumps, in 11 commerce" (as 11 com· merce" is defined in the Federal Trade Commission Act) and have in fact, through such cooperation, confederation, combination, agreement, ~nd conspiracy, frustrated, hindered, restrained, and suppressed competition in the purchase and sale of machinery, including motor driven iron shear· ing and punching machines and pumps in commerce. Pursuant to, in furtherance of, and as a part of the aforesaid under· standing, cooperation, confederation, combination, agreement, and con· spiracy, the aforesaid respondents have done, performed, and used, among other acts, things, practices, policies, and methods, the following: DELTA· EQUIPMENT CO. 205 202 Complaint . ·1. Promoted, established,. carried out, 'and I continued ·a· practice of maintaining a false appearance of competition between and among respondents, P. J. McBride and George B: McClennen, and other sellers of machines, including motor driven iron shearing and punching machines and pumps, in their submission of price quotations_and bids to buyers and Prospective buyers; . . 2. Conveyed to buyers and prospective buyers, including official award- Ing authorities of the United States Government, and others involved in the purchase of machinery, including mot~r driven iron shearing and Punching machines and pumps, the· representation tpat said respondents, P. J. McBride and George B. McCiennen, and other sellers were rival bidders and competitors when they in reality were acting collusiyely in pre- Paring and submitting bids;

3. Avoided and prevented competition in the sale .and distribution of machinery, including motor driven iron shearing and punching machines and pumps; and, . · 4. Prevented quotation of genuine competitive bids or price quotations on said commodities to purchasers thereof.

5. On numerous occasions, the exact numberand date's of which are Unknown to the Commission, respondents, P. J. McBride and George B. ~cClennen, acting as individuals, and in their capacities as partners in the elta Equipment Co., with the cooperation of Cramp Shipbuilding Co., its agents and employees, including one George Ward and one William C. Darragh, secured from other sellers of machinery (including· Calco Ma- F~inery Co., 1420 Chestnut Street, Philadelphia, Pa.; Albert 'Hepworth, lfth and Arch Streets, Philadelphia, Pa.; James F. Marran, 123 North 1'third Street, Philadelphia, Pa.; Worthington Pump and Machinery Cor- P?ration, general offices and principal place of business, Harrison, N. J., Wtth branch or district office located at 1616 Walnut Street, Philadelphia, fa.; and others), printed stationery of such sellers bearing their respective etterheads and used the same in the preparation and submission of sham, i ~alse, fictitious, fraudulent and noncompetitive bi~s .and price quotations or the furnishing of machinery, including motor driven iron shearing and Punching machines and pumps, over the respective names of such sellers of machinery to said Cramp Shipbuilding Co., anc~ its agents and employ- ~hes, in furtherance of the deception, as described het~in, the prices specified erein being different from, higher than and noncompetitive with the bid and price quotations submitted in each comparable instapce by the said ~spondents, P. J. McBride and George B. McClennen,·trading as Delta quipment Co. Thereupon, in each of the nu~ber of in~tances where tespondents, P. J. McBride and George B. McClennen, thus submitted to ~ramp Shipbuilding Co., its agents and employees, .different· bids on stahonery bearing the letterheads of other sellers of machinery, including lllotor driven iron shearing and punching machines and pumps, such bids ":ere in turn submitted as and for genuine and competitive bids for furlllshing such machinery, to representatives of the Supervisor of Ships, pnited States Navy, who were, through the appearance of such bids, mised and deceived in considering and approving them as genuine and com- Petitive.· • . . • 6. Re1<pondents, P. J. McBride' and Geor~e B. 1\IcClennen, trading as belta Equipment Co., as a result of the submission of the aforesaid sham, Findings 39 F. T. C.

false, fictitious, fraudulent and noncompetitive bids to furnish machinery as aforesaid, enjoyed awards of contracts to them by said Cramp Shipbuilding Co., its employees and agents, with the approval of officials of Cramp Shipbuilding Co. and representatives of the Supervisor of Ships, United States Navy, secured through deception as aforesaid. PAR. 4. The aforesaid understandings, agreements, combination, and conspiracy, and the doing and performing of the acts and things and the use of the methods set forth in the preceding paragraphs hereof tend to have and have had the effect of depriving buyers and prospective buyers of machinery, including motor driven iron shearing and punching machines and pumps, of the United States Government and the public in general, of the benefit of competition in commerce between and among respondents, P. J. McBride and George B. McClennen, trading as Delta Equipment Co., and others with whom they normally would be in competition in making bids and price quotations.

PAR. 5. The acts, practices, methods, understandings, agreements>, combination, and conspiracy of the respondents, as hereinbefore alleged, are all to the prejudice of the public, have a dangerous tendency to, and have actually frustrated, hindered, suppressed, lessened, restrained, and eliminated competition in the purchase and sale of machinery, in co:m· merce within the intent and meaning of the Federal Trade Commission Act, and have the capacity and tendency to restrain unreasonably and have restrained unreasonably such commerce in said products, have e. dangerous tendency to create a monopoly in the purchase, sale, and clio· tribution of such products, and constitute unfair methods of competition and unfair and deceptive acts and practices in commerce within the intent and meaning of Section 5 of the Federal Trade Commission Act. REPORT, FINDINGS AS TO THE FACTS, AND ORDER Pursuant to the provisions of the Federal Trade Commission Act, the Federal Trade Commission on February 19, 1944, issued and subsequently served its amended complaint in this proceeding upon the respondents named in the caption hereof, charging them with the use of unfair metho?5 of competition and unfair and deceptive acts and practices in commerce l~ violation of the provisions of Section 5 of said act. After the issuance o said amended complaint, respondents filed their answer thereto admittip~ all of the material allegations of fact set forth in said amended compl:un and waiving all intervening procedure and further hearing as to the facts. Thereafter, this proceeding regularly came on for final hearing before thd Commission on the said amended complaint and the answer thereto; an the Commission, having duly considered the matter and being now fully advised in the premises, finds that this proceeding is in the interest of the public and makes this its findings as to the facts and its conclusion drawn therefrom.

FINDINGS AS TO THE FACTS PARAGRAPH 1. Respondents, P. J. McBride and George B. McClenn~n, are partners, trading as Delta Equipment Co., with their office and prin· DELTA EQUIPMENT CO. 207 202 Findings cipal place of business located at 148 North Third Street, Philadelphia, Pa. Said respondents are sometimes hereinafter referred to as Delta Equipment Co. Throughout the period of time beginning on or about October 1, 1940, and continuing thereafter until subsequent to January 1, 1942, they Were engaged in the business of purchasing and selling machinery, including motor-driven iron-shearing and punching machines and pumps, and in the course of such business shipped such machinery and caused it to be shipped from locations in States other than the State of Pennsylvania to Philadelphia, Pa., and to locations in other States. Said respondents are in competition with others not named herein as respondents in making and seeking to make sales of the aforesaid types of machinery in commerce, as "commerce" is defined in the Federal Trade Commission Act, between and among the various States of the United States, except insofar as said competition has been hindered, lessened, restricted, or forestalled by the cooperation, concert of common course of action, understanding, combination, agreement, and conspiracy and the acts and things done and the Practices, policies, and methods followed pursuant thereto and in furtherance thereof as hereinafter set forth.

PAR. 2. During 1940, as a part of its work in the defense program of the United States of America, the United States Navy Department arranged with the Cramp Shipbuilding Co., whose shipyards are located at Richmond and Norris Streets, Philadelphia, Pa., for the construction of naval Vessels and the rehabilitation of the facilities, including office buildings and shipways, at said shipyards, and in that connection agreed to advance funds for the purchase of the materials and the performance of the work involved, with the understanding that the expenditure of the said funds for such work would be under the general supervision and subject to the ap- Proval of officials of the United States Navy Department. Thereupon, the said Cramp Shipbuilding Co. undertook to contract with various parties, including respondents, P. J. McBride and George B. McClennen, for the furnishing of materials for use in the construction of naval vessels and the rehabilitation of the said shipyards, and in that connection also agreed With officials of the United States Navy Department that it would obtain competitive offers from as many as practicable but not less than two (not less than three were specified) reputable firms in a position to provide the material, equipment, or services as required, at a reasonable cost, and to award a contract to that firm quoting the minimum price, and with the further understanding that the said offers, proposals, or bids were to be opened by, or in the presence of, the Supervisor of Shipbuilding, United States Navy, or his representative, and were to be subject to his approval before award of the subcontract for materials or services. In connection With the aforesaid contract the Cramp Shipbuilding Company negotiated With and made awards of contracts, directly and through agents, to respondents, P. J. McBride and George D. McClennen, trading a.'! Delta Equipment Co., for machinery, including motor-driven iron-shearing and Punching machines and pumps.

PAR. 3. Throughout a period of time beginning on or about the first day of October 1940 and continuing thereafter until subsequent to Ja~uary 1, 1942, the respondents herein have, through understandings together and With others, cooperated, confederated, combined, agreed, and ~onspired to frustrate, hinder, restrain, and suppress competition in the purchase and Findings 39 F. T. C.

sale of machinery, including motor-driven iron-shearing and punching machines and pumps, in commerce, as "commerce" is defined in the Federal Trade Commission Act, and have in fact, through such cooperation, confederation, combination, agreement, and conspiracy, .frustrated, hindered, restrained, and suppressed competition in the purchase and sale of machinery, including motor-driven iron-shearing and punching machines and pumps in commerce. Pursuant to, in furtherance of, and as a part of the understanding, cooperation, confeder3:tion, combination, agreement, and conspiracy, the aforesaid respondents have done, performed, and used, among other acts, things, practices, policies, and methods, the following: . (a) Promoted, established, carried out, and continued a practice of maintaining a false appearance of competition between and among respondents, P. J. McBride and George B. McClennen, and other sellers of machines, including motor-driven iron-shearing and punching machines and pumps, in their submission of price quotations and bids to buyers and prospective buyers. · (b) Conveyed to buyers and prospective buyers, including official awarding authorities of the United States Government and others involved in the purchase of machinery, including motor-driven iron-shearing and ·punching machines and pumps, the representation that said respondents, P. J. McBride and George B. McClennen, and other sellers were rival bidders and competitors when in reality they were acting collusively in preparing and submitting bids. . (c) Avoided and prevented competition in the sale and distribution of machinery, including motor-driven iron-shearing and punching machines and pumps.

(d) Prevented quotation of genuine competitive bids or price quotations on said commodities to purchasers thereof. (e) On numerous occasions respondents, P. J. McBride and George B. McClennen, acting as individuals, and in their capacities as partners in the Delta Equipment Co., with the cooperation of the Cramp Shipbuilding Co., its agents and employees, including one George Ward and one William C. Darragh,. secured from Calco. Machinery Co., 1420 Chestnut Street, Philadelphia, Pa.; Albert Hepworth, Fifth and Arch Streets, Philadelphia, Pa.; James F. Marran, 123 North Third Street, Philadelphia, Pa.; Worthington Pump and Machinery Corporation, Harrison, N. J., with branch or district office located at 1616 Walnut Street, Philadelphia, Pa.; and other sellers of machinery, printed stationery of such sellers bearing their respective letterheads and used the same in the preparation and submission, over the respective names of such sellers of machinery, of sham, false, fictitious, fraudulent, and non-competitive bids and price quotations for the furnishing of machinery, including motor-driven iron-shearing and punching machines and pumps, to said Cramp Shipbuilding Co. and its agents and employees, in furtherance of the deception as described herein, the prices specified therein being different from; higher than, and non-competitive with the bid and price quotations submitted in each comparable instance by the said respondents, P. J. McBride and George B. 1\IcClennen, trading as Delta Equipment Co. Thereupon, in each of the number of instances where respondents, P. J. McBride and George D. 1\IcClennen, thus submitted to the Cramp Shipbuilding Co., its agents and employees, different bids on stationery bearing the letterheads of other sellers of ma- DELTA .EQUIPMENT CO. 209 202 Order chinery, including motor-driven iron-shearing and punching machines and pumps, such bids were in turn submitted, as and for genuine and competitive bids for furnishing such machinery, to representatives of the Supervisor of Shipbuilding, United States Navy, who were, through the appearance of such bids, misled and deceived into considering and approving them as genuine and competitive. · · (f) Respondents, P. J. McBride and George B. McClennen, trading as Delta Equipment Co., as a result of the submission of the aforesaid sham, false, fictitious, fraudulent, and non-competitive bids to furnish machinery as aforesaid, enjoyed awards· of contracts to them by said Cramp Shipbuilding Co., its employees and agents, with the approval of officials of the Cramp Shipbuilding Co. and representatives of the Supervisor of Shipbuilding, United States Navy, secured through deception as aforesaid. PAR. 4. The aforesaid understandings, agreements, combination, and ~onspiracy, and the doing and performing of the acts and things and the Use of the methods set forth above tend to have, and have had, the effect of depriving buyers and prospective buyers of such machinery, the United ~states Government and the public in general, of the benefit of competition tn commerce between and among respondents, P. J. McBride and George B. McClennen, trading as Delta Equipment Co., and others with whom they normally would be in competition in making bids and price quotations.

CONCLUSION The acts, practices, methods, understandings, agreements, combinatio~, and conspiracy of the respondents, as hereinbefore alleged, are all to the Prejudice of the public, have a dangerous tendency to and have actually frustrated, hindered, suppressed, lessened, restrained, and eliminated com- Petition in the purchase and sale of machinery in commerce within the intent and meaning of the Federal Trade Commission Act; have the capacity and tendency to restrain unreasonably, and have restrained unreasonably, such commerce in said products; have a dangerous tendency to create a monopoly in the purchase, sale, and distribution of such products; and Constitute unfair methods of competition and unfair and deceptive acts and practices in commerce within the intent and meaning of Section 5 of the Federal Trade Commission Act.

ORDER TO CEASE AND DESIST This proceeding having been heard by the Federal Trade Commission llpon the amended complaint of the Commission and the answer of respondents, in which answer respondents admit all of the material allegations of fact set forth in said amended complaint and waive all intervening Procedure and further hearing as to the facts, and the Commission having trade its findings as to the facts and its conclusion that said respondents A.ave violated the provisions of Section 5 of the Federal Trade Commission ct.

Order 39 F. T. C.

It is ordered, That respondents, P. J. McBride and George B. McCien· nen, individually, and as partners, trading as Delta Equipment Co., their joint or respective representatives, agents, and employees, in connection with the offering for sale, sale, and distribution in commerce, as "com· merce" is defined in the Federal Trade Commission Act, of machinery, including motor-driven iron-shearing and punching machines and pumps, do forthwith cease and desist from entering into, continuing, cooperating in, or carrying out any planned common course of action, understanding, agreement, combination, or conspiracy between themselves, or between either or both of them and any other person, partnership, or corporation not a party hereto, to do or perform any of the following acts, things, or practices:

1. Conveying or assisting in conveying to buyers or prospective buy· ers, or to any official or awarding authority of any Federal agency, or to any one contracting with such agency, or to any one acting for or on behalf of such agency or for or on behalf of any contractor with such agency, any representation that any two or more apparent sellers are rival bidders or competitors, when in reality they are acting collusively in preparing and submitting bids. . 2. Aiding, assisting, or cooperating in any manner in the submission of any sham, fictitious, fraudulent, or non-competitive bids or price quota· tions to any buyer or prospective buyer, or to. any Federal agency or to any one acting for or on its behalf, or for or on behalf of any party pur· chasing material or equipment in fulfillment of a contract with such agency.

3. Interfering with or assisting in interfering with the procurement or consideration of genuinely competitive bids or price quotations by any Federal agency or any official or awarding authority of such agency, or by any buyer or prospective buyer.

4. Promoting, establishing, carrying out, or continuing any act or prac· tice for the purpose or with the effect of maintaining or presenting a false appearance of competition between sellers in the submission of price qu<>"' tations or bids to buyers or prospective buyers. 5. Arranging or attempting to arrange for the filing of any bid in the name of one ostensibly competing bidder when the prices and terms are in fact determined by some other bidder, or when in fact the bid is not a bona fide bid.

It is further ordered, That the respondents shall, within 60 days after t~e service upon them of this order, file with the Commission a report in writ· ing setting forth in detail the manner and form in which they have coiil• plied with this order.

THE O'BRIEN MACHINERY CO. 211 Syllabus