Consolidated Cigar Corp.

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IN Tile l\'IER OF CONSOLIDATED CIGAR CORP. AND G. II P. CIGAR CO. INC.

'COMPLAINT , FINDINGS, AND ORDERS IX REGARD '10 THE ALLEGED VIQLA'IOX OF SUBSEC. (D) OF SEC. 2 OF AN ACT OF COXORESS APPHOVED OCT. 15 , 1 9 14 AS A:MENDED BY AN ACT APPIWVED JUNE 10 , 1 9 3 6 Docket 586,1. Complaint, Mar. 1951-lJecision, July 19.51 Where a corporate maDufactUler and its wholly owned sellng subsidiary, engaged in the sale and distribution of cigars, including their "El Producto brand, directly to many large chain stores and hlrgc wholesalers and through their branches to thousands of independent retailers and small wholesalers; :Paid and contracted to pay money, goods or other things of value to or for the benefit of some of their customers as compensation for display services and facilties furnished by such customers in connection with the processing, bandling, sale, or offering for sale of their said cigars, without making such paj'ments or considerations available on proportionally equal terms to all other of their customers competing in the sale and distribution of said cigars, in that some customers received nothing; and others, as determined by individual negotiations, received different percentages of purchases, or varying lump sums; and thus made available such allowances, among others, to seven chain-store customers including- SIJme of the largest retail and retail cigar store chains, and included, nmong payments therefor, over a 4. year period, $10 000 a year in the case of one, and $4 000 in that of another; without making available, in any amount, such allowances to thousands of other customer chain stores and small independent retailers which com. peted with those thus favored:

Held, That such acts and practices, in the particulars noted, violated subsection (d) of section 2 of the Clayton Act as amended. Before Mr. Frank Bier trial examiner.

Mr. R. E. Schrimsher for the Commission. Maass, Davidson, Levy Friedman of New York City, for respondents.

COMPLAINT The Federal Trade Commission, having reason to believe that the corporations named in the caption hereof, hereinafter designated as respondents and more particularly described, h1ve violated and are now violating the provisions of subsection (d) of section 2 of the Clayton Act (U. S. C. title 15, sec. 13) as amended by the Robinson- Patman Act, approved June 19, 1936, hereby issues its complaint stating its charges with respect thereto as follows: Complaint 48 F. T. C.

PARAGRAPH 1. Respondent Consolidated Cigar Corp. is a corporation organized, existing and doing business under and by virtue of the Jaws of the State of Delaware with its offce and principal place of business located at 67-73 West Forty-fourth Street, New York, N. Y. Respondent G. H. P. Cigar Co., Inc., is a corporation organized existing and doing business under and by virtue of the Jaws of the State of Maryland, with its principal offce and place of business located at Third and Brown Streets, Philadelphia, Pa. All of its capital stock is owned by, and all of its acts and practices are under the direction and control of respondent Consolidated Cigar Corp. PAR. 2. Respondents are now and, since prior to June 19, 193G, have been engaged in the business or manufacturing and selling cigars. Certain of these cigars are being, and have been sold under the brand name El Producto by and through the respondent G. H. P. Cigar Co. Inc. Said El Producto cigars were sold directly to many large chain stores and large wholesalers and were sold through respondent' s distributing branches to thousands of independent retailers and small wholesalers.

PAR. 3. In the course and conduct of said business, respondents engaged in commerce, as commerce is defined in the Chyton Act as amended by the Robinson-Patman Act, having shipped said cigars or caused them to be transported from their various plants, and from Philadelphia, Pennsylvania, and other places where such cigars are stored, to their customers having places of business located in the same and other States of the United States and the District of Columbia. Said cigars were sold by respondents to said customers for resale within the United States.

PAR. 4. In the course of said business in commerce respondents paid and/or contracted to pay, money, goods, or other things of value to or for the benefit of some of their customers as compensation or in consideration for services and facilities furnished, or contracted to be furnished, by or through such customers, in connection with the processing, handling, sale, or offering for sale, of sa.id cigars which respondents manufacture, sell: or offer for sale; and respondents did not make, or contract to make, such payments or considerations avail able on proportionally equal terms to all other of their cllstomers competing in the sale and distribution of said cigars. PAR. 5. Illustrative of and inc1ucled among the payments alleged in para.graph 4 hereof were the payments of money for display services or facilities in connection with the offering for sale and sale of El Proclucto cigars, hereinafter referred to as display allowances. Said display allowances were available from respondents: and respondents paid or contracted to pay them, upon the following proportionally unequal terms:

CONSOLIDATED CIGAR CORP. ET AL.

Decisions Said display allowances were available in some amount to some customers, but said allowances were not available to all other and competing customers in any amount.

As to those customers to which said allowances were available some amount, the amounts were different percentages or proportions of the dollar amount of purchases among competing customers, the amounts paid in some cases being predetermined as different percentages of purchases, and in other cases being lump sums, the amounts in each case being arbitra-rily determined in individual negotiations whh individual customers.

The display services or Taci1ities furnished by said customers to which said display allo,yances were available in some amount, were indeterminate in Dumber, kind, and amount, they being, like said display allowances, arbitrarily determined in individual negotiations with individual customers.

PAll. 6. Included among the customers receiving display allowances from respondents in the manner alleged in paragraph 5 hereof were seven chain-store customers, including some or the largest chain retail drug stores and chain retail cigar stores. Said customers received said display allow!ices in each of the years 1946 to 1949, inclusive. One such customer received $10 000 and another received $5 000 in each or those years.

Said display al10Vlances were not available in any amount to thousands or respondents' other customers, including chain stores and small independent retail stores, many or which compete with said chain-store customers that received display allmvances. PAll. 7. The acts and practices of the respondents as above alleged violate subscction (d) of section 2 of the Clayton Act as amended by the Robinson-Patman Act (V. S. C. title 15, sec. 13). DECISIO:N OF 'I'HE COMMISSION Pursuant to rule XXII of the Commission s rules of practice, and as set forth in the Commission s "Decision OT the Commission and Order to File Report of Compliance " dated July 7, 1951, the initial decision in the instant matter of trial examiner Frank liier, as set out as follows, became on that date the decision or the Commission. INITIAL DECISION BY FRANK HIER, TRIAL EXA3IIKER Pm' suant to the provisions of the Clayton Act as amended by the Robinson-Patman Act approved June 19, 1936 (15 U. S. C., sec. 13), tbe Federal Trade Commission on March 27, 1951, issued and subsequently served its complaint in this proceeding upon Consolidated Cigar Corp., a corporation, and upon G. H. P. Cigar Co., Inc. , a C01'- FEDERAL 'trade CQ:\\lISSTOK DEICISITOXS Findings 48 F.

poration, charging them ,with violation of subsection (d) of section 2 of said act as amended, and fixing :.\fay 15 , 1951, as the time for hearing on the charges in said complaint. On May 14, 1951, respondents filed their joint answer, admitting, for the purposes of this proceeding only, all the material allegations of fact set forth in said complaint, except two, to which respondents admitted the facts to be slightly d fFerent than alleged, and counsel in support of the complaint agreed that the facts stated in said answer were the facts. Said answer waived the filing of proposed findings and conclusion and an intervening procedure and further hearing as to the facts but reserved the right to appeal under rule XXIII of the Rules of Practice of the Commission.

The initial hearing set in the complaint was thereupon canceled and thc record closed by the trial examiner. Thereafter, the proceeding regularly came on for iinal consideration by the above-named trial examiner theretofore duly designated by the Commission upon said complaint and ans\vcr thereto and said trial examiner, having duly considered the record herein makes the following findings as to the facts, conclusions drawn therefrom, and order: nXDI GS AS TO THE FACTS PARAGRAPH 1. Respondent Consolidated Cigar Corp. is a corporation organized, existing and doing business under and by virtue "f the laws of the State of Delaware with its offce and principal place of business located at 67-73 West Forty-fourth Street, New York Respondent G. H. P. Cigar Co., Inc., is a corporation organized existing and doing business under' a,ncl by virtue of the laws of the State of ::faryJand, with its principal offce and place of business located at 647 Fifth Avenue, New York, N. Y. All of its capital stock is owned by, and all of its acts and practices are under the direction and control of, respondent Consolidated Cigar Corp. PAR. 2. Respondent Consolidated Cigar Corp. is now and since prior to June 19, 1936, has been engaged in the business of mallufac turing and selling cigars. Respondent G. H. P. Cigar Co. , Inc. since January 1941, has been and is now selling cigars but has not and docs not manufacture cigars. Certain of these cigars are being, and have been sold under the brand name EI Proc1ucto by and through respondent G. H. P. Cigar Co., Inc. Said EI Producto eigaTs were sold directly to many large chain stores and large wholesalers and \'Ierc sold through respondent' s distributing branches to thousands of independent retailers and small wholesalers. \R. 3. In the course and conduct of said business, respondents engaged in commerce, as commer( e is defined in the Clayton Act as CONSOLIDATED CIGAR CORP. ET AL.

Findings amended by the Robinson-Patman Act, having shipped said cigars or c,"used them to be transported from their various plants, and from Philadelphia, Pennsylvania, and other places where such cigars are stored to their customers having places of business located in the eame and other States of the United States and the District of Columbia. Said cigars were sold by respondents to said customers for resale within the "Cnited States.

PAR. 4-, In the course of said business in commerce respondents paid, and/or contracted to pay, money, goods, or other things of value to or for the benefit of some of their customers as compensation or in consideration for services and facilities furnished, or contracted to be furnished, by or through such customers, in connection with the proeessing, handling, sale, or offering for sale, of said cigars which respondents manufacture, sell, or outer for sale; and respondents did not make, or contract to make, such payments or considerations avnilable on proportionally equal terms to all other of their customers competing in the sale and distribution of said cigars. PAR. 5. Illustrative of and included among the payments alleged in paragraph 4 hereof were the payments of money for display services or facilities in connection with the offering for sale and sale of El Producto cigars, hereinafter referred to as display allowances. Sa.id display allowances were available from respondents, and respondents, paid or contracted to pay them upon the iol1owing proportionately unequal terms:

Said display allowances were available in some amount to some customers, but said allowances were not available to all other and competing customers in any amount.

As to those customers to which said allowances were available in some amount, the amounts were different percentages or proportions of the donal' a, mount of purchases among competing customers, the amounts paid in some cases being predetermined as different percentages of purchases, and in other cases being lump sums, the amounts in each case being arbitrarily determined in individual negotiations with individual customers.

The display services or facilities furnished by said customers to which said display allowances were available in some amount, were indeterminate in number, kind, and amount, they being, like said display allowances, arbitrarily determined in individual negotiations ,with individual customers.

PAR. u. Included among the customers receiving display allowances from respondents in the manner alleged in paragraph 5 hereof were seven chain-store customers, including some of the largest chain retail drug stores and chain retail cigvx stores. Said customers received said FE.DERAL TRAnE COMMISSION DEICISLIONS Order 48 F.

display allowances in each of the years 1946 to 1949, inclusive. One such customer received $10 000 and another received $5 000 in each of those years.

Said display allowances were not available in any amount to thousands of respondents' other customers, including chain stores and small independent retail stores, many of which compete with said chain-store customers that received display allowances. CONOL USlOXS 1. Respondents herein, having the free choice whether to make or not to make payments for advertising services, and the equally free choice as to the terms or basis upon which such payments would be made determined to make payments for display services or facilities upon the basis in some instances of the customer s volume of purchases, in other instances upon no basis at all, the payments being merely lnmp sums determined by separate negotiation between respondents and particular customers.

2. The statute requires that the terms or basis be proportionally equal for all customers competing in the resale of respondents' cigars. This requirement has been violated in three particulars; some customers received nothing at all, while others did. The latter did not receive the same proportion or percentage of the basis selected by respondents, namely, purchase volume, but received different proportions. Still others were not paid on the basis sclectcd, but received lump sums determined by individual negotiation, on terms varying with each individual case. Thus respondents have paid some but not all their customers, have paid different proportions of the same term, and have paid on different terms, each available only to the particular customer; all classes of these customers being admittedly in competition with each other in the resale of respondents' products. 3. Such acts and practices, in the particulars noted, have violated subsection (d) of section 2 of the said Clayton Act as amended by the Robinson-Patman Act.

ORDER i8 ordered That respondents Consolidated Cigar Corp. , a corporation, and G. H. P. Cigar Co., Inc., a corporation, their oiIicers employees, agents, and representatives, directly or through any corporate or otller device, in connection with the sale, or offering for sale, of cigars in commerce, as "commerce" is defined in the aforesaid Clayton Act as amended, do forth,with cease and desist from: 1. Paying. or contraeting to payor allow, anything of value to for the benefit of, anyone customer for advertising or display services CONSOLIDATED CIGAR CORP. ET AL.

Order or facilities rurnished by or through such customer, unless such payment or consideration is available on proportionally equal terms to all other customers or respondents, who in fact compete with the favored customer in the resale of respondents' products. 2. Paying, or contracting to payor allow, anythilg of value to, or ror the benefit or, any customer for advertising or display services or facilities furnished by or through such customer as an agreed percentage or proportion or dollar volume or purchases by such customer different from the agreed percentage or proportion granted any other customer where both such customers compete in fact in the resale respondents' products and where such payments are based on the amount of purchases made.

3. Paying, or contracting to payor allow, anything of value, such as lump sum payments arrived at by negotiation with individual customers to, or for the benefit of, any customer for advertising or display services or facilities furrushed by or through such customer on terms not available to, or not proportionally equal for, all other customers competing with such customer and among themselves in the resale of respondents' products.

4. Paying, or contracting to payor allow, anything of value to, or for the benefit or, a customer as compensation or in consideration for any services or facili tics rurnished by or through such customer in connection with the handling, processing, sale, or offering for sale of any products or commodities manuractured, sold, or offered for sale by respondents unless such payment or consideration is available on proportionally equal terms to all other customers competing in the distribution of such products or commodities. Provided, however That nothing contained in or relating to this order shall be construed to affect the duty, authority or power of the Federal Trade Commission to reopen this proceeding and alter, modify or set aside, in whole or in part, any provision of this order whenever in the opinion of the Federal Trade Commission conditions of fact or or law shall require such action nor to prevent representatives or either the Federal Trade Commission or of the respondents or any of them from moving to so alter, modify or set aside, in whole or in part, any provision of this order.

ORDER TO FILE Rerort OF COMPLIANCE It i8 ordered That the respondents herein 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 the order to cease and desist (as required by said declaratory decision and order of July 7, 1951J.

y , FEDERAL TRADE COMMISSION DECISION' Complaint 48 F. T. C.