Colgate-P Almolivepeet Co.

Text (OCR of the scan at left; may contain errors)

IN THE 1fTTER OF COLGATE-P ALMOLIVE- PEET CO.

Docket 5587. Amended and supplemental complaint, Apr. 1951-order dcnying uppeal, etc., and opinion ' Dec. 1953 Oharge: Discriminating in price by selling soap products in commerce to certain custolners usually small businesslnen, at higher prices than to other and generally larger competing cllstomers, in violation of subsection 2 (a) of the Clayton Act, as amended; and Entering into advertising arrangements with certain customers whereby respondent paid or contracted to pay them compensation for services or facilities furnished b i them in connection with the sale, etc., of respondent' s soap products without making comparable paymenfs or consideration available to their competitors, in violation of subsection 2 (d) of the Clayton Act, as amended. Before Mr. Randolph PTeston and Mr. Earl J. Kolb hearing eXtLmlners.

h. Johm L. Yodc and Aft. William H. Smith for the Commission. Lonl, Day il LOTd of N ew York City, and Mr. H. Walter Reynolds and Mr. B. C. lhmldin of .Jersey City, N. J. for respondent. OHDlm DENYING Appeal FRmI INITIAL DECISION OF HEARING EXX Inter, AND Decislon OF THE CO~IThISSION This matter 1moving come on to be heard by the Commission upon the appoal of counsel supporting the complaint from the initial decision of the hearing examiner and upon the briefs and oral argument of counsel in support of and in opposition to said appeal; and The Commission having duly considered said appeal and the record herein and being of the opinion, for the reasons stated in the written opinion of the Commission whioh is being issued simultaneously herewith, that the appeal should be denied and that the initial decision of the hearing examiner is appropriate in all respects to dispose of this prooeeding :

It is ordered That the appeal of counsel supporting the oomplaint from the initial decision of the hearing examiner be, and it hereby is denied.

It is fut,thej' ordered That the initial decision of the hearing examiner, a copy of which is attaohed, shall, on the 16th day of December ID53, beoome the deoision of the Commission. 1. For opinion in this case ee page ::06 of the Lever Brother:: case. 526 FEDJijRAL TRADE COMMISSION DECISIONS Decision 50 F. T. C.

ORDER DISJ\ISSING AMENDED AND SUPPLE~iental CO~iplaint INITIAL DECISION BY EARL J. KOLB, HEARING EXAJ\INER. This proceeding came on to be considered by the above-named Hearing Examiner theretofore duly designated by the Commission, upon the amended and supplemental complaint, the answer thereto, testimony and other evidence, proposed findings as to the facts and conclusions, and brief thereon submitted by counsel for respondent, and oral argument of counsel.

The original complaint in this proceeding was issued on September 1948, charging the respondent, Colgate-Palmolive-Peet Company, a corporation, with having violated the provisions of subsection (a) of section 2 of the Clayton Act, as amended. Testimony ahd other evidence in support of the allegations of the complaint were introduced before Randolph Preston, a duly desig- JUtted Hearing Examiner of the Commission, but prior to the introduction of any evidence in opposition to the charg",s of the complaint the said Hearing Examiner, Randolph Preston, became unavailable to the Commission by reason of his retirement from the Government service, and the Commission by order issued August 24, 1950, designated Earl J. Kolb as Hearing Examiner in this proceeding to take testimony and receive evidence in the place and stead of Hearing Examiner Randolph Preston.

Thereafter, prior to the introduction of any testimony and other evidence by the respondent in opposition to the charges of the complaint, the Commission on April 26 , 1951, issued and subsequently served its amended and supplemental complaint in this proceeding charging the respondent with having violated subsections (a) and (d) of section 2 of the Clayton Act, as amended. On June 4 1951, after hearing upon certain motions of the respondent, the Hearing Examiner issued his order that all testimony and other evidence heretofore taken in this proceeding be stricken from the record as not being applicable to the issues raised by the amended and supplemental complaint.

Thereafter, on November 26 1951 , the Commission approved a stipulation executed by counsel in support of the complaint and counsel for respondent, pursuant to which the Hearing Examiner issued his order dismissing the charges contained in subparagraph 2 of Paragraph Five of Count 1 of the amended and supplemental complaint dealiug with quantity discounts, and further ordered that the testimony and other evidence theretofore taken in support of the original complaint be reinstated and considered as testimony and other evi- COLGATE-PALMOLIVE-PEET CO. 527 fi25 Decision dence taken in support of the amended and supplemental complaint. Thereafter, testimony and other evidence were introduced before Hearing Examiner Earl.T. Kolb in support of and in opposition to the allegations of the amended and supplemental complaint, which testimony and other evidence were duly recorded and filed in the offce of the Commission.

Respondent, Colgate-Palmolive-Peet Company, a corporation, is engaged in the manufacture and in the sale and distribution of soap and soap products in interstate commerce to retail grocers, jobbers and other purchasers. A substantial portion of respondent's business consists of sales 01' soap and soap products direct to thousands of retail grocers located in virtually every city and town in the United States. Among such retailer customers there are approximately 1 600 exclusive of approximately 800 cooperative chains, who operate chains of three or more stores and the rcmainder are single-store operators. The differences in price and aJlmmnces charged in the amended and supplemental complaint to be in violation of section 2 (a) and 2 (d) of the Clayton Act arise out of the Jollowing practices of respondent in connection with sales of soap and soap products to its retailer customeI's: (1) Price protection of warehouse stocks upon price decline; (2) Count and recount; (3) Advertising allowances. I. Price Protection of IVarehouse Stocks Upon Price Decline. Allowances to cover price decline in warehouse stocks is a general practice in the grocery industry and has the following purposes: (1) To provide adequate stocks immediately behind point of sale; (2) avoid necessity of maintaining greater number of warehouses by the manufacturer; (3) To pass on to the customer delivery cost; and (4) To induce the trade to maintain an adequate reservoir of stock. Many single and two-store retailers throughout the United States belong to cooperative associations or purchase all or part of their requirements of soap and soap products from jobbers. Respondent extcnds price protection to the warehouse stocks of such associations and jobbers enabling them to offer their members or customers the new lower price immediately upon the announcement of a price decline. Price declines on respondent' s soap and soap products were relatively few and at infrequent intervals and for the most part were made for thc purpose of offsetting the higher prices existing during .World War II and were due to the lower price of raw materials and the greater availability of such materials. when such price declines occurred respondent immediately reduced the price on all of its own warehouse stock which reduction applied to goods in transit. During the four- Decision 50 "i. T. C.

year period immediately preceding the issuance of the amended,and supplemental complaint there were six declines in price of respondent's soap and soap products ranging from 6 percent to 10 percent or roughly to 50if per case.

At the time of these price declines, respondent made adjustments to all of its customers having storage or warehouse stocks held by such customers for further handling, transportation and distribution to the site of retail sale. In making such adjustments the respondent did not protect any of its customers on stocks in their warehouses or stores which were purchased from jobbers or others and not directly from the respondent. Following such price declines, respondent determined the number of unopened cases held in the warehouse space of its various customers for distribution to three or more retail stores cases to such customersand made an allowance or rebate on such equal to the price reduction. Respondent made no payment on cases the sizeopen or unopened, held in retail store stocks regardless of of the retailer or the number of stores owned. In determining the amount of allowance to be made, respondent accepted the count of the customer who carried a running inventory, but as to those who did Bot, actual count was made by salesmen of respondent. No price protection was extended to operators of oue or two stores who bought and took delivery solely for the needs of those stores. An exception to this is the carload purchaser operating one or two stores to whom stock protection was granted on unopeued creses in the wrerehouse storage sprece rend only on merchandise recei ved as part of a carload shipment. No price protection was extended to a customer operating several stores on soap or soap products delivered to a unit store for resale solely in that store.

Respondent did not require thret the warehouse or storage stock should be in a separate building not in any way physically connected with any retail store. Instead, respondent included in its definition of warehouse and storage stocks any stocks located in a warehouse or storage space from which distribution was made at the customer expense to the site of retail sale in three or more retail stores. Some of respondent' s customers who received price protection on such warehouse or storage stocks kept such stock in warehouse or storage spacoe physically connected in some way to one of the retail stores from which further distribution was made.

In the administration of its price protection policy respondent carefully determined the eligibility of stocks for payment; carefully determined the number of cases on which payment should be made in to the amounts 80 accordance with its policy; and limited payments issue was raised in this proceeding of any arbitrary determined. No COLGATE-PALMOLIVE-PEET CO. 529 525 Decision or improper allowances being made to particular customers separate and apart from the general plan hereinbefore described. There is some evidence of improper classification of customers in several isolated instances through carelessness or improper conduct of salesmen but these were immediately corrected by the respondent and such isolated instances are not at issue in this proceeding. The charges of the amended and supplemental complaint were instead directed to the general practice of affording warehouse protection to the operators of three or more stores while not extending the same protection to the operators of one or two stores.

This issue was further limited by the following stipulation on the record by the attorney in support of the complaint: "* * " counsel supporting the complaint agrees, and wil so state that he raises no question as to price protection given by respondent to the warehouse stocks of chains, voluntaries, cooperatives or others scpl1xate building not in any way physicallykept in a warehouse in a connectcd with any retail store, while at the same time and in connection witll th" same april'( (l\1;tion (hmying floor-stock protection to other custonlCrs ,vito operate l'elail stores but who maintain no separate warchouse, but counsel supporting the complaint will continue to contend that section:2 (a) of t.he Hobinson-Patman Act is violated when floor-stock protection is accorded upon respondent' s products stored in the building used as a retail store by the particular customer who operates three or more stores under a common ownership while floor-stock protection is at the same time denied to other competing customers who operate one 01' two stores. ('11'. :284G. By this stipulation t.he issue was limited to the granting of price protection to what is claimed to be warehouse stock stored in a building used lts a retail store by customers who operate t.hrec or more stores while refusing this protect.ion to other retail customers who operate only one or t.wo stores. This stipulation was made prior to the introduction of any testimony in opposition to the charges of the amended llld supplemental complaint respecting warehouse st.ock protection and tho testimony in defense was based solely upon the issue as so limited.

It is uncontradicted in this record that when respondent granted an allowance on stock stores in a building occupied by one of the stores such allowance was made only on stock stored in the warehouse section for distribution to three or more stores and no allowance was made on cases opened or uIlopened on the floor of the store for replcnisL n ,,'nt of the retail stock.

There is no evidence in this record that any injury to competition was sustained by the single-store or t.wo-store operat.or by rellSOll of 403443--57-- FEDERAL TRADE COMMISSION530 DECISIONS 50 F. T. C. Decision the respondent's practice of granting warehouse stock protection. price protection was granted by the respondent on normal operating stock, which is that stock which the retailer requires to refill his shelves stock in the individual-memberand rebuild display. This includes all store other than that stored in the warehouse section for distribution to three or more stores. It is uncontradicted in this record that the normal operating stocks, including shelf stock, in unit stores of chains of three or more stores upon which no price protection was granted by the respondent were greater in size than that in single stores or in units stores have of two-store operations. Units of chains of three or more stock more unopened cases than as a part of their normal working do single stores or two-store units.

On the basis of the present record, it appears that there has been a supplemental total failure to sustain the charges of the amended and for the fol- complaint relative to price protection on decline in price, lowing reasons:

com- 1. The stipulation entered into by counsel in support of the prior to the introduction of wy evidence in opposition to the plaint, in effect aban- charges of the amended and supplemental complaint, doned the original theory of the amended and supplemental complaint; admitted the legality of the practice of extending price protection to warehouse or storage stocks and removed as an issue in this proceeding the granting of price protection to warehouse stocks stored in a separate warehouse.

2. By reason of this stipulation i+ must be considered, for the purpose of this proceeding, that a retail customer maintaining a separate and distinct warehouse for supplying three or more stores performs a warehousing function which entities him to the allowances made on warehouse stock in the case of price decline. 3. A customer maintaining a separate warehouse stock in one of its units for distribution to three or more stores, including the unit store, performs the same warehousing function as the customer maintaining a separate warehouse.

stores 4. ' while it was stipulated in the record that single and two who were not accorded price protection compete with customers who operate three or more stores and who receive price protection but do not have physically separate warehouses, there is no evidence in this record that the failure of unprotected customers to receive price protection affects their competitive position, ability or opportunity to compete with protected customers who do not have physically separate warehouses. The evidence on competitive effect relates to competition between unprotected customers and chain stores which have physically separate warehouses.

COLGATE-PALMOLIVE-PEET CO. 531 525 Decision 5. There is no competitive injury to the single or two-store operator who does not receive price protection because his unprotected stock at the time of any price decline is less than the normal operating stock of the units of chains of three or more stores which is likewise unprotected.

6. On the basis of the present record, the inventory loss to a single store operator resulting from failure to receive price protection on price declines occurring at infrequent intervals is at best de minimis and cannot affect his competitive position or opportunities. II. Oount and Recount The practice known as Count and Recount is a promotional plan common to the grocery industry, which is designed to stimulate the' movement of goods which are moving slowly. It is in operation for only a short period of time and usually involves only one product. During the past ten years this plan has been used by the respondent on only two occasions.

In the operation of this plan in 1948, the respondent issued a promotional allowance or rebate to chains of three or more stores and to jobbers amounting to 50if a case on Vel, btlsed upon the number of cases moved into the retail store from the warehouse during the periods from March 23, 1948, to Aprij 30, 1948, and X ovember 8, 1948, to December , 1948. The quantity on hand at the warehouse of such customers was counted at the beginning of the campaign period to which was added the quantity purchased and delivered to the warehouse during the campaign period and from the total the qmmtity on hand in the warehouse at the end of the period was subtracted. The difference being the amount moved from the warehouse to the individual store, which formed the basis for the promotional allowance or rebate. All customers operating less than three stores received no allowance or rebate for stock on hand but were charged the lower price on all Vel ordered or shipped during the sale period. No allowance or rebate was granted to chains of three 01' more stores on cases opened or unopened in their various units. It was the practice of the. respondent to notify all of its direct customers of the institution of a Count and Recount promotion and to have its salesmen make a special effort to sell the promotional merchandise during the period to all customers operating less than three stores.

There is no evidence that an opportunity to participate in the Count and Recount Plan was not offered to a1l chains of three or 110re stores or that operators of less than three stores did not have an opportunity to purchase at the reduced price during the campaign period. 01 that 532 FEDERAL TRADE COMMISSIOK DECISIONS Decision 50 F. 'L' . C. any injury to competition was suffered by any customer of the respondent by reason of the operation of said Count and Hecount Plan. The amended and supplemental complaint further charged that by reason of a general reduction in price, which frequently followed the Count and Recount Plan, certain customers received a second rebate on the same merchandise. 'V"while it is true that a general reduction in price by respondent did become effective on .May 5, 1948, and December 1948, there is no evidence that any customer of respondent received a promotional allowance on Count and Recount and a price protection :allowance on warehouse stock covering the same merchandise. In fact in the operation of these two plans the promotional allowance is received only on merchandise moved to the individual stores and the price protection allowance only on warehouse stocks, so that no duplication of allowances is possible on the same merchandise. There is no evidence that any injury to competition was suffered by any customer by reason of the fact that a general price reduction followed the Count and Recount campaign.

On the basis of the present record, it appears that there has been a total failure to sustain the charges of the amended lwd supplemental comph i Ilt relative to the Count and Recount practice. III. Advertising Allowances Count II of the amended and supplemental complaint charged the respondent with violation of section:2 (d) of the Clayton Act, in that: (1) Payments of allowances for newspaper advertising were not made available to all of respondent' s customers because it is not reasonably possible for those who purchase smaller quantities of respondent' products to avail themselves of the higher rate which respondent pays and agrees to pay for newspaper advertising; and (2) that the amounts received by the respondent's customers are disproportionate purchasers ofto the cost of advertising furnished by them in that large quantities of soap products receive sums which are grossly in they furnish whereasexcess of the cost of the advertising which purchasers of lesser quantities receive much lesser amounts in relation to the cost of the advertising they furnish. Respondent, in tbe course of its business in commerce, entered into contracts with, and made payments to, its customers for promocustomers. In the tional services and facilities furnished by such granting of such allowances the respondent used two forms of conofl"ered Iract-- (l) Cooperative Advertising Agrpcment, which was as a contract to be entered into on an annual basis, and (2) Display Feature Advertising Agreement, which was a contract physically incorporated as part of the order blank on each order written for customers who had not executed the annual contract. COLGATE PALMOLIVE PEET CO. 533 525 Decision In the Cooperative Advertising Agreement, often referred to as the annual contract, respondent agreed to pay to the customer an allowance per case ranging from 10 to 50 per case purchased, depend ing upon the product, on the condition that the customer render sales promotions and advertising service by conducting nine feature sale& annually on each product, three of which to be scheduled during each of the four month advertising periods. As a part of the feature sales the customer was required to place newspaper advertising which shall be run in such newspapers as dealer normally uses and that each sale be supported by a prominent store display of the product advertised and other usual promotional material used on major feature sales. The annual contract also provided for an option whereby the customer instead of advertising in newspapers could conduct the nine sales as required and use handbills in lieu of newspaper advertising. In this event the customer was paid 8q; to 30 pel' case on llll products purchased and advertised.

In the Display Feature Advertising Agreement, which was offered by salesmen to customers at the time the order was taken, the respond ent agreed to pay to the customer an allowance of 6 per case purchased on the condition that the customer render sales promotional service consisting of a prominent llass store display, together with a feature sale for one week.

The Cooperative Advertising Agreement, or annual contract, re quired that advertising space used in newspapers should be at least equivalent to that given to competitive products, and not less tlmn one column inch. ",Vhile one column inch consisting of 14 agate lines was specified in the contract, in practice this provision, identifying a minimum of one column inch to constitute a newspaper feature was not observed and respondent has accepted advertising of less than one column inch as compliance with its contract. There is no required media to be used in newSpltper advertising other than that used for regular consumer advertising. According to the testimony, any news paper carrying consumer advertising distributed in the territory covered by the customer is acceptable. This includes, in addition to metropoJitlLl newspapers, local, neighborhood, Rnd foreign language papers, and shopping news, either daily or weekly. The existence and aVRilabi1ity of said contracts and payments were made known by respondent to Rll of its customers and respondent oITered said contracts Rnd the opportunity to receive said payments to al1 of its customers. Respondent through its sales employees en deRvored to persuade Rll customers to avail themselves of the con tracts Rnd pRyulents and to furnish the services and facilities called for. All direct customers of respondent were offered the choice of Decision ;;0 F. r. c. executing either the annual contract or the Display Feature Advertising Agreement and the decision in each case was a matter for the retailer s own judgment and decision based on the retailer s own merchandising policies and choice.

Many of respondent' s customers, including small, single-store customers, belonging to cooperative or voluntary associations, including Tetailers who have affliated themsE'Jves for the purpose of joint buying or joint warehousing, and where such associations wished to advertise for their members, it was the practice of respondent to enter into its annual contract with such associations and to pay to them the advertising allowance based upon the total purchases of the members of such associations. For this purpose, the respondent, in addition to its regular annual contract, has two forms of annual contracts: Cooperative Jobbers (1) Coopemtive Advertising Agreement for , and (2) Co-avaibhle and oiJered to jobber groups and cooperatives operative Feature Advertising Agreement available and offered to any group of independent dealers who select a single agent to advertise for the benefit of alj the group.

The advertiser allowances provided for in its annual contracts were paid to customers by respondent at the end of the four-month period specified in the agreement, after verification of the advertising phtCed by the customer, either through report of check made by an independent audit bureau or subrnissioll of tcar sheets, particularly of those publications not covered by the audit bureau. Allowances were actually advertised. In paid only upon those products which were for .the event the feature sales were not conducted in all the stores as, example, in the case where the customer failed to provide newspaper advertising serving ajj of the areas of location of ajj the specified stores, payment to the customer was proportionately reduced. The same was true in the event the customer failed to conduct the minimum of nine feature sales annually. In that case payment was also proportionately reduced. Respondent required that handbiJJ advertisements supporting feature sales must be printed and copies submitted to respondents. This was required as a pmctical method of insuring that the advertisement had been prepared and distributed in good faith.

The attorney in support of the complaint did not file proposed findings or briefs with the Hearing Examiner but instead argued the matter orally, which argument, together with that of the attorney for the respondent, has been incorporated in and made a part of the record. In the argument the Rttorney in support of the complaint stated the following issues which may now be considered as the issues in this proceeding:

COLGATE-PALMOLIVE-PEET CO. 535 525 Decision (a) That it is not reasonably possible for customers who purchase smaller quantities of respondent' s products to avail themselves of the higher rate which respondent pays, and agrees to pay, for newspaper advertising because respondent's contract provides that the advertising placed must be included in the advertiser s regular consumer advertising and, consequently, if a customer does not do newspaper advertising, the rates provided by the annual contract are unavailable to him under any conditions.

(b) That among the customers who receive advertising allowances under the annual contract there is a lack of proportionality because such allowances which are paid upon a per case basis have no relationship to the advertising required to be placed, because there is no cutoff point between the per case allowance and the number of advertisements to be placed with the result that allowances are paid for advertising not placed as distinguished from allowances for advertising which is placed.

As to the first contention, this case was not tried on the theory now advanced by the attorney supporting the complaint in his oral argument. The evidence in this record is not suffcient to support this contention. There is no evidence that the respondent required advertising of its products to be included in the customer s regular advertising and the contract does not so state. There is no evidence that an isolated advertisement placed by a customer would not be considered compliance with the contractor that the re"pondent has ever refused to grant an advertising allowance because the advertisement appeared as an isolated advertisement in a newspaper. Aside from the counsel's contentions on availability, this question arises when the requirements for participation are such that only certain customers can in fact participate. There is no evidence in this record to support a finding that even the highest rate of payment offered by respondent for feature ",ales, including newspaper advertising, is not reasonably available to all of respondent's customers. The customer can avail himself of this rate either through use of the annual contract or as a member of an association, cooperative or affliated group. The respondent places no restrictions on the newspaper which he may use except that it cover the area where his store or stores are located thus enabling the use of neighborhood papers or weekly or monthly papers at a greatly reduced rate. In the absence of evidence that respondent has refused or withheld its annual contract from customers for not advertising all of its products or a substantial number thereof, it must be assumed that even a customer executing the annual contract could, if he so desired participate by advertising only one or more products as his financial Decision 50 F. T. C.

condition or needs might dictate. No witness has appeared in this proceeding who testified that he wished to participate in the advertising allowance but could not do so because of the expense. Furthermore, any customer, who for any reason does not wish to advertise can avail himself of promotional allowances at the rates provided by using handbills, radio or television or by conducting feature sales with display only.

As to the third contention that there is a lack of proportionality becauso allowances are pajd on a pel' case basis with no relationship to the advertising required to be placed, the evidence in this record is such that no finding whatsoever could be made on this point. All the record shows is that various newspapers charge different rates; that customers use different newspapers; that varying amounts of advertising are used by different customers to comply with their con tracts with respondent, and that lineage rates are different as between customers even though same newspaper might be used. Furthermore the allowances paid are for feature sales of which advertising is a part. Consequently, there is no comparative basis in this record which might be used to determine the relationship between the allow ances paid and the advertising required to be placed, and the defi ciencies of this record are such as to be fatal to any finding on this point.

On the basis of the present record it appears that there has been a tot; 1 failure to sustain the allegations of Count II of the amended and supplemental complaint charging that the method used by the respondent in granting allowances for advertising to its various cus tomeI'S is in violation of Section 2 (d) of the Clayton Act. It is therefore ordered That the amended and supplemental complaint in this proceeding be, and the same is hereby, dismissed. HUBER HOGE AND SONS ET AL. 537 Syllabus IN THE MN1"I'ER OF AND CECIL c., HAMILTON, JOHN SIDNEY C. HOGE AND BARBARA OBOLENSKY DOING BUSINESS AS HUBER HOGE AND SONS ET AL.

CONSENT SETTLEJliENT IN REGARD TO THE ALLEGED VIOLATION OF THE FEDERAL TRADE COMMISSION ACT Ducleet 6091. 007nl laint, May 1958-Dccision, Dec. , 195. "Vhere four pnrtncrs engaged in business as an advertising agency Hnd mail order prolT!Otion house, and two individuals engaged in the lnail order sale and distribution of various itelDs, including books; in advertising a book entitled "TV Owner s Guide to Operation and Repair" in newspapers and periodicals of general circulation, nnd through hroadcasts tlnd direct Inail advel'Lisillg (a) Ilcpresent€Cl falsely that the usual television recpiving set purchased after the spring of 1947, jf cared for according to the instructions in their said book, would give sharp and distinct reception without special electronic equipment up to 100 miles away from the transmitting station; (h) Itepre"ented falsely that through the information ami inst.ructions contained in saiel book, an owner would be able to trace each trouble to its source, make needed repairs, and locate and replace worn-out parts; that the book a ye an effective method of locating burned-out tubes, and. that, through follo\ving" such instructions, the OW)H r could prevent Inajar breakdowns and keep his set in perfect operating condition; (c) Represented falsely that such instructions would enable the owner to conyert his set to color, Rave $65 to $100 per year in service charges, and obtain 40r; discount when pure-hasing a new set; and (d) Falsely represented tlmt by following such instructions, repairs of and replacements in television sets might be made by inexperieuced persons without d.anger:

lie7d That such acts find l1raetices, under the eircuTlstances set forth, were all to the prejudice and injury of the public and of competitors and constituted unfair and deceptive acts and practices in COlnmerce and unfair methods of competition therein.

Before Mr. Abner E. Lip8eom.b hearing examiner. J1h W. J. 1'01nplcns for the Commission. lift. James R. WithTOW, JT. MT. Tho11sJ. McFadden and Donovan Le'tSUTe, Newton Irdne of New Yark City, for Huber Hoge and Sons.

Conrad SlIdth of New York City, for Harry Schneiderman and Louis Linetsky.

538 FEDERAL TRAm; COMMISSION DECISIONS Consent Settlement 50 F. T. C. CONSENT S JTTLEMENT Pursuant to the provisions of the Federal Trade Commission Act the Federal Trade Commission on May 6, 1953, issued and served its complaint on the respondents named in the caption hereof, charging them with unfair and deceptive acts and practices in commerce within the intent and meaning of said Act.

The respondents, desiring that this proceeding be disposed of by the consent settlement procedure provided in Rule V of the Commission s Rules of Practice, solely for the purpose of this proceeding, any review thereof and the enforcement of the order consented to, and conditioned upon the Commission s acceptance of the consent settlement hereinafter set forth, and as to respondents Cecil C. Hoge Hamilton Hoge, John Hoge, Sidney C. Hoge and Barbara Obolensky in lieu of answer to said complaint, and as to respondents Harry Schneiderman and Louis Linetsky, also known as Louis Linett, in lieu of the answer to said complaint heretofore filed by them and which, upon acceptance by the Commission of this consent settlement is to be withdrawn from the record, hereby: 1. Admit all of the jurisdictional allegations set forth in the complaint.

2. Consent that the Commission may enter the matters hereinafter set forth as its findings as to the facts, conclusion and order to cease and desist. It is understood that the respondents in consenting to the Commission s entry of said findings as to the facts, conclusion and order to cease and desist specifically refrain from admitting or denying that they have engaged in any of the acts or practices stated therein to be in violation of law, or that such acts and practices, if engaged , would be in violation of law.

3. Agree that this consent settlement may be set aside in whole or in part under the conditions and in the manner provided in Paragraph (f) of Rule V of the Commission s Rules of Practice. 4. Assert that they have ceased advertising and sellng the products here involved, namely, a book entitled "TV Owner s Guide to Operation and Repair.

The admitted jurisdictional facts, the statement of the acts and practices which the Commission has reason to believe are unlawful 1 The Commission s "Notice" announcing and promulgating the co-nsent settlement as published herewith, follows:

The consent settlement tendered by the parties in this proceeding, a copy of which Is served herewith, was accepted by the Commission on December 16, 1953 , and ordered entered of record as the Commission s findings as to the facts, conclusion, and order in disposition of this proceeding.

The time for flung report of compliance pursuant to the aforesaid order runs from the dn te of service hereof.

HUBER HOGE AND SONS ET AL. 539 587 Findings the conclusion based thereon and the order to cease and desist, all of which the respondents consent may be entered herein in final disposition of this proceeding, are as follows: FINDINGS AS TO THE FACTS PARAGRAPH 1. Respondents Cecil C. Hoge, Hamilton Hoge, John Hoge, Sidney C. Hoge and Barbara Obolensky are individuals and copartners and prior to October 1, 1952, were engaged in business as an advertising agency and mail order promotion house under the trade name of Huber lIoge and Sons with their offce and principal place of business at 699 Madison Avenue, New York, New York. Effective October 1, 1952, the business known as Huber Hoge and Sons was incorporated under the laws of the State of New York as Huber Hoge and Sons, Inc., with respondents Cecil C. Hoge, Sidney C. Hoge and John Hoge as directors and president, vice president and secretary, respectively. Respondent Harry Schneiderman is an individmtl doing business under the trade name of Bedford Company with his offce and principal place of business at 799 Broadway, New York engaged in the mail business and sells and New York. He isorderdistributes in the course of such business various items, including books. Respondent Louis Linetsky is an individual and is employed in the business known as Bedford Company. He is also known as Louis Linett. His address is the same as that of respondent Harry Schneiderman. All of the respondents have participated in the performance of the act.s and practices hereinafter set forth, except as otherwise specifically st.at.ed.

PAR. 2. Beginning in 1952 the respondents engaged in the sale and distribution of a book entit.led "TV Owner s Guide to Op ration and Repair . Respondents caused said book, when sold, to be transported from the St.ate of New York to purchasers thereof located in various other St.ates of the United States and in the District of Columbia. Respondent.s maintained a substantial course of trade in their said book in commerce, as "commerce" is defined in the Federal Trade Commission Act.

PAR. 3. In the course and conduct of their said business, and for the purpose of inducing the purchase of said book, respondent.s have made many st.atements with regard t.o the ability of owners of television set.s to keep their set.s in proper working order by following the instructions contained in said book. These represent.ations have been made by means of advertisements inserted in newspapers and other periodicals having a general circulation in the United States, by radio broadcast.s, add by means of direct mail advertising. Findings 50 F. T. C.

Pall 4. Through the use of various statements made in said advertisements, respondents represented, directly and by implication, that if cared for according to the instructions in their book, the usual television receiving set purchased after the spring of 1947 will give a sharp and distinct reception, without special electronic equipment, up to 100 miles away from the transmitting station; that through the information and instructions contained in said book a television owner will be able to trace each trouble to its source, make needed repairs, locate and replace wornout parts; that the book gives an effective method of locating burned-out tubes; that by following the instructions in the book the owner can prevent major breakdowns and keep his set in perfect operating condition, convert his set to color, save $65 to $100 pel' year ill service charges and obtain 40% discount when purchasing a new set; and that, by folJowiug the instructions in said book, repairs , and replacements in, television sets may be made by inexperienced persons without d:mgcl"

PAR. 5. The said representations as set forth in Paragraph Foul' hereof arc false, deceptive, and misleading. In truth and in fact, the I'ilure to receive sharp and distind pictures over a television receiver is sometimes governed by factors outside of the receiving set. Many television sets are so Joc:lted as to make sharp and distinct picture reception an impossibility. Even those set owners whose sets are favorably located cannot always get sharp and distinct pictures because present day telecasting conditions make perfect or even satisfactory reception impossible in many instances. By using the most modern electronic equipment. available and by following all of the instructions contained in respondents' book, a sbarp and distinct. picture reception cannot uJller all circumstances be obtained on present. day television receivers from a telecasting station located as much as or slightly less than 100 miles away. The book cont.ains infornmtion that should enable the television o,vner to make a number of different kinds of simple repairs but will not enable him to t.race every trouble to its source or make all needed adjustment.s. The book docs not inform. the set owner as to how he may himself locate or replace worn out parts. The informrct.ion contained therein may enrcble the owner to locate burnedout t.tubes in some instances. The majority of tube failures, however are not due to burnout. The method of detecting defect.ive tubes recommended is not an effective method of detecting rc defective tube. Compliance with the instructions sct out in this book will not enable a set owner to maintain his set in perfect working condition or prevent major breakdowns, will not enable a set owner to convert his set for colored recept.ion; furthermore, colored television pictures are not now obtainable.

HUBER HOGE AND SONS ET AL. 541 537 Order television upkeep. It is impossible to estimate the annual cost of :Many sets give good reception for a year or longer without any servic- It is therefore not possibleing either by the owner or a repairman. informationto state what amount, if any, can be sa.ved by reason of the contained in said book. ' While information in the book may enable a person to select a television set more suitable for his purposes than would ordinarily be possible without such information, its use will not enable him to obtain a discount, the matter of price being entirely llndeT sole control of the (leader. There is an element of danger to an illexperienced person who attempts to repair or replace parts in a television receiver. Some picture tubes retain an electric charge for a considerable time after the wall plug is removed and are capable of giving a shock which may have serious consequences. CONCLUSION The afOles id acts and practices of the respondents, as herein found ate all to the prejudice and injury of the public and of respondents competitors and constitute unfair tlld deceptive acts and practices and unfair methods of competition in commerce within the intent and meaning of the Federal Trade Commission Act. OHDEH TO CEASE AND DESIST Itis ordered That respondents Cecil C. Hoge, Hamilton Hoge, .John Hoge, Sidney C. Hoge and Ba.rbara Obolensky, individually and as copartners doing business under the name of Huber Hoge and Sons or under any other name, and respondent Harry Schneiderman, doing business under the name of Bedford Company or under any othername, and respol1lent Louis Linetsky, also known as Louis Linett, and the respective respondents' agents, representatives, and employees directly or through a.ny corporate or other device, in connection with the offering for sale, sale or distribution of the book entitled " Owner s Guide to Operation and Repair " whether sold under the same or any other name, or any book of substantially the same contents, in commerce, as "commerce" is defined in the Federal Trade Commission Act, do forthwith cease and desist from:

1. Representing that ownership of and compliance with the instructions set forth in the "TV Owner s Guide to Operation and Hepair will enable a television set owner to maintain his set in perfect operatillg condition or prevent major breakdowns; (fl) Trace the source of all troubles;

(b) :\fake all needed repairs;

(c) Locate or replace a 1) worn-ant pm.ts;

Order 50 F. T. C.

(d) Convert television sets to color;

(e) Save any stated amount in service charges; (f) Obtain a discount upon purchase of a television set. 2. Representing that said book gives an effective method of detecting defective tubes.

3. Representing that, by following the instructions in said book repairs or replacements may be made without danger. 4. Misrepresenting the distance from transmitting stations a,t which television sets, maintained in accordance with the instructions in said book, wil give sharp and distinct reception. It is further ordered That the respondents shall, within sixty (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.

Dated: Oct. 20, 1953.

(sgd. Cecil C. 110ge CECIL C. HOGE Dated: Oct. 23, 1953.

(sgd. ) 11 amilton H oge HAMILTON HOGE Dated: Oct. 20, 1953.

(sgd. ) John 110ge JOHN HOGFJ Dated: Oct. 23, 1953.

( sgd. ) Sidney C. 110ge SIDNEY C. HOGE Dated: Oct. 23, 1953.

(sgd. Barbara Obolensky BAHBARA OnOLENSKY Individually and as copartners doing business as Huber Hoge and Sons.

Dated Oct. 21, 1953.

(sgd. ) 11a1'ry Sclneiderman HARRY SCHNEIDERMAN doing business as Bedford Company.

Dated: Oct. 21, 1953.

(sgd. Louis Linett Louis LINETSKY also known as Louis Linett.

The foregoing consent settlement is hereby accepted by the Federal Trade Commission and ordered entered of record on the 16th day of December 1953.

, CHARLES AN JLL CO. , INC. , ET AL. 543 Syllabus IN THE MATTER CHARLES ANTELL CO. INC. ET AL.

DECISION IN REGARD TO THE ALLEGED VIOLATION OF THE FEDERAL TRADE COMMISSION ACT Docleet 610:2. Oomplaint, June 1958-Decision, Dec. 19, 1953 Where the corporation and its three offcers, joint owners of its entire stock engaged in the interstate sale and distribution of their "Charles Ant.ell Formula NO. 9" for the hair Charles Antell Shampoo," and "Hexachlorophene Soap; together wlth an advertising agent whose principal client they were; in advertising their said " Formula No. g" and " Shampoo" in daily papers and by broadcasts from many radio and television stations directly and by implication- (a) Represented falsely that t.he main ingredient. in said "Formula No. 9" was l'lIolin, that lanolin was the only natural oil or grease that is absorbed by the hair or scalp, that the lanolin therein would reach the roots of t.he hair and that it would cleanse the hair;

(b) Represented that. the use of said formula" would loosen the scalp and const.itute an effective treatment for infected scalp, dandruff, and cracked and split hair; and would remedy the damage emsed by improper dyeing permancnts, burning and other harmful practice The facts being that it would not alone loosen the scalp; while use thereof as directed with massage and brushing' would remove dandruff, it was not an effective treatment. for said condition or infected scalps; and while its Ilse would make the hair less brittle and more pliable and improve the appearance of hair which was cracked, split, or otherwise damaged ny' improper dyeing, pernUlnents, burning and other harmful practices, it would not remedy the cause of cracked or split hair;

(c) Represented that use thereof would promote t.he growth of hair and improve the hair by imparting to it. health and vitality, would change the color thereof, and would not leave grease on the hair; The facts being that, while brushing, pullng, and massaging the hair regularly with said "Ko. 9" served as a stimulant to the circulation in and around the hair roots and thus helped maintain normal scalp and hair health, it would not. grow hair; and, while used in excessive amounts, it. might. darken and leave grease on the hair of some persons, use as directed or in moderate amounts would not bring about sllch results; (d) Represented falsely that use thereof would cause the hair to curl and would prevent loss of hair and haldness ;

(e) Represented that the hormones contained in said " Shampoo" cleaned or aided in the cleaning of the hair and scalp; the facts being that it had not contained hormones for more than a year, aud hormones have no cle using action;

(f) Ilepresented falsely that their said "HexachJorophene Soap" would remove twenty-five times more dirt and other foreign matter from the skin than ordinary soap;

(g) Falsely represented that said soap would prevent the development. of impetigo and cradle cap in the case of habies; and pimples, boils, blackheads, or other skin blclnishes of external origin generally; and 544 FEDERAL TRADE COMMISSION m;CISIONS Findings 50 F. 'l' . C. (11) Represented that said " ol"lUla No. 9" came in sizes that normally sell at $3.98 and $4.95, but that said prices were reduced to $2.00 and $3.00 respectively, as special introductory offers; when in fact said so-called special introductory prices were the regular prices at which said product has been sold for a long time;

Held. That such acts and practices constit.uted unfair and decept.ive act.s and practices in com,merce.

Before JJlr. John, Le1m:/j hearing examiner. JJ1T. lVilliam L Pencke for the Commission. lift. Bernard II. Hersfeld of Baltimore, Md., for respondents. DECIHIUJ\ OF Tile CO n,IISSJON Pursuant to Tillie XXII of the Commission s Rules of Practice, and as set furth in the Commission s " Decision of the Commission and Order to File Heport of Compliance, dated December ID, ID5,1, the initial deeision in the instant matter of he:ting examiner .r ohn Lewis as set out as follows, became on that elate thl' decision of the CommISSJOn.

IJ\ITL\L DECISION BY .JOHN LEWlS J mARING EXA:\1!NEH Pursuant to the provisiuns of the Federal Trade Cummission Act the Federal Trade Commission on .J une R , 1 D5:\, issued and subseqnently served its complaint in this proceeding upon the respondents uned in the caption hereof, charging them with the use of unfair and elec2;)tive acts and practices in commerce in violation of the provisions of said Ad. After the issuance of said complaint and the filing of respondents' answer thereto, hearings were held before the abovenamed hearing examiner, theretofore duly designated by the Commission, at which hearings eOlmsel for respondents and counsel supporting the complaint entered into a stipulation as to the facts in this proceeding in lieu of oral testimony and other evidence in support of or in opposition to the allegations of the complaint, said stipulation being spread upon the record at said hearings and duly fied in the offee of the Commission. Thereafter, the proce.eding regularly eame on for final consideration by the hearing examiner upon t.he complaint. answer, and stipulat.ion, counsel having eleeted not to file proposed findings and conclusions for consideration by the hearing examiner and oral argument not having been requested; and said hearing examiner, having duly considered the record herein, finds that this proceeding is in the interest of the public lld makes the following findings as to the facts, conclusion drawn therefrom, 'Iud order: FINDINGS AS TO THE FACTS PARAGRAPH 1. Respondent Charles Antell, Ine., (incorrectly named in t.he complaint as Charles Antell Co., Inc. ) is a corporation, organ- CHAHLES ANTELL CO., lKC. , ET AL. 54;') 543 Fjndin ized and existing under the laws of the State of Maryland, with its offce and principal place of business Jocated at 112 South Street, Baltiinore Maryland.

Respondent T. A. A., Inc., is a corporation, organized and existing under the laws of the State of New York with its offce and principal place of business located at 1710 Broadway, New York, New York, and another place of business at 4 vYest Eager Street, Baltimore, Maryland. The individuals named in the complaint are not offcers of T. A. Inc.

Respondent Charles D. Kasher is President of Charles AntelJ , Inc. Respondent Leonard L. Rosen is Vice President, Secretary and Chairman of the Board of ClmrJes Antell, Inc. These individuals direct manage and control the policies and activities of said corporate respondent. Respondent Julius .J. Rosen is Vice-President and Treasurcr of Charles Antell, Inc. This individual participates in the direction, mawlgement and control of the policies and activities of said Charles Antell, Inc.

The principal offce and place of business 0:1' respondent Charles D. Kasher is located at 1710 Broadway, Xew York, New York; that of Julius J. Ilosen is located at 112 South Street, Ihltimore, Maryland and that of respondent Leonard L. Rosen is located at 4 west Eager St reet, Baltimore, Mary land.

PAn. 2. For more than two years last past, respondents Charles Antell, Inc., Charles D. Kasher, Leonard L. Rosen and Julius J. Hosen, have been, and are now, engaged in the Bale and distribution of certain cosmetic products, as "cosmetics" are defined in the Federal Trade Commission Act, and a soap.

Respondent T. A. Inc., has been and is, the advertising agent fol' respondent Charles Antell, Inc., and it, as well as the individual respondents Charles D. Kasher and Leonard L. Rosen have prepared and caused the dissemination of, or participated in the preparation and dissemination of, the advertising matter to which reference is hereinafter made.

Respondents Charles D. Kasher, Leonard L. Rosen and Julius J. Hasen, jointly own all of the stock of respondent Charles Antell, Inc. Said corporate respondent is the principal client of respondent T. A. Inc., and there exists a close business relationship between all of said respondents.

The designations used by respondents for said cosmetic products and soap, the essential information in regard to the composition thereof, and the directions for use of the cosmetic products, are as follows, except that hormones have not been used in either Charles Antell Formula No 9 or Charles Antell shampoo since approximately June 1052:

40::"1-1;:-;)7 - at) _________ _ _______ __ _ ... Ji'indings 50 F. T. C. Designation: OHARLES ANTELL Po'rmula #9 Composition: Parts Hormone Lanolin -------------- 13 9 cc of a 3% Alpha Estradiol in Petroleum ------------ 8 Propylene Glycol solution for every Mineral Oil___------- 20. 5 1000 Ibs. of finished cream. Paraffn -------------- 8. 05 Cetyl Alcohol-_------- . 49 Stearic Acid----------- 10. 4 TEA (triet.hanolamine) - 2.

Propylene Glycol ----- 3. 21 Vee Gum (colloidal clay) - Methyl ParasepL----- 092 Water --------------- 32.

Perfume Directions for use:

Before applying, massage scalp thoroughly with finger tips to stimulate circulation. Then apply a small portion of Formula No. 9 to finger tips. Liquefy by rubbing in palms of hands. Massage thoronghly into scalp and through hair. Should be repeated daily for best results. Designation: OHARLES ANTELL SHAMPOO Composition: Percent ---- 7. Oleic Acid---n- _n_n_ Coconnt Oil Fatty Acid_ ___n --n_ ___n__n 6. --- 0. 883 1441 (derivative of lanolin sorbitol)__----- 2. 19 MEA (monoethanolamine) ----- ___n___-------------------- --------------- 3. TEA (triethanolamine) ______n____nn_-__ Protovac 8894 (protein caseinate derivative) ---------------------- 0. 475 8. 94 Propylene Glycol__ Sequestrene AA (ethylene diamine tetra acetic acid)__------------ 0. 357 Perfurne-- - --- - - - O. 208 - 69. 5 Water - ---- Horomone (Alpha estradiol 160cc of a 3% solution of Alpha Estradiol in Propylene Glycol for 42 000 lbs. of finished shampoo. Directions for use:

Wet Hair Thoroughly and Apply a small amount of Shampoo. Work Shampoo into Generous Lather. Rinse with tepid water. Repeat these steps For a Thorough Cleansing.

Designatiou: HEXAOHLOROPHENE SOAP Composition: ilia",. % Min. 0/ Moisture and matter volatile at 105 degrees C._---- 15. 0 Sum of free alkali, total matter insoluble in alcohol and sodi urn chloride- - -- calculated as NaOHn---_ n---n Free alkali, Matter insoluble in lJ,O____n___n_ IJnsaponified saponifiable (free fat) ----- Anhydrous Soa p- 83. Lanolin-one percent Chlorophyll-1/100 percent Hexachlorophene-Two percent CHARLES ANTELL CO. , INC. , ET AL. 547 543 Findings PAR. 3. Respondents Charles Antell, Inc., and Charles D. Kasher Leonard L. Rosen and Julius J. Rosen cause said cosmetic products and soap, when sold, to be transported from their place of business in the State of Maryland to purchasers thereof located in various other States of the United States and in the District of Columbia. Said respondents maintain, and at all times mentioned herein have maintained, a course of trade in said products and soap in commerce between and among the various States of the United States and in the District of Columbia, and such trade has been and is substantial. PAR. 4. In the course and conduct of said business, respondents have disseminated and caused the dissemination of certain advertisements concerning said cosmetic products by the United States mails and by various means in commerce, as "commerce" is defined in the Federal Trade Commission Act, including, but not limited to newspaper advertisements in the Evening Bulletin, Providence, Rhode Island, of February 19 1952, the Baltimore, Maryland, Kews Post of November , 1951, and the Sunday Star, Washington, D. of May 18, 1952; and radio and television broadcasts entitled "Hair Raising Tale Some of My Best Friends are women Hollywood Story" and Hare Magic " transmitted over radio and television stations vVFIL- TV and 'VIP at Philadelphia, Pennsylvania, KFRC at San Francisco California, and many other radio and television stations in the United States, said broadcasts being of suffcient power to carry them across State lines, for the purpose of inducing and which were likely to induce, directly or indirectly, the purchase of their said products; and respondents have also disseminated, and caused the dissemination of advertisements concerning said products by various means including, but not limited to newspaper advertisements and the aforesaid radio and television broadcasts, for the purpose of inducing, and which were likely to induce, directly or indirectly, the purchase of their said cosmetic products in commerce, as "commerce" is defined in the Federal Trade Commission Act.

In the further course and conduct of said business, respondents made certain statements more than a year ago and which have not been repeated since that time concerning their hexachlorophene soap including, but not limited to, television broadcasts over television station WMAL- TV at Washington, D. C. Among and typical of said statements, but not all inclusive, were the iollowing: Even if yon are one of t.he two ont of five people who bathe daily, you re only 1/25 as clean as you could be. For if we re really clean after a bath why do we spend milions of dollars on deodorants to prevent body odor. . . . A beautifying, soothing soap because of the lanolin, and a soap that wil make you 25 times cleaner than ordinary soap because of the hexachlorophene. , 548 FEDERAL TRADle COMMISSION DECISIONS Findings 50 F. T. C.

Why is a baby that is bathed carefully every day in danger of impetigo diaper rash and cradle cap? Why do people have externally caused skin blemishes-pimples, boils and blackheads? Because ordinary soap cannot kill the milions of skin bacteria that are the cause of body odor of babies' impetigo and skin rashes and of skin blemishes of external origin. All ordinary soap can do is wash" few of these bacteria away . . For the first time there is an ingredient that, added to soap, wil kil these ba(;teria on contact and wil continue to kil them as t.hey get on your skin. One bath with this soap is effective as 3 bath every hour for 24 hours with ortlinary soap. P AH. 5. Through the use of the advertisl1wants referred to in Panlgraph 4 with respect to Charles Antell Formula No, \) and Charles Antell Shampoo and the advertisements quoted in said paragraph with respect to Hexachlorophene Soap, respondents have made, directly and by implication, the following representations: A. With respect to Charles Antell Formula No. 1. That the main ingredient in said product is lanolin; that the lanolin is fun strength or maximum potency and that. no other oils vI' greases are present.

2. That lanolin is the only natural oil which will or can be absorb'"d by the hair and scalp and that the lanolin in said product will be absorbed to the 'Cxte.ut that it willreach thl' l"ob of the hair; that lanolin will cleanse. the hair.

:3. That the use of said Formula No. , according to directions, will loosen dry scalp and constitute an effective treatment for infected scalp, dandruff and cracked and split hair: wil remedy the damage caused by improper dyeing, permanents, burning and other harmful practices; will promote the growth of hair and iinprove the hair by imparting to it health and vitality; will not change the color of the hair and will not leave grease on the hair. 4. That the use of said product will cause the hair to curl. 5. That its use wil prevent loss of hair and baldness. B. With respect Charles Antell Shampoo: That ooid shampoo contains substantial quantities of lanolin and that the hormones contained in said product clean or aid in the e1c1ling of the hail' and. scalp.

C. ,With respect to Hexachlorophene Soap:

1. That said soap will remove twenty-five times more dirt and other foreign matter from the skin than ordinary soop. 2. That said soap wil prevent the development of impetigo and c.adler cap in t.he case of babies, and pimples, boils, blackhea,ds or other skin blemishes of external origin generally. PAR. 6. Th foregoing representations with respect to the said cosmetic products and soap are false and misleading in material re- :;peets and, wit.h respect to said cosmetic products, constitute "false CUARLES ANTELL CO. , INC. , ET AL. 549 543 Findings advertisements" 'IS that te11n is defined in the Federal Trade Commission Act. In truth and in fact:

A. With respect to Charles Antell Formula No. 1. The main ingredient in said product from a percentage standpoint is not l,molin, but the lanolin present in the product is of full strength or maximum potency.

2. LanoEn is not the only natural oil or grease that is absorbed by the hair or scalp. Lanohn may be absorbed into the scalp but wil not reach to the roots of the hair. LanoEn will not cleanse the hair. :3. Said Formula No. alone wil not loosen the scalp. While the nse of said product as directed with massage and brushing of the hair will effectively remove dandruff, it is not an effective treatment for dandruff or infected scalp. "While the use of said product will ma.ke the hair less britte and more pliable and improve the appearance of hair that is cracked, split or otherwise damaged by improper dyeing, permanents, burning and other harmful practices, its use will not remedy the cause of cracked or split hair. Formula No. will not grow hair. However, brushing, pulling and massaging of the hair with Formula No. regularly, serves as a stimulant to the circulation in and around the hair roots fwd, since a healthy condition of the hair and scalp is aided by proper circulation, stimulation by this procedure wi)) help maintain normal scalp and hair health. Formula No. 9 used in excessive amounts may darken the hair :1nd leave grease on the hair of some persons. However, the use of Formula No. 9 as directed, or in moderate amounts, wil not darken the hair nor leave grease on the hair.

4. ,Vhen the hair has been set in curls or in some other manner :Formula No. wil help keep it as so set or arranged. However, said product will not curl the hair.

I). It will not prevent the loss of h:1ir or baldness. B. "With respect to Charles Antell Shampoo: S:1id shampoo does contain lanolin by the presence of G-1441.which is described as a modified or refined or processed lanolin product. However, said shampoo has not contained hormones for more than one year and has not been so advertised for more than one year. :Moreover, hormones, if present, have no cleansing action. C. ,With respect to Hexachlorophene Soap:

1. Respondents' soap is no more effective than ordinary soap as cleansing agent for the removal of dirt, grit, and other soil. 2. Respondents' soap wil not prevent impetigo and cradle cap in case of babies nor prevent the development of pimples, blackheads or other skin blemishes generally, however caused. PAR. 7. In the course and conduct of their business, respondents represent and have represented that said Formula No. 9 comes in sizes Order 50 F. T. C.

that normally sell at $3.98 and $4. , respectively, but that said prices are reduced to $2.00 and $3. , respectively, as special introductory offers. In truth and in fact, said so-calledspecial introductory prices are the regular prices at which said products are and have been sold for a long period .of time.

PAR. 8. The use by respondents of the said fal e advertisements with respect to the cosmetic products and the false, misleading and deceptive statemcnts made with respect to the said soap, has had, and now has, the capacity and tendency to mislead and deceive a substantial portion of the purchasing public into erroneous and mistaken belief that the statements and representations contained in the advertisements are true; and into the purchase of substantial quantities of said products by reason of said erroneous and mistaken belief. CONCLUSION The acts and practices of respondents, as hereinabove found, are all to the prejudice and injury of the public and constitute unfair and deceptive acts and practices in commerce, within the intent and meaning of the Federal Trade Commission Act. ORDER It is o1'dered That the respondent Charles Antell, Inc., a corporation, and its offcers, and respondents Charles D. Kasher, Leonard L. Rosen and Julius J. Rosen, individually, and respondent T. A. Inc., a corporation, and its offcers, and respondents' respective agents representatives and employees, directly or through any corporate or other device, in connection with the offering for sale, sale or distribution of Charles Antell Formula No. 9 and Charles Antell Shampoo or any products of substantially similar composition or possessing substantially similar properties, whether sold under the same names or any other names, do forthwith cease and desist from, directly or indirectly:

1. Disseminating or causing to be disseminated any advertisement by means of the United States mails or by any means in commerce as "commerce" is defined in the Federal Trade Commission Act which advertisement represents, directly or through inference (a) 'With respect to Charles Antell Formula No. (1) That the main ingredient in said product is lanolin; (2) That lanolin is the only natural oil or grease that is absorbed by the hair or scalp or that the lanolin in said product is absorbed by the scalp to the extent that it will reach the roots of the hair; (3) That the lanolin in said product wil cleanse the hair; CHARLES ANTELL CO.. INC. , E'l AL. 551 543 Order (4) That its use will loosen the scalp or constitute an effective treatment for dandruff or infected scalp;

(5) That it will remedy the CRuse of cracked or split hair or wil remedy the damage caused by improper dyeing of the hair, permanents, burning or other harmful practices having to do with the hair; (6) That the use of saiel products, as directed or otherwise, wil promote the growth of the hair;

(7) That the use of said product will give the hair health or vitality, except to the extent that brushing, pulling and massaging of the hair and scalp with said product regularly serves as a stimuplant to circulation around the hair roots and thereby helps maintain normal scalp and hail' health;

(8) That the use of said products will not. change the color of the hair or will not leave grease on t.he hair, unless such representation is limited to cases where said product is used in moderate amounts as directed;

(9) That its use wil cause t.he hail' to curl; (10) That its use wil prevent the loss of hail' or baldness. (b) With respect to Charles Antell Shampoo: That the hormones present in said product win have any cleansing action on the hair.

2. Disseminating, or causing the dissemination of any advertisement by any means for the pl1pose of inducing or which is likely to induce directly or indirectly, the purchase in commerce, as "commerce" is defined "" the Federal Trade Commission Act, of either of said products, which advertisement contains any of the representations prohibited in Paragraph 1 hereof.

It is further' ordered That respondents Charles Antell, Inc., a corporation, and its offcers, and respondents Charles D. Kasher, Leonard L. Rosen, and .T ulius .T. Rosen, individually, and respondent T. A. Inc., a corponltion, and its offeers, and respondents' respective agents representatives and employees, directly or through any corporate or other device, in connection with the offering for sale, sale or distribution in commerce as "commerce" is defined in the Federal Trade Commission Act, of the product known as Hexaehlorophene Soap, or any other soap or product of substantially similar properties, whether sold under the same name or any other name, do forthwith cease and desist from:

1. Misrepresenting, directly or by implication, the effectiveness of said soap as a cleansing agent.

2. Representing, directly or by implication, that the use of said soap win prevent impetigo or cradle cap in case of babies or prevent the development of pimples, boils, blackheads or other skin blemishes generally.

552 FEDERAL TRADE COMMISSION DECISIOKS 50 . T. C. Order It is further ordered That respondents Charles Antell, Inc., a corporation, and its offcers, and respondents Charles D. Kasher, Leonard , individually, and respondent T. A.L. Rosen, and Julius J. Rosen Inc., a corporation, and its offcers, and respondents' respective agents representatives and employees, directly or through any corporate or other device, in connection with the offering for sale, sale or distribution in commerce, as "commerce" is defined in the Federal Trade Commission Act, of any article of merc:handise do forthwith cease and desist from representing, directly or by ilnplication: sul:h price is the price at That it is being sold at a reduced price when which the article is usually and regularly sold. ORDER TO FILE HEPORT OF CO:1IPLIANCE It is ordered That the respondents herein shall within sixty (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 December 19, 1953J. &;

MANCO WATCH STRAP CO, ) INC. 553 Decision IN THE MA'IR MANCO WATCH STRAP CO. INC.

Dec. , 1958 Docket 5854. OompllLint, Feb. 1951-Decision, Charge: Advertising falsely and neglecting to disclose source of watch bands. Before MT. Clyde M. Hadley and MT. Earl J. Kolb hearing examiners.

. Jesse D. Kash for the Commission. Sperry, Weinber '7 Huskay, of New York City, for respondent. ORDER GRANTING RESPONDENT S Appeal FROM INITIAL DECISION OF HEARING EXA.'UNDER AND DECISION OF THE COMMISSION DISMISSING CO:/IPLAINT This matter came on to be heard upon the complaint of the Commission, respondent's answer thereto, testimony and other evidence in support of and in opposition to the allegations of the complaint, initial decision of the hearing examiner and the appeal t.therefrom by respondent, and briefs and oral argument. of counsel. The complaint alleges that the respondent imports watch bands from Occupied Japan and ChimL in bulk and also expansion b tDds from China, to which respondent attaches end pieces of domestic manufacture to make completed bands, and that these bands bear words showing the country of origin imprinted on a link on the inside of a band in words so small and indistinct as to be practically illegible to the naked eye. Those of such products as are not resold in bulk are attached to cards, in a manner which conceals the aforesaid markings, the cOITlplaint additionally alleges, and it is further charged that the sale thereof in commerce under the manner aforesaid has the tendency and capacity to mislead retailers and members of the purchasing public into the erroneous and mistaken belief that. said bands are wholly of domestic origin.

The hearing examiner in his initial decision concluded that. the allegations of the complaint in substance have been supported by the evidence in the record, and the order contained in such initial decision would require respondent., among ot.her things, to cease offering watch or wrist bands or similar products imported from any foreign countJ' y without affrmat.ively disclosing thereon, or in immediate conjunction therewith, t.he fact that they are of foreign origin. It appears from the record that many of the bands distributed by respondent in commerce are sold to the purchasing public through the channels of variety store chains.

Order 50 F. T.

The evidence in the record indicates that there are no domestic watch or wrist bands which are sold at prices comparable to the prices at which respondent' s imported bands are sold. There is no evidence in the record showing a preference on the part of a substantial number of members of the purchasing public for the higher priced domestic bands over respondent's lower priced imported bands. The Commission is therefore of the opinion that the complaint herein should be dismissed. This determination accordingly renders it unnecessary to rule more specifically on each of the objections to the initial decision raised in respondent' s appeal.

The Commission having duly considered the matter and being now fully advised in the premises, and having concluded in such connection that respondent's appeal should be granted: It is ordered, therefore That respondent's appeal from the initial decision of the hearing examiner be, and it hereby is, granted, and that the complaint herein be, and it hereby is, dismissed. Commissioner Mead dissenting and Commissioners Howrey and Gwynne not participating for the reason that oral argument respondent' s appeal from the initial decision of the hearing examiner was heard prior to their appointment to the Commission. PILLSBURY MILLS , INC. 555 Interlocutory Order IN Tile J\latter OF PILLSBURY MILLS, INC.

Docket 6000. Order and opinions, Dee. , 1953 Bdom i1h'. E'oerett F. Haycraft hearing examiner. Mr. L. E. Creel, Jr. , Mr. J. Wallace Adair and lJlr. Broc7cman Horne for the Commission.

Hogan il Hartson and Mr. E. Barrett Prettyman, Jr. of 'Washington, D. and Mr. Terrance Hanold of Minneapolis, Minn., for respondent.

ORDER GRANTING Appeal IN PAHT, SETTING ASIDE INITIAL DECISION ANn REI,TANDING PROCEEDING TO HEARING EXAMINER This matter is before the Commission upon an appeal by counsel supporting the complaint from an initial decision of the hearing examiner dismissing the complaint without prejudice, briefs in support of and in opposition to said appeal and oral argument of counsel. In support of this appeal, it is contended that the hearing examiner prroneously held that the allegations of the complaint are not supported prima facie by reliable, probative and substantial evidence. For the reasons stated in the written opinion of the Commission, which is being issued sirnultanecusly herewith, the Commission is of the opinion that a prima facie case has been made out and that the complaint was improperly dismissed.

Counsel supporting the complaint in their appeal also take exception to rulings of the hearing examiner excluding evidence relating to alleg(jd price discriminations by respondent in Arkansas and Louisiarm, exdnding eCit in market surveys made by several Scripps- HOWleI'd newspapers, by Good Housekeeping Magazine and by the New York "Vorld-Telcgram, excluding a summary of family flour and mix purchases made by the Weona Food Stores of Memphis and granting respondent's motion to strike all evidence relating to Oven Ready Biscuits.

The evidence as to the aUeged price discrimination relates to prices at which respondent sold family flour in regions outside of the southeast area. At the most, such evidence could only tend to show that respondent in the past may have abused economic power in the family flour market in other areas than the flour market with which this proceeding is concerned. It is believed that such evidence was properly excluded from this record.

Interlocutory Order 50 F. T. C. The hearing examiner did not reject all evidence of the results of market surveys. His rulings on this type of evidence which are excepted to in this appeal are based on the lack of materiality of the results of the surveys rejected. He excluded the Scripps-Howard survey which shows the brands of family flour and mixes on the store shelves in a cross section of stores in twelve cities in 1950 and in thirteen cities in 1951 as not having ady bearing on sales. He excluded the Good Housekeeping survey, consisting of the answers of 1 717 of its subscribers as to the brands of mixes they used, and the survey of the New York World-Telegram showing the sales of mixes in 200 retail stores in the New York City area, conducted in 1949 and 1950, respectively, as being too remote in time to be of any value determining the eiTect of the acquisitions. The Commission is of the opinion that this evidence was elToneously excluded. Market information for 1949 and 1950 is of value in determining the issues in this proceeding. Such surveys, if properly conducted, while certainly not conclusive are indicators of market trcnds and the existence of competitive products in the market surveyed. Such indicators, along with other information, may be of value in assisting the Commission in determining the actual market conditions. The summary of purclmses of family Hour and mixes by the Weona Food Stores of Memphis was properly rejected as the employee of that company who identified the rejected exhibits was not sure that they were complete or correct. His testimony as to the circumstances under which the date in dlese exhibits were collected casts serious doubts on their correctness.

The evidence as to Ballard' s Oven Heady Biscuits was properly stricken. Respondent did not make any comparable product and did not compete in the biscuit market. The fact that Oven Ready Biscuits are made from biscuit mixes does not make these products competitive except indirectly.

The Commission, therefore, being of the opinion that the complaint herein should not have been dismissed and being of the further opinion that certain evidence was erroneously excluded from the record: It is ordered That the appeal of counsel supporting the complaint from the initial decision is granted in part and denied in part in the manner and to the extent hereinabove indicated. It is further' ordered That the initial decision is hereby set aside. It is further' ordered That this matter is hereby remanded to the hearing examiner for further appropl.jate proceedings in due course in accordance with this order.

PILLSBURY MILLS , INC. 557 555 Opinion OPINION OF THE COJlIMISSJON Chairm m I-OWHEY delivered the Opinion of the Commission. The complaint in this case charges the respondent Pillsbury Mills Inc. has violated Section 7 of the Clayton Act, as amended, by acquiring the assets of two of its competitors, namely, Ballard and Ballard Company and Duff's Baking Mix Division of American Home Products Corporation. It alleges that Pillsbnry and Duff were, prior to the acquisitions, leaders throughout the United States (including the southeast) in the sale of flour-base mixes and that Pillsbury and Ballard were leaders in the southeastern part of the United States in the sale of family flour, bakery flour, and mixes. considerable amount of testimony was taken by attorneys in support of the complaint in Minneapolis, Louisville, Cincinnati, New Yark City and in many cities throughout the southeastern states. Subpoenas duces tecum were served on respondent to produce production and sales figures for a period of time before and after the dates of acquisition, and to produce other dahl to show competitive umrket shares and universe figures prepared for respondent by the Market Research Corporation of America. Respondent refused to honor these subpoenas and refused to produce the data requested. Instead of seeking enforcement of the subpoenas in court Hurl instead of seeking to subpoena figures from respondents' competitors as suggested by t.he hearing examiner, counsel supporting the complaint relied on figmes and estimates for the fiscal year 1948- 1950 furnished by respondent during the course of the preliminary investigation. In an effort to corroborate these estimates, counsel introduced surveys of spe( ific market areas made by newspapers and other independent agencies.

At the close of the case-in-chief of attorneys supporting the complaint, respondent moved to dismiss on the gl' found that a prima facie case had not been made.

,/Vithout expressing an opinion as to whether Section 7 had been violated, the hearing examiner gnmted the motion to dismiss on tlw ground that the "allegations of the complaint were not supported by reliable, probative and substantial evidence in the record as required by t.he Administrative Procedure Act."

Section 7 of the Clayton Act, as amended December 29, 1950, which is now before us for construction for the first time, provides in relevant part:

That no corporation engaged in commerce shall acquire, directly or indirectly, the whole or any part of t.he stock or other share capital and no corporatioJl subject to the jurisdiction of the Federal Trade Opinion 50 F. T. C.

Commission shall acquire the whole or any part of the assets of where in any line ofanother corporation engaged also in commerce, commerce in any section of the country, the effect of such acquisition or to tend to create amay be substantially to lessen competition, monopoly." 1 The salient facts as shown by the partial record now before usrespondent has not yet put in its case-are set forth below. We reserve until later the question as to the reliability of the evidence. Respondent Pillsbury is the second largest flour miller in the United States. Prior to the acquisition it was the 2nd largest seller mixes, the 3rd of family flour, the 2nd largest seller of flour-base largest seller of bakery flour, and among the 15 largest sellers of formula feed in the United States.

In the southeast, that is, the area east of the Mississippi River ,Lnd respondent was the 5th largest South of the Ohio and Potomac Rivers, seller of family flour, the 3rd largest seller of bakery flour, and the largest seller of mixes.

On June 12, 1951, respondent acquired all the assets of Ballard i'm' approximately $5 172 000. On March 7, 1952, it acquired Duff for about $2 238 000.

By these acquisitions respondent increased its capacity for milling for manufacturing mixes about 40 flour approximately 6 percent, percent,. and for manufacturing commercial feed by almost 57 perpercent, family flour cent; its total sales of bakery flour increased 2.8 and mixes 40. 9 (32.8) percent; ' its 23.8 percent, feeds 34.4 percent, to tenth place. feed position improved from "among the first fifteen" In the southeast respondent's sales of bakery flour increased 40 percent, mix sales increased 78 percent, and family flour sales increased 154 percent" Respondent's feed sales in this market increased from 101 Stat. 1125, 15 U. S. C., sec. 18.

2 Purchase was accomplished by issuing 115 000 shares of respondent' s stm..:1\ and turning Ufo tl1em over to Ballard in exchange for all its assets and liabilities. Ballard's net worth stated in its balance sheet of May in, 1951 , was $5 3 This amount was set forth in a statement which respondent fied with Secnriti 8 and 172000. Exchange Commission.

j The attorn€)'s supporting the complaint claim that the acquisitions iU(;l':Hseu n spondent's mix capacity about 48 percent. W e think this should be 40 rather than 48 percent. The latter figure seems to be based aD the assumption that the capacity inith(' Duff nol" Bailard creased at Springfield, Illinois, resulted from the acquisition. Xt bad a plant at that locatioll.

tJ These percentage figurf, except the 40.H percent for mixed, were anived :1 by dividing the Pillslmry Ilet dollar sales for the fiscal year ending lay 31, 1950, into. the Ballard net dollar sales for a similar fiscal year. Comparable fiscal year figures for Duff 'were not available so 1949 calendar year net sales were used to arrive at the 40.9 percent iig-ure for mixes; if 1930 calendar year net sales were used the figure would be 32. 8 percent. 6 These percentage figures for the southeast were based on the 1949 19()O sales 0f re- ::vondeut and the aequireu companies and were arrived at by dividing the derived df)lhn" PJLLSBURY MILLS , INC. 559 555 Opinion 000 tons per year to 175 000 tons per year. Attorneys supporting the complaint contend that the foregoing shows a "substantiality" of acquisitions suffcient to bring the mergers within the "substantiality doctrine " of the Standard Stations and Interntional Salt cases.

The record, however, contains much more in the way of economic and business facts-facts about Pillsbury, Ballard and Duff, about their respective shares of the market, and about the structure behavior and characteristics of the flour market in general. During the 11 year period ending in 1951 Pillsbury s net sales grew from approximately $47 000 000 to $224 500 000 ; its total assets increased from $30 000 000 to $95 500 000; and its net worth grew from $23 000 000 to $42 000 000. Its history during this period was marked by a number of acquisitions. It acquired a California miling company, two Iowa companies, four grain elevators in different parts of the country, and two Canadian flour mills. During the 10 year period from 1940 to 1950 Ballard' s net sales grew from approximately $8 000 000 to $30 000 000 and its assets increased from $2 600 000 to $11 300 000. The market for all of Ballard' s relevant products was within the southeastern region. In this area it was the 3rd largest seller of family flour, the 3rd largest seller of mixes, and the 9th largest seller of bakery flour. Duff, in 1950, was the 5th largest seller of mixes in the United States. and the 5th largest seller of mixes in the southeast. Its gross sales for the 11 month period ending November 30, 1951 were !tbout $6 500 000 and its gross profits were $1 919 404. Duff's inventory and fixed assets as of November 30, 1951 were $2 396 320. By the acquisitions respondent was promoted in the southeastern area from 5th to 2nd place in family flour, from 3rd to 1st place in bakery flour, and increased its 1st place position in the mix market in the southeast from 22.7 percent to almost 45 percent. sales figure for respondent into the actual dollar sales figures for Ballard and the dcrivl'd sales figures for Duff.

The figures for the three companies were arrived at as follows: Ballard' s actual dollar sales for each class of products for the fiscal year 1949-1950 an:. in the record. As it sold only in the southeast, these were its dollar figures in that area. For respondent and Duff, the record contains total dollar sales, total unit sales by product, and unit sales for each class of product in the southeast. Dollar sale in the southeast were calculated from its dollar sales for the country on the assumption that the percentage of its total dollar sales in the southeast would be the same as the percentage of unit sales in that area.

Standard Oil Co. of Califonlia v. United States (Standard Stations), 337 U. S. 2aa (1949) ; Internationa! Salt Go. v. United States 332 U. S. 392 (1917). 8 Market positions and percentage figures were arrived at by combining respondent' figures with those of the acquired companies for lB50 and llsing them as a basis for e timating sales positions after the acquisitiolls. \\ ( 560 FEDEUAL TRADE COMMISSION DECISIONS Opinion 50 F. T. C.

The wheat flour miJJing industry in the United States has decreased in size from a peak of 11 6U1 mils in lUau to 1 7U9 mils in 1951. In 1945 there were 2 571 mils with a total capacity of 1 349 699 cwt. daily. By 1951 the country s 1 799 mils had an aggregate daily capacity of 282 796 cwt. with about 97 percent of all flour products being acc01wted for by the 355 largest mills.

In 1945 the ten largest firms in the United States, measured by mils capacity.ing capacity, controlled about 34 percent of the industry In 1951 the ten largest companies-the same firms as in 1945-had 10 percent of the capacity. Between 1945 and 1951, while the industry was losing about 67 000 cwt. in daily capacity, the ten largest companies increased their daily capacity by 57 000 cwt. Of this total increase, over 39 000 cwt. or 68 percent resultcd from acquisitions. If the acquisition of Ballard by Pillsbury is included, the daily capacity gain is 62 000 cwt. with acquisitions accounting for over 71 percent of the increase.

Although the southeast had 21 percent of the country s population (1950) and 34 percent of the number of mills (January, 1951), it had only 11 percent of the nation s mining capacity. The number of mills in this area declined from 805 in 1945 to 660 in 1951; the total daily capacity declined from 154 073 cwt. to 142 907 cwt. No new mils, of any size, have been established in the southeast in recent years.

For many years Ballard had offered effective competition to Pillsbury in the southeast. In 1945 the BaJJard flour mill had the largest capacity of any mil in this area. In 1951 it shared this distinction with the General Mills plant in Louisvile. At the time it was acquired by Pillsbury it owned and operated one of the largest and most modern formula feed plants in the southeast. The Ballard brands of flour, formula feeds and prepared mixes enjoyed widespread consumer acceptance. Ballard had shown a profit for many years prior to its acquisition. It had sizable net earnings for the eleven month period just before its acquisition. It was an important factor in the competiti ve 'market.

Through its acquisition of Ballard respondent increased its share of the family flour market in the southeast from 3.66 percent to 8. !! According to the trade publication, The Nortlnv(':-tern Iil('J' , there were 805 mills in southf'ast in HH5 of which capacity figures were given for only 757: namely, 154 073 Similarly, there were Gf)O mills in the ;outhenst in 10G1 oj' whidl capacity figuresnvt. 1'' giveo 1'01" only 61Ci, namply, 142 D07 cwt. It is nssumcd that the Usted mills for \\"hkh 'Illi NOl"tll\\'esh rn Miller conle1 gt.t uo figures, \were ypry sl\al1. 10 Bnllard's unit volume of s:iJes of l'nmil:'T flour and bater;; flour combined in the southt for the fnwal ye:1r 194 l!)50 \vas slightly larger than respondent' s and second only tiJ (;,'H"lnl :'fills.

PILLSBURY MILLS , INC. 561 555 Opinion percent; it increased its share of the bakery flour market from 4. percent to 8. 55 percent.

While there were a large number of mills sellng flour in the southeast, respondent' s sales were more concentrated in :.rban areas and competed with relatively few flour milers in each of said urban areas. Respondent' s and Ballard's prices differed in different locations prior to the acquisition. Afterwards the prices of the two brands became identical.

In the mix market, prior to the acquisitions, respondent was the largest seller in the southeast (22.7%) and the second largest seller in the United States (16%). It was in competition with both Ballard and Duff in the southeast and with Duff on a national basis. As a result of the acquisitions respondent increased its share of the market in the southeast to 44.9 percent.13 In the national mix market, its position advanced from second to first place, or approximately 23 percent of the national market.

Three questions are presented by brief and argument on appeal: 1. Do recent cases decided under Section 3 of the Clayton Act apply to Section 7 eases; that is, where "substantiality" of the acquisilion has been established, is it necessary to examine economic eonsequences or determine the probable effects of the acquisition? 2. If Section 3 cases are not applicable, what tests do apply under Section 7; do Sherman Act tests apply or does Section 7 have tests of its own? 3. Does the record show prima facie by reliable evidence, that the effect of the acquisitions may be substantially to lessen competition or tend to create a monopoly in certain market areas? The attorneys supporting the complaint rely, in the first place, on the substantiality " doctrine of International Salt, Standard Stations and U These figures were arrived at by combining Ballard's and respondent' H Pf'l'cputage of the market during the 1949-1950 fiscal year. 12 It is the policy of the chain stores to carry the leading national brands, the top one or two local br Ulds, and one or two cheap priced brands or a total of five or .six brands. Store movement records of certain chain ::tor-es, testimony 01' grocery wholrsalel' IIHI testimony of certain of respondent's regional managers tal\( n together sho\\' that lnl)()IHlent' s sales of flour in urban areas in the wutheast are a much great.er IJercent:lg-( of th(: total sales in such markets than its percentage of the entire soutl1east tJonr market. 'rlll' also show tliat only a few brands are sold in all areas. Many local brands are impor1:nnt only in their own areas.

13 This percentage figure was arrived at by combining respondent' , Ballard' , and Dllfl' percf'ntages of the market during the fiscal year 1949- 1950. 14 Id.

15 Stan(l.ard Oil Co. of California Y. "United States su,pra . InternaUonal Salt Co. Unit(;d States, su.pra.. United Statf8 v. Richfield Oil COTp. U. S. 922 (1952) ; Auiomatic Canteen Co. of America v. P. 1'. 194 F. 2d 433 (C. A. 7, 1052), reversed OlJ grounds not44;:J-57-prps-rntly pertinent, 346 U. S. 61 (1953). Opinion GO F.

other Section 3 eases.'6 To be on the safe side, however, they also introduced proof of market structure and eharacteristics which they claim are suffcient, even if the Commission rejects the substantiality theory, to show that respondent's acquisitions will substantially lessen. competition.

Section 3 of the Clayton Act prohibits the use of tying and exclusive dealing contracts the effect of which "may be to substantially " 17 Thelessen competition or tend to create a monopoly. International Salt case " brought under this section, involved a tying of the company s salt to the patented salt dispensing machine it leased to its customers. The tying device was struck down by the Supreme Court which held that the test of potential injury to competition was satisfied by proof that in one year the company had sold for use in its machines 119 000 tons of industrial salt valued at $500 000. Such a market, the Court said, was not "insignificant or insubstantial" and itis " unreasonable per se to foreclose competitors from any substan- " 19tial market.

In the Stamarrl Stations case 20 also brought under Section 3, the Supreme Court applied a like doctrine to requirements contracts in the retailing of gasoline by a major company through independent stations. In its holding, .the Court fLppeared to read out of the qualifying clause any real consideration of the effect upon competition and declared that the requirement was satisfied by proof that a substantial share of the market was affected by the practice. Under the exclusive supply contracts which Standard Oil had entered into with independent service stations in a 7 State market area, $57 6'16 233 worth of gasol ine, amounting to 6.7 percent of the total, was held to be a substantial share. " 21 Although there is a considerable difference between the two cases it may be assumed for present purposes that in each case the Court held that the "qualifying clause of Section 3 is satisfied by proof that competition has been foreclosed in a substantial share of the line of commerce affected.

It does not follow, however, that because the qualifying clauses of Sections 3 and 7 lre expressed in the same language they prescribe the 1d.

17 3R Stat. 731 , 15 U. S. C. sec. 14.

"332 U. S. 392 (1947).

Id. at :-J96.

'" 337 U. S. 293 (1949).

"ld. 295, 3J4 (J949).

22 In the Standard Stations case-unlike the Salt case-the Supreme Court spoke of the share" of the market foreclosed; it also showed a full awarene of the important difference behveen tying contracts and requirement contracts. "" 337 U. S. 293, at 304, 314, and 332 U. S. at 394-397. , PILLSBURY MILLS, INC. 563 555 Opinion same tests. "Familial' but loose language affords too ready a temptation for comprehensive but loose construction. " 2' used with different mean- It is not unusual for the same word to be ings in the same act, and there is no rule of statutory construction which precludes the courts from giving to the word the meaning which 25 Accord-the legislature intended it should have in each instance." Sections 3 and 7 are to beingly, the respective tests prescribed by determined in thc light of the purpose of each section. The primary purpose of Section 3 is the protection of buyers and sellers in the marketing process-to guarantee to buyers the right to handle any goods they see fit, and to sellers the opportunity to obtain the business of any buyer whose trade they wish to seek. Section 7, on the other hand, is directed toward adverse changes in It is concerned competitive patterns that may result from mergers. with with the effects of acquisitions on the character of competition, the maintenance of competition in every market to the end that business rivalry may produce better products at lower costs. Ii\while both sections arc designed to protect the competitive process they reach this goal by difJ.erent routes-one by protecting the seller and buyer segment of our economy, the other by protecting competition on an over-all basis.

The impact of a tying contract or a requirements contract is different from that of an acquisition. The forces of the former falls principally upon buyers 01' upon competitors of the company which imposes the contract, the effect of such contracts is thus to cut off these competitors from what would otherwise be part of their natural market. In contrast, an acquisition seldom has such an immediate inpact upon competitors. The reason that acquisitions are, under certain circumstances, to be regarded as illegal is not because of their effect on buying and selling practices but because of their probable effect on competition.

24 Autouwtic Ca'ntetm, Co. oj America v. P. '1. CO 346 U. S. 1 at 65 (1953). v. Uniterl States 286 U. S. 427, at 433 (1932); see also 2: .iltlantic Cl,eaner and Dyers F. '1. C. v. Jforton S(ult Co. 4 e. S. :-n, at 4fj, Footnote 14. Of. l\IcAllistel' \Vhere the effect may he to substantially lrssE'n compptition or tend to create a monopoly," Proceedings of the American Bar Association, Section of Antitrust Law, August 26-27, 1853, p. 131.

Specifically, exclusive dealing and tying arrangements are for hidden ,vhen the rpstrieted freedom of the buyer to purchase from competing suppliers injures his competitive position or that of the competing supplier. '..'1 As the Commission said In the M-utter of Automatic Ca,nteen Company oj Arnerfca, 46 F. '1. C. 861 , and 894 (1950), " It is apparent that (respondent' s exclusive dealing con s uig- tracts) entirely foreclosed the sale and leasing of vending machines to respondent' tributors by anyone but respondent and that other sellers and suppliers of candy, gum, nuts and other confectionery products have been completely and effectively foreelosed from selling these products to respondent' s distributors. Affrmed 194 F. 2d 433 (C. A. 7, 1952), reserved on grounds not presently pertinent, 346 U. S. 61 (19G3). 28 In determining the effect on competition under Section 7 the Commission is, of course, concerned \-'with the relationships between nn acquiring company and other parties, such a,; competitors, snpplh rs and outlets, insofar UH such relationships may affect competition ill a given market.

Opinion 50 F. T. C.

Moreover, a further distinction can be drawn from the fact that tying and exclusive dealing contracts are frequently coercive, while acquisitions are usually voluntary in nature. Competition cannot be directly measured; no single set of standards can be applied to the whole range of American industries. No single characteristic of an acquisition would of itself be suffcient to determine its efiect on competition. For this reason it would not be suffcient to show that an acquiring and an acquired company together control a substantial amount of sales, or that a substantial portion of commerce is affected.

Much as the simplified test laid down in Standard Stations and lntemational Salt may aid in the presentation of proof in cases under Section 3, it is not in itself a reliable guide for the Commission in carrying out its long-run responsibility to prevent reductions in competition through acquisitions of assets or stock. Furthermore, neither case can be construed as depriving the Federal Trade Commission, as an administrative agency, of the right to examine relevant economic factors and competitive effects (even in Section 3 cases) in the event it desires to do so.

In creating the Federal Trade Commission, Congress had two principal ideas in mind: first, to create a "body of experts" competent to deal with complex competitive practices "by reason of information ; 31experience, and careful study of business and economic conditions and second, to authorize this body of experts to deal with unfair competitive methods in their incipient stages. The driving impulse in creating this, and other administrative agencies, was the need for specialization and expertise.'" The complexities of modern American trade, and industry had made it apparent that eii'active trade regulation could neither be accomplished by "selfexecuting legislation nor the judicial process. " See F. C. C. v. Potts- 1Jile Broadcastin q Co. 309 U. S. 134, 142 (1940) ; Oppenheim Federal Antitrust Legislation: Guideposts to a Revised National Antitrust Po7ir?l. fio Mich. L. Rev. 1139, 1221, n. 215 (1952). ::!J The attorneys supporting the complaint sngge::t thf- following te t for Section 7 cases: 'Vhpre a IC;HHng factor in the l' Jcn1It Ilmrket having' a suhstantial share of that market, Requires another factor in that market also IHlYing a substantial share of that market, the tnfcrf'ncc ari ('s tllnt competition mny be substantially lessened in the lines of commerce involypu.

:!o In the Matter of The Ma1:co Company, hlc. decided by Ii'. T. C. l)cccmber 7, 1953. 31 Sen. Rfp. r-"o. 597, f)3d Cong" 2d S ss.. vP. 9 , 11 (1914) ; P. T. C. v. The Cement Insti tute 333 L. S. 683, 727 (lD48) ; P. 1'. O. v. H. P. J(eppel Bro. , Inc. 291 U. S. 305, 314 (1934).

Strmrlani Fa.shion Co. v. qrane- lJ()wdon Co. 258 U. S. 346, 356 (1\)22). 33 The Commission was to be staffed with Inw:vers, economists, accountants, statisticians nn(l otl1(r businp:,s rxprrts. It was understood that tllis staff would become specialists in pn' vf'nting imprOr1Cl' '111sinpss practice- 8 which intt'rfered with the competitive process or "\'er' e against the IJublic interest. Cf. United States Y. Morton Salt Co. 3.38 U. S. (-32 640 (1940).

PILSBURY MILLS, INC. 565 555 Opinion The laws given to the Commission to administer are, for the most part, general in nature and not clear of policy elements. "Congress advisedly left the concept flexible to be defined with particularity 34 It contemplatedthe myriad of cases from the field of business." clarification and completion by the Federal Trade Commission. If the administrative tribunal to which such discretion is delegated does nothing but promulgate per se doctrines, the rationale for its creation disappears.35 If a particular competitive act is automatically to be presumed unlawful, the administrative process of the Commission loses its purpose, and the justification for limiting the scope of judicial review and for exempting the Commission from executive control no longer remain. In such event the administrative agency may as well give way to the prosecutor.

As we understand it, the Federal Trade Commission has a greater task than this in administering the broad provisions of Section 7 of the Clayton Act. There must be a ease-by-case examination of a1l relevant factors in order to ascertain the probable economic consequences.

The most recent decision interpreting Section 7, prior to its amendment, is l'ranswnerica Oorporation v. Board of Governors of the Feder' ul Reserve System 206 F. 2d 163 (1953), cert. den. November , 1953. The Federal Heserve Board had ordered divestiture of stock in a number of banks comprising the so-called Giannini group in the 'Divest Coast and Rocky Mountain area. The Board pointed out that the Giannini banks did a large proportion of the banking business in five western states, invoked the Standard stations case, and held that Section 7 was violated. The Third Circuit reversed, saying: ", such acquisition is a violation only if its effect may be in fact to substantially lessen competition between such corporations, to restrain commerce or to tend to create a monopoly. Otherwise the acquisition is entirely lawful, so far as Section 7 is concerned. It necessarily follows that under Section 7, contrary to the rule under Section 3, the lessening of competition and the tendency to monopoly must appear from the circumstances of the particular case and be found as facts before the sanctions of the statutes may be invoked. Evidence or mere size and participation in a substantial share of the Jine of business involved, the ' quantitative substa tiality' theory re- " 30lied on by the Board, is not enough.

The court was impressed by the "tremendous concentration of banking capital" " " in the hands or the Transamerica group," and ')1 34 P. '1' C. v. fotion Pir-ture Aclvert'sino Service Co. Inc. 344 U. S. 392 (1952) ; F. V. Keppel a Bro., supra, 310-312.

3" See dissenting opinion of Mr. Justice Jaclison in The Ruberoid CA. V. F. '1. C' 343 U. s. 470 (1852).

206 F. 2d 1G3, at 170 (C. A. 3, 1953), cert. den. Nov. 30, 1953. , , Opinion 50 F. T. C.

thought that legislative or administrative action might well be desirable to decrease it. But the Court held that no case had been made under Section 7. Lessening of competition or tendency to monopoly were market phenomena, and could only refer to some particular market or set of markets. But the Board had not attempted to show any undesirable effect or dangerous probability in any given markets. The five state area was but an artificial segment of the United States unrelated to any market activity. Hence, said the Court, the contention of the Reserve Board could not be sustained. While the l'ransarnerica case does not question Standard Stations far as Section 3 is concerned, it does seem to seal off Section 7 from the per se rule of that case. The fact that the l'ransarnerica case was decided under old Section 7 does not in our opinion lessen its applicability in this respect. While the 1950 amendment modified Section 7 in many ways it did not change the basic purpose to protect competition in a given market.

This does not mean that we are thrown back on Sherman Act tests. In fact, one of the purposes of amended Section 7 was to reestablish the difference between Sherman Act and Clayton Act violations and to restate the legislative view, largely repudiated by the case law,"" that the tests of the Sherman Act have no proper place in the application of Section 7.

Monopoly and coinpetition, as economic facts, are the same no mat- 40 Marketter what law is applied to them." control, restraint of trade injury to competition, tendency toward monopoly are the subjects of both the Sherman and Clayton Acts. But the standard of ilegality is different; otherwise Congress would have been wasting its time by enacting duplicating legislation. The difference is usual1ly said to be that under Section 7 the undesired condition may not yet be in existence; there is only a reasonable probability that it will come to pass if nothing is done to stop it. This, of course, was the underlying purpose of the original Clayton Act. It was designed to "supplement" the Sherman Act, to prohibit practices which singly and in themselves 37 Id. 169.

33 Id.

Intertl,ational Shoe CO. V. F. T. C. 280 U. S. 291 (1930) ; V. Vivaudou. v. F. T. C., 54 F. 2d 273 (C. A. , 1031) ; Temple Anthracite Coal Co. v. F. T. C., ::1 F. 2d 656 (C. A. 3 1931) ; UnHed Sta, tcs v. Republic Steel Corp. 11 F. Supp. 117 (N. D. Ohio, 1935) ; see Irvine The Uncertainties of Section 7 of the Clayton Act, " 14 Cornell L. Q. 28, 40 (1928) for a review of the earlier cases.

40 See Adelman Acquire the Whole or Any Part of the Stock or Assets of Another Corporation " Proceedings of the American Bar Association, Section of Antitrust Law, Aug. 27, 1953, pp. 111 , 117.

., PILLSBURY MILLS, INC. 567 555 Opinion were not covered by that act, to arrest potential violations of the Sherman Act in their incipiency and before consummationY The trouble is that his sort of language, lawyer s language some call it, is not very meaningful until applied to a particular set of facts fads wJ1ichsuffce for the Clayton Ad but do not constitute a showing of evidence suffciently impressive under the Sherman Act. The courts and the Commission have frequently paid homage to the incipiency doctrine and the difference between the Sherman and Clayton Aet tests, but not detar standards have emerged. Putting aside the broad concepts of competition and monopoly, the essential difference seems to be that the Clayton Act requires a lower standard of proof of the same kind of facts- evidence which is quantitatively or qualitatively less impressive than where the Sherman Act is invoked."'2 More speeifjcally, the merger in U. S. Oolumbia Steel 00. 334 U. S. 495 (1948), which was examined under the Sherman Act, would probably not have been approved had new Section 7 been in existence and invoked against it. Section 7, before it was amended, prohibited corporate acquisitions of stock which might have anyone of the following effects: (1) substantial lessening of competition between the merging companies (2) restraint of commerce in any section or community, or (3) tendency to create a monopoly. This language, if taken literally, would have precluded almost every merger where competition existed between the two merging companies. As we have ir:dicated, the courts shied away from this drastic interpretation and invoked the rule of reason of the Sherman Act..

Section 7, as amended, prohibits the acquisition of assets as well as stock, thus closing the long-standing loophole on this point. The acquisition is prohibited "where in any line of commerce in any section of the country, the effect of such acquisition may be substantially " 45to lessen competition, or to tend to create a monopoly. The earlier test as to competition between the acquiring and acquired companies is eliminated and so is the earlier alternative test to restrain such commerce in any section or community." The elimination of the first test eliminates the possibility of a strict and literal interpretation which would strike down local and unimportant acquisitions; the elimination of the second test removes any likelihood that broad Sherman Act tests will again be applied.'6 The legislative history is clear on this point. 41 Sen. Rep. No. 698, 63d Con 2d Sess., p. 1 (1914); Standard Fashion Company JIagrane-lIouston Co. 258 G. S. 346, 356 (1922). 42 See Adelman supra, 118.

.. H. R. Rep. No. 1191 , 81st Cong. , 1st SeBs., pp. 10-11 (1949). 44 See also McAllister supra, 142-143.

"64 Stat. 1125, 15 U. S. C.. Sec. 18.

.w See McAllister 8Up1" , 143.

Opinion 50 F. T. C.

The Senate Committee said:

The purpose of H. R. 2734 was to make this legislation extend to acquisitions which are not forbidden by the Sherman Act. * * The Committee believe that the excessive sweep that has been given to Section 7 of the present Clayton Act by these two features of that Section has been largely responsible for the tendency of the court in cases under that Section to revert to the Sherman Act test. By eliminating the provisions of the existing Section that appear to reach situations of little economic significance, it is the purpose of this legislation to assure a broader construction of the more fundamental provisions that are rebined than has been given in the past. The Committee wish to make it clear that the bill is not intended to revert to the Sherman Act test. The intent here, as in other parts of the Clayton Act, is to cope with monopolistic tendencies in their incipiency and well before they have attained such effects as would " 41 justify a Sherman Act proceeding.

This is confirmed in the House Report:

Acquisitions of stock or assets by which any part of commerce is monopolized or by which a combination in restraint of trade is created are forbidden by the Sherman Act. The present bill is not intended as a mere reenactment of this prohibition. It is not the purpose of this committee to recommend duplication of existing legislation. Acquisitions of stock or assets have a cumulative effect, and control 0:1' the market suffcient to constitute a violation of the Sherman Act may be achieved not in a single acquisition but as the result of a series of acquisitions. The bill is intended to permit intervention in such a cumulative process when the effect of an acquisition may be a significunt reduction in the vigor of competition, even though this effect may not be so far-reaching as to amount to a combination in restraint of trade, create a monopoly, or constitute an attempt to monopolize. Such an effect may arise in various ways: such as elimination in whole or in material part of the competitive activity of an enterprise which has been a substantial factor in competition increase in the relative size of the enterprise making the acquisition to such a point that its advantage over its competitors threatens to be decisi ve, undue reduction in the number of competing enterprises, or establishment of relationships between buyers and sellers which de- " 48prive their rivals of a fair opportunity to compete. The House and Senate committees also took the occasion to make clear that "may be" means reasonable "probability," not "possibility. Thc Senate Hcport said:

47 Sen. Hep. 1'0. 177:3 , sist Cong. , 2d Ses, pp. 4-5 (lD50). '" II. R. Rep. No. 1191 , 81st Cong., 1st Sess. , p. 8 (J 949). , PILLSBURY MILLS, INC. 569 555 Opinion The use of these words l"may be J means that the bill, if enacted would not apply to the mere possibility but only to the reasonable probability of the prescribed effect, as determined by the Commission in accord with the Administrative Procedure Act. Under amended Section 7 "the Government must define and prove the relevant market and the relevant products involved in the acquisitions. The 'line of commerce' need not be industry-wide; any part of the domestic commerce is included. 'In any section of the country apparently is intended to cover any market area in the United States in which the acquiring or acquired corporation is doing business and to embrace potential as well as actual competition. * * " The Government, therefore, has a lesser burden of proof under Section 7 than under the Sherman Act, which requires a proof of an un- " 50reaasonable restraint of trade.

As we see it, amended Section 7 sought to reach the mergers embraced within its sphere in their incipiency, and to determine their legality by tests of its own. These arc not the rule of reason of th\\ Sherman Act, that is, unreasonable restraint of trade, nor are Section 7 prohibitions to be added to the list of per 8e violations. Somewhere in between is Section 7, which prohibits acts that "may" happen in a particular market, that looks to "a reasonable probability," to " substantial" economic consequences, to acts that "tend" to a result. Over all is the broad purpose to supplement the Sherman Act and to reach incipient restraint.

While these are far from specific standards-specificity would in any event be inconsistent with the "convenient vagueness" of antitrust prohibitions-they can, we believe, be applied on a case-by-case basis. 'Ve think the present case is the type Congress had in mind-one that presents a set of facts which would be insuffcient under the Sherman Act but nonetheless establishes prima facie a violation of Section 7 of the Clayton Act.

Commission action, under Section 7 (c) of the Administrative Procedure Act, must be supported by "reliable, probative, and substantial evidence." 52 It is said that "These are standards or principles usually applied tacitly and resting mainly upon common sense which people engaged in the conduct of responsible affairs instinctively understand." 5:J This is in reality a restatement of the 4\J Sen. Hep. No. 1775, Hlst Cong., 2d Sess. , p. 6 (19GO). 50 Oppenheim Federal Antitrust Legislation: Guideposts to a Revised National Autitrust Policy," 50 Mich. L. Rev. 1197 (1952). 51 See :\JcAlli t!:r supra, 148.

"60 Stat. 241 5 U. S. C., Sec. 1006e.

53 II. R. Rev. o. 1980, 79th Cong., 2(1 Sess., p. 36 (1946) ; Sen. Her. No. 752 , 79th Congo. 1st Sess. , p. 22 (19'15) ; (Sen. Doc. 1\0. 248, 79th Cong. , 2d Sess., pp. 208, 270 (1946). 570 FEDERAL TRADE Commlssion DECISIONS Opinion 50 F. T. C.

54 Substantial evidence "means such substantial evidence rule." relevant evidence as a reasonable mind might accept as adequate to Consolidated Edison Co. v. National Laborsupport a conclusion. Relations Board 305 U. S. 197 229 (1938).

it is clear that, as heretofore, the technical Under Section 7 (c) rules of evidence are not applicable to administrative hearings. Thus it is stated that "the mere admission of evidence is not to be taken as prejudicial error (there being no lay jury to be protected desirablefrom improper influence)." 56 "But this assurance of the flexibility in administrative procedure does not go so far as to justify orders without a basis in evidence having rational probative force. " 57 The principal evidence in this case which the hearing examiner refused to accept as reliable, consists of several letters addressed to the Commission, in which respondent set forth (1) its sales of the relevant products in the southeast and in the nation (2) the acquired companies' sale of the relevant products in the southeast and in the nation,"9 and (3) respondent' s best estimates of its major comcounsel didpetitor s shares of the relevant markets. Respondent's not object to the introduction of these letters as not being competent evidence. In fact, respondent said at the time that there were accurate, absolute figures available in the flour industry showing competitors' sales or total sales.

1Vhether or not respondent's estimates of competitors' shares of a particular market can be accepted as reliable depends upon the circumstances. According to the testimony of respondent's market analyst, the best data available showing the market position and trend of sales of respondent and certain of its competitors in the flour industry are surveys prepared by the Market Research Corporation of America. This organization makes a random sample audit of retail stores which the witness described as the only random sample available which he considered projectionable. Respondent must have considered this information reliable enough for its own purposes inasmuch as it paid about $50 000 per year for sameY MAttorney General's Manual on the Administrative Procedure Act, p. 76 (1947). 55Id. "Furthermore, administrative agencies lil e the l\-'ederal Trade Commission have n. V. Baird never been restricted by the rigid rules of evidence. Interstate Commerce Cornm 194 U. S. 25, 44. And, of course, rules which bar certain types of evidence in criminal or effect of the quasi-criminal cases are not controlling in proceeding like this, where 'the Commission s order is not to punish or to fasten . liability on respondents for past conduct but to ban specific practices for the future in accordance with the general mandate of Congress. F. T. C. v. The Oement Institute ct al. supra 705. 68 See footnote 53.

57 Consolidated Edison Co. v. National Labor Relations Board supra p. 230 (1938). 58 The letters contained actual figures for respondent for the fiscal year 1949-1950. 5\1 The letters set forth actual sales for Ballard for the fiscal year 1949-1950 and respondent' s best estimates for Duff for the same period. 60 The admissibility of commercial reports is well recognized. As Wigmore points out The . . . (exception to the Hearsay rule) is capable of liberal expansion to include ,. , &: , PILLSBURY MILLS, INC. 571 555 Opinion Respondent prepares periodic market analyses of flour and mix markets for its use in the regular course of business, in which it uses the information supplied by the Market Research Corporation. The market position information contained in these reports was used together with respondent's own data, in the preparation of the estimates in question.

The reports containing the data supplied by the Market Research Corporation were subpoenaed by cOllnsel supporting the complaint but respondent refused to comply on the ground that it was not liberty to divulge such information.

The estimates were prepared by respondent and submitted to the Commission during the course of the preliminary investigation, and respondent asked the Commission to rely upon them in reviewing the case prior to the culmination of the acquisitions. Presumably respondent at that time, as an advocate put its best foot forward. Under all the circumstances " it is believed that the "common sense estimates areand "reasonable mind" tests have been met and the prima facie evidence of respondent' s market position, the market position of the acquired companies and the market position of its major competitors. Prima facie evidence is the minimum quantity necesary to raise a presumption of fact or is suffcient, if not rebutted, to establish the fact. Otis Co. v. S. E. C. 176 F. 2d 34 (C. A. D. 1949). Respondent, when it puts in its case wil have full opportunity to rebut, explain, or contradict. It is important to remember in .this connection that the issue here does not go to the absolute sales of respondent, the acquired companies or its competitors, but to the question as to the effect which the mergers may have on competition. A few words should be said about the problem of proof in antitrust cases. Competition is a complex and constantly changing phenom- Injury to competition, asenon. It has never been sharply defined. distinguished from injury to a competitor, is seldom capable of proof by direct testimony and may therefore be inferred from all the surrounding circumstances. "An antitrust charge may * * * be proved by circumstantial evidence, and the circumstances may include actions " 62affecting any of the broad issues of fact posed in the complaint. Analysis of the competitive effects of an acquisition should begin we believe, with the relevant facts concerning the competitive pattern commercial and industrial records, made by person-ns disinterested in the particular litigation, published or kept accessible to third persons, and customarily relied upon by them in the conduct of particular occupations." 6 Wigmore on Evidence, sec. 1708 (3rd ed. 1940), p. 38.

61 These circumstances include the fact that respondent refused to comply with Commission subpoenas seeking the basic data upon which the estimates were based. 62 See McAllister The Big Case: Procedural Problems in Antitrust Litigation " 64 Harvard L. R. 27 at 28.

572 FEDERAL TRADE COMMISSIOK DECISIOKS Opinion 50 F. T. C.

particularly in the periodof the industry as a whole and its markets, preceding the acquisition. From such facts, and from information about the specific merger, it should be possible to determine what changes the acquisition can be expected to make in the character of competition in the markets concerned.

Counsel supporting the complaint say they have made such an analysis; that the evidence was not limited to the application of Section 3 cases to Section 7, but included in addition "an extensive showing of the character of the markets and the market setting in which the acquisitions took place.

To summarize the evidence, respondent, whose rapid growth during the past few years has been due in part to acquisitions and mergers these ac-has now acquired two more substantial competitors. By quisitions it has substantially increased its millng and production capacity and its market position. In one of the relevant products namely, mixes, its position in the southeast increased to about 45 percent.

These acquisitions have taken place in an industry which has steadily declined in size and capacity, and in which the big companies have increased their percentage share. This increase has been largely due-71 percent of it-to mergers. In the southeast the number of mills has not only declined but there have been no new entries of any size into the industry. The number of competitors in the southeast more particularly in the urban markets, has been materially reduced by the acquisitions; in the mix business, for example, Ballard with 12 percent and Duff with 10.2 percent of the market, have been eliminated.

This establishes, it seems to us, a prima facie case."3 The pattern of competition in the southeast, particularly in the cities, has undergone a considerable change as a result of the mergers. Unless explained, contradicted, or rebutted, and respondent will have every opportunity to do this when it puts in its case, it is a change which constitutes a move away from hcalthy competitive conditions. There is nothing in the record to indicate that the mergers will at present convert the industry in the southeast from a competitive to a noncornpet,itive pattern. The inference, in fact, must be to the contrary inflslluch as large national distributors, such as General Mills and Quaker Oats, and large regional distributors remain to furnish in the urban effective competition to Pillsbury Mills However, U3As f'tatf'd In re Chicago Rys. Co. 175 F. 2d 282 (C. A. 7 , 1940), cert. denied, (Illinois8 v. Sullivan), 338 U. S. 850 (1949), a !)rima facie case is established by eyidellCe adlluced by the plaintiff in sUDPort of its case up to the time such evidence stands unexplaine'l and uncontradicted.

. .

PILLSBURY MILLS , INC. 573 555 Opinion markets at least, the mergers lead in the direction of what is sometimes called oligopolistic or "monopolistic" competition, that is, to a situation where the remaining competition in the particular market is between big companies.

, for example, respondent should continue to acquire competitors at the rate it has since 1940, and other large companies should do the same, the urban markets in the southeast may come to be dominated by a few large milling companies. This, of course, has been the trend in other industrie.s. In some of them, under the policy of the Sherman Act, competition between the big companies continues to protect the consumer interest. But, as we understand it, it was this sort of trend that Congress condemned and desired to halt when adopted the new Clayton Act antimerger provision. This matter, therefore, should be remanded to the hearing examiner for further consideration in conformity with this opinion. Mr. Mead, while concurring in the result, will file a separate con- CUlTmg oplIllon.

CONCUHHING OPLNION OF COJlIJlIlSSIONER MEAD The Chairman in the very able Opinion of the Commission has stated the fads in this case and has discussed the applicable law in detail. I concur with his analysis of the fads and with his conclusion that the reveJant evidence now in the record establishes "prima facie" that Pillsbury violated Section 7 of the Clayton Act by b"ying Ballard and BaJJard Company and the Duff Division of American Home Products Corporation.

In view of the very important questions discussed in the Opinion and of the fact that this is the first case considered by the Commission under the revised Section 7 of the Clayton Act, I deem it advisable to comment briefly.

The Opinion of the Commission in this matter (as weJJ as in the recently decided 1:aico case, Docket 5822, brought under Section 3 of the Clayton Act) discusses broadly the necessity of "a case by clctse examination of ajj relevant factors in order to ascertain the probable economic consequences." In my opinion this language should not be interpreted as encouraging the introduction into trial records of remotely relevant economic evidence which is unnecessary for a determination of the issues.

Certain court opinions have suggested that the Commission is Lotter equipped than courts to consider economic data. As to the extent 64 Sen. Rep. o. 1775, 81st Cong., 2d Sess., p. 5 (1950); H. R. Rep. No. 1191 , 81st Cong. 1st Bess. . p. 8 (lD49).

Opinion 50 F.

to which economic or other data is necessary in trial records, I believe there is a difference between the Federal Trade Commission Act and the Clayton Act. In the Federal Trade Commission Act the Conlanguage. It declared illegal unfairgress used broad sweeping define whatmethods of competition in commerce. The Act does not the Congress meant by unfair methods of competition. The definition is left initiany to the Federal Trade Commission. The only method by which the Commission c m properly and adequately define such term is by a process of administrative inclusion and exclusion as complaints are issued and cases decided. Under the Trade Act, if the Commission in issuing its complaint has reason to believe that a then the practice not theretofore determined to be ilegal is illegal, trial of such case should fully develop the facts so that the Commission in its role of expert would be fully informed in deciding the oase of first impression. The Commission should then make adequate findings "with suffcient clarity" to enable a court to review the order. Frankfurter in FTC vs. jJ otion Picture (See the dissent of Mr. Justice A.advertising Service Co., Inc. 344 US 392 which was a Trade Act case. ) In Section 7 of the Clayton Act as distinguished from the Federal Trade Commission Act, the Congress specifically declared that the that merger of certain types of corporations is ilegal provided only the effect of the mergers may be substantially to lessen competition or tend to create a monopoly. Other sections of the Clayton Act also describe in comparatively specific language the act or practice which may be illegal.

vs. R11beroid Co., 343 Mr. Justice .Jackson in his dissent in FTC US 470 (a Section 2(a) Clayton Act case) had specific reference to the remedy in the order to cease and desist and not to the elements of by the proof or evidence necessary to support a finding of illegality Commssion. As I understand it, Mr. Justice Jackson indicated that the Congres, in writing legislation in the antitrust field, must necessarily limit the legislation to principles or policies. The Commission in drafting its orders to cease and desist, should give meaning and purpose to the general legislative policy. This should be done where feasible, not by parroting the words of the statute but by prescribing a definite remedy within the general policy. The remedy should be adapted to the facts of the particular case. The Commission, guided by the Congresional mandate and using its expertness, should devise remedies which are effective and informative. The question of whether or not certain types of corporate mergers arc questionable has been determined by the Congress. The only issues other than jurisdictional which the Commission must decide PILLSBURY MILLS, INC. 575 555 Opinion are whether or not the particular merger may cause the injury described in the statute. The extent and character of economic or other data which is necessary in any particular case in order for the Commission to make an informed decision is a matter which must be determined by the facts of that particular case. Economics is not an exact science. The economic factors and economic theories available for exposition relating to what effect a merger, an exclusive dealing contract or a discriminating price may have on competition may be so many and so changing that proceedings attempting to explore thoroughly all facets would have no foreseeable termination dates.

Many distinguished offcials of Government and members of the Bar have been disturbed because of the length of trial records in ad. ministrative hearings. Consideration is now being given to various means to shorten these records so as to reduce the expense for all the parties, including the Government. Shorter yet adequate records should result in a reasonably prompt determination of issues. We certainly do not desire to take any action which will unnecessarily lengthen the records in cases before this Commission. In my opinion the Commission does not desire economic or other data in trial records just for the sake of the data. Weare trying cases in order to determine public legal rights. We are not in this forum making ext msive economic investigations for the purpose of adding to the general store of knowledge. The facts to be determined may be so apparent that a reasonable man could fairly decide the issues without the benefit of extensive data. In such cases extensive hearings should be avoided.

The ' Commission was established so that the public would get prompt informed action when there is a reasonable probability that a trade act or practice will injure competition. Prompt informed action is particularly necessary in cases of mergers which may be finally found to be illegal. The passage of time may make much more diffcult the task of unscrambliDg the assets of the merged companies and restoring competition to its original form. In short, I agree with the result of the Commission s action in this case. I approve of the dispatch with which this decision was reached. In my opinion, however, the Commission does not desire to "gild the lily" by encouraging hearing examiners to admit in trial records interesting but unnecessary factual data. An expert can practice his expertness and yet act decisively and with dispatch. An expert can also be a reasonable man.

Decision 50 F. T. C.

IN Tile MATTER OF MERCANTILE STORES COMPANY, INC., ET AL.

I'EGISION IN REGARD TO THE ALLEGED VIOLATION OF Tile FEDERAL 'trad COMMISSION ACT 24, 1953-Decision, Dec. , 1958 Doclcet 6094. Oomplaint, Apr. \VllPre a corporation and its wholly owned subsidiary engaged in the int.erstate sale and distribution of children s shoes under the brand name "I-health- Fiex" which, thus stamped ann boxed, were shipped from their place of manufacture to a number of retail stores' wholly ownen subsidiaries in variol1s other states and were by said stores in turn advertised and sold as "1-IeaHh-Flex shoes with the knowledge, consent, and approval of the aforesaid corporation- Ilepresented directly and by implication that said shoes were constructed in such a manner that their use would prevent and correct abnormalities and deformities and ailments of the feet and keep them healthy, through use of the word "Heart.h" as a part of tlle trade or brand name therefor, and as stamped in and on said shoes and on the boxes in which they were sold; The facts being said shoes were merely stock shoes, made on order by quantity production methods by the manufacturer from which said subsidiary bought the same and upon \vhieb, and upon the containers thereof, said llalne was stamped at its direction; and while said shoes might contain some features not found in other stock shoes, effect thereof upon the feet in the prevention or correction of abnormalities, deformities, or ailments or in keeping the feet healthy ,vas insignificant:

Held That. such acts and practices constituted unfa.l and deceptive acts and practices in commerce.

Before llfr. James A. Purcell hearing examiner. Mr. B. G. Wilson and llfr. George E. Stei' rvetz for the Commission. DECISION or THE COMMISSION, AND ORDER TO FILE REORT OF COMPLIANCE Pursuant to the provisions of the Federal Trade Commission Act issued and subse- the Federal Trade Commission, on April 24, 1953, quently served its complaint in this proceeding upon the respondents named in the caption hereof, charging them with the use of unfair and deceptive acts and practices in commerce in violation of the provisions of said Act. The respondents fied a joint answer admitting all of the material allegations of the complaint and waiving all intervening procedure and further hearing as to the said facts, but reserving the right to withdraw said answer if the Commission fai.led to grant respondents' request for an extension of the effective date of any order to cease and desist which might be entered to a date specified MERCANTILE STORES CO. , INC., ET AL. 577 576 Findings by respondents. On July 24, 1953, the hearing exammer fied his initial decision.

The Commission, having reason to believe that said initial decision did not constitute an adequate and appropriate disposition of this matter, subsequently placed this case on its own docket for review. On October 5 , 1953, the respondents filed their consent to the withdrawal of the portion of their admission answer relating to the effective date of the order to cease and desist which might be entered, and the Commission, on November 9, 1953, issued, and thereafter served upon the parties, its order setting time within which objections to a tentative decision of the Commission attached to said order, and reply thereto, might be filed. No objections having been filed within the time permitted, the proceeding regularly came on for final consideration by the Commission upon the record herein on review; and 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 fuldings as to the facts, conclusion drawn therefrom, and order, the same to be in lieu of the initial decision of the hearing examiner.

FINDINGS AS TO THE FACTS PARAGRAPH 1. Respondent Mercantile Stores Company, Inc., is a corporation organized and existing under and by virtue of the laws of the State of Delawarc, with its offce and principal place of business located at 100 West 10th Street., Wilmingt.Qn, Delaware. Respondent Mercantile Stores Company, Inc. (N. Y.) is a corporation organized under and by virtue of t.he laws of the State of New York, with its offce and principal place of business locat.ed at. 128 West. 31st. Street. New York 1, Nev,' York The said New York corporate.ion is a wholly owned subsidiary of t.he said Delaware corporate.ion. The t.wo corporations act in conjunct.ion and cooperat.ion with each ot.her in the performance of t.he acts and practices hereinafter set fort.h. PAR. 2. Respondents are now, and for more t.han two years last. past have been, engaged in the sale and distribution in commerce of children s shoes bearing the brand name "Health-Flex. Respondents cause, and have caused, t.their said shoes, when sold, to be transported from t.he place of t.their manufact.ure in Ephrata, Pennsylvania, t.o purchasers t.hereof locat.ed in various States of t.he Unit.ed Stat.es. Respondents maintain, and at. all t.times ment.ioned herein have maintained, a substantial course of trade in commerce in said shoes. PAR. 3. Respondents' method of operation is as follows: Said shoes are manufactured on order of respondent. New York corpora- 40;j4..: 57- :18 Findings 50 F. T. C.

tion by the Eby Shoe Corporation of Ephrata, Pennsylvania. At the time of manufacture, in accordance with the direction of respondent New York corporation, the name "Health-Flex" is stamped in and on the shoes and on the boxes in which they are packed and sold. This is done with the consent and approval of, and inures to the benefit , respondent Delaware corporation, which is the owner of the registered trade-mark "Health-Flex . Respondent New York corporation sells and causes said shoes, so stamped and boxed, to be shipped from the place of their manufacture in Pennsylvania to a number of retail stores, located in various other States of the United States which are wholly owned subsidiaries of respondent Dehtware corporation. These various retail stores in turn advertise and sell said shoes as "Health-Flex" shoes with the knowledge, consent and approval of respondent, the Delaware corporation.

PAH. 4. Through the use of the word "Health" as a part of the trade or brand name for said shoes and as stamped in and on said shoes and on the boxes in which they are sold, respondents have represented, directly and by implication, that said shoes are constructed in such a manner that their use will prevent and correct abnormalities deformities and ailments of the feet and will keep the feet healthy. PAR. 5. The said representation is false, deceptive, and misleading. In truth and in fact, the use of said shoes will not prevent or correct any abnormalities, deformities or ailments of the feet or keep the feet healthy. Respondents' shoes are merely stock shoes, made by quantity production methods, and while they may contain some features not found in other stock shoes, the effect of such features upon the feet in the prevention or correction of abnormalities, deformities or ailments of the feet or in keeping the feet healthy, is insignificant. PAR 6. The use by the I'respondents of the foregoing false, deceptive and misleading representation with respect to said shoes has had and now has the tendency and capacity to, and does, mislead and deceive a substantial portion of the purchasing public into the erroneous and mistaken belief that said shoes are constructed in such a manner that their use will prevent and correct abnormalities, deformities and ailments of the feet and will keep the feet healthy, and into the purchase of substantial quantities of said shoes because of such erroneous and mistaken belief. Furthermore, respondents' said practices place in the hands of retailers of said shoes and others a means and instrumentality to mislead and deceive members of the purchasing public into the erroneous and mistaken belief that s tid shoes are con- 3tructed in such a maIlleI' that their nse will prevent and correct ab- 10rmalities, deformities and ailments of the feet and keep the feet teal thy.

MERCANTILE STORES CO. , INC. , ET AL. 579 576 Order CONCLUSION The aforesaid acts and practices of the respondents, as herein found are all to the prejudice and injury of the public, and constitute unfair and deceptive acts and practices in commerce, within the intent and meaning of the Federal Trade Commission Act. ORDER It is ordered That the respondents, Mercantile Stores Company, ), aInc., a corporation, and Mercantile Stores Company, Inc. (N. Y. corporation, their offcers, agents, representatives, and employees, directly or through any corporate or other device, in connection with the offering for sale, sale, and distribution in commerce, as "commerce" is defined in the Federal Trade Commission Act, of shoes now designated as "Health-Flex " or any other shoe of substantially the same constitution, do cease and desist from: 1. Using the name "Health-Flex" or any name in which the word "'Health" appears as a trade or brand name therefor. 2. Representing, directly or by implication, that the said shoes are onstructed in such a manner that their use will prevent or correct abnormalities, deformities, or ailments of the feet or will keep the feet healthy.

It is jwrther ordered That the respondents shall, within sixty (60) days after service upon them of this order, fie with the Commission a report in writing setting rorth in detail the manner and form in which they have complied with the order to cease and desist. 580 FEDERAL TRADE COMJ\IISSlON DECISIONS Syllabus 50 F. T. C.