General Foods Corporation

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IN Tile Matler OF GENERAL FOODS CORPORATION Docket 567.5. Complaint ",ly 7 191,9-Decision, opinion, and (h sentinfl o1Jin'ion, Apr. , 1954 Charge: Discriminating in price in the sale of "Certo" and " Sure-Jell" pectin products in violation of Section 2 (a) of the Clayton Act, as amended. Before Mr. Abner E. Lipscomb and MT. William L. Pack hearing examiners.

Mr. EldonP. SCh7UP for the Commission. MT. Lester E. V ateTbuTY, of 'Vhite Plains, N. Y., for respondent. DEClSIOK OF 'rhe COJ\IJIISSlON DE YDI(; Appeal A DISJ\IISSING (JOMPLAIN'1' This matter came before the Commission upon the appeal of counsel supporting the complaint from the initial decision of the hearing ex. aminer' dismissing the complaint.

The Commission has considered the entire record herein including the exceptions to the initial decision and, for the reasons stated in the written opinion of the Commission which is issued herewith, is of the opinion that the rulings of the hearing examiner are free from prejudicial error and that the allegations of the complaint should be dismissed.

It is ordered, therefore That the appeal of counsel supporting the complaint from the initial decision is hereby denied and that the allegations of the complaint are hereby dismissed. Commissioner MEAD dissenting and Commissioner CARHJo'l'I'A not participating.

OPINION OF THE COMJlHSSION By GWYNNE, Commissioner:

The complaint charges respondent with territorial price discrimina. tion in violation of Section 2 (a) of the C1 ayton Act, as amended. At the conclusion of the evidence of counsel supporting the complaint respondent moved for dismissal on the ground that the evidence failed to prove:

(a) That the goods involved were of like grade and quality; (b) That there was any price discrimination; and (c) That the alleged practices tended substantially to lessen competition, or to create a monopoly, or to injure, destroy, or prevent Opinion 50 F. T. C.

competition within the meaning and intent of said Section 2 (a) the Clayton Act, as amended.

The hearing examiner sustained the motion on the latter ground and counsel, supporting the complaint, appeals. Respondent, a large manufacturer and wholesale distributor of food products, also sells "Certa" (a liquid pectin) and "Sure.J ell" (a powdered pectin), which products are used by the housewife in making jellies and jams. In 1929, by the purchase of certain patents, respondent had a virtual legal monopoly in the liquid household pectin business. In 1939, because of the expiration of these patents and because of the appearance of powdered pectin on the market, the situation had changed considerably. At that time respondent had 75% to 80% of the national market of liquid pectin and 40% of powdered pectin. In the western territory it had 50% of liquid and 25% of powdered pectin.

In 1940 (and continuing until the end of 1947) respondent put into operation certain "deals " in the western territory (being roughly that portion of the United States west of the Rocky Mountains). Under these deals, respondent's wholesalers, jobbers, and retailers were authorized to sell one additional bottle of Certo, for example for 3 when the customer bought two bottles at the regular price. The net effect of these deals was to sell Certo and Sure. Tell to the consumers in the western territory cheaper than prices maintained elsewhere. Within the chosen area the deals were open to all who wished to buy Certo and Sure-Jell. There is no claim of injury in other than the primary line, that is to competition between respondent and others engaged in the sale of household pectin at wholesale. That part of Section 2 (a) of the amended Clayton Act material to this inquiry is as follows:

That it shall be unlawful for any person engaged in comnlerce, ill the course of such cornrnerce, either directly or indirectly, to discriminate in price between difJ'erent purchasers oJ commodities of like grade and quality, where either or any of the purchases involved in such discrimination are in commerce, where such commodities are "old for use, consumption, or resale within the United States, or any Tenitory thereof or the District of Columbia 01' any insular possession 01' other place under the jurisdiction of the United States, and where the eHect of such discrimination may be substantially to lessen competition or tend to create a monopoly in any Jine of commerce, or to injure, destroy, 01' preyent competition with any person who either grants or knowingly re('eiyes the benefit of such discrimination, or with customers of either of them GENERAL FOODS CORP. 887 885 Opinion The first question to be considered is what is the test for determining injury to competition ill territorial discrimination cases where injury is in the primary line. On that subject, the hearing examiner at page 6 of his initial decision said:

vVhatever may be the correct rule in cases charging injury to com" petition among competing purchasers, the examiner understands that in territorial price discrimination cases where the injury charged is in the primary line, that is, to competition among sellers, the inquiry is of a uroader ,md more gelleral nature. In such cases the important question is not whether a particular seller may have lost business but rather whether competition in thc area in question has been or is likely to be substantially injured. In short, whether tl,ere is a substantial tendency toward monopoly.

It is true that in such cases injury to competition and a tendency toward monopoly are proper subjccis of inquiry. But we do not believe the law makes the distinction between competitive injury to sellers and competitive injury to their customers that the above state. ment would seem to indicate. Both sellers and customers are equally under the protection of Section 2 (a). The test is the same in either case. The standard for determining the unlinvfulness o'f an unjusti. fied price discrimination, namely, the substantiality of the effects rea. sonably probable, is the same whether the competitive inj Llry occur' at the seller level or at the customer level. Thc fact of injury is to be determined in all cases by ,t consideration of all thc competent and relevant evidence and thc infel'c,'ces which may be reasonably drawn therefrom. l.i1lier ditIel'ing circumsiances the proof necessary to establish injury or even to make out a prima facie case will difl'er. See 334 U. S. 37 (1947).Fedeml Tmde Commission v. Morton Salt Co. That the statements of the Comt in the Morton Salt case concerning permissible inferences of injury where the discrimination was between competing customers could not automatically be applied cases of territorial price discrimination, even in the case of customers is well set out in the 1948 Policy Statement of the Federal Trade Commission.

However, there are strong reasons why the concept of injury adopted by the court in the :Morton Salt case should not be applied automatically to discriminations arising under geographic pricing systems in which purchasers paying different prices are differently located and the price differences generally diminish as the distances diminish between purchasers' locations. In these circumstances corn. petition between purchasers paying significantly difierent prices IIay occur in quite limited areas or only along thc fringes of trade terri. tories. Seeming advantages in price may be materially affected by Opinion 50 F. T. C.

disadvantages of location. These and other considerations make it clear that in geographical price discriminations inferences of injury to competition drawn merely from the existence of price differences between purchasers who compete in some degree would have no sound basis. The minimum determination of injury should be based upon ascertained facts that afford substantial probability that the discriminations, if continued, will result in injury to competition. Puerto Rican Amencan Tobacco Company v. American Tobacco Company, 30 F. 2d 234, in volved a territorial discrimination under Section 2 (a) prior to its amendment by the Robinson-Patman Act. The evidence there was that the competing seller had suffered severe linancialloss because of the discrimination and also that the diserimi. natoI' was selling cigarettes in Puerto Rico at a loss, for the purpose of eliminating its competitor. jJ11 lle7' Company v. JiedeTal Tmde Commission (1944) 142 F. 2d 511 , was generally similar in its facts. There the evidence was that prices were reduced in certain areas below cost with the deliberate intention of eliminating a competing seller. That this competing seller did snffer injury was shown by the decline of its sales of chicory from 2 3H) 507 Ibs. in 1936 to 1 459 195 Ibs. in 1937. Count III of Minneapolis-Honeywell Regulator Company v. Fed. eml Tmde Commission (1951) 191 F. 2d 786, involved price discrimi. nations under Section 2 (a). The complaint charged injury in both the primary and secondary lines. The hearing examiner found "that competition is not injured. " The Commission, with one member dissenting, reversed the hearing examiner. In reversing the Commis. sion, the court pointed out "various undisputed facts as to the effect of Minneapolis. Honeywell practices 011 competitor competition " (that , in the primary line), including the following: (a) That the prices charged by Minneapolis.Honeywell' s competi. tors were generally lower than those 01' Minneapolis. Honeywell and that there is no evidence of any undercut:ing of its competitors by the Minneapolis.Honeywell Company.

(b) That throughout the complaint period the keenest kind of price competition existed mnong control manufacturers. (c) That during this period the total business of Minneapolis. Honeywell' s competitors increased.

(d) That Minneapolis- Honeywell' s slml'e of the available con. trol business was reduced from 73% in 1937-1938 to only 60% in 1941. With respect to the secondary line, the court also found that injury to competition was not proved because there was no causal connection between the price of controls (sold by respondent) and the price the finished product (oil burners with respondent' s controls attached) sold by respondent' s customers. A writ of certiorari was dismissed , , , GENERAL FOODS CORP. 889 885 Opinion because the petition was not filed within the period avowed by law. The dissent of MI'. .Tustice Black indicated his disagreement with the conclusion arrived at by the Circuit Court of Appeals in regard to injury in the secondary line, a question not presented in tlw instant case.

The burden of proof to establish injury to competition is on counsel supporting the complaint. Tn A. E. Staley M anufact1tTin,q C01npany Federal I'Tade Cmnm'ission 1;'\5 F. 2d 4;';) , the conrt held that proof of discrimination in price is Ilot suificient; that in addition "there must be evidence to support a finding and there must be a finding based on that evidence to show wherein competition is substantiaHy lesscned and a monopoly fostered. " Tn suits brought to recover treble damages both before and after the Hobinson-Patman Amendments to the Clayton Act, it has been indicated that the plaintiff must a1Jege and prove injury to competition. See BaTen v. Goodyear Ute and Rubber Company (1918) 256 Fed. 570; Sidney Moss v. National Association of StationeJ's, Offce OutfitteTs and anufactureT8 (1930) 40 F. 2d 620; ATth' UT v. Kraft. Phenix: Cheese COTpomtion (1938) 26 Fed. Supp. 824.

Moss ncoTpo1'ated v . Federal 7' mde C omrni8sion (1945, Second Circuit) 148 F. 2d 378, apparently announces a different conclusion. That case involved discriminations in price under Section 2 (a) and the claimed injury was in the primary line, that is, to competitors of the seHer. The Commission made iindings of fact which set out eight instances in which respondent had discriminated in price. each case, there was a finding that such discriminations resulted in :'lbstantial injury to respondent's competitors and tcnded to create a monopoly. (In the matter of Samuel H. Moss, Inc. (1942) 36 FTC 640. ) Thus, thc question of which party has the burden of proof is not involved. The court, however, stated that where a discrimination was shown, the burden was on anyone making such discrimination to show that injury to competition did not occur. This view was again expressed by the same court in Fedaal I'ra. de Commission v. Stamdard Brands (1951) 189 F. 2d 510.

The view apparently taken by this court has been criticized by writers on the subject. See Oppenheim Should the Robinson- Patman Act be Amended " Robinson-Patman Act Symposium, New York State Bar Association, 1948 CCH edition, pp. 141 , 152 (1948) ; McCollester Suggestions as to Certain Amendments " Robinson- Patman Act Symposium SUPTa pp. 133, 136 (1948); A ustern Re. quired Competitive Injury and Permitted Meeting of Competition Robinson-Patman Act Symposium, Ncw York State Bar Association 1947 CCH edition, pp. 63 70 (1947).

Opinion 50 F. 'l' The Federal Trade Commission has very generally held, that under Section 2 (a), counsel supporting the complaint has the burden of proof to esiablish the necessary competitive injury. 'Where that burden has not been sustained, the cases have been dismissed. See in the matter of Champion Spade Plug, Docket :3977; in the matter of Geneml Motion Corpomtion and A C Spark Plug Compa:ny, Docket 5620; and in the matter of The Electric Auto-Lite Company, Docket 5624. Even in its brief opposing certiorari in the Moss case, the Commission expressed this same view, in the following language taken Jrom page 8 :

Although a respondent undoubtedly has the burden of proving the various justifications listed in the provisos in Section 2 * * * the Commission has always construed the Act to require it as a part of its affrmative case to present evidence that a discrimination may lessen or tend to injure competition.

The first part of Section 2 (a) sets out the elements necessary to establish a violation of the law. They are: (1) discriminations in price betweeen different purchasers of commodities of like grade and quality; (2) certain jurisdictional facts; and (:3) competitive injury. Proof of all three is necessary to make out a prima facie case. It has often been pointed oui that differences iu price without competitive injury are not illegal.

The section then goes on to point out certain situations in which price difference is not il1legal. That is, in those instances, )1ro(,f of certain facts may be made, not by way of denial, but by way of justification. The burden, however, of affrmativc justification is on the party charged with the violation. The facts which such a party must show arc facts concerning which he would have peculiar means of know ledge. Therefore, Congress (following a plrcn often adopted by legislative bodies) put on him the burden of rebutting the prima facie case. As to the fact of competitive injury, however, such a party would ordinarily have no peculiar knowledge or means of knowledge. We should not assume that Congress meant to apply the same rules of proof to these clearly different situations unless it said so in clear and unequivocal language.

The complaint in this case alleges competitive injury and counsel supporting the complaint offered evidence to prove the allegation. order to prove injury to a competitor, counsel supporting the com. plaint presented the testimony of Herbert T. Leo, President of the Mutual Citrus Products Company of California, a competitor of respondent in the sale of pectin. .Mr. Leo stated that respondent's deals had adversely affected his business to a substantial degree. pointed out by the hearing examiner, however, the figures given as ____________ . . . . . _.. ..... . .._ . _. . GENERAL FOODS CORP. 891 885 Opinion to the sales by the witness in cross-examination showed a different picture.

In 1939, the year immediately preceding the first of the deals M. C. P. s sales were 98 874 dozen packages; in 1940, the first year of the deals, sales were 101 001 dozen; in 1941, 120 070 dozen; in 1942 168 878 dozen; in 1943, 405 202 dozen; in 1944, 410 251 dozen; in 1945 294 263 dozen; in 1946, 42 708 dozen; in 1947, 335 447 dozen; in 1948 495 11:3 dozen; in 1949, 428 42:i rlozen; in 1$150 , :327,052 dozen ;in 19;)1 (to September 1), 387 215 dozen.

Mr. Leo further testified that the lower sales in 1946 were due to sugar rationing rather than to respondent's deals and that the in. creased sales of 1948 and 1949, after the deals ended, were due to the failure in quality of the product of a third competitor. The evidence also shows that the deal price of respondent was generally a little above Mutual Citrus Products prices, although in 1947 the latter advanced its price above the deal price but later went back to the old pice.

The vice president of another competitor, Pen. Jel Corporation, also testified that respondent' s deals injured that company. However, he also testified that Pen. .T el sales were 10% to 15% higher in 1847 than in 1940.

The record llso shmys tkLt the sales oi' another competitor, Fault1ess Foods Company of Seattle, IVashington, had dropped from 25 558 cases in 1939 to 3 058 in 1946 , risen to 27 940 cases in 1947, and hnd declined to 1 740 in 1950. It appears however, that the drop in the volume of sales was due to causes other than the competitirJl of re spondent' s deals. IVhile the presideni of this company al,;o chimed injury because of responrlpnt's deals, he further expressed the opinion that his company had lost business to the two other competitors named herein.

Figures are not avaihLle to show respondent's position in the western territory during the years ill which the deals were in operation. However, the pei centage of the national pectin market held by Certo and Sure. Jell fol certain years was shown to be as follows: Yea,.

1\188.. - u ----- 67. 2 1939__ ------ 62. 2 19.10-- - 67 1\141__ - 6 1942_ . 74. 1943-- - 72. G 1944- --- 74. 2 1\145-- --- 8 1946- ---- 80. G 1947-- --- 64. , Opinion 501;. T.

The hearing examiner also found "except for the early years, when there was a legal monopoly due to the existence of patents, competition in the pectin industry, including that in the western portion of the United States, appears to have been at all times active and virile and to he so today.

The hearing examiner concluded that the evidence failed to establish a prima i'cie case in support of the complaint. He had opportunity to observe the witnesses both on direct and cross.examination and his findings are to be given proper weight. l/ni1JeTsal Cam.eta Corporation v. National Labor Relations Board, 340 U. S. 474; Folds v. Fedeml Trade Con/mission (1951) 187 F. 2d 658. 'Ve agree with the conclusion of the hearing examiner, and it is therefore ordered that the complaint be dismissed. Commissioner MEAD dissents and Commissioner CARHETTA did not participate.

DlSSIGNTING OPINlON OF COMMISSlONI'H JlEAD The respondent in this case, the General Foods Corporation, is one of the nation s largest producers and distributors of foods. It pro. natio1laJJy advertised products such as ell-duces a number of Maxwell House Birds Eye" and others. This case relates to respondent' s pectin products designated "Certo" and "Sure. Tell." Certo is a liquid product and Sure. J eJJ is a powdered product. Pecti1l is used in making jams and jellies.

The Commission on .July 7, 1949 issued a complaint alleging that respondent was violating Section 2 (a) of the Clayton Act, as amended by discriminating in price in the sale of its pectin products. This case relates to the Hobinson.Patman amendment to the Clayton Act. The attorney in support of the complaint has completed his case in chief. The attorney for the respondent has filed a Motion to dismiss the complaint on the ground that the record does not support a prima facie case of law violation by the respondent. The Hearing Examiner issued his initial decision dismissing the complaint. The attorney in support of tlJP complaint appealed to the Commission from this initial decision.

The record indicates tlmt the pectin industry in the United States originated as a result of certain experiments performed by Robert E. Douglas who obtained t 'yo U. S. patents. In 1929 General Foods purchased all of the asc;ets of the Douglas Company, including the Douglas patents. These patents inclu(1ed only liquid pectin which was the only type manu factured at that time. For a few years after General Foods obtainPrI the Douglas patents, it enjoyed a complete GENERAL FOODS CORP. 893 885 Opinion monopoly in the sa.1e of pectin in this country. In the mid thirties the Douglas patents pxpin:d. Respondent and others also began to produce a powdered form of pectin. According to the Hearing Examiner, in 1939 in the liquiel pectin field, General Foods' percentage. from 1000/ to approximately of the national market had declined 750/ or 800/. In the powdered pectin field, General Foods controlled approximately 40% of the national market. In the 'Vestern states respondent' s share of the liquid pectin market was approximately 500/ and of the powdcred pectin market approximately 25%. The record shows that a few small manufacturers began to give respondent some competition in the pectin field in the late thirties. Respondent considered ways and means of retaining its dominant position in the field. Respondent could have, of course, in meeting price competition, reduced its prices across the board. It decided against a general price reduction and in lieu thereof, chose to offer its customers in the Western States, where it had competition, certain so.caIJed "deals. " In other words, respondent did not choose to re duce its prices generally but did choose to discriminate in price between two geographical areas.

The "deals" described above were olI'ercd by General Foods to its Western eustomcrs from 1940 until about 19.17. For illustration, in 1946, respondent's usual case price for Certo was $4.30 per case of two dozen. Respondent's "deal" price for Certo was $8.22 per case less handling allowance of 4 cents per case. The "deal" price there. fore was $3.18 per case as compared to the usual price of $4.30 per case. As for Sure- r eIJ, respondent's usual price was $3.25 per case but its "deal" price amounted to a net of $2.57% per case. Respondent distributed its pectin products on a nationwide basis. As stated above, respondent offered these "deals " only in the 'Vestern States. Respondent therefore was discriminating in price among its purchasers of commodities of like grade and quality in COll1nercp. It is not necessary under Section 2 (a) of the Clayton Act that the customers of the seller be competing customers. If the price discrimination is among competing customers, the question is usually whether or not there has been any injury in the so-caIJed sccondary line of commerce, th:lt is, whether the injury is to the purchasers who are discriminated against. In this case as the purchasers who were discriminated against are not in competition with the favored customers, the question of injury relates only to thc so.caIJed primary line of commerce, that is, to the manufacturers who are competing with General FOOllo Although we may assume from the record that the competitive products are of equal1 quality to the General Foods pectin products Opinion 50 F. T. C.

the latter command premium prices in the market. This is apparently because of the prestige of General Foods, the wide distribution, nationwide advertising, etc. Although by use of the "deals" in the \Vestern States respondent substantially reduced its prices in that area, the prices charged by respondent's local competitors in those States con. tinued to be lower than respondent's prices. It is an obvious economic fact, however, that a reduction in the price of a well advertised national brand of merchandise may cause business to be diverted from a relatively unknown local or regional product although the reduced price of the national brand may continue to be greater than the price of tile local or regional brand.

There is very frequently a trade price differential between well advertised brands and relatively unknown brands of merchandise although the quality of the two may be substantially equal. If this trade djflerential is 10 cents a unit and the gap is reduced to 8 cents a unit, a certain number of customers will discontinue purchasing the This eco.cheaper product and will purchase the premium product. nomic fact was recognized in the hearings before Congressional committee in connection with the proposals to amend the Robinson-Patman Act provision relative to meeting the equally low price of a competitor. The point was that if a seller is to be allowed to claim the defense of good faith meeting of competition, he should not be required to meet the identical price in order to plead this defense. He should only be required to meet :hat price which is equal to the customary trade differential between t.he t.wo products if such trade difl'erential in fact exist.s.

The purpose of General Foods in offering these "deals" in the Western states was frankly aggressive. As stat.ed by the attorney for Gen- 'tral Foods in his able oral argmnent before the Commission: \Ve were interested in getting some more business in the 11 West- 'ern states, t.hat is t.he reason we did it.. A memorandum obtained from the files of the respondent and dated Sovember gO, 1942, describes the purpose of the "(leals" as follows: tlcn am of Uw opinion that had 'we not made it lou/th 'for:\1. C. P. as we did the last three years, they would have spread eastward at a much faster rate than they did and ,ye would now be facing some pretty tough competition in the midcl1e.west, the high 'Sure. Jell' per c:apita market. '" " * The management mlly rightiuJJy ask how much longer is it going t.o be necessary for us to continue the deal operation in the \Vest. I cannot an,, \\er that q llestion. The record, however \,"ould indicate that if we cease to be competitive in the \Vest, we wiJJ very likely lose ground rapidly to M. C. P. and otl,er local competition. If we can, hy means oJ the deal opeI'atioll, contine this competition ,j. _ GENERAL FOODS CORP. 896 885 Opinion largely to the Far West, I think there is good insurancc and that the deal serves a two.fold purpose. (Comm. Ex. No. 28) The general picture, therefore, as I see it, is that the former legal patent monopolist in the field and the current dominant seller.initiated these deals in order to confine its existing competitors to their local markets in the "\Vestern states and to prevent these competitors from obtaining any higher percentages of the IV estern market. Assuming thcsc to be the purpose of the "deals " they were successful as General Foods has localized this competition and has obtained a larger percentage of the national market.

The Examiner and the majority opinion point out that certain of respondent' s competitors increased their dollar volume during the period that General Fooct1 offered these deals. However, the significant test as to whether or not a concern is losing l,'Found or succeeding in the competitive struggle over any period of time is the changes if any, in tlJ(o share of the market enjoyed by such concern. The record in this case shows that General Foods increased its share of the market and that the competitors of General Foods had a decreasing sharc of the market.

Dollar volumes increased substantially in the war years. During that period a concern might continue to have the same dollar volume or even have a modest increase in its doj1ar volume but yet be falling behind competitively speaking. It is common knowledge that during this period the cost of doing business substantially increased.' Concerns were staying compctitivc not by retaining their past dollar volumes but by retaining their proportionate shares of the expanding market. The substantial new business helped oJlset the higher break even levels which were a necessary floor for staying in business. The contest among competitors, therefore, was for this new business which could be obtained during thc war years. This contest was vital for small business with Jimited resources.

The statistical picture showing the different shares of the market of the pectin competitors between 1939 (prior to the General Foods dcals) and 194G (after the deals had been in effect for approximately 6 years) is very vividly illustmted by Commission s Exhibit 79. This exhibit was obtained from the files of General Foods. In 1939 total United States pectin sales were divided as follows: Liquid PmodeT sales-44%1. Certo sales_-Sales-56%- 41. 1. Sure. Jell sales_---- -- 20. 1'% 4% sales--__ 11. 6%2. .Jels.Rite - - 5. 9% 2. Pen.Jcll All others__----_- -- 8. 3. AJ1 others----_--_ .. 11. 7% General Foods had 62.2% National Market.

Opinion 50 Ir. T. C.

In 1946 total United States pectin sales were divided as follows: Liquid Powder- Sales-51.5%1. Certo sales_8ales-48.5%------ 42. 1. Sure. Jell sales---- -_- 37. 8% 2. All others_ --- 5. 2. Pen. Jell ------------ 6. 7% 3. M. C. P. sales--_ _---- 4.

4. All others_ -- 3.

General Foods now had 80.5% of the National Market. This shows (A) The 19;q9 liquid market dropped from 56% in 1939 to 48.5% in 1946 or a drop of 7.5 percentage points.

1. Certo gained from 41.4% in 1939 to 42. 8% in 1946 or a 104 percentage point gain on a dropping market.

2. All other liquids including Jels.Rite dropped from 14.6% in 19a9 to 5.7% in 1949 or a loss of 8.9 percentage points. 1939 to 51.5,/0(B) The powdered market gained from 44% in 1946 or a gain of 7.5 percentage points.

1. Sure-Jell gained from 20.8% in 19a9 to 37.7% in 1946 or a gain of 16.9 percentage points.

2. Pen.Jell lost from 11.6;; in 19:39 to (U;; in 1946 or a loss of 5. percentage points on a rising market.

3. M. C. P. which first appears on the chart in IH41 with 4.7% had 4% in 1946 or a loss of 1'10 of '1 P( e!lLagc pomt OlJ 'J rising market. 4. All others lost from 11.6% in 19,\9 to a.3% in 1946 or a loss of 8. percentage points on a rising market.

The above analysis and also the majority opinion point out that in 19;19, the year immediately prior to the initiation of the deals, General Foods controlled (j2.2 % of the national market in pectin. The opinion and the analysis further shows that General Foods' share of the mar. ket increased during the "deal" years to 1946 when its share was 80.5% of the market. (During the last deal year-1947-General Foods had operational diffculties and its share of the national market decreased. ) The Court in the case of E. B. lihlZler Co. vs. Federal TTade Commission. 142 F. 2d 511 , aptly described this cc'OllOmic situation. These discriminations \H,ne' not, as petitioners would have us be. lieve, unrelated to the central purpose, which was the destruction of petitioners' only competitor. By (liscriminating against other gen. eml trade areas in favor of 'Iew Orleans, Muller, on the 0I1e hand, was able to force the price so low in New Orleans that Sch:ll7,er could not meet its competition. On tJ1( other hand, by selling at higher prices in othpI' geneI'al trade arpas, Muller rnnde up its loss in the New Orleans distrid.

, ;,,,.

GENERAL FOODS Lv...... .

885 Opinion Economists may differ tS to what particular percentage of the national market a concern may have before it may be classified as a monopoly. A concern having :35% of the market may not be It mo. nopoly, but certainly when a concern begins to obtain over 50% of the national market in any particular commodity, then such concern, because of such share, is iil the position to exert a very significant effect on the market. An area price discrimination by a concern having % of the market may not have as great an adverse effect as a discrimination by a concern controllng 80% of the market. If a crocodile had any concern as to the future of the fish enclosed with him in a small pool, the crocodile should exert some care as to the manner in which he flips his tail. It would not be necessary for him to exercise the same degree of care if he and the fish were in a large body of water. In the sma1Jer pool the crocodile already occupies most of the maneuveI'ng space.

Commission Exhibit 28 which was taken from the files of General Foods affords a very enlightening picture as to Whtlt offcials of Genend Foods believed these deals were accomplishing on the 'IV cst Coast. The exhibit states in part that the Pacific Northwest ami Southwest account for close to one. fourth of the total pectin sales "hence losses or gains in this important pectin territory affect onr national pectin sales materia1Jy. fhe exhibit stntr' s that a table shown on the ex. hibit "shows a comparison of onr (General Foods) competitive position in these two crop areas for 1938 and 19:)$J-the two years inane. diately preceding Ollr deal operatjon and for the three years during which we had tne consumer deal in cited. This table shows that in 1939 (the last pre-deal year) the competitive brands had 53.9% of the market and General Foods brands had 46. 1 % of the market in the Pacific Northwest. In 1942 (the last deal year shown on this partic. ular table) al1 competitive brands had 87.5% of this market and General Foods ' brands had 62. ;;, of thc Pacific Northwest market. The table shows that for the Pacific Sonthwest in 1939 a11 competitive brands had 44.;)% of the marl-wt and General Foods' brands had 55.7'; of the market. The table shows that in 1942 all competitive brand had 30.9% of the Pacific Southwest market and Cxeneral Foods' branch had 69.1 % of such market.

Commission exhibit 28 (taken horn General Foods' Jiles) states il mediatelv after tile table referred to above, as follows: Prior to 1939 M. C. P. (a competitor) was selling a liquid pec in a tin can which did not meet with any success. In H)89 they in! duced their powdered product and promoted it aggressively. above figures show that we lost heavily the first two Yt ars of 1\1. ( powder competition. ln the Southwest, Certo and Surp, .Tell ( :t:;- 57. .

( \\ .."n.vl! COMMISSION DECISIONS Opinion 50 F, T. C. bined dropped from 73% of the market to 52% in two years. In 1940 we ofiered the Sure-Jell deal in the Southwest. We made a good gain on Sure-Jell but M. O. P. made greater gains, resulting in a further sharp decline for Certo. In 1941 we offered deals on both products and registered substantial progress, M. C. P. taking a sharp loss. In 1942 we made a further gain on Sure. Jell but lost a little ground on Certo. M. C. P. also showed a small gain but you 'v ill notice that liquid competition has almost been completely eliminated, Certo and Sure.J ell combined getting G9% of the market compared to 52% in 1940 ancl73% in 1938.

As an addendum to the above, the share of the market enjoyed by General Foods continued to increase subsequent to 1942 until in 194G General Foods had 80.5% of the market. If this exhibit (28) had been prepared in 194G instead of 1\)42, the officials of Geneml Foods would probably have stated that the deals had been extraordinarily successful in view of the fact that General Foods then had almost a monopoly on pectin sales in the United States. Monopoly and competition has been a favorite subject recently of learned economists. IVe are advised from the cloistered halls of economic thinking that perfect price competition docs not exist. Our aim, we are told, should be to obtain the most desirable form of imperfect competition. There is, however, a disagreement among economists as to which is the preferred type of imperfect competition. We hear such terms as countervailing powers, workable competition effective competition, potential competition, substitute products, etc. Some of the economists appeal' to give doctrinal support for the thesis that the antitrust laws as interpreted by the Oourts are now outmoded. It is indicated that we should view the problem of competition on a much broader basis than heretofore.

For illustration, if the manufacturer of a product becomes too TIonopolistic a competitive substitute product will be developed and hus curb the monopolistic practice and make unneeessary an antitrust 'gal proceeding. This bro:nl type of eosmic economie thinking is lteresting, if inc1efini te. However, this Commission is enforcing speeifie statute. IVe are dealing here with qlH'stiollS of iet about jury to eeJ'ain smaU competitors. "lve are not dealing with general )110111ic. theol'jes.

!'he snm of competition in this industry equals the accunn:1: t.H1 ,rts of these small competitors of the llmninant seller-General (YJ11y ' lY to yip",,\ tlle \whole- competih:m iT1 thc il)ch1s, ds. 'Ille 1 ) +1,.."'L l-, :. l . ,- '1(\O 111- -. JJ -1taill SOT\l'C .I: have cJailned th;rc rhe 1 obins(n"l- atElaJl l ct proge11erally s soft t'olllpetitio1.1 l' d:hel' than h(llcl COlllpetjtloT1. rIllis !.

GENERAL FOODS CORP. 899 885 Opinion bIToneous concept may bc due in part to a misunderstanding or perhaps in a few cases, to a misapplication of the Hobinson-Patman Act. The Robinson.Patman Act promotes hard, fair competition. For illustration, General Foods, the dominant seller, encormtered a degree of competition on the ,Vest Coast. Competition is vitalized by any one or more of the following: (1) lowering prices; (2) raising qualchoose to use aity; or (3) better selling methods. General Foods deal" offer which was in fact a price reduction. But did this Goliath march bravely on the field of battle and compete with the"e litte Davids by making this "deal" available to all of its customers 1 Th would have been a choice by General Foods lot hard and fair com. business competitors,petition between General Foods and the small But General Foods did not ,,0 choose. It chose instead to lune its customers in the other sections of the country, who did not eJljOY the fruits resulting from this competition by the small competitors, to be chargpd higher price,, so that General Foods would have a war chest 10 beat down the small business eOIljJetition. For General Foods-. was unfair "as soft competition. For the small competitors-it competition.

Under this system the swaJ1 local area bn"incssman cannot corn pete on even approximately eqmtl terms with the nationwide distributor' The large corporation can play its area pricing patterns Jike a pi'li'o, It can erush sm dl business competition wllerever the latter appec and charge the tariff to its other customers who have no price alternatives. The little Davids are deprived of even their sling shots in their c:contest with Goliath. Is that hard or soft competition for Goliath? It is soft for the dominant seller, the Goliath. It is calamitous for :omall busilwss, the little Davids.

Because of his limited area distritJlition, each of the small businessman s custOITlerS is generally in competition with the other customers, The small distributor, therefore, must charge all of his customers pro. portionately equal prices 01' c lsl' he may be guilty of an ilegal price discrimination. The Imtionwide distributOI, of course, has JJany customers who are not in competition with each other and he may c1mrge ditIeJ'ent prices in diflerpnt areas without directly injuring the nonhtvored customers, If the natiOlHvide distributor ean legally use this area price discrimination weapon against his small competi. tors, he has another powerful weapOll to llld to his arsenal which includes mass production, n:ttionwide advertising, 1nrge financi lls(J1rces, researeh facilities, and many other. Should a hn' " distrilmtol' receive a price subsidy from other areas of the cOlmtry in ()rcleT to cornpete with a few small cOInprtitors on the \Vest COlt,;U \gain 1 ask, is that hard OJ' soh compejjtionu for Genenll Foods Opinion 50 F. T. C.

To constitute a prima facie case of violation of Section 2 (a) of the Cli\yton Act, there must be established (1) jurisdiction; (2) the sale of goods of like grade and quality to purchasers at discriminatory prices; and (8) the existence of circumstances which makes it rea. sonably probabb that the competitive effects described in the statute will result from this price discrimination. There is no issue before us as to jurisdiction, the grade or quality of the goods or that General Foods sold at discrimina.tory prices. The only issue is as to whether or not the competitive effects described in the statute resulted from the price discrimination. The statute describes these effects as follows:

may be substantially to lessen competition or tend to create a monopoly in any line of commerce, or to injure, destroy, or prevent competition with any person who either grants or knowingly receives the benefit of such discrimination, or with customers of either of them It is admitted that Govennnent counsel did not oiIel' in evidence in this case the scalps or the hides of the smaJi business competitors of General Foods. IVe do not have in evidence pounds of flesh 01' buckets of blood. IVe should not expect the type of evi(lence that Salome is said to have asked of Herod.-the head of John the Baptist on a sil vel' platter.

In lien of sanguinary evidence, let us review wlmt the vid,ims of General Foods' price d iscrimina lion practices had to say about this particular brand of conljJP.ti( ion. A witness represeming 1\'1 C. P. a competitor of General Food, , testified on page 307 of lhe record as follows:

Q. 1 ask you one d ired question, Mr. Leo. Is it your testimony that during (he years ID40 through ID47, while the General Foods Corporation deals were in e11cc! on Ccrto ami Sure-.Tell that they hurt your business ' A. Yes, they did very matel'iaJ1y.

This witness also testified as follows:

where the General Foods' special deals Oil Q. Now, in the areas Certo and Sure. JelJ were in dIeet, wO\dd you tell us whether or not they substantially aJ!ected the sales of your product? was A. Yes, very definitely, because it l spec.ial deal that they offered. And General Foods, without an.\ special deals, arc pretty tough competition. They operate some 2 500 salesmen and have entre to retail chains and jobbers by various pressure methods. They are. able to get die1tribntjoll whee the "wrage ,mall business concern tmlay is faced with n horrih1e problem of trying to get di :trihu( ion and they try to hold that distribution f'0Jl time. 10 timp. And we , GENERAL FOODS CORP. 901 885 Opinion didn t have a margin of profit suffcient to travel very many men out. Even now we can only travel two or three men, and it' s quite diffcult to maintain distribution.

This competitor was fortunate in that he also sold in an area where General Foods did not offer these deals. This competitor enjoyed some increase in business. However, this witness was asked whether or nbtthe business increase was more in the territories where there was no deal than it was in the territories where there was a deal. The witness answered "Positively.

A witness for ,Tels-Rite, another competitor of respondent, testified ,on page 747 of the record as follows:

Q. State whether or not the deals in effect on Certo and Sure-Jell during the years 1940 through 1947 in any way affected the sales of YOUI product els- Rite.

A. I feel definitely that they did.

Q. What effect did they have on YOUI' sales? A. Decreasing our sales through their advertising medium and their free goods, or whatever you wish to term it, and their aggressiveness, pointed, I would say, particularly at our Northwestern territory. This witness on cross-examination was interrogated as follows: Q. As I understand it, you complain because the price of Sureell as you contend was reduced in your territory; is that right? A. Right.

Q. l;Yell, what difference did it make to you whethn it was reduced or maintained outside of YOUI' territory? What effect would that have on your territory? A. The eflect it had was to break down my territory, I would say. In other words, I was reaching at that time to Denver and San Diego and it did make, it made it increasingly hard for me to get into these territories, and I am completely out of them now. A witness for the California Fruit Growers Exchange testified on page 454 of the record:

Q. And would you state that, in your sales to the jobbers, those -deals of General Foods Corporation might affect the sales to these jobbers? A. Yes, I think any special deal of flny competitor is bound 10 affect the sale of a similar product of other manufacturers. A witness for a food brokerage firm in Portland, Oregon, was interrogated at page 876 of the record as follows: Q. And what effect, if any, on your attempted sales of M. C. P. products did these General Foods Corporation deals on Certo and Sure-Jell have ? A. IVe11, it has been my job to cover the entire area, the State of Oregon and the 7 Southern Counties in Washington, and also l;Yest 902 :FEDERAL TRADE COMMISSION DECISIONS Opinion 50 F. T. C.

Idaho there, to cover all the jobbers and large direct chain buyers in the interest of M. C. P. powdered pectin.

Now, as you gentlemen well know the rnerchandising of pectin is entirely a seasonal operation. Time is the essence, and as I made these rounds and contacts, it was particularly noticeable among the larger jobbers and the larger chains, also the fact that when we presented our picture to the jobber, buyer, or other clmin store buyer, the buyers' answers seemed to be entire.)y cont.ingent upon the receipt or an announcement from General Foods as to t.he number of Cert.o deals and the number of Sure-Jell deals he was going to receive. Now, in other words, ,,;hen we were working against t.he General Foods deal, it was extremely difficult for us t.o secure large initial placement orders at the beginning of the season, with which to mer. chanc1isetothe retailer nud other consumers. * * * In other words, there was a natural reluctance on the part of the buyer to purchase large quantities of M. C. P. or even to cover at times until he knew exactly what he had coming from General Foods; and by the way, these allotments iu my territory were usually handled on the allotment basis, and the jobbe.r and the chain were told earlier in the season how many cases of deals they could plan on receiving, :md their merchandising was built around that quantity. Now, that infiltrates itself into t.he retail level because ever)' retailer has got to huy the deals to protect himself from competition and it. is entirely relative.

The testimony of this food broker paint.s very clear picture of the effect on competition of the deals offered by General Foods. Each customer of GeJwral Foods was allotted a certain number of these deals and apparently these customers would not consider purchasing com. petitive products until it was ascertained by them t.he extent of the deal allotment t.hey would receive from General Foods. One must keep in mind that these deals constituted price reductions to customers on the \Vest Coast and price discriminations to custolIwrs elsewhere. J believe it. is obvious that the use by GelJeral Foods of these deals not only resulted in a reasonable probability that competit.ion in these VI! est. ern states was inj ured but on the basis or the present record the Commission could reasonably find that competition was injured in fact In F. T. C. v. MoJ'on Salt 334lJ. S. :37, the Supreme Court point.ed out that the Congressional Committee reports on the Robinson- Patman Act emphasized the belier that the old Section 2 of the Clayton A.ct had been too restrictive in requiring a showing of general injury to competitive conditions. The Court in a footnote quoted from the statement of the Sennte Judiciary Committee as follows: This clause represents a recommended addition to the Bill as referred to your committee. It tends to exclude from the Bill other. GENERAL FOODS CORP. 903 885 Opinion wise harmless violations of its letter, but accomplishes a substantial broadening of a similar clause not contained in Section 2 of the Clay" ton Act. The latter has in practice been too restrictive, in requiring a showing of general injury to competitive conditions in the line of commerce concerned; whereas the more immediately important concern is the injury to the competitor victimized by the discrimination. Only through such injury, in fact, can the larger general injury result and to catch the weed in the seed will keep it from coming to flower. "\Ve do not have here only one competitor testifying tlmt he has been "victimized" by a discrimination in price, but we have substan. tially all of respondent's competitors on the Divest Coast testifying that they hlwe been the dominant seller continue,s to "victimized." If suppress its smaller competitors and continues to obtain by means of price discriminations a larger and larger share of the market, the prob. able result would be a monopoly and then perhaps a Sherman Act case for dissolution. A dissolution would certainly not be good for the dominant concern. For the entire economy, it is much better for these conditions to be corrected before a dissolution proceeding is necessary. It was for that principal reason that the Congress passed the Clayton Act. It is the duty of the Commission to act in the in. cipiency of the monopolistic tendencies before the monopoly mature" and a dissolution suit is the only eii'active remedy. It is stated that assuming that General Foods iJ1egalJy discrimi. nated in prices between 1940 and 194() this discrimination was not continued thereafter. In other words, it is claiIned that there is no public interest IJOW to justify the Commission proceeding further in this matter. General Foods contpnds that it did not discriminate illegally. General Foods has not stated that if the Commission dis. misses this complaint General Foods win not rpsume this practice in the future. In this connection, Commission Exhibit No. 80 dated November 12, 1948, is interesting. This 'was a mely0nmdum obtained from the files of General Foods. The memorandum was written after the deals had beeIJ discontinued by General Foods but a few months before the complaint ,,,as issued by the Commission. The memorandum states:

ciJson reports Divest Coast promotion-study or Barton and N com.indicate that the major powdered competitor--M. C. P.-made as did Peu.Jell on apetitive headway on the Coast this summer, smaller scale. For lack of a better explanation, we have to believe that the withdrawal of our Divest Coast free goods deal put us at a competitive disadvantage which we can ill aiford in that region. Ac. cordingly, we agree with you that it is almost essential that you reinstate some form of deal in ' 49.

Opinion 50 F.

It is reasonable to assume that if the complaint in this case had not been issued, General Foods would have resumed oilering the deals on the West Coast. In other words, the smaller competitors could compete with General Foods if General Foods did not discriminate in price. The dominant sBlIer, however, demands the added WBapon of price discrimination when it competes with small business. Does General Foods want hard competition or soft competition for General Foods? The majority Opinion relies as a matter of Inw in dismissing this case on Minneapolis. Honeywell Regulator' Company vs. F. T. C. 191 F. 2d 786. That was a Section 2 (a) Clayton Act case involving in part the question of injury in the primary line of commerce. How. ever, the price discriminations involved were not geographical price discriminations. Minneapolis-Honeywell was using a quantity dis. count system of pricing which it was alleged was discriminatory. The Court of Appeals for the Seventh Circuit reversed a finding by the Commission of injury in the primary line of commerce. The Court based its opinion on a showing that the total business of Minneapolis. Honeywell competitors had increased, that three new cancel's which had entered tbe industry had enjoyed a steady growth in sales volume that Minneapolis.Honeywell' s share of the available control business was reduced from 7:% in HJ:7- 19:J8 to only 60% in 1941, that Minne. apolis lost to its competitors 53% of the control business of 31 customers who previously had standardized on Minneapolis controls and that in the same year 126 of Minneapolis ' other oil burne-I' manufac. turer.customers also purchased competitive controls. In my opinion, the above statement by the Court of the facts in the Minneapolis.Honeywell case clearly distinguishes that case from the factual situation in this case. General Foods had a largBl' share of the market and the area price discrimination used by Gene-ral Foods was obviously devised for the purpose of obtaining the customers of the small competitors. No evidence was introduced in the Minneap. olis.Honeywell case of documents written by officials of that company boasting of the success of Minneapolis price discriminations in elimi. nating competition.

In regard to the linneapolis.Honeywell, ase, it is interesting to note that the Government petitioned the Supreme Court for a writ of certiorari in that case. The Supreme Court in its opinion of December 22, 1952 dismissed the appeal of the Commission on the ground that the Commission did not file its petition for writ of cer. tiorari within 90 days after the entry of the judgment of the Court of Appeals. JIowevel', Mr. .Justice 13hwk in a dissent commenting on the opinion of the Court of Appeals stated: GENERAL FOODS cu tir .

885 OpinioIj The end result of what the Court does today is to leave standing a Court of Appeals decree which I think is so clearly wrong that it could well be reversed without argument.

.Justice Black further stated that the "Court of Appeals here biled to follow our holding in the. Morton Salt case. For this reason also it should be reversed.

It might be argued that the Minneapolis.Honeywell case was not reversed because of a technical error in the fiing of a petition for the writ of certiorari. 'Whether or not the Supreme Court would have reversed MinneapoliscHoneywell if the Court had considered the case on its merits is a matter of speculation. Granting, however, that Minneapolis. Honeywell is a correct statement of existing law, I be. lieve that the evidence of injury to competition in this case is much more significant and substantially greater than was present in the record in the Minneapolis. Honeywell case. If we accord the decision in Minneapolis. Honeywell full scope, the facts in this case would stil, in my opinion, amply justify the Commission in finding the requisite statutory injury to competition in the primary line of commerce.

The disturbing factor to me in this case is the question of what is the future of Section 2 (a) of the Clayton Act as it relates to possible injuries in the primary line of commerce. If the price discrimination is in the sec.is among competing customers and the resulting injury ondary line of commerce, the fact of such probable injury may be readily apparent and demonstrable. In other words, if a seller has two customers located across the street from each other and the seHer discriminates in price between the two customers, probable injury to the non.favored customer may be reasonably apparent. However the question of injury in the primary line is not so readily discernible particularly if the seHers are of comparable equal size and control substantially the same percentage share of the market. If the sellers are substantially equal and if the competition is keen, there may be a constant fluidity of prices as one competitor may lower a price here or there to test the market. Any price discriminations resulting from these factors may be sporadic and may strengthen competition rather than injure it. An entirely different situation is present, however when one large seHer controls most of the market and uses an area price discrimination over a substantial period of time for the obvious purpose of controlling an even greater shnre of the market and thus deprive his seller competitors of their opportunity for healthy growth or ultimate survival. It is apparent to me that. is the situation in this case.

ilVU FEDERAL TRADE COMMISSION DECISIONS Opinion 50 F. i'. C.

A reasonable man might very well find in the light of the Morton Salt case (334 U. S. 37) and the fact that General Foods has discriminated in price and also controls such a large share of the market that the obvious result may be the competitive injury described in Section 2 (a) of the Clayton Act. However, in this case there is much more than just proof of a price discrimination and the fact that the seller has a large share of the market. There is in the record the testimony of the small competitors that they were seriously injured by the General Foods price discriminations. There are in the record documents taken from General Foods' fies in which offcials of the company bragged about the results of the deals (price discriminations) and stated in Commission Exhibit 28 that in 1942 "liquid competition has almost been completely eliminated." It is very unusual for the government to obtain the type of evidence that was obtained in this case. I am referring to the exhibits from respondent' s files in which offcials boasted that because of the price discriminations, General Foods' share of the market had been substantia1Jy increased. H the evidence now in this record is not suffcient to estab. lish a prima facie case under Section 2 (a), I seriously pose the question of what additional evidence could the government reasonably obtain in order to carry its burden.

In the vernacular of baseball, it is much easier for the batter to get a three base hit or a home run if he proceeds from first base directly to third base and avoids following the base paths around second base. H his competitors are required to follow the rules and touch second base, that is soft competition for the base runner. In this case, the small competitors have followed the rules. They are not discriminating in price. General Foods is discriminating in price. If the New York Yankees were competing with a small minor league baseball club it would be llnfair to require the players on the minor league team to circle the bases properly according to the rules and to permit the Yankees to bypass second base. General Foods-like the New York Yankees-should touch second base.

In my opinion, the record shows prima facie that General Foods has violated Section 2 (a) of the Clayton Act as amended by the Robinson.Patman A ct. In my opinion, the decision of the Hearing Examiner dismissing the complaint should be reversed and the case remanded to the Examiner to permit the respondent to proceed with its defense.

The majority of the Commission has concluded that General Foods has not violated the law, and has dismissed the complaint. From that action by the majority, I dissent.

SIGMA SEWING IV1ACHlNE CO. 907 Consent Settlement IN THE MATTER PAUL E. FEDER DOING BUSINESS AS SIGMA SEWING MACHINE COMPANY CONSENT SETTLEJln:NT IX J:EnAHD TO TUE ALLEGED VTOLATIOX OF THE FEDERAL TRADE COMMISSION ACT Apr. 1.954 Doclcet 6147. Complaint, Dec. 1953-Decision, 1Vhere an individual engaged in the sale of sewing machine heads imported from Tapan and of complete sewing machines incorporating the same, upon the front of which a medallon, easily removable, displayed the word or words Japan" or "Made in Japan" in such indistinct lettering as not to constitute adequate notice to the public that the machines were imported, and upon which. in the event of such removal, there appeared no visible marks of origin- (a) Ij'niled to disclose adequately 011 his said sewing machines and sewing lluchine heads-upon ",hiell, before uttered to thp puhlic, he placed no other marks disclosing their f(Jl'dgn origill- tllat said products were made in Japan;

(b) Falsely represented, through th€ adoption and use of the words "Admiral Star" as the trade name for his said products, and the conspicuous display thereof on the front horizontal arm of the machine and use thereof in his advertising matter, that his said product was made by or connected in some way with the well and favorably known American firm with which the word Admiral" had long been associated:

Held That such acts and practices constituted unfair and deceptive acts ami practices in commerce and unfair methods of competition therein. Before lJ1T. Williams. Pack hearing examiner. M T. Ames W. W illimn.s for the Commission. CONSENT SETTLE fENT 1 Pursuant to the provisions of the Federal Trade Commission Act the Federal Trade Commission, on December 3, 1953, issued and subse. quently served its complaint on the respondent in the caption hereof charging him with unfair and deceptive acts and practices and the nse of unfair methods of competition in violation of Section 5 of said Act.

nt as 1 The Commission s "Kotiee" announcing and promulgating the consent settlem published herewith, follows:

The consent settlement tendered by the parties in this proecf'ding, a copy of which is served herewith, was accepted by the Commi!:sion on April 15, IH54, and ordercd entered of record as the Commission s findings as to the facts, conclusioll, and order in disposition of this proceeding-.

The time for filing report of romplinncf' pur lJant to the foresaid order runs from tbe date of service hereof.

jj 908 FEDERAL TRADE COMMISSIOK DECISIOKS indings 50 F. T. C.

The respondent, desiring that this proceeding be disposed of by the consent settlement procedure provided in Rule V of the Commission Rules of Practice, solely for the purposes of this proceeding, any re view thereof, and the enforcement of the order consented to, and conditioned upon the Commission s acceptance of the consent settlement. hereinafter set forth, and in lieu of answer to said complaint hereby: 1. Admits all the jurisdictional allegations set forth in the complaint.

2. Consents that the Commission may enter the matters hereinafter set. fort.h as its findings as to the facts, cOlwlusion, and order to cease and desist. It is underst.ood that the respondent, in consenting to t.he Commission s entry of said findings as to the facts, conclusion, and order to cease and desist, speeii1early refrains from admitting or denying that he has engaged in any of the acts or practices stated therein to be in violat.ion of law:

3. Agrees 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, The admitted jurisdictional facts, the statement of the acts and practices which the Commission had reason to believe wert unlawful the conclusion based thereon, and the order to cease and desist, all oi' which the respondent consents may be entered herein in final disposi. tion of this proceeding, are as follows:

FINDINGS AS TO TIn; FACTS PAHAGIL\PII 1. Respondent., Paul E. Feder, is an individual trading as thl" Sigma Sewing Machine Company wit.h his oftce and principal place of business located at 270 1Vest. 19t.h Street, New York 11, New York.

PAH. 2. Respondent is now and has iol' several years last pnst been engaged in the sale of sewing machine heads imported from Japan ,wd complete se.wing machines of which said heads are :l part to dis. tribut.ors and also t.o ret.ailers who in turn sell t.o the purchasing public. In the course and conduct of his business, the respondent causes his products, when sold, to be transported from his place of business in the State of New York to the purchasers thereof locat.ed in various other st.ates and maintains, and at all times mentioned herein has maintained, a course of trade in said products in commerce among and between the various States of the United States. The volume of trade in said commerce has been and is substantial. PAR. 3. 1Vhen the sewing machines were sold by the respondent they were marked with a medallion placed upon the front of the machine SIGMA SEWING MACHINE CO.

907 Findings and upon which medallion the word " Tapan" or the words "Made in J apan" appear. The lettering of such word or words was so indistinct, however, as to not constitute adequate notice to the public that the sewing machines were imported. Furthermore, said medallion could be easily removed and when the medallion was so removed no visible marks of origin appeared on the machine. Respondent placed no other marks on the sewing machines disclosing foreign origin before such machines were offered for sale to thepublic.PAR. 4. 'Vhen sewing machines or sewing machine heads arc exhibited and of Ie red for sale to the purchasing public by retail dealers and others who sell to the public and such products are not labeled or otherwise distinctly marked so as to disclose foreign origin the pur. chasing public understands and believes such products to be wholly or su bstantially of domestic origin.

There is and was among the members of the purchasing public a substantial number who had and now have a decided preference for sewing machines and sewing machine heads which are manufactured in the United States over such products originating in whole or in substantial part in foreign countries.

PAR. 5. Respondent used the words "Admiral Star" as a trade THlme for his sewing machines. Such name appeared in conspicuous letters on the front horizontal arm of the sewing machine. It likewise appeared as a trade or brand name in respondent's advertising matter. The word "Admiral " used as aforesaid by the respondent is the trade name, mark, or brand of a business organization, long established and engaged in the manufacturing and marketing of household appliances in the United States, and which has been and is favorably known to the purchasing public.

PAR 6. By using a domestic trade or brand name such as "Admiral Star" respondent represented, and now represents, directly and by implication, that his product, a household appliance, is manufactured by, or connected in some way with, the well and favorably known American firm with which the word Admiral has long been associated which is contrary to the fact, and the use of such name by respondent onfuses and misleads the public and constitutes an unfair and deceptive act and practice. The nse of said trade or brand name by the respondent on his sewing machines and se,ying machine heads enhanced the belief upon the part of the public that said sewing ma. chines and heads were products of or sponsored by the well and favor "bly known firm with which said name has long been associated. PAR. 7. Respondent, by placing in the hands of dealers his sai, cnving macllines and sewing machine heads, provided said dealm v,""AL TRADE COMMISSION DECISIONS Order 50 F. T. C. a means and instrumentality whereby thBY may mislead and deceive the purchasing public as to thb rnanufacturB and place of origin of such sewing machines and smving machine heads.

PAR. 8. Respondent, in thb course and conduct of his business, was and is in substantial competition in commerce with other individuals and with firms and corporations engaged in thb sale of sewing machines and sewing machine heads in commerce. PAR. 9. The failure of thb respondent to disclose adequately on his sewing machines and sewing machine heads that such products are made in .Tapan, and also thb use of the trade or brand name "Admiral Star" on his sewing machines and sewing machine heads had the tendency and capacity to lead mmnuers of the purchasing public into the erroneous and mistaken belief that. his product.s were of domestic manufacture and were manufactured by the well and favorably known firm with which said trade or brand name "Admiral" has long been associated, and to induce memb\'rs of the purchasing public to purchase sewing machines and sewing machine heads because of said erroneous and mistaken belief.

As a result thereof, subst.antial t.trade in commerce has been unfairly divert.ed to respondent.s from his competitors and substantial injury has been and is being done to competition in commerce. CONCLFSION The act.s and practices of t.he respondent., as herein found, arc all t.o t.he prejudice and injury of the public and of respondent' s compet.it.ors and constitute unfair and deceptive acts and practices and unfair methods of competition in commerce wit.hin the intent and meaning the Federal Trade Commission Act.

OIWER TO CEASE ANn DESIST It is ordered That the respondent, Paul E. Feder, individually and trading as the Sigma Sewing Machine Company, or under any other name, his representatives, agents and employees, directly or through any corporate or other device, in connection with the oilering for sale 3ale or distribution of sewing machines and sewing nrachine heads in ;commerce, as "commerce" is defined in the Federal Trade Commission \et, do forthwith cease and desist from:

1. Offering for sale, selling or distributing foreign-made sewing 1machine heads, or sewing machines of which foreign-made heads are a art, without clearly and conspicuously disclosing on the heads in such manner that it wil not be hidden or obliterated the country of 'igin thereof.

SIGMA SEWING MACHINE CO. 911 907 Order 2. Using the word "Admiral", or any oimulation thereof, ao a brand or trade name, or as a part thereof, to designate, describe OJ' refer to his sewing machines or sewing machine heads; or representing through the use of any other word or words, or in any other manner, that said sewing machines or sewing machine heads are manufactured by any. one other than the actual manufacturer.

It is further ordered That the respondent herein shall within sixty (60) days after service upon him of this order file with the Commission a report in writing setting forth the manner and form in which he has complied with the order to ce.ase and desist. (Sgd) Paul E. Feder PAUL E. FEDER doing business as Sigma Sewing Machine Company. Date: March 23, 1954.

The foregoing consent settlement is hereby accepted by the Federal Trade Commission and ordered entered of reeonl on this 15th day of April 1954.

Consent Settlement 50 F. T. C. IN THE MATTICR OF SV IHSKY CLOTHING CO., INC., ET AL.

CONSENT SETTLEMENT IN REGARD TO Tile ALLEGED VIOLATION OF THE FEDERAL TRADE COMJllIRSION ACT AND THE WOOL PRODFCTS LABELl:;G ACT IJodwt 61IJ6. (!ompla.int, Feb. 5. 1.954-Jleei8ion, Apr. , 1954 \Vhere a corporation and its two officers, engaged in the HUlllufaeture and interstate sale and distribution of wool products as defined in the Wool Products Labeling Aet- (a) Misuranded certain men s coats in t.hat while they were labeled or tagged as containing "All Wool" or 100' 70 Wool", they contained substantial quantities of repro('Pssed and reus.edwool; (b) Further misbranded such coats in that the fiuer content of interlinings contained therein was not separately set forth 011 labels or tags attached thereto as required under tht provisions of saidAet; and (c) Purther Illisbl'andcd certain of said wool products in that the stamp, tag, label, or other means of identification l'P(Juired ullder the provisions of said Act failed to disclose the name or registered identification number of the Inanufad,urer thereof, or of onc or more persons engaged in the introduction into COllrnerce or in the uffer for sale, sale, transportation, distribution, or deli very for shipTnent of said wool products in ('Olllllleree: Held: rhat such acts and vractices, under the circumst.ances set fort.h, were in violation of the Wool Produds Labeling Ad and the Rules and Regulations promulgated thereunderc and COllRtituted unfair and deceptive ficti and practices ill COllTnercc.

Before Mr'. JohnLewis hearing examiner. MT. ()eot,qe E. Steinmetz for the Commission. MT. Sidney A. M anti:bet of N ew York City, for respondent.s. CONSENT SETTLEMENT 1 Pursuant t.o t.he provisions of the Federal Trade Commission Act and the \Y 001 Products Labeling Act of 1939, the Federal Trade Com. mission, on February 5, 1954, issued and subsequently served it.s complaiut upon the respondents named in the caption hereof, charging them with t.he use of unfair and deceptive acts and practices in viola. tion of t.he provisions of said Acts.

1 The CnmmiRsion s "::notice" announcing and promulgating the consent settlement as IJublished herewith, follows:

'1h(- cnm;pnt settlement tendered by the parties ill this 11roceccling. a copy of which is !-crYf'd lwrcwi th was Hcccpted by tlle Commission on April 15, lH51 , ilnd ordered entered of n'cord as the Commif'f'ion s fill(Iings as to the fads. concl\Jsion, and order is disposition of this l1i'()cprclin The time for filing report of compliance purSllant to the nforr:-a ill order rnns from the dat e of Sl'rvice hereof.

SVIRSKY CLOTHJNG CO,) INC.) ET AL. 913 912 Findings The respondents, desiring that this proceeding be disposed of by consent settlement procedure, provided in Rule V of the Commission 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 in lieu of answer to said complaint, hereby: 1. Admit all 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.

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. The admitted jurisdictional facts, the statement of the acts and prac. tices which the Commission had reason to believe were unlawful, 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, arc as follows:

FINDINGS AS TO THE FACTS PAMGMPH 1. Respondent Svirsky Clothing Co., Inc., is a corporation organized and existing under and by virtue of the laws of the State of New York. Respondents Samuel Svirsky and Seymour Svirsky arc the president and secretary-treasurer, respectively, of said respondent corporation. These individuals formulate, direct and control the acts, policies, and practices of said corporate respondent. The offces and principal place of business of a11 respondents is 110 Fifth Avenue, New York, New York.

PAR 2. Subsequent to the effective date of the ",V 001 Products Labeling Act of 1939 and more especially since 1951, respondents have manufactured for introduction jnto commerce, introduced in commerce, sold, transported, distributed, delivered for shipment and offered for sale in commerce, as "commerce" is defined in said Act wool products, as "wool products" are defined therein. PAR. 3. Certain of said wool products were misbranded within the intent and meaning of Section 4 (a) (1) of said VV 001 Products Labeling Act and the rules and regulations promulgated thereunder in that they were falsely and deceptively labeled or tagged with respect to the character and amount of the constituent fibers contained therein. 40344:J- 57- 914 :FEDERAL TRADE COMMISSIOK DECISIONS Ordcel" GO F. T. C. Among such misbranded wool products were men s coats labeled or tagged by respondents as containing "All IVool" or "100% Wool whereas, in truth and in fact, said products did not consist of all wool or 100% wool as defined in said Act, but contained substantial quanti. ties of reprocessed and reused wool.

PAR. 4. Certain of said wool products were further misbranded by the respondents in that the fiber content of interlinings contained in said coats were not separately set forth OJ! labels or tags attached thereto as required under the pI"visions of Section 4 (a) (2) of said ,Yool Products Labeling Ad, aml of l ule 24 of the rules and regula. tions promulgated thereunder.

PAH. 5. Certain of said wool products were further misbranded by the respondents in that the stamp, tag, label, or other means of identi. fication required under the provisions of Section 4 (a) (2) of said Act failed to disclose the name or registered identification number of the manufacturer thereof, or of one or more persons engaged in the introduction into commerce, or in the offering for sale, sale, transpor. tation, distribution or delivery for shipment of said wool products in commerce, as "commerce" is defined in said vVool Products Labeling Act.

CONCLUSJOK The acts and practices of the respondents as herein found were in violation of the VV 001 Products La beling Act of 1\)39 and of the rules and regulatioj)s promulgated tlJereul1der, and constitute unfair and deceptive acts and practices in commerce within the in1 ent and mean. ing of the Federal Trade Commission Aet.

onDJm '10 CEASIc . ND DESIST It i8 ordered That the respondent Svirsky Clothing Co. , Inc. , a corporation, and its offeers, and responden1 s Samuel Svirsky and Seymour Svirsky, individually :Uld as ofij('ers of said corporation and respondents' representatives, agents and employees, directly or through nny corporate or other device, in conucdion with the intro. duction or' rrlHnufacture for introduction into commerce, or the offer. ing for sale, sale, transportation or distribution in commerce, as "com. merce" is defined in the Feeleral Tmde Commission Act and the Wool Products Labeling Act of 193!J, of men s coats or other "wool prodnets" as sneh products are defined in and subject to the vYool Prodnets Labeling Act of 1939, which products contain, purport to contain or in any ,,' ay are represented as containing "wool reprocessed wool" or "rensed wool " as those terms arc defined in said Act, do forthwith cease and desist from misbranding such products by SVIRSKY CLOTHJNG CO. , IKC. , ET AL. 915 91:! Order 1. Falsely or' deceptively stamping, tagging, labeling or otherwise identifying such products as to the character or amount of the constituent fibers included therein;

2. Failing to securcly aflix to or place on each such product a stamp, tal". label or other means of i(lentj1ication showing in a clear and con- SPICUOUS mannm' :

(ft) The percentage of the total fiber weight of such wool product exclusive of ornamenttttion Hot exceeding five per centum of said total , (4)fiber weight, of (1) wool, (2) reprocessed wool, (3) reused wool each jibeI' other than wool where said percent age by weight of such I1ber is five per centum or more, and (iJ) the 'tggregate of an other ti bets:

weight of such wool (b) The maximum percentage of the total product of any nonfibrous loading, finiug, or adulterating matter; (c) The name of the registered identification number of the manufacturer of such wool product or of one or more persons engaged in introducing such wool product into commerce, or in the offering for sale, sale, transportation, distribution or delivery for shipment thereof in commerce, as "commerce" is defined in the IV 001 Products Labeling Act of 1939.

3, Failing to separately set forth on the required stamp, tag, label or other means of identification the character and amount of the constituent fibers appearing in the interlinings of such wool products, as provided in Rule 24 of the Rules and Regulations promulgated under the said Act.

PTovided That the foregoing provisions concerning misbranding shall not be construed to prohibit acts permitted by paragraphs (a) aml (b) of Section 3 of the 'Wool Products Labeling Act of 1939, and PTovided furthe?' That nothing contained in this order shan be constmed as limiting any applicable provisions of said Act or the Rules and Regulations promulgated thereunder.

Provided fUTtheT That the respondents herein shall, within sixty (60) days after service upon them of this order, fie with the Commis. sion 'L report in writing setting forth in detail the manner and form in which they have complied with the order to cease and desist. Svirsky Clothing Co., Inc.

a corporation.

By /s/ Samuel Svirsky, PTesident.

Order 50 F. T. C. Isl Samuel Svirsky, Samuel Svirsky, individually and as an offcer of Svirsky Clothing Co., Inc.

Isl Seymour Svirsky, Seymour Svirsky, individually and as an offcer of Svirsky Clothing Co. Inc.

Date: March 12, 1954.

The foregoing consent settlement is hereby accepted by the Federal Trade Commission and ordered entered of record on this 15th day of April 1954.

HARRY BERNSTEIN & ""v- Consent Settlement