Kay Windsor Frocks, Inc., et al.

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IN THE MATTER OF KAY WIKDSOR FROCKS, lKC., ET AL.

ORDER, OPINION , ETC., IN REGARD TO THE ALLEGED VIOLATION OF SEC. 2 (D) OF THE CLAYTON ACT AS AME1\'"ED Docket 5735. Coni-plaint, Jan. 1950-Dwision, Attg. 18, 1954 Order requiring two associated corporate manufacturers of women s and misses dresses, with factories in Boston and Fall River, Mass. , respectively, RDd common New York show rooms and a common manager, to cease violating Sec. 2 (d) of the Clayton Act as amended, by granting credits to certa customers as compensation for advertising services without advising their competitors that any advertising credit plan was in effect, and by granting credits to othet. customers at disproportionate unit rates and upon unequal minimum purchases.

Before july. Clyde JI1. Hadley, hearing examiner. M1'. W'lllia.m H. Smith. llb. Peter J. DiaB and Mr. Richa.rd E. Ely for the Commission.

MO'. Be,"wrd E. Singe'/' of Kcw York City, and Mr. J. J. Sp'legel of Boston, l\lass., for respondents.

ORDER ADOPTIKG INITIAL DECISION AS THE DECISION OF Tile IJ\ISSION AXD ORDER TO I' lle HEPORT OF CO:\IPLIANCE This case having come on for hea.ring before the Commission upon the appeal filed by the respondents from the initial decision of the hearing examiner; and The Commission, for reasons stated in its opinion which is sepa,r rately issuing herein, having determined that the appeal should be denied and tha.t the findings as to the facts, conclusion and order contained in the initial decision are appropriate: It i8 o"dered that the respondents' appeal be, and it hereby is, denie(j. 1 t is fu,rthe7' ordered that the initial decision of the hearing exam" iner, a copy of which is attached, be, and it hereby is, adopted as the decision of the Commission.

It i8 fwrther 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 the order to cease and desist. Commissioner Carretta not participating.

Said initial decision, thusndopted by the Commission as its deeis-ion follows:

Findings 51 F. r. C. INITIAL DECISION BY CLYDE M. HADLEY, TRIAL EXAMINER Pursuant to the provisions of the Act of Congress entitled "An Act to supplement existing laws against unlawful restraints and monopolies, and for other purposes " approved October 15, 1914 (the Clayton Act), as amended by the Hobinson-Patman Act, approved June 19, 1936 (15 U. S. C., Sec. 13), the Federal Trade Commission on January 25, 1950, issued and subsequently served its complaint in this proceeding upon Kay Vindsor Frocks, Inc., a corporation Aaron Shapiro, individually and as its president and treasurer Winnie Peck, Inc., a corporation, and Lou Swartz, individually and as its president and treasurer, charging them with violation of subsection (d) of Section 2 of said Act as amended. After the filing of answer to the complaint, hearings were held at which testimony and other evidence in support of and in opposition to the allegations of the complaint were introduced before the above-named trial examiner theretofore duly designated by the Commission, and said testimony and other evidence were duly recorded and filed in the offce of the Commission. Thereafter, the proceeding regularly came on for final consideration by said trial examiner on the complaint, answer thereto testimony and other evidence, proposed findings as to the facts and conclusions presented by counsel, oral argument not having been requested; and said trial examiner, having duly considered the record herein makes the following findings as to the facts, conclusion drawn therefrom, and order:

FIKDIXGS AS TO THE FACTS PARAGRAPH 1. (a) Respondent Kay 'Windsor Frocks, Inc. , is a i.iassa,chusetts corporation, with its offce and principal place of business located at 75 Kneeland Street, Boston, :\fassachusetts. (b) Respondent Aaron Shapiro, an individual, is the President and Treasurer of said respondent Kay 'Windsor Frocks, Inc., at the same address; and directs, controls and is responsible for its acts and practices.

(c ) Respondent ,Vinnie Peck, Inc., is a JIassachuset.ts corporation with its offce and principal place of business located at Eddy Mill No. 1, Fall River, l\iassachusetts.

(d) Respondent Lou Swartz, an individual, is the President and Treasurer of said respondent \Vinnie Peck, Inc., at the same address; and during the time mentioned herein, has directed, controlled, and been responsible for its acts and practices. PAR. 2. During the period of time from about September, 1948 to the present, respondents, have engaged in the business of manu- KAY WINDSOR FROCKS, INC., ET AL.

Findings facturing women s dresses in fa.ctories located in )iassachusetts and of selling them to customers with places or business located in variou.s States of the United States and in the District of Columbia, for resale within the United States. In the conduct of their business such dresses were shipped and caused to be t.ranspOlt,ed by respondents from their factories to the places of business of said customers. PAR. 3. During said period or time, Illy \Vindsor Frocks, Inc. o\vned 500/0 or the stock or respondent 'Vinnie Peck, Inc., and acted as selling agent for that respondent. Both corporate respondents sha.red the same showrooms at 1350 Broadway and later 1400 Broadway, New York, :X. Y., and employed the same illcliviclual as sales manager. I\:ay Vindsol' Frocks, Inc., manufactured misses ' sizes and Vinnie Peck, Inc. manuractured ladies sizes in the same or similar styles or dresses. The corporate respondents sold their rIlcrchanclise to the same enstomers, at the same prices, and granteel some. customers advertising credit.s, based upon the size or the purchase or merchandise of either or both corporate respondents. The respondents proportionalized between themselves the credits so granted. thus conducting their business, respondent,s jointly engf1ged in the acts and praetiecs hereinafter found.

PAR. 4. In the, course of the.ir business in comnwrce, responde.nts sold their garments direct to retailers. In some cases such retailers placed their orders with respondents through buying syndicates an resident buyers, for whose services the retailer paid. In all instances the retailers were invoiced directly by the respondents; in a.ll instances the merchandise was shipped directly to the retailer by the respondents, and in all instances payments liere made directly by the retailers to the respondents. In those instances ,vhere credits were granted, they were granted directly by the respondents to the retailers. It is therefore round that all retailers to ,,"hom respondents sold their garments were customers or the respondents. PAR. 5. During said period of time, in the course or selling the.ir dresses in commerce, respondents granted or contracted to grant credits to various customers in consideration or as compensation for advertising services rurnished or to be furnished by or t.through said customers in connection with their handling, offering for resale or resale of said dresses. Such credits were in reduction of the purchase prices of respondents' dresses which they sold to their customers. PAH. 6. During the same period of time, in the course of selling their dresses in commerce respondents did Hot offer orothenvise make available any advertising credits to other customers engaged in the re,sale or respondents' dresses.

FEDERAL TRADE CO:l:IISSIO" DECISIONS Order 51 F.

PAR. 7. Hespondents offered advertising credits to certain of their customers on the following basis: for off-season initial purchases of a minimum of 600 units, an advertising allowance or 25 cents per unit when advertised by the customer; or half the cost of the advertising, whichever .vas less. Nohvithstanding the terms or this offer, such advertising credits were granted by respondents to customers who purchased much less, in va-rying amounts, than the so-caJJed requisite 600unit minimum initial purchase; the credits as granted by respondents varied in amount and percentage, often exceeding the prescribed 25cent maximum, as, for example, 31, 33, 43, 44 and 50 cents per unit; and the stated limitation of such credits to off-season purchases was not enforced by respondents.

PAR. 8. It is found that such payment or consideration was not available to all customers on proportionally equal terms, in that respondents failed to advise some customers of the fact that any advertising credit plan was in effect, while to other customers, respondents granted credits at cbsproportionate unit rates, and upon unequfll miniurn purchases.

PAR. D. Those customers of respondents to whom advertising credits we.re granted, offcrcd or made available, were. in competition in t.he Eale of respondents' dresses with other customers of respondents to whom no advertising credits were granted, offered, or made available; and various customers of respondents to whom advertising credits were granted at disproportionate unit rates and for unequal minimum purchases were in compet.ition with each other. CONCLUSION The acts and practices of the respondents as herein found violate subsection (d) of Section 2 of the Clayton Act as amended by the Hobinson-Patman Act (D. S. C. Title 15, Sec. 13). OImER It is ordered That the respondent.s, Kay Windsor Frocks, Inc. Aruon Shapiro, individually and as president and treasurer thereof 'Vinnie Peck, Inc., and Lou Swartz, individually and as president and t.reasurer thereof, their representatives, agents, and employees, jointly , in C011-or severally, directly or through any corporate or other device , asnee60n with the sale of any of respondents' dresses in commerce eomme.rce" js defined in the CJnyton Act as amended, do forthwith cease and desist:

From paying or contracting to pay, or granting or contracting to grant, or allowing anything of va.lne, including credits for advertising KAY WINDSOR FROCKS, INC., ET AL.

Opinion services, to or for the benefit of any customer as compensation or in consideration of any newspa.per advertising or other services or facilities furnished by or through said customer in connection with the sale or offering for sale of respondents' dresses, unless such payments credits, or allowances are available on proportionally equal terms to all other customers competing in the distribution of such dresses. OPIXIQX OF THE COMMISSION Per Curiam:

This case comes before us upon the appeal of respondents from the initial decision of the hearing examiner, which held that respondents have engaged in acts and practices in violation of subsection (d) of Section 2 of the Clayton Act, as amended by the Robinson-Patman Act.

The respondent corporations have engaged in the manufacture of cotton dresses which have been sold in commerce by the respondents to department stores, specialty shops and other retailers for resale to the public. The initial decision held, in effect, that the respondents had granted to some customers credits or payments in consideration for advertising services furnished by those stores in offering respondents garments for sale and that credits or payments for such services were not available on proportionally equal terms or available at all to others competing in the distribution of respondents' dresses with the customers to whom payments were granted. Representatives of the respondents testified to the effect that the respondents: program of granting compensation for newspaper advertising was limited to crediting customers at the rate of 250 per ga.rment purchased or one hali the cost of that advertising, whichever happened to be the lesser amount in the event the customer (a) purchased on an initial order a minimum of 600 cotton dresses, and (b) made such purchase during certain offseason periods for sales promotions in J anuary or immediately after Easter. As the initial decision in effect found however, the respondents did not adhere to those terms but, on the contrary, granted credits or compensation for advertising services to customers who bought much less than the requisite 600 minimum initial purchase and as granted by respondents these credits, in instances, varied in amount and percentage often exceeding the prescribed 250 maximum. Neither was the stated limitation to off-season purchases adhered to. The evidence presented in this proceeding which is pertinent to the matters raised under the appeal relates primarily to sales made by respondents to stores located in N ew York City, 1' ewark, 1' ew Jersey, and I-Iartford, Connecticut, and respondents, among other things, con- FEDERAL TRADE CO!\IMISSION DECISIOl\ Opinion 51 F. T. C.

tend that the hearing examiner erroneously rejected certain findings proposed for his adoption and that he erred in those connections also in Tuling that the practices engaged in by respondents in each of such areas were unlawful. Turning first to the New York City area, the evidence shows that the respondents' deliveries of their garments to one of their customers, Franklin Simon, upon its purchases extended from January 13, 1949, when an initial shipment exceeding 1400 garments was made, to J uue 30 of that year. During such period Franklin Simon received in excess of $3 500 as credits toward their advertising of respondents' drcsses and of this amount two credits totaling approximately $900 were accorded in Jnne of that year. Two of the newspaper advertisements for respondents' lines of garments, as inserted by Franklin Simon appeared on April 24, 1949, and l\fay 22, 1949, both dates being subsequent to Easter of that year. Respondents' deliveries to R. H. JIacy & Company, Inc., a retailer competing in the resale of their dresses, extended from April 18 1049 the day following Easter, to June 17 of that year on its purchase of approximately 300 garments. The record clearly shows that R. H. 11acy & Company, Inc., received no advertising allmvRnces or credits that none was offered to it and that the respondents did not inform that concern s representative as to any terms or conditions under which the customer might reecive compensation or allow-auees for services in advertising respondents garments. In this connection, the respondents urge that it cannot be properly found that credits or compensation for advertising services were not a vailable on proportionally equal terms to these two competing custoll!9rs for the reason that 1\. J-I. JUacy & Company, Inc., made no offseason purchases. However, the circumstance that one store may have made one or more off-season original purchases of more than 600 dresses prior to the time when its competitor did its buying and perhaps placed various reorders thereon does not justify the respondents failure to inform as to the conditions under which credits would be granted or to offer allowances to R. H. iacy & Company, Inc. , on terms proportionally equal to those being granted to its competitor. VVe accordingly conclude that the hearing examiner correctly rejected those of respondents' proposed findings which were to the eflect that the record fails to support conclusions that re::pondents credjts were not available among its New York City customers as required under the Act. Hejected also is the respondents' contention t.hat the hearing examiner erred in concluding in eflect that the Act requires that seners must inform customers as to the terms under which they may receive compensation for services or otherwise offer KAY WINDSOR FROCKS , INC.) ET AL.

Opinion such credits when they have been made available to resellers competing with such customprs. Although thc word "avajlable" rather than offered" appears in the relevant subsection or the Act, the statute contemplates that customers competing in the resale of a seller 1nerchandise be aft'orded equal opportunity to share in payments for promotional services in the event the seller elects in the first instance to provide it to one or their competitors. A course of con duet under which a seder rails to inform respecting such compensation or make known his terms or otherwise to offer them to one customer while granting payment for services to his rival resell or essentially represents concea.lment. In such case, the credit 01' allowfl1ce is not "available" to the unfavored competitor, for all practLca1 purposes a withholding and denial or opportunity to share occur, and the law is violated.

In Newark, the respondents were selling their merchandise to three retailers. Of the two to whom no advertising credits were offered and who were not informed by respondents of conditions under which advertising credits could be received, one purchased directly from respondents and the other purchased through a resident buyer. Thc third, Kresge-Newark) made it.s purchases through ltlutual Purchasing Syndicate. IlJllstrat.ive of the respondents' several transactions with this concern was the group or bulk purchase made on March 18, 1949, for April 18th delivery which was placed by l\iutual's subsidiary for 6 38G dresses. Rpspondents agreed to grant $1 645 in advertising credits and permitted YI utua1 to allocate that amount among the reta.11ers whose names apppared on the distribution sheets. I\:resge-N e-work received an advertising credit of $150 on its purchase of 300 dresses representing a port.ion of that bulk purchase. To it and the other participating retailers, respondents shipped the merchandise directly and in all instances billed them for the merchandise and granted them credits directly. Payment for their dresses likewise came to respondents from the stores and not through l\lutual. Hespollc1cllts, however, contend that 11utual alone was the customer in these transactions and that the credits or pay ments made to I\:resge-Newark have not been paid to a "customer or respondents within the meaning of the Act. In the circumstances here, however, whatever legal.l relationship and rights were created as between 1utllal Purchasing Syndicate and the respondent.s as a result of their negotiat.ions is not controlling to a determination as to whether the retail stores named at the outset to receive the merchandise and designated as future recipients of respondents' advertising credits were customers of the respondents. 423783--8- FEDERAL TRADE COM:\ISSION DECISIONS Opinion ;:1 F. Consummation of the transactions, as contemplated by Mutual Buying Syndicate and the respondents, necessarily entailed a course of direct dealing between the respondents and the merchants identified in the distribution sheets with respect to all essential phases of the transactions. In a very real sense therefore, each of the stores for which this group buyer was acting must be regarded as a "customer of the respondents and the Commission accordingly is of the opinion that the challenged rulings of the hearing examiner relating to the practices engaged in by respondents in the Newark area are free frOlTI prejudicial error and that the objections thereto as interposed by the respondents in support of their appeal are without merit. With respect to the Hartford area, several retailers were competitively engaged in the resale of the respondents' garments. Of the two customers who received advertising credits, one bought his merchandise from the respondents directly, the other made his purchases through Ivlutual, and in February, 1949 , they 'were accorded credits of $77.24 and $75. , respectively. Another of the respondents' Hartford customers was Blue Bird Shops, Inc. This purchaser received no credits or payments, it was not informed by the respondents of any program under which credits would be accorded by them and none was offered. Respondents contend that it ca,nnot be properly concluded that credits were not available to this customer for the reason that it made no purchases in J annary. Although the record -indicates that this customer made no January purchases, on its purchases it received Iarch and early April deliveries prior to Easter, the elate when one of the respondents' so-called off-season promotions was effective. Everything considered, it is evident from the record that credits and compensation for advertising- services were not available on any terms to one competing customer in the I-Iartford area and that as between the two others which received payments they received credits at differing or proportionally nnequal rates per garment, neither of which rates reflected the 25 per unit amount which respondents have stated represented their unit rate. Respondents' objections to the conclusions reached by the hearing examiner in reference to these matters must be rejected. The respondents contend that the order to cease and desist as COlltained in t11C initial decision is too broad in scope and that it is not suffciently specific and they propose certain language of limitation for adoption into the onler. It is not correct, as respondents in effect (',contend, that the order is deficient in specificity be,cause of the similarity of its lang-utlge and import to that of the subsection of the '\.ct to which the respondents ' violations of Inw relate. Sillce they KAY WIYDSOR FROCKS, INC., ET AI..

Opinion ate intended to prevent occurrence in the future of illegal activities and are prospective in their operation, the Commission s orders necessarily must be somewhat general in scope. To be efiective, such orders must proscribe the unlawful practice or course of conduct typified by the acts performed in the pRst. Inasmuch as the prohibition of the order is directed to the respondents' practice of failing to make compensation for services or facilities available on proportionally equal tern1S during the course of their performance of the acts refelted to in the initia.l decision and this commercial practice is the one with which the subsectjoll here pertinent is concerned, the order is not to be regarded as unduly broad in its scope. It would not be in the public interest, however, to restrict the order as requested by respondents so that it would be applicable only to credits for advertising services. To do so, would excl ude therefrom any payments in lieu of the aforesaid ones which the respondents might elect to provide in the future for other types of facilities or services similarly furnished by or through customers. VVith respect t.o respondents additional request that a definition of the term "customer " as defined by the hearing examiner, be included in the order, it is to be noted that the initial decision has not undertaken to enumerate all situations under which the relationship of seller and customer may arise but instead sets forth the reasons why the retail stores which purchased through Mutual Buying Syndicate or through resident buyers must be regarded as customers of the respondents in the circumstances here. There appears no necessity, however, for incorporating in our order definitive language in general reference to seller-customer rela.tionships. j\foreover, the diffculties attendant to an undertaking to define all conditions of commercial dealing through which such relationship may be created are obvious. These requests of the respondents are not being granted.

Hespondents contend also in connection with the foregoing matters t.hat the order should specify in what fashion the respondents' allowances were not "available" and the marmer in which they were not granted on proportionally equal terms. Counsel supporting the complaint do not oppose these particular requests and in the brief additionally oiler for our consideration certain statements bearing on these matters which they suggest be appended to the order. First to be considered in these connections is the request, among others, of counsel supporting the complaint that the order to cease and desist as issued by the Commission be snpplemented to the end that it in effect contain a rlescription of the allowances not available heretofore from t.he respondents on proportionally equal terms and include in suell FEDERAL TRADE CO:MMISSIO DECISIONS Opinion 51 F.

category credits for services granted only upon initial minimum pnrchases of 600 garments. It is evident from the record that the respondents essentially had no uniform terms with respect to purchases and credits but granted credits to some and withheld offering them to competing retailers to accommodate their own purposes. On the other hand, the decision and rulings below have not determined whether this minimum purchase requirement, had it been uniformly imposed as a condition to the granting of credits to competing customers, would or would not have constituted proportionally equal in theterms a,among customers in the light of conditions prevailingwomen s apparel industry. The issues as framed by the pleadings and otherwise cannot be deemed to permit or require a decision on that quest.ion at this time. The requests of counsel supporting the com plaint are not being granted.

Resetting now to the respondents' request for specificity, an instance previously noted in which allowances were not granted on proportionally equal terms by t11e respondents is revealed by the evidence which relates to the payments reflecting different rates per garment unit as accorded to t,,o of the H "reord customers. The initial decision clearly identifies the competitive situations in which allowrmces, ete not "available" at all as being: those in which customers in competition with g-nmtees of respondents' credits \'er8 not offered credits or wherein there was a fajJure to inform fib to terms under which they likewise could rceeive compensation for services. In connection with t.these situations, it is apparent that in instances unfRvorec1 customers (a) engaged in in-season resale of garments while in-season discounts were being granted to competing customers OT (b) made some purchases before Easter or during the course of one of the respondents ont-of-season promotiollRl periods and resold competitively with other retailers "ho were contemporaneol1sly rceeiving or who previously had been granted out-of-season credits on simDar quantities purchased in the course of another sales promotion period. llaving determined that an order broad enough to proscribe the nnJawfnl course of conduct ('ll, ap:ed in is fully warrnntec1 here, we likewise eonc111cle that.1t ,,ould not be appropriate to restrict its application unduly and that no useful purpose ,,auld be served by I'granting the requests to supplement the order by adding reference to the specific acts from which respondents vlolntions of law have stemmed.

SUbSrOllE'nt. to the chte upon which tJlC oral arguments of counsel were held before the Commission in this case, changes in the membership of the Commission have occurred. The determinations as made. KAY WIDSOR FROCKS , IXC., ET AL.

Opinion here are based on our consideration of the entire record and the Commissioners participating, who were not members at the time when such arguments were presented, have duly considered the offcial transcript of those arguments. The decision, as separately issuing here adopts the initial decision as the decision of the Commission. Commissioner Carretta did not participate in this case. &, &, Decision 51 F. T. C.