Argus Cameras, Inc.

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

IN THE MATTER OF ARGUS CAMERAS, INC.

Docket 6'199. Complaint, Ma-. 1954-Decision, Oct. 20, 1954 Dismissal-on the ground that respondent voluntarily discontinued all the prac tices involved, that resumption thereof was unlikely, and that everything that could be accomplished by a desist onler bad already been accomplishedof complaint charging a manufacturer of photographic equipment at Ann Arbor, Mich. , with violation of Sec. 2 (a) of the Clayton Act as amended through its practice of pricing its products on an annual-volume discount basis, and violation of Sec. 2 (d) of the same Act through granting two of its customers an extra 3% rliscoimt from list price on all purchases made from their mail order business as. compensation for advertising the products in their nationally-distributed mail order catalogs. Before Mr. William L. Pack hearing examiner. Mr. Peter J. Dias, and Mr. Rice E . Schrimsher for the Commission. Rogers, Hoge Hills of New York City, for respondent. ORDER DIS),iISSING CO?IPLAIXT 'V ITIIOUT PREJUDICE This matter coming on for the Commission s consideration of the question ,vhether or not the respondent's showing of complete abandonment of the practices alleged in the complaint to have been Unlawful warrants dismissal of said complaint without prejudice, which question was certified to the Commission by the hearing examiner under the provisions of Rule XIV (9) of the Commission s Rules of Practice; and The Commission having considered the record thus far made, including the respondent's motion for dismissal and supporting material and the answer in opposition to said motion filed by counsel in support of the complaint; and The Commission having determined that said question should be answered in the affrmative and having set forth its reasons therefor in the accompanying written opinion:

It i8 ordered that the complaint in this proceeding be, and it hereby , dismissed, without prejudice, however, to the right of the Commission to issue a new complaint or to take such further or other action against the respondent at any time in the future as may be warranted by the then existing circumstances.

Comlnissioner l\fead dissenting, _ y, Opinion 51 F, QPINIOX 'OF THE C01\DIISSIO By Gwynne, Commissioner:

Complaint charges violation of Sections 2 (a) and (d) of the amended Clayton Act. Prior to the taking of testimony, respondent filed a motion supported by affdavits requesting t.he hearing examiner to dismiss the complaint or, in the alternative, to certify to the Commission for its determination, the following question: Should the proceedings herein be terminttted and the complaint herein be dismissed for Jack of public interest '? Grounds for its nwtion are that the respondent has fully and voluntarily abandoned the practices complained of and will not resume them, The motion was supported by two affdavits by IV. J. Scholten, a vice president and director of respondent, \vho was responsible for its sening policies. On May 24 1954, the hearing examiner cert.ified the matter to the Commission. The respondent is a manufacturer of photographic equipment which it sells to retailers. The complaint charges respondent in Count I with violation of Section 2 (a) of the Clayton Act in its practice of pricing on an rmnual volume discount basis fis follo\Ys: Percent Purchases less than S600 per year__ 33Y, Purchases from 8600 to $99 999___ - 40 Annual purchases of $100 000__-- - 40 plus 7 Count II charges that respondent gaye an extra. 3% discount to two customers for advertising purposes which allowance was not m,ade available to other cllstomers.

Following the service of the complaint, respondent took steps to modify its practices and took additional steps when attention was called to the fact that the new pricing policy did not eliminate all the charges made in the complaint. It now appears that respondent has discontinued all the ilegal practices charged in the complaint. The aftidavits of Mr. Scholten are to the effect that the abandonment of such discounts has been made by respondent without intention of resuming them or any similar arbitrary discounts. It is .well settled that a discontinuance of the practices which the Commission found to constitute a violation of the law does not render the cont.rogers ' moot. (FTC v. C;oodyew Tii' R1tbbeT Company (1938) 30' G. S. 257. ) The fact that a respondent has discontinued an illegal practice even prior to the issuance of a complaint does not prevent the Commission from issuing a cease and desist order. " such cases, the Commission must exercise h.s discretion in view of an the circumstances. (Guar' antee Yete'i'ina?' Y C07npany FTC (10:22) ARGUS CAMERAS, IKC. 407 405 Opinion 285 Fed. 853. ) In E!lgene Dietzgen Company v. FTC (1944) 142 F. 2d 321, the court said:

The propriety of tlle order to cease and desist, and the inclusion of a respond ent therein, must depend on all the facts which inclnue the attitude of respond. ent towards the proceedings, the sincerity of its practices and professions of desire to respect the Ian" in tbe future and aU other facts, Ordinarily the Commission should enter no onler n'here none is necessary, This practice shoulu include cases where the unfair jJrudicf: bas been discontinued, On the other hand, parties who refused to discontinue the practice until prof:eedings are hf:gun against them and proof of their wrongdoing obtained, occupy no position where they can demand a dismissal 'The order to desist deals with the future, and \ye think it is somewhat a matter of sound discretion to be exercised wisely by the COl1ul.ission-when it comes to entering its order, The object of the proceeding- is 1:0 /Stop the unfair practice. If the pradice has been surely stopped and by the act of the party offending, the object of the proceedings having llllll attained, no order is necessary, nor should one be entered. If, however, the action of the wrongdoer does not insure a cessation of the practice in the future, 1:he order to desist is aPlwopriate. 'Ve are not satisfied that the Commission abused that discretion in the instant case. In exercising its discretion, the Commission should examine not only the question of a discontinuance of all the iJlpgal practices (as distinguished, for example, from the. giving up only of c.certain spec.ific acts (see lien hey Chocolate Company v. FTC (1941) 121 F. 2c1 968), but it should also consider the likelihood of the practices being resumed in the future, Promises of a. respondent as to its future course of action should be "eig-hed in the light of attending circumstances. For example, in Goshen Jla;rwfactuJ'ing C01npany v. Alyel's jJlanufacttwing Cmnpany, 242 LT. S. 202, a suit based on infringement of a patent, it appeared that defendant had sold his factory before the suit 'vas fied ,with no present intention of resmning manufacturing, Nevertheless, he was still attacking the validity of the patent so an injunction was held proper. In Sears, Roebucl and Oompany FTC (1919) 258 Feel. 307, respondent had discontinued the illegal practices before complaint issued and in its ans"er alleged it had no intention of resuming them. Nevertheless, it contended that its nets were not illegal.l because the law ,vas unconstitutional. A cease and desist order 'VIlS held proper. In PeTTJut- 11aicl COinpany v. FTC (1941) 121 F. 2d 282, the record failed to show that the aJ1egec1 atte,mpts made by respondent to t.enninnte the illegal practices \Were successfnl or were likely to be so in the future. Issuanc.e of an order was therefore upheld. In II S. v. 11. 1' Om",t C01npCtny (1853) ;;45 U. S. 629, the court declined to grant an injunction to prevent fntul'e violation of Section 8 of the Clayton Act where defendant.s advised Opinion 51 F. T. C. the court that "the interlocks no longer existed and discla,imed any intention to revive them." The court said, at page 633; The necessary determination is that there exists some cognizable danger of recurrent violation, something more than the mere possibility which serves to keep the case alive, The chancellor s decision is based on all the circumstances; his discretion is necessarily broad and a strong showing of abuse must be made to revcrse it. To be considered arc the bOlla !ides of the expressed intent to comply, the effectiveness of the discontinuance, and, in some cases, the character of the past violations.

In the matter of Wildroot Oompany, Inc. (1953) Docket No. 5928 it appeared that the respondent had subscribed to the Trade Practice Conference Rules for the Cosmetic and Toilet Preparations Industry! which Rules adequately covered the practices complained of. Thero was also in the record a declaration under oath of respondent's vice president and general manager that the respondent had no intention of resuming the practices, The complaint was dismissed without prejudice.

As bearing upon the good faith of the respondent in the instant case and the likelihood of the resumption of the practices complained , the record shows as follows.

At various times during 19+7 and 1948, respondent was contacted by representatives of the Commission by telegram, letter and in person for information in regard to respondent's fair trade contracts and its discount practices. The requested information was furnished and said representatives were allowed unrestricted access to respondent books. In 1949, respondent received a letter from the Commission the material part of which follows:

The Commission has rcvie,ycd the preliminary investigation made pursuant to an application for complaint alleging violation of Section 5 of the Federal Trade Commission Act through the alleged use of full line forcing and tie-in sales practices in connection with the sale of cameras and photographic equipment by Argus, Inc., proposed respondent in the above-numbered application. From the facts as disclosed by the preliminary investigation! the Commission does not contemplate at this time further proceedings in this matter. You are adviscd, ho\'ever, that the Commission may, at any time, take such further action as the public interest may require, In a similar manner in 1952, respondent was again contacted and information secured as to its discount structure and particularly as to its transactions with two customers, ARGUS CA1ERAS, INC. 409 405 Opinion A copy of the complaint "Was mailed April 1 , 1954. On April 15 respondent wrote customers that certain discounting practices were being discontinued in order to c01nply "With the direction of the Commission. R.espol1dent says its intention was to abandon all the practices complained of by the Commission. At the hearing, when re spondent' s attention was called to the fact that all the practices complained of had not been a.abandoned, respondent agreed to give these up also and filed a second affdavit to that eHeet, The record indicates that the respondent has at all times been cooperative; that prior to the service of the complaint, respondent was not specifically advised that its practices were correct nor ,,rab it. told that they were irregular; that the course of dealing over the years was such as to justify respondent in the belief, prior to the issuance of the complaint, that no challenge wns being made to its practices. Dismissal of a complaint in cases of this general character is not the usual proced urc. It should not be done unless there is a clear showing of unusual circumstances which in the int.erest of justice require it. Those circumsta.nces exist in this case. Respondent has shmm its good faith by both word and deed. That fact has an important bearing on the likelihood of the practices complained of not bejng resumed in the future, lye conclude (1) that respondent has voluntarily discontinued all the practices inyolycd in the complaint, (2) that a resumption of these practices is not likely, and (3) that everything that could be accomplished by a cease and desist order has already been accomplished.

It is therefore ordered that the complaint be dismissed "Without prejudice.

COlmnissioner l\Ieacl dissents.

410 FEDERAL TRADE COYL"'ISSION DECISIONS Order 51 F.