Knomark Manufacturing Company, Inc.

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IN THE l\L1.TTER OF KNOMARK MANUF ACTGRl:'G COMPANY , I CO:VSENl' ORDER, ETC. , IX REGARD TO THE ALLEGED VIOLATION OF THE EDERAL TRADE COl\BnSSION ACT AND OF SEGS. 2 (d) AND 2 (e) OF THE CLAYTON ACT AS .'\:UE::DED Docket 6264. Complaint, Nov. 195-4-Decision, Apr. , 1955 Consent order requiring one of the three largest manufacturers of shoe polishes, dyes, etc., including its "Esquire" orand, to cease discriminating in price between competing customers through (u.) paying to some of them promo. tional allowances for furnishing. services and facilties, and (b) furnishing certain others with facilties s\1ch as wire rncks or dispensers for displaying its products and free demonstrator service, while not making proportional allowances 01' facilities available to competitors of those favored, in viola- !ion of subsections (cl) and (e) of sec. 2 of the Clayton Act as amended; and to cease buying dealers' stocks of competing produds and sellng thell to jobbers at reduce(l prices, and making cash payments to buyers of certain lilrge customers \without apprising their employers thereof, in violation of the Federal Trade COllllission Act.

Before 1111'. Frank flier hearing eXflminer. i1f,' . Panl R. Di;non and MI'. Willialn L1. ill1Ll. ve.y for the Commission. llII'. Abrahmn Zemlock of Ne\y York City, for respondent. COj\:(PL.:I.INT Thc Federal Tra,de Commission, having reason to be1leve that the corporation named as the respondent ill the caption hereof, and hereinafter more particularly designated and described, has violated and is nOlY violating the provisions of sub-sections (c1) and (e) of Section 2 of the Clayton Act as amended by the Robinson-PatmrU1 ---\ct, approved .June Ii!, 1936 (15 U. S. C. A., See. 13), ane! provisions of t.he Federal Trade Commission Act (15 U. S. C. A., See. 45), hereby issues its complaint stating its charges with respect thereto as follo"\s: Cou.nt I Pi\:AGR"\PH 1. Respondent, Knomark fanufaeturing Company, Inc., is ,l corporation, organized, existing, and doing business lllc1er and by virtue of the laws of the State of Kew York, \with its offce and principal place of business located at 330 ,Yythe A venuc, Brooklyn )Je-vYol'k.

";7S.s-:SS- 880 FEDERAI TRADE COMMISSION DECISIONS Complaint 51 F. T. C.

PAR. 2. Respondent is no-wand for many years has been engaged in the business of manufacturing and selling shoe polishes, including pastes, creams, dyes and other related products. Certain of these products are being, and have been sold under the brand name Esquire." It is Olle of the two or three largest firms engaged in the business of manufacture, sale and distribution of shoe polishes in the United States. It has grown with accelcra60n in recent years. Respondent manufactures its products, or most of them, at its plant located in Brooklyn, K ew York, and sells such products to over 3400 retailer customers or purchasers in the United States and in other places subject to the jurisdiction of the United States for resale within such places to consumers.

Substantially all of such customers or purchasers are, either chain shoe stores, jobbers and retailers solely engaged either in the sale or rep Lir of shoes, food and drug chain stores, variety chain syndicates and major department stores. '1,,0 or more of such customers or purchasers are located in each of a large number of different tmnls cities and other trading areas, and such customers or purchasers, ,\"hen so located, are in competition "ith mwh other in offering for resale and reselling respondent's products.

PAR. 3. In the course and conduct of its business, respondent engaged in commerce, as commerce is defined in the Clayton Act as amended by the Robinson-Patman Act, having shipped said products or caused them to be transported from their plant to their customers having places of business located in the same and other States of the United States and the District of Columbia. Said products "were sold by respondent to such customers for resale within the 17united States. PAn. 4. In the course and conduct of its business in commerce, particularly during the past two or three years, respondent paid or contracted for payment money, credits, allowances or other things of value to or for the benefit of some of its customers as compensation or in consideration for services or facilities furnished, or contracted to be furnished, by or through such customers, in connection with the sale or offering for salc of respondent's products, ,,-which it manufactures sells or offers for sale; and respondent did not make or contract to make, such payments or considerations available on proportionally equal terms to all other of its customers competing in the sale and (listribution of respondent' s products.

PAR. 5. Included among and illustrative of the payments alleged in Paragraph 4 "ere credits and sums of money, by "ay of allowances rebates n,nd quantities of free merchandise, as compensation or in consideration for general promotional services or facilities in connection KNOMARK MANUFACTURING CO. , INC. 881 879 Complaint with the offering for sale or sale of respondent's products, including displays and advertising in various forms. Such payments are hereinafter referred to as promotional allowances. Promotional allowances were not available on proportionally equal terms to all of respondent' s customers competing in the distribution of its shoe polishes, as alleged in Paragraph 4, in that: (1) Respondent paid or contracted to pay promotional allowances to some competing customers, and respondent did not offer to payor otherwise make available promotional allowances to all other competing customers.

(2) Respondent paid or contracted to pay promotional allowances to competing customers in amounts not determined by any percentage and not equal to the same percentage of dollar volume of purchases or of any other measurable base; and respondent did not offer to pay or otherwise make available promotional allowances to all of such competing customers in amounts equal to and determined by the same percentage of dollar volume of purchase or of any other measurable base. (3) Respondent paid or contracted to pay to some competing customers by granting and giving free quantities of its products to said cllstomers, particular.rly to chain stores, in amounts not determined by any percentage, and not equal to the same percentage of dollar volume of purchases or of any other measurable base; and respondent did not offer to payor otherwise make available this form of promotional allowance to all of such competing customers in amounts on an equally proportional basis or on any basis.

PAR. 6. The acts and practices of respondent as alleged above in Count 1 violates sub-section (d) of Section 2 of the Clayton Act as amended by the Robinson-Patman Act. (15 U. S. C. A. Sec. 13) Count 1 PARAGRAPH 1. The aJlegat.ions of this parftgraph ate the iiRme as the allegations made in Paragraphs 1, :2 nncl 3 of Count 1. FAn. 2. In the course and conduct of its business in commerce, pfll'ticularly during the past two or three years, respol1tlent discriminated in favor of some purchasers against other purchasers of its product bought for resale by contracting to furnish, furnishing, or contributing to the furnishing of Tvices or facilities connected with the halldling, sale, or ofier for sale of such products so purchased upon terms not accorded to all competing purchasers on proportionally equal terms.

PAR. 3. Included among and jJustrative of the services or facilities alleged in Paragraph :2 'Were wire racks or dispensers, fixtures espe- 882 FEDERAL TRADE COMJ\llSSION DECISIONS Complaint 51 F.

einny designed for use in retail stores to display and offer for sale shoe polishes purchased from respondent. Said display racks or dispense.rs are priced and sometimes sold by respondent. Display racks were not accorded on proportionally equal terms to al! of respondent s pl1rehasers compe6ng in the distribution of its shoe polishes, as alleged in Paragraph 2, in that respondent contracted to furnish or furnished display racks or dispensers to S011e competing purchasers without charge, and respondent did not ofler to furnish or otherwise accord display racks or dispensers without charge to an other of such competing purchasers but only ouered to sell or sold display racks to such other competing purchasers. PAR. 4. Also included among and jllustratlYc of the services and facilities alleged in Paragraph 2 ,vas Lhe practice of respondent of furnishing prizes, money or merchandise to some competing customers for promotional enterprises wHhout charge. This service was not., accorded on proportionally equal terms to all of respondent's purchasers competing in the distribution of respondent/s products in that respondent furnished this service to some of such competing customers and did not offer to furnish or othenvise accord it to all other of such competing customers.

PAR. 5. Also included among and illustrative of the services or facilit1es alleged in Paragraph :2 was the practice of respondent of furnishing some competing purchasers \\,ith free demonstrator service. This service was not accorded on proportionally equal terms to an of respondent's purchasers competing in the distribution of l'e poJldenCs products in that respondent furnished this service to some of such competing cust.omers and did not over to furnish or otherwise accord it to alj other competing customers.

PAR. 6. The acts and practices of respondent as alleged above in Count II violates snb-section (e) of Section 2 of the Clayton Act as amended by the Robinson-Patman Act. (15 U. S. C. A. , Sec. 13) Count III mAGRAPH 1. The nile,gations of Paragntphs 1 and 2, of Count I of this complaint are hereby adopted and incorporated herein by reference and made a part of this Count III the saine as if they yerc rcpeated here verbatim.

PAn. 2. In the course and conduct of its bu ine. , respondent engaged in cmnmercc, as commerce is defmed in the Fe,deral Trade Commission Act, as amended, having shipped its products or caused them to be transported from ew York to such customers or purchasers located KNOMARK MANUFACTURING CO., INC. 883 879 Decision in the same and in the other States of the United States, and in other areas subject to the jurisdiction of the United States. PAR. 3. Except to the extent t.hat competition has been hindered frustrat.ed and lessened as set forth in this complaint, respondent has been and is in substantial competition with other corporations and individuals, firms and partnerships, engaged in the sale and distribution of shoe polishes and related products in commerce as the term is defined in the Federal Trade Commission Act. \R. 4. In the course and conduct of its business, particularly during the past t\VO yefl1'S, respondent, in attempting to sell and in the sale and dist.ribution of said products in interstate commerce, has used, engaged , done and performed, among others, the following acts, practices and methods with the enect of interfering with the sale of merchandise bearing the trade names and trademarks of competitors: (1) Offered to buy and bought from retail dealers existing stocks of shoe polishes and related products sold aud distributed by competitors to such retail dealers.

(2) Offered to sell and sold the shoe polishes and related products mentioned in sub-paragraph (1) above to jobbers at. reduced prices who in turn offered for sale and sold said products to retail customers at prices substantially below t.hose prices customarily obtained for such products.

(3) Offered to give and gave cash payments to buyers of certain large customers without apprising said customers or employers of said buyers of such pa.yments.

PAR. 5. 'The above alleged acts, practices and methods of the respondent, all and singularly, have a dangerous tendency unduly to restrain, hinc1er, suppress and eliminate compet.tion between and among respondent and its compet.itors in the sale and distribution of shoe polishes and related products in commerce within the meaning of the Federal Trade Commission Act, and constitute unfair methods of cOlnpctit1on and unfair acts and practices in commerce within the intent and meaning of Section 5 of the Federal Trade Commission Act.

DECISION OF THE COl\DIISSIOX Pursuant to Rule XXII of the Commission s Rules of Practice, and as set forth in the Commission s "Decision of the Commission and Order to File Report of Compliance, dated A prij 7, 1855, the initial decision in the instant matter 01 hearing examiner Frank HieI', as set out as follows, became on that elate the cision of the Commission. , Decision 51 F. T. C.

INITIAL DECISION BY FHA)n\: HIER, IIEAIUKG EXAJUIXER Pursuant to the provisions of the Clayton Act, as amended by the Robinson-Patman Act (15 U. S. C. A. 12), and the Federal Trade Commission Act (15 U. S. C. A. 41), the Federal Trade Commission on Xovember 19, 1954, issued its complaint in this proceeding against respondent, upon whom such complaint \vas duly served and thereafter answered.

Respondent is a New York corporation, located at 330 'Vythe Avennc, Brooklyn, K ew York, and is engaged in the manufacture and sale or shoe polishes and related products under the brand name Esquire. On J nnuary 20 , 1955, counsel for the parties hereto entered into a stipulation providing for entry of a consent order, \which stipulation appears of record. By the terms thereof, respondent admits an of the jurisdictional anegations set forth in the complaint; stipulates that the record herein may be taken as if the Commission had made findings of jurisdictional facts in accordance with such allegations; expressly \Vaives a hearing before a hearing examiner or the Commission, t.he making of findings of fact or conclusions of law by the hearing examiner or the Commission, the filing of exceptions and oral argument before the Commission and all other and further prOCecllll'PS before the hea.ring examiner and the Commission to which respondent may be entitled under the Federal Trade Commission Act or the Rules of Practice of the Commission. By the terms of said stipulation, respondent withdraws its answer heretofore filed by it; agrees that the onler hereinafter set forth shall have the same force and effect as if made after a full hearing, presentation of evidence, and findings and conclusions thereon; specifically waives any and all right, power or privilege to challenge or contest the validity of said order; agrees that the stipulation, together with the complaint, shall constitute the entire record herein; agrees that the complaint herein may be used in construing the terms of said order, which order may be altered, modified, or set asicle in the manner provided by the statute for the orders of the Commission; and agrees that the stipulation is subject to ap. pl'royal in accordance with Bules V and XXII of the Commission Rules of Practice and that saiel order shall have no force and effect mdc3S and until it becomes the order of the Commission. Said stipulation further provides that it is made for settlement purposes only and dops not constitute fin admission by the respoll(lent that it has violated the law as alleged ill the complaint.

On the basis of the foregoing, the undersigned hearing eX8,miller concludes that this proceeding is in the public interest and in confonnity with the action therein contemplated and agreed upon makes the following order:

, KNOMARK MANUFACTURING CO. , INC. 885 879 Order onder It is ordered That respondent Knomark Jfanufacturing Company, Inc., a corporation, its offcers, employees, agents and representatives directly or through any corporate or other device, in or in connection with the sale of shoe polishes and related products or of any other related products, in commerce, as "commerce" is defined in the aforesaid Clayton Act as amended, do forthwith cease and desist from: A. Making or contracting to make any payment to or for the benefit of any customer unless a payment is offered to be made or otherwise made available to each of all other competing customers. B. Making or contracting to make, to or for t.he benefit of com peting customers, any payments in amounts which are not determined by a percentage of dollar volume of purchases or by some other measurable basis.

C. Making, or contracting to make, to or for the benefit of any customer, any payments in an amount equal to and determined by any percentage of donar volume of purchases or of any other measurable base unless such a payment, in an amount equal to and determined by the same percentage of dollar volume, or of such other measurable base, as the case may be, is offered to be made or otherwise made available to each of all other competing customers. D. J\1:aking, or contracting to make, to or for the be,nefit of any customer, any payment, unless such a payment is made waiJable on proportionally equal terms to each of ali other competing customers. As used in Part I of this Order payment" means the payment of anything of value as compensation, or in consideration for any services or facilities furnished by or through any customer of respondent in connection with his handling, offering for sale or sale of products sold to him by respondent.

A. Discriminating between or a.among competing purchasers by furnishing any service or facility to any of them unless a service or facility is of rei' cd to be furnished or otherwise accorded to each of all of the others.

B. Discriminating between or among competing purchasers by furnishing any service or facility.y without charge to any of them unless a service or facility is offered to be furnished or otherwise accorded without charge to each of all of the others. C. Discriminating between or a,llong competing purcl1asers by fur. nishing them any service or facility in amounts which are not deter- Order 51 F. T. C.

mined by a percentage of dollar volume of purchases or of some other measurable base.

D. Diserinlinating between or a.among competing purchasers by furnishing any service or facility to any of them in amounts equal to and determined by any percentage of dollar volume of purchases or of any other measurable base Ullles slh:h service or facility in an a.mount equal to and determined by the same percentage of c10Dar volume of purchases or of such other measurable base, as the case may be is ofi' ered to be furnished or otherwise made available to each of all of the others.

E. Diseriminating bet,ycen or among competing purchasers by furnishing any service or facility to them upon terms not accorded to all of them on proportiona.lly eqnfll terms.

As used in Part II of this order:

1. "Service or facility" means any seryjces or facilities.s connecte.d wjth the handling, offering for sale, or sale of respondents products by Plll'chasers who bought theln from respondent. 2. "Furnishing" means furnishing, contracting to furnish, or contributing to furnish.

1 t is lUTthel' ol'dcl'ecl That respondent 1\n011ark fanufacturing Company, Inc., a corporation, its offcers, employees, agents and representatives, directly or through any corporate or other device, in or in connection with the sale of shoe polishes and related products, or of any other related products in commerce as c.omnwrce is defined in the aforesaid Federal Trade Commission Act as amended, do further cease and desist from:

A. OHering to buy or buying and taking over stocks of shoe polishes and related products sold and distributed by competitors to reta.i sellers.

B. Offering to sell or selling shoe polisl1es and related products mentioned immediately in "A" above to jobbers at prices lower than the prices at which competitors ordinarily offer for sale a,nd sell such products to jobbers.

C. Oilering to give and ma.king gifts of cash payments to buyers of its customers "without the knowledge of such customers or employers of said buyers.

onder TO :FLE REPORT OF COMPLIANCE It is ordered That the respondent herein shall, within sixty (60) days after service upon it of this order, file with the Commission a l'e,port in "writing setting forth in detail the manner and form in which it has complied with the order to cease and desist (as required by said declaratory decision and order of Aprij 7, 1955j. &:

CLEAN-RITE VACUUM STORES , INC. , ET AL. 887 Findings