Moog Indbstries, Inc.

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IN TJ-IE :MATTER OF MOOG INDBSTRIES, INC.

ORDER OPINIOXS, ETC. , IX REGARD TO THE ALLEGED VIOLATION OF SEC. 2 (A) OF THE CLAYTON ACT AS A:iIRXDED Docket Sib3, Complaint, Dec. 20, lD. Decisio'! , Apr. , 1955 Order refluiring a manufactnrerof automoU-ve replacement parts in St. Louis Io., to cease discriminating in price between c1iierent customers by sellng its products of like grade and quality at higher and less favorable prices to numerous sruaJl businessmen than to their larger competitors, in violation of sec. 2 (a) of the Clayton Act fis amended. Defore lift. Ea1'l J. l( olb hearing examiner. JfT. Eldon P. Sch""l', Jh. James E. OoTlcey and JfT. Francis O. Jl aye1' for the Commission.

lift. Edwin 8. D. Butterfield of Chicago, 111. Halfpenny, Hahn & Jfellitz FnmkOassedy, of 'Washington, D. and Rosenblum, St. Louis, :Mo., for respondent.

INITIAL DECrSlQ); BY EARL .T. KOLB, HK\RING EXAl\IIXEH. This proceeding is before the undersigned Hearing Examiner for final consideration on the complaint, answer thereto, testimony and other evidence, and proposed findings as to the fn,cts and conclusions presented by counsel.

1. The complaint in this proceeding charges that the respondent J\foog Industries Inc., has discrim1natecl in price between different purchasers of its products in violation of subsection (a) of Section 2 of the Clayton Act, as amended hy the Robinson-Patman Act (1;. S. C. title 15, section 13).

2. The price differentinJs which are charged to be in violation of the Clayton Act arise from respondents pricing practices, involving the granting of an annual retroactive volume rebate to its customers and also in the granting of such retroactive volume rebate to group purchasers on the basis of their aggregate purchases instead of upon the individual purchases of the members.

3. The general system of pricing llsed by the respondent, as developed by the record, and the variations therefrom in the case of group buyers, is not disputed by the respondent but was instead defended on the basis that the merchandise sold by the respondent to its various customers was not of like grade and quality; that the pricing practices of respondent has not resulted in any injury to 932 FEDERAL TRADE CO HvIISSION DECISIONS Decisioll 51 F, T. C.

competition; and that fespondenfs prices, discounls and allmvances were made to meet competition. No attempt ,,,as made by respondent to justify its price diiIerentJals on the basis of differences in cost. of manufacture, sale or delivery. Evidence as to primary line injury to competition betweon respondent and its competitors is not suffcient 1.0 warrant any finding, and consideration of this matter must be limited to secondary line injury to competing customers of the 1'e- Rpondent.

4. Respondent :\1oog Industries, Inc., is a :Missouri corporation ,with H.s principal offce and place of business located at 6650 Easton Ayenuc St. Louis, l\1missouri, with selling and distributing subsidiaries kno,,as the St. Louis Spring Suspension Service Company of Texas, Jloog Industries, Inc., of Tennessee, :Moog Industries, Inc., of Colorado, and St. Louis Spring- Suspension Service Company of Nebraska, 5. Since June 1D36 the respondent has been engaged in the llMnufacture and in the sale and distribution in interstate commerce of automotive replacement parts, consisting of coil action parts, le,lf springs, coil springs, chassis parts, pist.on rings and other related items in competition \dth other concerns who \were also engaged i1l the sale and distribution of similar products in interstate commerce. 6, The market in automotive replacelnent parts is highly C011petitive. The amount of business transacted by the respondent iJl the replacement parts field is substantial. In an advertising circular clistributed by respondent to its customers in 1848, it \yas stated '; The company with a small beginning back in 1919, has brcorne one of the country's large industries and recently consolidated its manufacturing" divisions: St. Louis Spring Co. foog Coil Action Parts Co" and :\foog Piston Ring Company, into \roog lndustries, Inc. The respondent sells its products in every state of the United States and in 1950 maintained 25 branches and warehouses in the principal cities. 7. The respondent, during the times mentioned herein, has sold its replaceme,nt parts to jobbers, who \\ere desiglHlted by the respondent as distributors, who resold such products to garages: service stations fleet owners and to other jobbers, The respondent separated its products into three classificahons (a.) leaf spring line \which consists of leaf springs, coil springs: tie rod ends: shackles and kingbolts; (b) coil action line, which.h consists of front. wheel spring asselnbly pans exclusive of coil springs; nnd (c) piston ring line. A portion of the replacement parts in each of these line,s was sold in the form of kits or packages containing complete 1m it illstallations for yarious Jlflke. of cars. From time to time respondent issued its distributor s price Est on each of these lines which listed the basic prices used by the, . ()()() , MOOG INDUSTRIES, INC. 933 931 Decision respondent in the sale and distribution of its various replacement parts. Any discounts, allowances or rebates were off said distributor price list. Respondent also from time to time issued suggested resale price lists for use by distributors and dealers in the resale of respondent' s products. During the year 1949, respondent sold approximately 200 coil action accounts, 800 leaf spring and chassis parts accounts and 400 piston ring accounts. In relation to total sales, the leaf spring line and coil action line have always predominated with the piston ring line accounting for a small proportion of the total overall sales. 8. The net purchase price paid by distributors for respondent' products is the purchase price pajcl subject to and following aU applicable rebates, discounts and allowances. The automotive replace ment parts sold and distributed by respondent were all of one grade and quality. Respondent sold such products of like grade and quality to Hs distributors at varying net prices. Such dist.ributors of respondent were competitively engaged in the resale of respondent' s replacement parts in the various territories and places where such distributors carried on their businesses.

9. The annual volume rebates, provjded for in respondent' s pricing plan, were incorporated in, and made a part of, its distributor franchise agreement. The volume rebate on the coil action line and the piston ring line has been a retroactive volume rebate in substantially the same amount since 1947. Prior to .July 1, 1949, respondent allowed a non-retroactive rebate on its leaf spring line, but subsequent thereto had granted a retroactive volume rebate. The retroactive volume rebates as set out in respondent' s franchise agreements with its distributors are as follows:

COIL ACTION PARTS Ntf' purchases during each fiscal year ! Rctroactiye Ket purcbases during eae l fi eal ye1lr IRetroactive rebate rebate , Perctnt Perceni Under $1 000 ?\onc $15.00Q--S17 499_ 000-M,999__--_ $l7 ,0()$IH 999- 000-S7 499-- $20 OOO-$2Z 499- $7, 5Qo-$9, 999_ $22 fJQ()S24 999.- $1O OOQ-311 49L__ $2,'i OOo-$27 -'99- $12 " ,5Z75Ql) alld O'iCr-- 5Qo-S1409\L PISTON RING LI:\' Percent Percent render $2 000- :\one S9 00o-$O,90L- 000-$2 999_ 2 Slo,000-$11 999- 000- 999_ S12 000- 9!J9- L'j OQ()$4 999- I S15 $l7 999-- $5,OOO-S5,999_ OO()S20,99L $6,OOo-SO,999- JO i:$18,I $21 O()O- :24 g9L 000- 999_ 1l;. $2.' OO()$29 99P-- 00lJ- 999_ 12 I S30,UC'0 and oye!-- __ .\ .. ;;;.. .. , Decision 51 F. T.

Real" SPRIXG:LIXE, I:-CLUDIXG COIL SPRINGS AXD CHASSIS PARTS ' Percent Under $1 000_ :"one:1 $lJ,OOG-S14 ggLm 001)$2 999- : n5 OOQ-, 99!L-- OOIJ, 99!L- 7 SZO,OOO- 27, 499- - OOQ- 9gil- OOO-$10 999_ 6 II m:gg :i In addition to the above volume rebate, the respondent allowed a 10 percent \varehousing and redistributing c.ommission to distributors who resold respondent's products to other jobbers who had been ap. proved by the respondent, provided the combined earnings of the warehousing and redistributing commission and the vohnl1c rebate on any line cannot exceed the earnings figured at the. maximum rebate for that line. The retroactive volume rebate. was paid by respondent on a1l purchases of the distributor including merchandise resold by the distributor to other jobbers.

10. Under the retroactive rebate plan, purchasers were granted and received rebates on all their inchvidual purchases according to the re bate bracket applicable to their total annual purchases. Any individual purchase price was retroactively determined by the, total ()f a,n purchases during the year according to the terms of the retroactive rebate plan.

11. Thc amounts involved in the granting by respondent of the volume rebates were, substantial and reflect the importance \,which was attached to sajd rebates by the various purchasers. Hebates 'were granted by respondent and received by some, but not aD, the purchasers ()f the coil action line for the foJ1owing years in the follmving amounts:

1947 -- - - $163 , 802. GO J 918_- - ---- - -- - ---- - - 203 478, 1040_- - -- - -- - - 106, 2,55. 91 Rebates were also granted by respondent and received by some, but not all, the purchasers of the piston ring ling for the foJ1owing years in the following amounts:

1917 ----- -- $57 561, J948- - 21 011. 1949- -- 22 380. Rebates were likewise granted by respondent and received by some but not an, purchasers on purchases of the leaf spring line in the year 1050 in the amount of $81 300.

____ _______ ___ MOOG INDUS'lRIES , !XC. 935 931 Decision 12. During the year 1949, respondent sold its products to jobber members of various group buying organizations, entering into the Moog distributor s franchise agreement. Sa.les were made during 1949 to members of Nthe followingarnegroup buyingAdd1'eS8organizations: Ark- Tex ,Varehouse Distributors, Inc_n__u- Iarshall, Texas Associated Parts Company U_--- n___n_- Somervile, Mass. Automotive Jobbers, Inc___ ____n_- Cleveland, Ohio Automotive Parts Distributors, Inc_____ -------- Athens, Ga. Automotive Southwest, Inc ------------- Dallas, Texas Cotton States, Illc__n_ - Greenwood 1Iiss. l\Ietropolian Automotive WholesalenL___ - :\ew York :\. Y. Hd-South Distributors, Inc-- -_n )'lemphis, Tenn. l\Iiu-\Vest \Vurehouse Distributors__ __--------- Kansas City, Mo. Ozburn-Crow & Yantis Co_------- - Memphis, Tenn. Six- States Assoeiates ___n__nn__ - Boston, Mass. Southern California Jobbers, Incn_nn-----_u- LOR Angeles, Calif. Southwest A utoilotive Distributors_--- - Los Angeles, Calif. Sout1nvestern \Val'ebouse Distributor's----------- Dallas, Texas Warehouse Distributors, Inc_____ - Chattanooga, Tend. 13. The pure-hase proe-edure in a group buying operation provided for the forwarding of purchase orders by the individual johber memher to the sener directly or through the group offce. Merchandise so ordered was shipped by the respondent direct to the individual johber member with biling for same being directed to the group offce. :Monthly settlements '''ere made bet ween respondent and the group offce for the aggregate purchase otc1e1'8 of all the jobber members so received and each jobber member also settles monthly with the group offce for his own individual purchases so made. The annual volume rebate allowed by the respondent was based upon the aggregate purehases of the group members and was paid to the group offce, which in turn distributed such volume rebate to the jobber members in proportion to the, amount of such jobber s individual pute-hases. The rebates and discounts, as shown by the tabulations in evidence, were granted and allowed by respondent to each individual member of the said buying groups on the basis of the total purchases of all the members irrespectjve of whether or not the amount of such individual member s purchases met with the. requirements of any particular bracket of respondent's volume rebate schedules set forth in the respondent' distributors' franchise ngreernent. The group buying organization was in reality a bookkeeping device for the collection of rebates, discounts and allowances received from sellers on purchases made by its jobber members. Such jobber members, in fact, purchase their requirements of respondent's produe-s direct from the respondent and at the same (jj ._ __. : $ . , !, j , 936 FEDERAL TRADE CONThHSSION DECISIONS Decision 51 F. T. C.

time receive a more favorable price or higher rebate based upon the combined purchases of alj of the members.

14. Illustrative of the monetary benefits derived by the individual jobber member of such group buying organizations, as opposed to those individual purchasers buying without the henefits of such group consolidation of purchases is the following tabulation taken from Commission s Exhibits 21-V and 21- , dealing with the transactions between respondent and the Mid-Sonth Distrihutors, Inc. : A ldomotive jobber "group-buying" method of purcha.sing 1:JanUfactller SPUlJliShCdc1iscounti ' 3 - 4 , rhedule to trade I 2 -\etn:'l net I\'fannfac. :)'fanufac. ManUiflC MflDUfar TJUrdmsrs pach, tufer s ' turer s, turer s turer s! .""actual; member jobber ' ?\et purc!1E!SeS 7JCe r:Jte arnOll:t: I rebate te:;ppl1. pUld cablr Hmnunt due I ' ere perant Percent Under J\I ()OO- !1m OOO- -"one 5 ' , 51U- UO i-"rm_ ;i 7G.50 19 llu2\10. iO 214 000-$7.499.-- 7H ,i. 2 J i JU, 493.0" 3iJl, 50()-S!J !J!JD_ 6 1 .,\01,9, 51 129.7;; will 2R1.t:9, 207, $JO OOQ-$12 483.05-1, 71.18 19 l 10 7U8,41$12, 186.42 ,'j2i. !!!I4:; ;00 1!1' g99_ 20465 ' 1,.;5, 19 1 7h 499_ 12 S n,, 728. 1,\QOO-SI7 499_ 14' 9 2,b.l(i_06/59. (,9 609.20137, iJ 1\J 52!. 3,1 3511. :)1' 1 , 4"-1, SOO-S19 1() 0,;:1,2 10, 3, ., 440.61170 172,03 20S. 11. 1.492,$20,OUO-€22,'\99_ $3. 5 ! !mg 1.;1G 10 ,999_$22 WO-S24 i7 1 12, - 750. 74,(,4 )9 142. 67 142. -- 92 :\'one'\25 000-$27 499_ IS I, 11. 1 , n 180. 51 J!J 118 l. - O, 08$27, 500 and Olcl- 19 . 4. 1 , Ol . 02,1 ,,, 53. GO 19 - 203. 68 l Total 8.(j I 33 i==, 15. In following the pricing practices hereinabove described, 1'0sponclnt has discriminated in price by means of rebates allowed by it in the sale of its va.rious automotive products and related items as bet\veen respondent' s competing distributors and also between respondent s distributors and competing group buying jobbers, and the effect of such discriminations may be to substantially lessen, injure, destroy or prevent competition between customers receiving the benefit of said discriminations and the customers \yho do not receive the benefit of such disc.riminations.

16. The respondent did not grant exclusive territory to any of its customers and has had more than one distributor in various trade areas who were in fact, in competition with each other and also in competition with group buying jobbers, who sold respondent's replace ment parts to dealers and other purchasers in their respective trade areas. The price discriminations received by some distributors as compared with others, competing with them in the same trade area, as a result of respondents pricing plan, is shown by a number of tabula- :\\j, _ ___ . _ . ; j. . (, : MOOG L DUSTnIES INC. 937 931 Decision tions taken from the respondent's books and records which were received in evidence as Commission s Exhibits 61 through 79- , inclusive. These tabulations show the prices paid and the rebates received by purchasers located in various trade areas throughout the United States during the years 1947 through 1950. Testimony was taken of distributors of the respondent in four trading areas, as shown on the tabulations-New Orleans, Memphis, Denver, and Dallas. The amounts purchased by the distributors in these areas and the discounts and rebates received by them on both the leaf spring line and the coil action line are as follows:

LEAF SPRING, COIL SPRIXG A;-D CHASSIS PARTS LINE Kame of purchaser Net ))W'- Amo Pcrccntchases ages KewOrleans: GrciDcrAlltoT'artsCo. h_n _n.-.n-- $3, 3i3, -"7232 )4, Auto Cr.assis &: Snring CO_--_--_--n n-- 687. 81. Dealers Truckstell Sales, 111en_--_ ------n 447. 2236 ::Vremphi ?\JiUs-:\Iorri.'; C,).l 301.09: 7U2 1.95 Ol.bw-n-Abstoll &: Co. __un---- 1181.31 201.12! 14. \)9 T, B, Cook Au(o ::'lachine COn_-- 260. 18G 15. Dealcro Truck tcll S:lh' s, Inc- 922. ;;4 40, :\lcKee-:\Ioog Spring Co-- 230. 409. 13. :Oallas'\llomotil eAppli:llce CO. 2H\. 26. 12. :'101.01" Supply Co. of Dall::s 1 101.63 6. l!J J2. '\mrric:m Geelr ci Parts Co. ----n_ 'i3, H. Dg Terry AUiomotive Supply In--_--.- 955, 14:J, 15, lic1Hlerson Auto P:u1.s-- -_u,-- snle Truett-WorreD Spring & _I,Jiglling____-- t090, 26S. ! G)'ciller Auto Part Co- W8S a merrber of C;cotton St.:ltrs Inc., a group beyi lg rJ"" 111iz:1.i011; I\1i!s-:\'Torrls Co. , 8 member of:11id-SonthDisnibutors, Inc. ; Ozbur Abs 01l & CO. :l mellbe f Ozburn- Crow & YantisCo: Au ornoti,c ,\appliance Co, and iotor Supply Co. of Dallas, membcro (,r _\rk-L8-Tex Warelio\J trib\J(o!'s, Iuc. : AmerictlIl Gear &: Parts Co. , :: memher of AutoITct, e EJcutbwrst, Inc. lid Terry Autol!otiv- Supply, :1 !T:embfr of Soutl1\ve tern \\'archousc Distributors. COIL ACTION LIXE I - Iaftrrdeductiug::''et pure ase :\Tflmeofpll'cha,el cp. b (jj counf Ar'1011!toi Percen:!l all( \dse tax rebutc and other cle( i ts Xt\I' Orle:u:s. Percent Auto Spring & Brak S('1T - - 70:;. 2 41 7;2 "'i - i;6 09 " 1- Anto Shock .Ab ol'bel' 8ales_ - .np g(jjj, 30G!1 67, 48, Greiner Aoto Pru.ts Co. - .u_ 74988 :!lpmphis.

.1. TI. C;ook Auto &: Id cl:jne Co_- l,G.!3GOi 164, -'lcKc'e. ?,Toog . pring Co-- \487, 27' 412. 7'; Ozhurn-Abston Co. 101.1()I , 7 9, 21 1!J )lnls-;\orrisCo S46, !Jll 2'J7, lJnr Fosln Anto S1Jppl ' Co-- 5",,1 1lO, r!'kcl Auto 1'1lppl)' Co_- 13230: F, .1\, SWCCIICY EIre, Co_ 17742' e5tc:.n 8prl.-g :3et"Yicr Co. goo. 1 Greiner Auto Parts Co, wa fL member r)f Cotton Stafrs Joe, CI g:,OU)) bllc.-illg: ol'galliult,oll; Olbllll- "L1Sl0l1 Co. , a Il;emher of Ozburn-Crow & YaJltl, Co. ; "nd :\iills-:\,orns Co., Cb me:nber of :\rhi.Soll Dis,."ilm(rJrs, Il1c.

1 CO,11PUtcd Ol Set .Sr.1es" before deducting- " Cash Di cow'.t" and " Excioe Tax. ___.._ __ : _ ,. $ 938 FEDERAL TRADE COMlISSION DECISIONS Decision 51 F. T. C.

There is nothing in the record to indicate that the above trading areas are unique or different from other trading areas where respondent sells its products at differing prices. It is therefore concluded that competitive conditions shown to exist in these four areas, ,,,ith respect to purchase and resale of respondent s products are typical and representative of the other areas in the United States and that respondent' s dist.ributors reselling respondent' s products in the same trading area ate in competition with each other in the resale of such products.

18. The inequities arising from the annual volume rebate plan based solely on total yearly purchases and which completely ignores the size and quantity of individual purchases is illustrated hy Commission Exhibit 69 which is set out as follows:

D, 5723 Moog Industries, Inc.

Summary by discount brackets of number of cllstomers and averetgc aruma! coil action purchases-!047, 1948, and 1949) et purchases - Rebate Xumber I i of cus- 'I A\"a=ual rage Kuwberof em- Averageannual I' Numberof cus- i AVCIal!cannual chases; tomcrschasespur- tomersi chasespur- tomers pur- Under$I Only 000-$4 999-- ' 3 000-$7 499_ 'i00--$9 999_ :'172 22, 4 8$10 000-$12,499_ 705770 660 6, 10, 8 b 8' llb:279031$12 500-$14 13667 11 909-- 1012 ': 676, 2610 7 945$15 000-$17 499-- $17 50()$19 999_ $20,000-$22 499_ 1 20 0 -- 940$22 099 500-$24 444 1 23 734 II 22 1 22 1617 987$25 000-$27 887 499._ 1 20 18 0' 471$27 500 and over_ 11, 36 ,; 33 0'--17 38 488 065 19 This exhibit shows that in 1947, 456 purchasers participated in the rebate plan on coil action line sales; in 1948, 557 purchasers participated; and in 1949, 407 purchasers participated in the rebate plan. In none of the years selected did as many as half of the purchasers from respondent receive a rebate on their purchases, and for the most part, only approximately one-third of the purchasers from respondent were favored 'ivith the lower prices resulting from the granting of said rebates.

19. The record, based upon the tabnJations in evidence in this proceeding, disclosed substantial differences in the net purchase prices paid by competing purchasers of respondent's products for resale. The substantiality of the amount represented by such price differences with relation to the purchasers' net profit margin is eonclusively shown :VIOOG II\DUSTRIES , INC. 939 931 Decision ,,,hen compared with the competitive effect of the amount represented by the 2 percent cash discount. Distributors of respondent, who testified in this proceeding, stated that they invariably took advantage of the 2 percent cash discount as being essential in the conduct of their respective businesses and that such discount reduced the cost or acquisition of respondent' s products. This 2 percent reduction in cost or acquisition is substantial and may account ror a substantial portion of the margin of profit. One jobbcr of respondent, ranking third or fourth in the Dallas, Texas, trade area, testified that the overall net profit for his company ran less than 4 percent. By the very nature of the business operated by the various jobber customers of respondent their profit ,vas necessarily based upon an accumulation of small margins of profit on many items. Some of the witnesses handled 15 to 75 lines, involving an aggregate of thousands of items. Practically all of respondent's jobber customers extend the same cash discount they receive to their customers, however, on a mark-up of acquisition cost the discount actllany given by such customer to its purchaser on resale will be greater than the 2 percent cash discount. 20. In the course of this proceeding it was the contention of the respondent that no injury to competition existed by reason of respondellt s pricing practices because its custmllers generally followed the suggested resale price Ests, issued by the respondent, in the resale to their respective customers. In support of this contention, the respondent jntroduced testimony of a number of distributors that they had not suffered any injury by reason of differing or higher prices paid by them as compared with prices paid by competitors in their respective trade areas. On cross-examination, these witnesses admitted that their reasons for stating that they had not been competitively injured was due to the fact that their competitors a11 followed the suggested resale price of the respondent and that there was no price competition in their particular trade areas.

21. The fact that pric.e competition may have been eliminated in some areas because of uniformity of resale price does not eliminate the question of injury to compe6tiol1. Any saving or advantage in prjec obtained by one competitor as against another increases his margin of profit, permits additional services to be extended to cu,stom('rs, the use of additional salesmen, the carrying of larger and more varied stocks, fL1cl the estabbslunent of branch houses for expansion of the business, 'Vhile price competition a.among customers 'YH.' more or less non-existent, except in isolated instances, in the areas where testinlOllY 'vas taken, the possibility of pric.e competition is ever present ,vhere lo,ver prices 10 certain competing customers exjsts. , Decision 51 F. T. C.

22. The contention by the respondents that no injury to competition ean be proven or inferred ,vhere the discriminatory discount has not been used to reduce the sale price, is \fithout merit as a. defense in this proceeding and has been so held by the United States Supreme Conrt. In F. T. O. v. Lllorton Salt 001npany: 334 U. S. 37, the Supreme Conrt held that where. purchasers, buying and competing in the resale of the same merchandise, are charged different prices t.herefor, the conclusion is inescapable that injury to the competitive eiIorts of the unfayorecl purchasers is present. In this connection the Conrt said It "would greatly handicap effective cnforcernent of the Act to require testimony to show that which 'Ye believe to he self-evident, namely, that there is a 'reasonable possibility' that competition 1uay be adversely affected by a practice under which manufacturers and producers sell their goods to some cllstomers substantially cheaper than they sell like goods to the competitors of these cust.omers, This shoYI"ing in itself is suffcient to justify Ollr conclusion that the Commission s findings of injury to competition were adequately supported by evidence." In the present case the evidence more than meets this test. 23. It was also contended by the respondent that the replacement parts sold by it to competing customers have not been shown to be of like grade and quality, and as a basis for this contention respondent lms taken the position that such parts to be of like grade and quality, under Section 2 (a) of the Clayton Act, must pass the test of interchangeability. This would, in eilect, he saying that merchandise to be of like gntde and quality must be identical. If Congress had intended to so require it ,,auld have said so. "\Ve do not have here differcnt grades of merchandise designed to sell at difierent price levels, such as first quality line and a second or inferior quality line. All of respondent's products are of the same grade and quality. 24. Hespondcnfs distributors purchased respondents replacement parts, not as individual items but as part of a line designed to supply the needs of garages and others engaged in the repair of motor vehicles. The respondent has grouped its automotive replacement parts for discount purposes into three separate categories "\\"which arc referred to as respondent s coil action ljne, lea f spring line and piston ring line. Each one of these lines carries a separate and c1iffert:mt retroactive volume rebate. Respondent has made the selection of t,he parts to go into the various lines, and the rebates granted to purcl1asers of sneh lines apply to each and every item in the line. llaving gronped its parts for discount purposes, the responclent cannot logically contend that items within the group a.re not of like grade and quality, or that distributors jn the same trade area, who purchase items within the group for resale, are not competitive.

MOOG INDUSTRIES, INC. 941 931 Decision 25. The Robinson-Patman Act is an antitrust statute designed to preserve equal competitive opportunity. Respondent' s contention of interchangeability places the existence. 01 like grade and quality solely on functional similarity and thereby ignores the effect upon compet.itive opportunity. .When the re,pondent sells replacement parts, classified into the three lines described above, to its distributors, who resell in competition with each otller in their respective trade areas, the functional similarity of the individual items in each class is no longer of consequence because from a competitive standpoint they arc all of like grade and quality. It also appears from the record that distribut.ors in order to supply the needs of their garage customers would purchase substantially all of the items in respondent's various lines over a period of time, their purchases of the items being dependent upon the demands of their customers, It must accordingly he concluded t.hat the discriminations in price herein found were, in fact made in connection with the sfile and dist.ribution of merchandise of like grade and quality and that the defense that such products must pass the test of interchangeability is without merit. 6. The respondent in its ans".er did not assert a defense of meeting competition under Section 2 (b) of the Clayton Act and did not request a finding on this issue in its proposed findings submitted to the Hearing Examiner. I-imyever, the attorney for the respondent did announce on the record t.hat he intended to jntrocluce testimony on the defense of meeting competition. 1Vhile respondent. did consider and compare competitors' prices in preparing its price list, the price differentials and the discriminations in price did not. occur from the use of the price list or deviations from such price list to individual customers, but instead arose out of the pricing practice involved in the use of a pricing plan consisting principally of a non-retroactive volume rebate. There is no evidence that the respondent either met the price of a competitor or any rebate or discount schedule used by a competitor. In fact, there was no uniformity in the discount schedules of competitors; some used a retroactive volume rebate; some a non-retroactive volume rebate; some a flat percentage discount; and others an incentive rebate based on turnover of merchandise or maintena.nce of stock.

27. The activity of the respondent in meeting competition summed up by respondent's execuUve "Vice president who said, in refen'ing to the use by respondent. of the discount schedule of the ,Vausau ::\'Iot.or Parts Co,. in determining respondent' s pricing policy, "'Ve \youlcl examine it. 'Ve would try to e. valuate the effect of Vv ausau 011 our market, hmy close "'e ,,"Quid have to eomc to meeting the competi- 942 FEDERAL TRADE CO:VLYfISSION DECISIOXS Order ;)1 F. T, C. tive offer and hmy far away \ye should stay because of certain pitfalls which it. may lead lls into, and upon examination of this we would use our own good judgment and experience to try flld vmrk this thing in with all of t.he others and eo me out with a contract. and a schedule which we reel would earn us the greatest amount of profit and lose us t.he smallest number of custOJners and attract the most." This might be adopting a pricing practice or sales system best suitable for the respondent in a competitive market, irrespective of any discriminating effect, but it does not constitute R shmying that lower prices to some favored customers, resulting from the pricing practice, \were made in good faith to meet an equally low price or a competitor. 28. Section 2 (b) of the Clayton Act does not mean that a seller r,m use a sales plan which constantly results in his getting more money for like goods from some customers than he docs from other customers competing with them. This ,,,s definitely decided by the l:united States Supreme Court in F. T. O. v. A. E. Staley, 374 17 S. (.6 753 in which the Court stated that Section 2 (b) "does not concern itself with pricing systems or even with all the -seller s discriminatory prices to buyers. It speaks only of the seller s 'lower' price and of that only to the extent that it is made 'in good faith to meet an equally low price of a competitor . The Act thus places emphasis on individual competitive situfltions, rather than upon a general system of competition. ,Ve think the conclusion is illaclmissible in view of the clear Congressional purpose not to sanction by Section 2 (b) the excuse that the person charged with a violation of the law ,vas merely adopting a similarly unlawful pra,ctice of another." It must therefore be concluded that responclenfs price discriminations were not made in good faith to meet an equally low price of a competitor and that respondent' attempted defense under Section 2 (b) of the Clayton Act is without merit.

CLLSTOX The aforesaid discrimina.t.ions in price by the respondent as herein found constitute violations of subsection (a) of Section 2 or the Clayton Act, as amended by the Robin on- Patman Act. ORDER It is ordered That the respondent i\Ioog Industries, Inc., a corporation, and its offcers, representat.ives, age,nts and employees, directly or through any corporate or other device, in connection with the sale for replacement purposes of antomotiye replacement parts, consisting of coil action parts, leaf spring, coil spring, chassis parts piston rillgs and MOOG INDUSTRIES, INC. 943 931 Opinion other related items in commerce, as "commerce" is defined in the Clayton Act, do forthwith cease and desist from discriminating in the price of such products of like grade and quality: By sellng to anyone purchaser at net prices higher than the net prices charged to any other purchaser who, in fact, competes with the purchaser paying the higher price in the resale and distribution of respondent' s products.

OPINION OF THE COJ'IlIISSION By SECREST, Commissioner:

This case is before us on respondent's appeal from the hearing examiner s initial decision.

Respondent, lHoog Industries, Inc., is charged with having discriminated in price between different purchasers of its automotive replace ment parts in violation of Section 2 (a) of the Clayton Act, as amcnded by the Robinson-Patman Act. ' Hearings were held at which testimony and other evidence in support of and in opposition to the complaint were introduced and the hearing examiner, after considering the entire record, made his initial decision in which he found that respondent's prking practices have resulted in price discriminations between competing cllstomers and that the effect of the discriminations may be to substantially Jessen, injure, destroy or prevent competition between customers receiving the benefit of said discriminations a, the customers who do not receive the benefit of such discriminations. The order in the initial decision prohibits respondent from discriminating in price:

By selling to anyone purchaser at net prices higher than the net prices charged to any other purcha.ser who, in fact, competes with the purchaser paying a higher price in the resale and distribution of respondent' s products.

Respondent, in its appeal, takes exception to specific findings and conclusions in the initial decision as well as to certain procedural matters, including rulings of the hearing examiner. Exception is also taken to the substance and form of the hearing examiner s order to cease and desist. ",Ve consider first respondent's contention that as a result of certain alleged procedural errors it has not been accorded a fair and impartia.1 hearing.

During the course of the proceeding respondent made two requests for a bill of particulars, the first before it filed its answer and the second at the conclusion of the taking of evidence in support of the com- 115 v. s. C., sec. 13, 42378i1-!'i8- 944 FEDERAL TRADE COM.WSSION DECISIONS Opinion 01 "'. T. O.

plaint. The Commission denied respondent's first request and the hearing examiner denied the second. Respondent claims that by such denials prejndicial error was committed. In its order denying respondent' s original request for a hill of particnlars, the Commission expressed the view that the complaint was suilcient to advise respondent of the nature of the charges against it. ,Ye are still of that view 'Ve are also of the view that the hearing examiner s refusal to grant respondent' s motion for a bill of particulars was not prejudicial. The function of a bil of particulars is to enable the moving party to prepare for responsive pleadings and then only to the extent that it required for that purpose; the offce of the bil is related to pleading, not to trial. During the presentation of the case in support of the complaint respondent became fully informed as to the scope and details of the charges against it. Continuances are freely granted in Commission proceedings and respondent had full opportunity to study the record before proceeding. There was no possibility of "surprise to thc respondent or inopportnnity properly to prepare its case. During the course of the hearings respondent moved the hearing examiner to issue a rule requiring counsel supporting the com plaint to make certain elections from the evidence which would be relied upon to constitute the case against the respondent. As ,grounds for the lllOtion respondent stated, in substance, that by virtue of the undue proliferation of evidence which had been offered and received over respondent' s objection, including voluminous tabulations with respect to sales by respondent to customers in many different communities during many months and years, involving hundreds of different automotive parts and thousands of invoices, there had been placed upon the respondent the almost insurmountable burden of analyses and proof requiring the breakdown of thousands of invoices and cost allocations requiring thousands of man hours of time and extensive, exorbitant and needless work, and causing respondent to be faced with the sit nation wherein it was impossible for it to receive a fair and impartial hearing. The hearing examiner denied respondent's motion and the Commission refuse,d to entertain respondent' s appeal from that ruling. Respondent s mot.ion was made at a hearing held on June 23 , 1953. . Counsel supporting the complaint rested their case on .Tune 2, 1952. In the interval between tllOse dates, at hearings l1elcl in St. Louis Denver, Dallas, New Orleans, :J:Iempl1is and Ne\y York, respondent introduced considerable evidence in opposit.ion to the complaint. There is no indication that respondent did not know the issues it must meet during the presentation of this evidence. The evidence introduced in support of the complaint was that which counsel supporting MOOG INDUSTRIES, Thc. 945 931 Opinion the complaint believed necessary to establish respondent's practice of price discrimination. It does not appear that respondent has advanced any defense to this proceeding which would require it to analyze or break down each of the numerous transactions represented in the tabulations. vVe think the motion was properly denied by the hearing examiner and are accordingly rejecting respondent' s contention that prejudicial procedural errors were committed whicb prevented it from having a fair and impartial hearing. Respondent does a substantial business in the manufacture and sale of automotive replacement parts consisting or coil action parts leaf springs, coil springs, chassis parts, pist.on rings and related items. Respondent has classified the products itself into three lines, namely, leaf springs line, including coil springs and chassis parts, coil action line and piston ring line. Respondent sells its products in every State of the United States and in 1950 maint,,ined 25 branches and warehouses in the principal cities. In 1949 respondent sold its products to approximately 1 200 coil action accounts, 800 leaf spring accounts and 400 piston ring accounts.

During the period covered by this proceeding respondent sold its products to customers designated by respondent as distrihntors at the prices appearing in respondent's distributor net price sheets, less specified discounts, allowances and rebates. Respondent's customers resold these products to garages, service stations, fleet owners and other jobbers. Respondent from time to time issued suggested resale price lists for nse by distributors and dealers in the resale of respondent' s prod nets. Respondent's base price was the same to all customers. The price differences with which we are concerned arose from the practice of granting discounts or paying rebates to customers the amount being determined by each customer s total annual net purchases or, in the case of purchasers who purchased through a group buying organization, by the aggregate annual net purchases by all members of a particular group.

The annual volume rebates available to customers were incorporated in and made a part of the franchise agreement which respondent entered into with its distributors and group buying organizations. A different volume rebate schedule was applicable to each of the three lines. For example, on the coil action line the amount of the retroactive volume rebate ranged from 5% on annual net purchases of $1 000 to 19% on annual net purcha,ses of 827 500 or more. On the piston ring line the range was from 2% on annual net purchases of $2 000 to 20% on annual llet purchases of $30 000 or more. On the leaf spring line the retroactive volume rebate schedule adopted as of July 1 , 1949 946 FEDERAL TRADE COM.;VIISSIOK DECISIONS Opinion 51 F.

provided for rebates ranging from 5% on annual llt purchases of 000 to 15% on annual net purchases of $35 000 or more. In addition to the volume rebate, respondent allowed a 10% warehousing and redistributing commission to distributors who resold respondent' products to jobbers who had been approved by respondent, provided the combined earnings of the warehousing and redistributing commission ,md the volume rebate on any line could not exceed the earnings figured at the maximum volume rebate for that line. In 1949, respondent had franchise agreements with 15 group buying organizations. The johher members of these groups forwarded their orders for respondent's merchandise either directly to respondent or through the group offce. The merchandise was shipped by respondent direct to the jobber members hut the biling for same was to the group offce. The alilual volume rebate, which was computed on the basis of the aggregate of the purchases by all members of a group, was paid to the group offce, which in turn made distribution to the jobber members on the basis of each member s purchases. In other words, under this arrangement members of the group buying organizations were granted discounts or paid rebates based on the total purchases by all members of the group rather than on the total purchases of the individual member, with the result that many such purchasers received a more favorable price or higher rebate than other competing purchasers who did not purchase through group buying organizations. Substantial differences in the net purchase prices paid by competing purchasers have resulted from the above-described pricing practices. The record contains a numher of tabulations prepared from respondent' s accounts and records showing details of respondent' s sales of two of its three lines to customers in a number of different trading areas. These tabulations reflect differences in net buying prices between customers in the same trading area or varying amounts and percentages with some differences amounting to as much as 19%. For example respondent, in 1950, sold its leaf spring5line to six customers in Dallas Texas, all or whom were in compet.ition with each other in the. resale of respondent' s products. Four of these purchasers purchased through group buying organizations at net prices ranging from 12% to 15% off list price. One customer received no discount or rebate on its pur chases and the Jargest purchaser received a rebate of 2D% on its total net. purchases.

The inequities of T€'..pondent's annual volume rebate plan are further demonstrated by the fact that in 1949, for instance, of the approximately 1 200 purchasers of respondent's coil action line, there were only 407 purchasers ,,,ho received a rebate on their purchases, and ____ _ : : ;;; MOOG INDUSTRIES, INC. 947 931 Opinion that 352 of these 407 received a rebate of only 5%, all as ilustrated hy the following tabulation:

,"vir- ber of Average et purchases Rebate customers a=ual purchases -;ere ' i )'1 J1: !12: :H n f n -- :n!! $12 500-$14 09a _____n_ 4 13, 667 12 ! mm i!':i!Hir ii. mj Iii The substantiality of respondent's price differences and the probability of injury to competition can best be shown by comparing it with the competitive effect of the amount represented by respondent' s standard 2% discount for cash given to all customers. Distributors of respondent testified that they invariahly took advantage of this 2% cash discount and that this discount was essential to the conduct of their respective businesses. Testimony in the record also indicates that the market in which these distrihutors compete is highly competitive with many dealers handling from 15 to 75 different lines of automotive products consisting of thousands of items, many of which sell for only a few cents. The dealers' financial life depends on the a.ggregate of small margins of profits made on a nunlber of individual automotive items. One jobber in Dallas, Texas, ranking third or fourth in that area, testified that his overall net profit on auto. motive items ran less than 4%. ' With overall net profit so low discounts to favored customers, ranging up to 19%, could well mean the difference between commercial life and death if these discounts were extended to a suffcient number of items purchased by a distributor. Nor is it controlling that the items herein considered may constitute only a very small part of the dealers' total sales. As the Supreme Court said in the Morton Salt case: There are many articles in a grocery store that, considered separately, are comparatively small parts of a merchant' s stock. Congress intended to protect the merchant from competitive injury attributable to discriminatory prices on any or all goods sold in interstate commerce, whether the particular goods constituted a major or minor portion of his stock. Since a grocery stock consists of many comparatively small articles, there is no possible way to effectively protect a SFedera Trade Commfs8ion v. Morton Salt Co., 334 D. S. 37 (1948), 948 FEDERAL TRADE COMMISSIO" DECISIONS Opinion 51 F.

grocer from discriminatory prices except by applying the prohibitions of the Act to each individual article in the store. Respondent contends that the evidence in the record does not support the hearing examiner s finding that "the effect of such discriminations may be to substantially lessen, injure, destroy or prevent competition between customers receiving the benefit of said discriminations and cllstomers who do not receive the benefit of such discriminations. " This contention appears to be basec11argcly on the fact that respondent's customers testified generally that they had not been injured by reason of the higher prices paid by them as compared with prices paid by t.their competitors in the same tra.ding area. On cross examination, however, these same witnesses admitted that their reasons for so testifying was due to the fact that both they and their competitors followed the suggested resale prices of the respondent and that there was no price competition in their particular trade areas. The ndhenmce by respondent's cllstomers to its suggested resale prices does not elimina e the question or injury to competition. As the Sllpre.me Conrt said in the Corn PTodgcts case: 3 But it is asserted that there is no evidence that the allowances ever were reflecteel in the purchasers' resale prices. This argument loses sight of the. statutory command. As -we. have said, the statute does not require that the discriminations must in fact have harmed competition, but only that ther' e is reasonable possibilty th t they may' have such an eflect. "lve think that it was permissible for the Commission to infer that these discriminatory allowances were a substantial threat to competition.

The hearing examiner in his ini ti al decision found that: Any saving or advantage in price obtained by one competitor as against another increases his margin of profit, pe,rmits additional services to be extended to customers, the use of addit.ional salesmen the carrying of larger and more varied stocks, and the establishment of branch houses for expansion of the business. "\Vhile price competition among customers was more or less non-existent, except in jsolated instances, in the areas where testimony was taken, the possibility of price competition is ever present where lower prices to certain competing customers exist. " 4 In support of the hearing examiner s finding of the requisite statutory injury, there is in the record reliable respectable probative evidence in the form of testimony that respondent's 2% discounts for Corn Products Refining Co. v. Federal Trade Commission 324 U. S. 726. 742 (1945). 4 Cf. Inital Decision of the Hearing Examiner, Docket 5771, In the Matter of Namsco, Inc., adopted by the Commission March 17, 1952. MOOG INDrSTRIES , INC. 949 931 Opinion cash were invariably taken by respondent's customers and that these customers considered this discount essentin.I to the conduct of their business. Additionally, some witnesses testified that in order to expand their business, it would be necessary to bire additional1 salesmen handle more lines, and provide additional services to customers which could only be effected through increased profits. vVe believe that the hearing examiner was justified in concluding that respondent' s annual volume rebate plan resulted in price discriminations viohtive of the Robinson-Patman Act.

Hesponclent further contends that the evidence does not establish that it has discriminated in price between any specifically named purchaser of the same type of automotive product.s or supplies of like grade and quality who \\81'e competiti"\7cly engaged in the resale thereof during the same period of time and in the same market area. Respondent' s customers do not purclulse respondent's products as individual items. They purchase them as part of a line designed to supply the needs of garages and others to whom the products are resold. The rebates \were not granted on the basis of the individual items purchased but on the basis of t,118 total dollar purchases of a particular line. The price differentials involved did not adse from ny difference in the grade or quality of the products sold to diiferent customers. Instead, they arose from varying rebates on an entire line. The very nature of the businesses carried on by respondent' customers required that they calTY substantially all of the items in a particular line, and many purchasers of the same line of respondent' products were in competition with each other in tlle resale of such products to garages, service stations, and others. ,Ve think the hearing examiner properly Immd tlmt the c1iserim-inations in price were made in connection \with the sa,le and distribution of mercha,nelise of like grndc and quality.y.

"\Ve now consider respondent's objection to the order to cease and desist in the initial decision. Hcspondent contends that the order is too broad in its scope and exceeds the authority of the Commission by including the offcers, representatives, agents and employees of the respondent and by covering "piston rings" and "other related items Respondent additionally contends that the order is fanlty in that it is not limited to prohibiting price discriminations which injure secondary line competition; that it is not limited t.o prohibit.ing price discriminations in the sale of specific types of automotive replacement parts and that it contains no guiding yardst.ick by means of which respondent can determine the lawfulness or unlawfulness of its pricing practices.

950 FEDERAL TRADE Colll\USSION DECISIONS Opinion 51 F.

In support of its argument that the order should not run against its offcers, representatives and employees, respondent cites the decision of the United States Court of Appeals for the Seventh Circuit in the Reynolds Tobacco case ' which involved an order issued pursuant to the Federal Trade Commission Act. The Seventh Circuit Court in its more recent decision in the Anchor Serum case 6 held, however, that the order in a Clayton Act case was properly directed against the offcers, represent.atives and employees" of the corporate respondent and this same holding appears appropriate here. The further argument that the order should not include "piston rings" and "other related items" appears to be without merit. The record shows that respondent sells piston rings to the same type of purchasers, that is, automotive jobbers, as it sells its other products and that similar pricing practices were employed. The Commission s power is not limited to prohibiting the identical practices which have resulted in il1legal price discriminations. It has the authority and duty to also prohibit acts of the same type or class as those which ha VB been committed in the past.

The Supreme Court in the Ruberoid case 8 considered arguments with respect to the breadth of Commission orders to cease and desist in a Section 2 (aJ proceeding similar to those here presented by respondent. The Court observed that:

Orders of the Federal Trade Commission are not intended to impose criminal punishment or exact compensatory damages for past acts, hut to prevent jjegal practices in the future. In carrying out this function the Commission is not limited to prohibiting the jjegal practice in the precise form in which it is found to have existed in the past. If the Commission is to attain the objectives Congress envisioned, it cannot be required to confine its road block to the narrow lane the transgressor has traveled; it must be allowed effectively to close all roads to the prohibited goal, so that its order may not be by-passed with impunity.

In rejecting respondent's contention that the order to cease and desist in the initial decision is too broad in scope, it is pointed out that under the decision in the Ruoeroid case the fact that the order does not spell out in detail every phase of the statute does not in any way prejudice the respondent. Implicit in every Commission order are all the statutory defenses by means of which respondent can determine the lawfulness or unlawfulness of its practices just as if the order RfJvnald8 Tobacco Co. v. . T. C" 192 F. 2d 535 (lIHil) , nAnchor Serum Co. v. F. T. 0., 217 F. 2d 867 (1954). HenJhey Chocolate CO. V. F. T. 121 F. 2d 9E18 (1041). 8 F. T. C. v. Ruberoid Company, 843 u. S. 470 (1952). &;

MOOG Industries, L 951 931 Dissenting Opinion had set them out in exten80. vVe believe that the order, as drafted, is proper and that the statute and the courts have provided respondent with a proper yardstick for determining, under the order, the lawfulness or unlawfulness of its future practices. Finally, we consider respondent's contention that: Section 2 (a) of the Clayton Act, as amended by the Robinson- Patman Act, as construed and applied in this proceeding offends the constitutional standards of definiteness and reasonableness of due process of law under' the Fifth Amendment to the Constitution of the United States.

Respondent argues under this contention that Section 2 (a) of the amended Clayton Act "is admittedly a vague, indefinite ambiguous statute, and that it is wen settled that "a statute may be so vague as to violate the due process clause of the Fifth Amendment to the Conss con-titution of the United States . If, as we construe it, respondent' tention in this regard can be interpreted as rajsing the issue of the constitutionality of Section 2 (a) of the amended Clayton Act, the obvious answer is that it is not within the province of this Commission to pass upon the constitutionality of the statutes it is charged with administering.

" * * * an administrative agency, invested with discretion, has no jurisdiction to entertain constitutional questions where no pro- " 9vision has been made therefor.

W' e believe that the initial decision of the hearing examiner is adequate and appropriate to dispose of this proceeding, and respondent' appeal therefrom is accordingly denied.

Commissioner :\lason dissents.

Chairman IImvIrEY, concurring:

The record contains direct and substantial evidence showing probability of injury to competition in the secondary line, namely, in the distribution of automotive parts through jobbers and dealers. For .this reason I concur in the majority opinion. DISSENTING OPI:\-ron By :\Iason, Commissioner:

This is a Section 2 (a) Clayton Act case. Three elements must be found present to legitimatize a cease and desist order here. They are: 1. Interstate commerce;

2. Disparate discounts or rebates to competing customers (these 9 EnginaY'8 Pul;Uo Service Co. v. Securities Exchange Comnvss10n, 138 F. 2d 936 April 29, 1955.

, _ 952 FEDERAL TRADE CO:\IMISSION DECISIO:!\.T Dissenting Opinion 51 F. T. O. two we need not consider because in the instant case both sides concede their existence) ; and 3. The disparate discounts must have at least one of the following effects:

a. 1fay substantially lessen competition;

b. Tend to create a monopoly;

c. Injure, destroy or prevent competition. As long as the billion dollar auto parts makers are around, v.e need not fear defendant 1Ioog wiJ deslJ"Y General1Iotors, Ford, Chrysler et aI., nor is this independent auto pa-rts maker apt to create monopoly or substantially lessen, destroy or prevent competition with these or any of the ot.her big companies in the primary Ene commerce.

This leaves but one question for ns to answer. Has there been injury in the secondary line of commerce; that is, injury to those customers of Jloog who got smaller quantity discounts than others The Supreme Court has always held that an inference of injury can be drawn from the substantial difference in discounts alone, without any direct testimony of injury. For as the late :Mr. Justice ,Jackson once opined:

The law of this case, in a nutshell is that no quantity discount is valid if the Commission chooses to say it isnot." Relying on this carte blanche authority grant.ed US ll the prosecutor based his case on the disparate discounts admitted by both sides. At this stage in the case if the Commission chose to infer (and it did) that the discounts injured some of 1foog s customers, it could do so, and wen enough. The prosecution s contention that injury to competition existed was based upon inferences drawn from the fact that there were differences in discounts and rebates. This is as far as the prosecution had to go, though, of course, the direct and most sensible way to ascertain the real trut.h regarding injury would be to can those who were supposed to be injured; that is Moog s customers who received the srmdler quantity discounts. These, the prosecution by-passed.

However, before the trial was over, the defendant himself subpenaed the missing witnesses.

This meant traveling all over the country-Dallas, Denver, New Orleans, Memphis and New York City. Of conrsc, defendant could have avoided these long journeys if it had been wiling to admit for the sake of the record that it had injured its customers, but it refused F. T. o. v. Morton Salt 00' 334 U. S. 37, at page 58. 1. "The Commission is authorized by the Act to bar discriminatory prices upon the reasonable IJossibilty ' that different prices for like goods to competing purchasers may have the definedeffer.t on competition, F. '1' G. Y. Morton Salt Co. 334 U. S. at page 47. MOOG IND"C3TRIES, INC. 953 931 Dissenting Opinion to do so. In the ensuing safari, every witness called positively denied he suffcred any competitive injury from the challenged discounts or rebates "-a position they all stoutly maintained in spite of the badgering the prosecutor gave them for ruining the Government' case.

In t.his day and age of phony informers, it is heartening to behold American businessmen reject Government's cozening of \vitnesses to get them to say they were injured, when in fact they weren t. The Government' s position is faintly reminiscent of the personal injury lawyer whose advice at the scene of an accident was t.o "lie down and groan until the claim agent arrives.

Only in the instant case the so-called "injured competitors" refused to lie down or groan.

To top all of this, the Government was fmally forced to concede that if all other jobber witnesses who received the lesser discounts were to he summoned to the stand, they, too, would deny they had been injured.

If there had been no direct evidence on the question of injury, inferences could fill in the empty spaces. Bnt the spaces had best be empty of direct facts before an inference is invited in. With many hundreds of witnesses " admittedly ready to back up the testimony of a dozen or more who had already denied the injury, and with not a sonl wiling to impeach their assertions of no injury, we find an entirely different aspect pnt upon the case. J listice requires that we give precedence to direct evidence over inferences.

For inferences and facts are two different things. Their standing might be compared to mistresses and wives.

Inferences are compliant things, swaying to the whim of those who draw them. While facts, like wives, can be harsh, unbending, and often block the selfish aims of those who must live with them; they do nevertheless carry a badge of legitimacy that no unsupported inference has ever been able to achieve.

To prevent predelictions guiding onr judgments rather than cold facts, reviewing courts fro\Yl1 on us if our orders are based on inferences when direct testimony to the contrary bars the way. For as :Mr. Justice Stephcns says in United States v. U. 8. GYl'sum: ".1. fact may not be inferred from a proven fact or facts where unimpeached and uncontradicted testimony consistent with such proven J. See dige of testimony in appendix.

18 R. p. 043, lil' be number of defendant' s accounts 1s not Bet out with exactitude, but the Hearing' Examiner s report indicates they run into the thousands, Appendix 51 F. T. C.

fact or facts but inconsistent with the fact sought to be inferred, is in the record. " 15 Like a helligerent wife crashing in on an assignation with a hussy, the direct testimony of the alleged injured customers that they in fact were not injured, broke up the inference of injury so necessary to the Government' s case.

In spite of this, my learned majority of the Commission bas Divorced Cold Solid Reason from its bed And taken Inferences Instead.

On such a pretense Government has snatched itself a victory, bnt at what a cost.

In my opinion, the effectiveness of cease and desist orders rests on the respect their paternity commands.

An order born from the legitimate union of direct facts naturally ranks highest. In the absence of direct factual testimony, findings on inferences may support an order, but it wil be countenanced with about the same degree of condescension a common Jaw wife receives in polite society.

But not even this low degree of acceptance wil be accorded the order in the instant case, for in the face of direct testimony controverting the inferences of guilt, the Commission has c1ra Wll an order which commands neither the respect of the public nor, in my opinion, will it receive the npproval of reviewing courts.

,Ve are judged by the level at which we solve our problems. To take inferences that serve onr ends and reject facts presents an inaccurate and unhappy picture of what should he our most sacred institution-the judiciary.

The Commission has won a cease and desist order. But I doubt if the ends are ,vorth the means. For myself- I am against it.

APPENDIX (Digest of testimony, R. pages 617-899) Q. Have the pricing practices of Moog in tbe leaf spring line or in this coll actiori sales line, have either or both of them injured you competitively necessarily? A. No.

Q. I wil a!:k you whether you know whether or not the fad that an allowance of 15 percent was made to the Terry Automotive Supply Company injured your company, American Gear and Parts Company, competitively in the distribution 1J 57 Supp. 397 (1946) at page 4150.

J& With apologies to Omar Khayyam.

MOOG INDUSTRIES, INC. 955 931 Appendix of Moog Industries' leaf springs, coil springs, and chassis parts during the period indicated? A. sir.

Q. Do you kDowwhet er it did? A. Ko, sir. Frankly, I didn t know Terry Automotive had Moog up. until three or four months ago.

Q. Well, were you injured competitively by it? A.. Ka, sir.

Q. By virtue of the spread you were not? A. Ko, sir.

Q. And I wil ask you if you know whether or not you were injured com. petitively during that period of time by virtue of the fact of this differential spread on allowances off distributor s net prices in the purchase of Moog leaf springs, coil springs and chassis parts resold by you to your customers? A. Yes.

Q. You were so injured? A. No.

Q. I ask you if you know whether or not for that period of time the Motor Supply Company of Dallas suffered any competitive injury by virtue of this diferential in allo'lvanres off of distributor s net prices in purchases of leaf springs, eoil springs and chassis parts from Moog Industries, which they purchased from Moog and resold to its customers? Do you lmow whether or not you were injured? A. I do.

Q. Were you so injured? A. No.

Q. And I wil ask you would you know whether or Dot by virtue of the spread and differential in allowances off of distributor s Det prices the Henderson Auto Parts Company was competitively injured in the purchase of leaf springs, coil springs and chassis parts from Moog Industries, IDC" in the sale of such products to its customers? A. Yes.

Q, 'Vas it so injured? A. I do not think so.

Q, Do you know whether by virtue of this difference in percentages in pay ment for coil action parts from Moog Industries by your company and the other companies shown there, do you know whether or Dot you were injured competitively? A. Yes, I know.

Q. Were you injured competitively? A. No, I was not injured competitively, in my opinion. Q. ow do you know whether for that period of time so shown on that exhibit Auto Chassis and Spring Company was injured competitively in the purchase and sale of ::\Joog coil action parts in ::Tew Orleans, by virtue of that differential from the distributor s net prices or difference in allowances? A, it was not.

\..

Appendix 51 . T. C. Q. It was not? A. It was not hurt.

Q. Do you know whether you suffered an injury or not? A. No, I didn t suffer.

COUNSEL FOR PROSECUTION. Just a minute. V?e aren t so interested in getting your answer you are making as we are to find out whether or not you have the knmvledge yes or no, whether you know, and at that time I ,""auld like to make my objection.

The WITNESS. You want to know what, now? What is your question? COUliSEL FOR PROSECUTION. I think .:Ir. Butterfield bas a question pending. TRIAL EXA:MI ER. Mr. Witness, the question is directed to your knowledge as to whether or not you know, not whether or not you did or did not, but whether or not you kuow whether you did or not. That calls for a yes or no answer. The WrTl'ESS, Whether I know I was injured, that is the question he asked , was I injured.

TRIAL EXAMI:"ER. Do you know whether or not you were injured? You know or you don t know. lie wil ask you a further question on that. The WITNESS, My answer stil was no.

COUNSEL Fon PROSEC1;TION. I think the witness misunderstands the question. The "WITNESS. You asked me if I was injured. COU="SEL FOR DEFENDANT. I ask if you know whether or not you were injured. The WITNESS. Do I know whether or not I was injured' Q, Yes.

A. The answer is I don t think I was injured. I don t see how I could be in jured, I would say, whether I know whether I was injured or not' Q. Yes, do yon know? A. I don t know as far as either way. I am not injured in any way. I mean the question was asked, am I injured. We ha,e, all the fellows are competitors. Q, .Who in your organization would know better than you "\vhether you were injured or not? A. Whether I was injured, in what way are you asking? Your question is whether or not I was injured? Q. That is right.

, I am not injured.

COUNSEL FOR PIWS :CUTION. I stil move that answer be stricken and we have a yes or no answer to the question.

TJUAL EXAMINER, 'Ve wil let the answer stand, CO"'NSEL FOR DEFENIJANT. You may cross examine. TRIA EXAMINER, It is too complicated to get straightened out. Tmde EXA 1TKER. The question is \vhether or not you know; not whether or not you were injured, but whether or not you know whether or not you were injured. "VYITNESS. Yes, I would know.

COUNSEL FOR DEFENDANT. \Were you so injured? 'Vhat was the c0D1pan, how was the company injured by virtue of the differentials? WITNESS. 'Ve were not to my knowledge.

Q. I nsk you to study this exhibit showing these sales and rebates, and I ask you if, by virtue of any of the differentials shown in rebates or commissions or differences on this sheet, whether you know if American l\Jotor Specialties was MOOG INDUSTRIES, INC. 957 931 Order injured competitively in its resale of the coil action parts of :\loog Industries, Inc. for the ;years indicated? A. No. The same as it was in the other case. Q. And by " " you mean that you were not injured competitively by reason of the differentials shown on this sheet.

Q. Do you know whether you \were competitively injured? A. No, I don t believe I have been.

Q. By that you mean that you have not been competitively injured? A. No.

COUNSEL FOR DEFE)fDAN'T, I wil ask you to examine this chart and tell me whether or not you know whether Sapil'oAuto Parts Company was or was not competitively injured by virtue of the differentials in rebates shown on that chart? CO'G SEL FOR PROSECUTION. 'We have the same objection we have had heretofore, TRIAL EXAMINER. Objection overruled.

'VIT':ESS. As far as I can say, we in Sapiro Auto Parts Company3' more or less mind our own business, and we are not interested in what Clinton Square Auto Parts gets, or what they do, because there seems to be enough business in the tel'. ritory for all of us, and we all get our share of the business, and we all wnke our profit.

COUNSEL FOR DEFE DANT. Do you know whether or not you were injured cowpetitiyely by virtue of these differentials? ,Vrl'KESS, .Not as far as I know, no.

Q. By " not as far as you know'" " yon mean that you were not injured competitively'? A, That is right.

AI. ORDER I\respondent )Ioog Industries, Inc., having filed on July 13, 195. , its appeal from the init.ial decision of the hearing examiner in this proceeding; and the matter having been heard by the Commission on briefs and oral argument; and the Commission having rendered its decision denying the appeal.and affrming the initial decision: It is ordered That respondent Jioog Industries, Inc. , shall, wit.hin sixty (00) days after service upon it of this order, file with the Commission a report in "\writing, setting forth in detail the manner and form in which it has complied with the order contained in said initial decisjon.

Commissioner ::Uason dissent.ing.

958 FEDERAL TRADE COMi\USSION DECISIONS Decision 51 F. T. C.