Whitaker Cable Corporation

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Ix THE :MATTER OF WHITAKER CABLE CORPORATION ORDER, OrIXION, ETC., rx REGARD TO THE ALLEGED VIOLATION OF SEC. 2 (a) OF THE CLAYTON ACT AS Al\ENDl::

Docket 5722. Complaint, Dec. 20, 1949-Decision, Apr, , 1955 Order requiring a manufacturer of automotive replacement cable products and related items in North Kansas City, 1\10" to cease discriminating in price between different customers by sellng its products of like grade and quality at higher and less favorable prices to nUllerous small businessmen than to their larger competitors, in violation of sec. 2 (a) of the Clayton Act as amended.

Before Mr. Earl J. l1 olb hearing examiner. Mr. Eldon P. Schmp, JfT. James E. Corkey and Mr. Francis C. 1!1 ayer for the Commission.

Mr. EdwinS. D. Butterfield of Chicago, Ill., for respondent. INrTIAL DEcrSION BY EARL J. KOLB, HEARING EXA:':INER Pursuant to the provisions of the Clayton Act and the Federal Trade Commission Act, the Federal Trade Commission on December 20 1949, issued and subsequently served its complaint in this proceeding upon the respondent "\Vhitaker Cable Corporation, a corporation charging it with the violation or the provisions or subsection (a) or Section 2 of the Clayton Act, as amended hy the Rohinson-Patman hearings wereAct. After the filing of answer to the complaint, held at which testimony and other evidence i11 support or, and in opposition to, the allegations of the complaint "-'ere introduced berore the above-named H_caring Examiner, theretofore duly designated by the Commission, and said testimony and other evidence were duly recorded and filed in the offcc of the Commission. Thereafter, this proceeding regubrly came on for final consideration by said IIeflring Examiner on t.he complaint: ans\\er thereto, testimony and other evidence and proposea fllclings as to the facts and conclusion:: presented by counsel and said J-Jef1rlng Examiner having duly considered the record herein makes Ow follo\\ing findings as to the f:lcts, concl,lsions drawn therefrom: and order:

WHITAKER CABLE CORP. 959 958 Findings FrNDINGS AS '10 THE FACTS P ,iHAORAPH 1. Respondent 'Whitaker Cable Corporation is a Delaware corporation with its principal offce and place of business located at 13th and Burlington Streets, North Kansas City, Missouri, and factory branches at St. Joseph, l\Iissouri, Philadelphia, Pennsylvania and Los Angeles, California. Said respondent was originally incorporated in 1928 as the Whitaker Battery Supply Co., which corporate name was changed in 1944 to Whitaker Cable Corporation. PAR. 2. Since its incorporation in 1928, respondent has been engaged in the manufacture and in the sale and distribution in interstate commerce of automotive replacement parts, consisting of automotive cable products and related items, in competition with other concerns who were engaged in the sale and distribution of similar products in interstate COlpmerce. The amount of business transacted by the respondent in the after market replacement field is suhstantial. The market in automotive replacement parts is a highly competitive one both between respondent and its competitors and between respondent' customers. It was testified hy the President of respondent that the total after market replacement volume for automotive parts was around 3 bilion dollars. He further testiied that respondent sells less than 1 percent of products competitive with its own in the automotive re. placement field and sells 8% percent of the 14 000 jobbers in the 17united States who sell automotive replacement parts. K 0 relationship hetween the 3 billon dollars total and products competitive with those sold by respondent was shown. This witness further testified that after 33 years the respondent had a very substantial business in replacements throughout the automotive field and was recognized as one of the leaders in the after market replacement field because of its effective ethics and manner of doing business. In 1949 the respondent published a brochure describing the development of the company over the 25 years of its existence, which was circulated to the trade stockholders and suppliers. In said brochure it \vas stated that in 1920 the company "established the first line of after market automotivereplacement cables on the American market" and that "during the succeeding years 'Vhitaker Battery Supply Company continued to maintain its position as the largest 11anuf Lcturer in the world of automobile battery cables and terminals for after market replacement" and by the addition of bulk cable" ignition terminals and wiring assemblies in 1929 became "the most complete line of its kind on the market. (CX23) PAn. 3. From time to time the respondent issued its .r obber Price List which listecl the basic prices used by respondent in the sale and 423783- _____ _ 960 FEDERAL TRADE CQJ,lMSSION DECISIONS Findings 51 F.

distribution of its products in the automotive after market replacement field. Any discounts, allowances or rebates were off said Jobber Price Lists. Respondent also from time to time issued suggested resale price lists for use by jobbers and dealers in tbe resale of respondent' products.

PAR. 4. In the course and conduct of its business, the respondent sold its replacement parts, all of which were of like grade and quality, at varying prices to purchasers for resale to dealers and other purchasers. Such customers of the respondent were competitively engaged in the resale or respondent's replacement parts in the various territories and places where customers carried on their business. These customers of the respondent have been variously classified as follows: 1. Whitaker Warehouse J obben. Customers so classified operated under the 'Whitaker 'Warehouse Jobber Contract and purchased respondent' s products on the current Whitaker Jobber Price List sub. ject to annual volume rebates payable by respondent to such customers as follows:

REBATE SCIIEDcLE- On net purchases of:

:: GOO.OO 01' leSL_ - Xo Sales Hebate $ EjOO, OO-$1000.00_ --- 5% Sales Rebate $1000,00-81500.00______------------- - 7 ,6% Sales Rebate $1500,00-$2000.00_ - 10% Sales RelJate 82000.00-$3000.00_ - 121j:!O/ Sales Rebate $3000,00 and o."eL- 17%% Sales Rebate Rebates in each bracket wil be accumulated to make up total rebate, but are not retroactive.

In addition to the above annual volume rebates, "\Yhitaker ,Valehonse Jobbers also received a freight allowance on shipments of a certain minimum size and a 5 percent trade discount on shipments in excess of $150, 00. Certain warehouse jobber customers, purchasing in large volume received a 20 percent discount from Jabber List Price in lieu of both the foregoing rebates and the 5 percent trade allowance. Although the "lYhitakcr "lYarehouse Jobber Contract provides for the signature of the purchasing jobber and the "lYhitakel' Cable Corporation, many customers so classified by ,Vhitaker purchase under the above terms without having signed any such formal agreement. ,Vhitaker \Varchouse obber customers purchasing from ,Vhitaker are a.approximately about 4501n number.

2. 1FhitakeT' Gr01tp Buying Jobbers. Customers so classified pl1r chased respondent's products on the current vVhitaker Jobber Price List subje( t to a freight allowance and 20 percent discount from the .Jobber Price List jn the case of 4 groups, and 17Y2 percent discount WHTAKER CABLE CORP. 961 958 Findings from the J ohber Price List plus 5 percent trade discount and freight allowance in the case of another group. In the operation of the group buying procedure, purchase orders of jobber members were forwarded tothe respondent either direct by such members or through the group offce. Respondent in turn shipped the merchandise so ordered direct to the group memher and bills therefor were sent to the group organization and paid by it. Rebates and other discounts earned on such purchases were paid to the group offce which in turn distributed the net, after deduction of operating expenses, to the jobber members in proportion t.o their individual purchases. The group buying organization is in reality a bookkeeping device for the collection of rebates discounts and allowances received from sellers on purchases made by its johber members. Such jobher members, in fact, purchase their requirements of respondent' s products direct from the respondent and at the same time receive a more fa-vorable price or higher rebate based upon the combined purchases of all of the members. 3. Whitaker Wholesale Distributor JOUDe'S. Customers so classified purchased respondent's products through the 'Whitaker \Varehouse J ohber on the basis of the Cl1Tent \Vhitaker J ohher Price List subject to the same rebate schedule as contained in the \Vhitaker Warehouse Jobber Contract. :lIerchandise so ordered was shipped and hired by the \Vhitaker vVllrehouse J obher. The warehouse distributor was usually located in the same territory covered by the warehouse jobber through "whom he purcha,secl respondent' s products and consequently 'vas engaged in competition with an warchouse jobbers and other \farehouse distributors in his trade area. The vYholesale Distributor Contract, entered into behveen t.he wholesale distributor and the respondent, provided for the forwarding of orders of the wholesale distributor to the warehouse jobher, the respondent to fnrnish the wholesale distributor whh necessary catalogs, price sheets and such ad vertising material as may be issued from time to time to promote respondent' s sales. The cnmnlative rebate was paid by respondent to the wholesale distributor direct \then approved by the warehouse jobber. The warehouse jobber obtained the benefit of the volume purchases by both himself and the wholesale distributor giving him a higher rebate based upon the greater volume of pnrehases. Eac.h wholesale distributor contract issued by respondent specifically provided for the signature of the wholesale distributor, the signature of respondent' s district manager, and the approving signature of the Whitaker warehouse Jobber and the ,Vhitaker Cable Corporation. The degrce of control exercised by respondent over sales to the wholesale distributor accounts 'las such that said sales were in all essential 51 F. T. C; Findings respects sales by respondent. The wholesale distributor is therefore a purchaser from respondent within the meaning of the Clayton Act as amended. There are approximately 700 wholesale distributors so classified purchasing respondent's products. 4. Private Brand OU8tomers. Customers so classified purcha respondent' s replacement parts, bearing their individual brand names for resale to dealers and ot.her purchasers, at discounts from respondent' s Jobber Price List as follows:

(a) American Oil Company ("Amoco ) at 20 percent of Jobber List Price, pins 2 percent boxing allowance; (b) Philips Petroleum Company ("Philips 66" ) at 20 percent off Jobber List Price, plus 2 percent boxing allowance; (c) Sun Oil Company ("Sunoco ) at 20 percent off Jobber List Price, plus 3 percent boxing allowance prior to May 24, 1949, and after that date at 28.5 percent discount on most items, including battery cables and one cahle assortment, and 26 percent discount on the remainder of the line, covering the items other than battery cables; and (d) The Goodyear Tire and Rubber Company at 30 percent discount oll J obher List Price, plus 3 percent battery cable boxing allowance until February 2, 1949, then after that date 30 percent to 35 percent oll Jobber List Price.

All of said private brand purchasers sold to jobbers and direct to retail dealers and to this extent were in competition with respondent' direct and indirect purchasers hereinabove described. PAR. 5. In addition to the customers listed in the foregoing paragraph, evidence was introduced in this proceeding with reference to transactions between respondent and the IVillard Storage Battery Company on the theory that the contractual relationship between the respondent a.nd "'Villard and its customers was such as to constitute Willard customers as purchasers from respondent. The record in this proceeding, however, does not support this position, and, consequently, the testimony and other evidence in connection with the 'Villard Storage Battery Company transactions are not material to the issues in this proceeding.

PAR. 6. Evidence was also introduced with reference to certain purehasers of respondent's products who were classified as service distributors. In sales to these purchasers the "\Vhitaker Service Distributor Contract was used which provided for the signature of the service distributor as purchaser, the IVhitaker Warehouse Jobber, the IVhitaker IVarehouse Jobber salesman, and the approving signature of the IVhitaker Cable Corporation. This contract provided that the service distributor should carry a representative stock of respondent's prod- WHTAKER CABLE CORP. 963 958 Findings ucts and required the placing of an initial order of $25.00 or more to entitle the purchaser to buy at Whitaker Service Distributor prices. Under the contract the service distributor placed his orders with the Whitaker Warehouse J obher or a Whitaker W110lesale Distributor who in turn delivered the merchandise to and biled the service distributor. The degree of control exercised hy respondent through the execution of the ,V11itaker Service Distributor Contract was such as to constitute the ,Vhitaker Service Distributor a purchaser from respondent within the meaning of the Clayton Act, as amended. However, the testimony and other evidence in this proceeding is not suffcient to support a finding with respect to competition so far as the vVhitaker Service Distributor is concerned. PAn. 7. In following the pricing practices hereinbefore described the respondent has discriminated in price by means of the discounts rehates and allowances allowed by it in thc saJe of automotive cohle products and related items as between (1) respondent's warehouse jobbers; (2) respondent's direct purchasers, namely, wa.rehouse jobbers, group buyers and private brand buyers; (3) respondent's direct purchasers and its indirect purchasers, such as wholesale distributors 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 who do not receive the benefit of such discriminations.

PAR. 8. The respondent did not grant exclusive territory to any of its customers and has had more than one warel1011se jobber in various trade areas -.vho were, in fact, in competition with each other and also in competition with "'hi taker "lVhoJesale Jobbers, groups buyers and private brand buyers, who sell respondent' s replacement parts to dealers and other purchasers in thetr respective trade areas. PAH. D. In the record in thjs proceeding there are a number tabulations taken from respondent's books and records which were received in evidence as Commission s Exhibits :i7- , inclusive, showing the prices paid and the discounts received by purchasers located in various trade areas through ant the United States during the year 1949. Testimony was taken of purchasers from respondent in three trading areas shown on these tabulations, Denver, Dallas and New Orleans. There is nothing in the record to iudicate that these trading areas are unique or different from other trading areas \vhere respond ent sells its products at differing prices. It is therefore concluded that competitive conditions shown to exist in the,se three areas with respect to purchase and resale of respondent's products are typical and representative of the other areas in the United States and that respondent' \\ : : : ::__:__ __ ___: :_ j, 964 FEDERAL TRADE CQMC,nSSlON DECISlOXS Findings 51 F. T. C.

customers reael1ing it products in the same trading area are in COlllpetition with each other in the resale of respondent's products. PAR. 10. In the Denver area there were six purchasers of respondent' s products: throe \varellOuse jobbers, Auto Equipment Co., Colo rado Jobbers Supply Co., Hendrie & Bolthoff Co. ; two private brand purchasers, Goodyear Tire and Rubber Company, Phillps PctroJeum Co. ; and one wholesale distributor, Automotive Supply Company. All of these purchasers in the Denver area were in competition with each other in the resale of respondent's products. In the Dallas area there were seven purchasers of respondent's products: six warehouse jobbers, Automatic Appliance Co. , Dallas Parts Service Co., English Equipment Co., Meggs Co., Robertson & King Motor Supply, Texas Auto Parts; and one private brand purchaser, Goodyear Tire and Rubber Co. All of these purchasers in the Dallas area were in competition "\ith each other in the resale of respondent' s products.

In the New Orleans area there were five purchasers of respondent's products: three warehouse jobbers, Automotive 1Vholesalcrs Delta Distributors, Inc. , Parts Service Co. ; one private brand purehaser, Goodyear Tire and Rubber Co. ; and one group purchaser No"\ OrleansGreiner Auto Parts Co. All of these purchasers in the area were in competition with each other in the resale of responde,nt' products.

The amounts purchased and discounts and rebates received by the purchasers in the above areas, during the year 1949, were as follows: Xat purcbaseCombinedand rebatesclisc:JUnts Name of customer und trading area aftercteclurting, ! freight ami - I allo\,ance Amo1."1t Percent of net price Denver.

, 561. 93 512::5 20, ppf;, CO- I 167. 405. 12. Gooclve u Tire 11111 Rubber CO. nnnn_H_-- --n_nn 15. 35. 0,,9. .,2 487:22 20.

hfji; ==. m - m - - - m - -- - - - 987. 197. 20. Automoth- 81Jpply Con:pU::Y-nnn 852. 12. Dallas' :: -. - - n - - - 994. J97, (Un 868. 16294 872 Englioh Equipr:el:t CO_ n__ ----n__ n__ _n_ 888. 54. r,5 GOO!1 Har Tire Hill Rubber Co_ 21.'1, Rf;. 1403& ?\-Ie Co - __nun__ n____ 42,'385 482 05 19, Rol)lrt.son &:1\iQg :\lotor Supply_--n 93486 43. Texas Auto Parts n_ n--____ _----nnn- 26, 98. )J(', A1Jto:-oti,eOrleans' \Y!lolesa)ersn _ __n__n_- 6S7. 03i 36, (,9 Deltu Distributors, In n_nn_nn__n 857. 90i 32i\J3 11. 000(h' e2r Tin fmd Rubber CO_n - n_ , 1 :3 32 3!!fina 5. 02 Gre er Auto J-"rts COn -- ____unn_--n- :101.03 81;0. 20. Pmto Service COn "_--nnn----_n---- 292. 31 244. 10. 1 Based on prices in effect Feb!"ary I to May 2, 1949. WHITAKER CABLE CORP. 965 958 Findings PAR. 11. In the course of tllis proceeding it ""as the c.contention of the respondent that no injury to competition existed hy reason of respondent' s pricing practices because its customers generally followed the suggested resale price lists issued by the respondent in the resale to their respective customers. In support of this contention, the respondent introduced testimony of a number of jobbers that they had not suffered any injury by reason of differing or higher prices paid by them as compared with prices paid by compet.itors in their respective trade areas. On cross-examination, these "\itllcsses admitted that their reasons for stating that they had not been competitively injured was due 1:0 the fact that their competitors all followed the suggcstcd resale price of the respondent and that there was no price competition in their particular trade areas. Practically all of the witnesses, who purchased respondent's products, whether caned in support ofj or in opposition to, the charges of the complaint, tcstificd that the respondent uniformly gave a 2 percem cash discount and that they invariably took a.advantage of this cash discount as being essential in the conduct of their respective businesses and that such discollllt reduced the cost of acquisition of respondent's products. This 2 percent reduction in cost of acquisition is substantial and may account for a substantial portion of tl1c margin of profit. One jobber of respondent, ranking third or fourth in the Dallas, Texas, area, testified that the overall net profit for his company ran between 3 percent or 4 percent. PAR. 12. The net purchase price paid by respondent's jobber customers is the price paid subject to and following all applicable rebates, discounts ancl allowances. By the very nature of the business operated by the various jobber customers of respondent their profit was necessarily based upon an accumulation of small margins of profit on nmny items. Some of the witnesses handled 15 to 75 lines involving an aggregate of thousands of items. Practically an of respondent' jobber customers extend the same cash discount they received to their customers, hmvc.ver, on a mark-up of acquisition cost, the discount actually given by such customer to its purchaser on resale will be greater than the :2 percent cash discount.

PAIL 13. The fact that price competition may have been eliminated in some areas because of uniformity of resale price does not eliminate the question of injury to competition. Any saving or a,advantage in price obtained by one competitor as ag-ainst another increases his margin of profit, permits additional services to be extended to customers, the use of additional saJesmcn, the carrying of larger and more varied stocks, and the establishment of branch houses for expansion of the business. \Vhile price competition \Vas more or less , . , . 966 FEDERAL TRADE COJ.VIISSIOK DECISIONS Conclu.ions 51 F.

non existent, except perhaps in isolated instances, in the areas where testimony was taken the possibility or price competition is ever present where lower prices to certain competing customers exists. fact, one vdtness in New York testified that he deviated from the suggested resale prices on certain large orders. It must therefore be concluded that respondent's defense in this particular is without merit and that respondent's c1iscrimination in price between customers competing in the resale or its products has had, and may have, the enect or substantially lessening competltion among- its customers and or injuring and preventing compctitjon among tl em. PAR. 14. In its answer, the respondent asscltec1 a defense or meeting competition under Section 2 (b) of the Clayton Act. The evidence in this proceeding does not support this defense. The president of respondent corporate.ion testified that about 15 or 18 years ago The Electric Auto-Lite Company came out with a volume rebate plan which respondent considered good and which it adopteel. He furt.her testified that it h d been the practice of respondent to he the highest priced line in the market, relying on quality of its rrH l'challdjse and greater amO'lnt of selling effort to maintain its competitive position. ,Vhile respondent did consider and compare competitors' prices in preparing its price lists, the price differentials and the discriminations in price did not occur from the use of the price Jists or deviations from such price lists to individual customers, but instead arose out of the pricing practice involving the use of a pricing plan eol1sisting of rebate, , discounts and allo\vances. The defense of meeting competition as provided for under Section 2 (b) of the Clayton Act, does not permit "a seller to use a sales system which constantly results in his getting more money for like goods from some customers than he does from others. " 1 CONCLUSIONS 1. Respondent's private brand customers: American Oil Company, Philips Petroleum Company, Sun Oil Company aud Goodyear Tire and Rubber Company; and respondent's jobber customers Whitaker Warehouse Jobbers Whitaker Group Buying Jobbers and .Whitaker 1Vholesale Distributors, were all engaged in the resale of respondent' products as wholesalers to dealers and other purchasers and as such were all in competition each with the other in their respective trade areas in the resale of respondent' s products. 2. Respondent's pricing plan, which was used in sening to its various customers and the various rebates, discounts and allowances allowed by such pricing plan, resulted in a substantially lower price being paid P. T. O. v, Cement Institute, 333 U. S, 6R3, 725. , WHTAKER CABLE CORP. 967 958 Order by some of its customers than was paid hy other of respondent' s customers competing in the same trade area in the resale of respondent' products.

3. Such lower price, when reflected in the resale price of respondent's products, enables favored purchasers to attract business away from non-favored purchasers or force the latter to sell at a substantially reduced profit. Said lower purchase price, in the observance of a suggested resale price, enables the favored purchaser to resell said products at a substantially higher profit margin than that obtainable by the non-favored purchaser in such resale. 4. Respondent's contention that no injury to competition can be proven or inferred where the discriminatory discount has not been used to reduce the resale price, is without merit as a defense in this proceeding and has been so held by the L.united States Supreme Court. F. T. O. v. Morton Salt Oompany, 334 U. S. 37, the Supreme Court held that 'where purchasers, buying and competing in the resale of the same merchandise, ate charged different prices therefor, the conclusion is inescapable that injury to the competitive efforts of the un favored purchasers is present. In this connection the Court said It would greatly handicap effective enforcement of the Act to require testimony to show that which We believe to be self-evident, namely, that there is a reasonable possibility' that competition may be adversely affected by a practice under which manufacturers and producers sell their goods to some customers substantially cheaper than they sell like goods to the competitors of these cll tomers. This showing in itself is suffcient to justify our 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. 5. The aforesaid discriminat.ions in price by the respondent as herein found constitute violation of subsection (a) of Section 2 of "An Act to supplement existing la,ws against unlawful restraints and monopolies and for other purposes" approved October 15, 1914 (Clayton Act) and amended by Act of Congress June 19, 1936 (Robinson-Patman Act). ORDER It is ordered That the respondent .Whitaker Cable Corporation, a corporation, and its offcers, representatives, agents and employees, directly or through any corporate or other device, in connection with the sale for replacement purposes of automotive cable products and related items in commerce, as "commerce " is defined in the Cla.yton Aet, do forthwith cease and desist from discriminating in the price of such products of like grade and quality- , .

9GS FEDERAL TRADE COMMISSION DECISIONS Opinion 51 F.

1. By sellng to anyone purchaser at net prices higher than the net prices charged to any other purchaser who, in fact, competcs with the purchaser paying the higher price in the resale and distribution of respondent' s products.

2. By sellng to any indirect purchaser at net prices higher than the net prices c1mrged any other direct or indirect purchaser who, in fact, competes with the purchaser paying the higher price in the resale and distribution of respondent' s products. OXINIOX OF TI-IE CO?iDnSSION By SECHEST, Commissioner:

This case is before the Commission on cross appeals from the hearing examiner s initial decision.

Respondent Whitaker Cable Corporation, is charged with violation of Section 2 (a) of the Clayton Act, as amended by the Robinson- Patman Act by discriminating in price between purchasers of its automotive rep1fccment parts. Hearings ,were held at which testi- 1110ny 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 pricing practices have resulted in price discriminations as between (1) respondent's ,mrehouse jobbers; (2) respondent's direct purchasers, including warehouse jobbers, group buyers and private brand buyers; and (3) l'esjJondent' s direct and its indirect purchasers, such as wholesale distributors. The hearing examiner found that the eirect of respondent's discriminations in price "may be to substan tially lessen, injure, destroy or prevent competition between customers receiving the benefit of said discriminations and the customers I'ho do not receive the benefit of such discriminations " and issued his order accordingly.

Respondent in its appeal excepts to numerous specific findings and conclusions of fact and law in the initial decision, as well as to cer tain conduct and rulings of the hearing examiner and to the hearing examiner s failure to make certa.in findings. The appeal of counsel supporting the complaint relates only to the hearing examiner s finding that the contractual relationship between respondent and IVillard Storage Battery Company and its customers was not such as to constitute 'Villard's customers as "purchasers" from respondent within the meaning of the Act. s Hi '0. S. C. sec. 13.

8lbld.

WHITAKER CABLE CORP. 969 Y58 Opinion We turn our attention first to respondent' s exceptions to the hearing examiner s conduct and rulings. Respondent contends that the hearing examiner erred in accepting an appointment as hearing ex aminer in another Commission proceeding against a purchaser charged with violation of Section 2 (f) of the Clayton Act, as amended involving some of the same transactions considered in this proceeding. Respondent argues that there can be no charge of receiving an illegal discrimination under Section 2 (f) of the Act unless the ilegal discrimination was first given by the seller, and that the implied effect of the examiner s accepting the appointment and proceeding to take evi dence in another hearing was that this case had already been adjudicated.

In proceedings of this nature each case must be decided on the basis of the individual case record. There is no indication that the hearing examiner considered the evidence in any other proceeding in reaching his decision in this case. vVe are accordingly rejecting respondent' contenton that as a result of the examiner s action the Administrative Procedure Act has been violated, that respondent has not been accorded a fair trial: or that its constitutional rights have been violated. Respondent excepts to the hearing examiner s refusal to receive in evidence certain exhibits offered by respondent for the purpose of showing that the sales figures set forth in Commission s Exhibits 37 A t.o 53TI did not represent goods of like grade and quality. Commission s Exhibits 37 A to 531' are tabulations prepared from respondent' s books and records showing the prices paid and discounts received by purchasers in various 1Tacling areas eluring specified periods. These tabulations do not show the different items sold to the different customers. Instead, they show the price differences on tota,l sales to customers in the same trading areas. The question raised by this exception as well as the exception to the hearing examiner s finding that respondent s replacement parts are of Jike grade and quality, is whether the price differentials involved in this proceeding resulted from different prices on goods of like grade and ql1amity. The price differentials we are considering did not arise from a difference in the grade or quality of the products sold to competing purchasers. They arose fronl varying discounts off base prices. Respondents customers do not purchase. re.spondent's plodl1cts 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. To illnstrate, under the agreement which respondent enters into wit.h its warehouse jobbers the purchaser is required to "give ,\Yhitaker an irrevocable initial order 'J5 IT, S, c. sec. 15 (a).

Opinion 51 F. T. C for a representative stock of all items (quantities to be determined by 'Vhitaker) and in all cases to be suffcient to permit Purchaser to take care of jobbing functions on all lines covered by " the contract.' The purchasers also agree to permit "Thitaker representatives to check their stocks of respondent's products. We believe the record establishes that the products involved were of like grade and quality and we caTC of jobbing functions on all lines covered by " the contract. The exhihits offered by respondent.

At the Jast hearing in this proceeding respondent moved the hearing examiner to issue a rule requiring counsel supporting the complaint to make certain elections from the evidence which would be relied upon to constitute the case against the respondent. As grounds for the motion 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 com- , involving hl1ndred of com-munities during many months and years modities included in a single figure and thousands of invoices, there had been placed upon the respondent the almost insurmountable burden of analysis and proof, requiring the brea,kc1own of thousands of invoices and cost allocations, requiring thousa,nds of man hours of time ' and extensive exorbitant and needless work, and causing respondent to he faced with the situation whcrcin it was impossible for it to receive a fair and impartial hearing. The hearing examiner denied the motion, stating that he did not think it was timely filed and that he did not believe there was any merit to the motion. Respondent contends that such action constituted a denial of a fair trial and violated respondent' s constitutional rights of due process. Respondent' s motion was made at a hearing held on J unc 25, 1953. Counsel snpporting the complaint rested their case on March 5, 1952. In the interval between those dates, at hearings in Kansas City, Denver, Dallas, New Orlcans, Memphis, New York and Washington, respondent introduced considerable evidence in opposition to thc complaint. There is no indication in the record 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 the complaint believed necessary to establish respondent' s practice of price discrimination. It does not appear that respondent' s right to establish the contrary was in any way restricted. The tabulations to which respondent refers show details with respect to sales by respondent to customers in different trading areas during 5 Commission Exhibit WHTAKER CABLE CORP. 971 958 Opinion specified periods. It does not appear that respondent, by this motion challenges the accuracy of the figures appearing in the tabulations. Also, 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 hy the tabulations. We believe the hearing examiner was justified in denying the motion and that such denial did not constitute a denial of a fair trial or violate respondenes constitutional rights of due process. Another action of the hearing examiner to which respondent takes exception was the issuance of a rule to sho\v cause why a hearing should be held which respondent had requested. At a subsequent hearing, held pursuant to the rule to show cause, counsel for respondent and counsel supporting the complaint entered into a stipulation on the record which obviawd the necessity for holding the hearing which respondent had requested. There is no indication on the record that counsel for respondent was not entirely satisfied with this stipulation. The hearing examiner in issuing the rule to show cause was acting within his authority to regulate the course of the hearings and respondent' s rights were in no way prejudiced.

Having determined that the record discloses no prejudicial procedural errors, 'iVB turn now to a consi.deration of the principal and cantroning issues in the. case which respondent claims were erroneously resolved by the hearing examiner. The price differential involved in this proceeding arose, for the most part, from respondent' s practice of paying rebates or granting discounts to its customers, the amount of the rebate or discount being determined by each customer s total annual net purchases. Respondent's customers ate variously classified as (1) 'Vhitaker 'Varehouse .Tohhers, (2) 'V1,itakcr Group Buying .Tobbers, (3) Whitaker Wholesale Distrihntor .Tohhers, and (4) Private Brand Customers, and the hearing examiner found that all of these customers wore competitively engaged in the resale of respondellt replacement parts.

Respondent's products are sold and distributed on a nation"ide scale to both the automotive jobbing trade and to various large oil and tire companies. TheEe products are sold under both the W'hitaker brand name and various so-called private brand names owned by its customers. In its sales respondent has been cha.rging substantially different. net purchase prices for its products, as between its jobbers and its oil find tire company trade, as well as between its various classifications of jobbers and its oil and tire trade.

Respondent's products are sold to the jobbing trade on the basis of its current published jobber list price subject to its published volume 972 FEDERAL TRADE COMMISSION DECISIO Opinion 51 F. T. C.

discount applicable to such prices. This graduated and progressively higher discount is based on the dollar amount of annual purchases made by each buyer, irrespective of the dollar amount, size or number of the individual transactions producing such aggregate dollar pnrchase amount by the buyer. Additional11y, jobbers purchasing from respondent through a so-called group-buying device receive a higher discount rate than would normally be applicable to their individual purchase volume, due to the crediting of the annual purchase volume of a11 such purchasers to each such purchaser. The hearing examiner found that respondent' s volume discount on jobber list price resnJted in the payment of substantially different net purchase prices for respondent's products by the numerous jobber customers of .Whitaker purchasing its products for competitive resale. These price differences range from the payment of jobber list price by some jobbers, purchasing $600 or less annually, to the payment of a net purchase price 17%% below jobher list price by jobbers purchasing $3000 or more annually. In the case of group buying jobbers, individual jobbers receive as much as 20% off the jobbers' list price. Jobber members of these buying groups send their orders for respondent' s merchandise either direct to respondent or through the group offce. Respondent ships the products so ordered direct to the group members. The group organizations are biled for the merchandise shipped to the members and respondent is paid by the group organizations. Rebates and discounts on such purchases are paid to the group buying organizations, w-which in turn distribute the net after deducting operating expenses, to their members on the basis of ea.ch member s purchases. The hearing examiner properly found that the jobbers who purchased respondent's products through the various buying groups were in fact purchasers from respondent. Other purchasers of respondent's products were those classified respondent as .Whitaker .Wholesale Distributor Jobbers. Respondent' sales to customers so' classified were made through \Vllitakcr "\Varehouse Jobbers on the basis of the current johber price list, subject to the same rebate schedule as was applicable to sales to warehouse jobbers. vVl,oJesale distributors were appointed by respondent. They executed respondent's standard ""\Vholesale Distributor Contract in which both respondent and the ,,-wholesale distributor agreed to perform and do certain things. For example, the distributor agreed to maintain an assorted stock of vVhitaker products of a specified dollar value; to select a vVhitaker 1Varehouse J ohber and to send orders for respondent' s products to such jobber. Respondent agreed, among other things, to supply the distributor with catalogs, price sheets WHITAKER CABLE CORP. 973 958 Opinion and advertising material. The cumulative rebates "\ere paid by respondent direct to the wholesale distributor when approved by the warehouse jobber. The contracts provided for the signat.ure of the distributor, of respondent' s dist.rict manager, and t.he approving signature of the warehouse jobber and of Whitaker Cable Corporation. ,Ve think the hearing examiner correctly found that the degree of control exercised by respondent over sales to t.he wholesale distributor accounts was such that the sales were in an essential respects sales by respondent and that the wholesale distributors were, therefore, purchasers from respondent ,within the meaning of the Clayton Act, as an1ended.

At this point, it is appropriate to consider the question raised by the appeal of counsel snpporting the complaint as to whether the contractual relationship between respondent and 'Villard Storage Battery Company was such as to constitute the 'Villard customers as purchasers from respondent. The hearing ex-aminer found that the evidence does not support this position. Under the arrangement between respondent and \Villard, respondent sold its products bearing the Wi1ard brand to ",\TillaI'1. Shipments were made by Whitaker direct to \Villard customers, but invoices covering the shipments were sent to vVi11ard and payments were received from vVi11ard. Wi1ard resold the products purchased from respondent to automotive jobbers handling the ",Vi11ard line. There is no evidence that respondent in any way participated in the selection aT the customers who purchased the "'Villard line or that respondent was a pa.rty to the transactions between 'Villard and its customers. There is no evidence of control by the respondent of the sales by 'Villard to its customers, such as that which respondent exercised over the sales to '\Vhitaker warehouse distributors. Accordingly, we reject the contention of counsel supporting the complaint that '\Villard s customers were purchasers from respondent within the mea.ning of the Clayton Act, as amended. 1Viol reference to respondent s so- caned private brand customers the record reveals that respondent sold its products to these purchasers at jobbers list price, less varying discounts and allowances. For example, American Oil Company and Phillips Petroleum Company have received a discount of 20% off list price plus 2% boxing allowanee. Sun Oil Company received a discount of O% off list price plus 3% boxing allowance prior to 1\fay 24, 194tJ, and after that date received a discount of 28. 5% on most items and 2.6% on the remainder of respondent' s line. The Goodyear Tire & Ruhher Company received Cln the Matter of Champion Spa1"k PIng Co" Docl(( t Ko. 3977 (1953); In the Matter oj K1-ajt P1wnia; Cheese Corp. 2:: F, T. C. 537 (193i). 974 FEDERAL TRADE CO L'iISSION DECISIONS Opinion 51 F.

a discount of 30% off list price, plus 3% battery cable boxing allowance until February 2, 1949, and aiter that date received discounts of 30% to 35% off list price. Willard St.orage Bat.tery Company received a discount of 30% off list price.

The hearing examiner concluded that. respondent's private brand customers a,nd responclenfs jobber cllstomers were all engaged in the resale of respondent's products as wholesalers to dealer's and ot.her purchasers, and as sllch were all in competition with each other in their respective trade areas in the resa.le of respondent' s products. The hearing examiner further concluded that respondents pricing practices had resulted in substantially lower prices being paid by some of its customers and that such lower prices enabled the favored purchaser to resell respondent.'s products at substantially higher profit margins t)-lan was obtainable by its non-favored purchasers. I\respondent contends that the hearing eXilminer s findings with respect to the effect of its price discriminations arc not in accordance \with or supported by the evidence in the record. The record contains a number of ta,bulations, prepared by members of the Commission staff from the books and records of the respondent, with respect to respondents sales to customers in selected trading ElI'eas. These t.abuhtions graphically disclose the nature and extent of the price differcnces bctwcen cornpeting customers \which have resulted ftom respondent's use of the abovehdescribecl pricing pracUces. For example during 19M) respondent sold directly to five purchasers in the Orleans trading area, in the amounts and at the percentages oft' list price incJjcated helow:

,arterdP(IUCtl::gtP\ll'ehnsrsl1-creentoff-- Custumer I !leig\:t llcl list price alJnwanees Percent Automotive 'Vholcs 1(,T5- !687 03 34- J1.47 , 8:7 lnc_ DcltaDistribiltcls ()2 3. :,2 1:\;i. G(J.dVC H Til'\' and nubhcr Co_ 1.1 20. Greinrr..luto Pflrts 00 :301.03 lO. 292. plJrtsSe.n'iccCo_ I Based OIl prices in elect February 1 to .:Tay 2 19'19. Greiner Auto Parts Company purchased respondent.'s products through a group buying organization. Goodyear Tire .and Rubber Company was a private brand purchaser. The other tl1Tec purchasers were wa.rehouse jobbers. In the Denver trading area, respondent sold directly to three warehouse jobbers and two private brand purchasers and indirectly to one wholesale distributor, at prices ranging from 1.4870 to 35. 5370 off list price. Testimony of purch,scl's in these and ;

WHITAKER CABLE CORP. 975 958 Opinion other trading areas clearly shows that purchasers of respondent' products were in competition with each other in the resale of such prod ucts.

It appears that for the most part purchasers of respondent's products for resale resold at the prices suggested by respondent with the result that in a number of the trading areas there was little, if any, price competition in the resale of such products. In this connection it is noted that respondent in its appeal brief approves of the hearing examiner s finding that the market in which respondent's customers compete is a highly competitive one, yet disapproves of his finding that the elimination of price competition because of uniformity of resale prices does not eliminate the question of injury to competition. Respondent urges that "where there is 110 price competition there is no competition whatever In rejecting respondent's contention, we note that a similar argument "\YfiS advanced in the Corn Products case 7 where the Supreme Court said, in part:

But it is asserted that there is no evidence that the allowances ever were reflected 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, hut only that there is a reasonable possibility that they ' may ' have such an effect. ,Ye think that it was permissible for the Commission to infer that these discriminatory allowances were a substantial threat to competition.

The substantiality of respondent's price differences and the probability of injury to competition is clearly demonstrated by the record. From the very nature of the businesses operated by respondent' s customers, it is clear that their profits are necessarily based upon an accumulation of small margins of profits on many items. The record shows that some of respondent's jobber customers handled from 15 to 75 different lines of automotive replacement parts involving thousands of different items, some of which sell for only a few cents. 1Vitnesses testified that they invariably took advantage of the 2% cash discount offered by respondent; that such discount reduced their cost of acquisition of respondent's products and that it was essential to the operation of their businesses to take the discount. It follows inescapably that the price differences resulting from respondent' s pricing practices must materially affect the business health of respondent' s customers and that purchasers who paid the higher net prices were at a competitive disadvantage with the purchasers VdlO paid the lower net prices. Corn Produ.cts Refining Co. v. F. T. C" 324 U, S, 720. 742 (1945), 4237R:i-58- 976 FEDERA. 'TRADE CO:\r:.IISSIOK DECISIOXS Opinion "1 F. T. C. ;\ further indicat.ion of the importance to responden(s customers of lower purchasing prices is the fact. that many of them found it expedient to enter into group buying arrangements and thereby receive larger discounts and rebates from respondent and othet fwtomotive replacement parts manufacturers, 1Ye think the hearing examiner correctly found tha.t:

Any saving or advantage in price obtained by one. competitor as against another increases his margin of profit, permits additional services to be extended to customers, the llse of additional salesmen, the carrying of larger and more varied stocks, nncl the establishment. of branch hOllses for expansion of the business. ,YbDe price competition \YfiS more or less nonexist.ent, except perhaps in isolated instances, in the area,s I,here testimony was takeJl the possibility of price competition is ever pre.sent where Icj\n..r prices to certain competing customers exists. In fact, one I,itness in Ke\\" :(ork testified tl18the devinted from the suggested resale prices on certain large on1c1'8. It must therefore be concluded that respondents defense in this particular is without merit and that respondent's discrimination ill price- betweell customers competing in the resale of its products has had and may have the effect of substantially lessenjng competition allong its customers and of injuring and preventing competition among t hern. The hearing exarnincr Immel that respolldenfs defense of meeting competition under Section:? (b) of the Clayton Act is not supported by the cyidence. Hesponclent excepts to this finclillg, claiming that the evidence " demonstrates that re::IJOnclent, in selling less than 1 of product.s competitive Iyith its OI,n in the markel in good faith, did only that which it could reasonably do, C111d t.hat I,as to use a pricing practice Iyhich reflected as near lls pos iblc that praelice I\hi('h I,"ould render it competitive with the other more than 9D% 01' the sellers in the market, :' The principal evidence in the re,cord relating' to this rfefense is the t.testimony of respondent's president, to the effect that about fifteen to eighteen years ago reiJponc1ent flclopted the same volume rebate plan as that used by The Elf'l'tric Auto- Lite Company. There is no shmying that respon(lent ever actually rec1need its prices to me.et a competitor s prices. In fact, respOlHlenfs president testified that it J1fls ahvays been respoJlc1enfs practice to have the highest price,d line in the market. Hespol1c1ent s defense of meeting competition clearly has not been estahJished.

Respondent devotes a Jarge part of its brief to the contention tha.t since responclEmt sells less than 1 of an the products competitive 'Ivith its own sold in the automotive industry, it. is impossible for its pricing practices to have the effect on competition which the hearing examiner WHITAKER CABLE CORP. 977 Order found. This argument loses sight of the fact that competitive injury between responclent and its competitors is not at issue ill this proceeding and respondent's relative position in the industry is not controlling to a determination that its pricing practices may not have had the etrect ascribed io them by the hearing examiner. There is substantial evidence in the record that respondent is a major' manufacturer in that particular industry segment specializing in the making and selling of automotive replacemcnt cflbJes and 1'0latccl parts. Hespondenfs flJlllWJ sale volume for the year 19. approximated $:2 000 000 and accorclillg to the testimony oJ respondenfs president, 40%. to 50% of this volume represents sales in the after market replacement field. As between respondent's purchasers '\ve believe that the record as a whole establishes that the amount of IJlsiness done by the respondent is substantial. The premises eonsiL1erecl, it appears that the initial decision of the hearing examiner is adc(llw(e and nppropric1te to (lispose of this proceeding. Accordingly, the appeals of respondent and counsel supporting the complaint are (lenie(1.

Commissioner Iaso1J dissents, the rationale. therefor' being set forth in his dissenting opinion in Do(',Let ::Ioog Industries, lnc, FINAL ORDER Counsel supporting the cOlnplaint and respondent \Vhitakel' Cable Corporatioll having respe,ctively filed on :Jlareh 19 , 1954, and April , 1054 , their cross-appeals ironl the initial decision of the hearing examine.l' in this proce.eding; and n1P matter having been heard by the Commission on briefs and oral argument; and the Commission having rendered its dec.ision denying the appeals and affrming the initial decision:

It onie' ied That respondent ,Vhitaker Cable Corporation shall \within sixty (GO) clays after servic.e upon jt of this order, file with t.he Commission a report in writing, setting forth in de.ail the manner and form in ,,' which it has c.complied \\"ith the onler contained in said initial decision.

Commissioner J\lasoJJ dissenting. the rationale therefor being set forth in his dissenting 0))111On m Docket 57:2:3-"loog Industries Inc.

1\ "(' I' !I,jJ.

978 FEDERAL TRADE CO Li\SSION DECISIONS Decision 51 F.