Little, Brown and Company, Inc.

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IN THE . MATTER .OF LITTLE, BROWN AND Camp ANY, INC.

CONSENT ORDER, ETC., IN REGARD '1'0 THE ALLEGED VIOLATION OF THE FEDERAL TRADE COMMISSION ACT Docket 5900. Complaint, J'll1/e 29; 195L-Decision, Feb. 8, 1956 Consent order requiring a Boston publisher to cease fixing~ and maintaining resale prices and terms and conditions of sale of the publisher s editions of books which it sold to its retail book seller customers while permitting book clubs to sell their own editions of the same books in competition with stich retailers at an~' prices and on any terms they might determine. Before JJb'. F' J'ankHier hearing examiner. 1111'. Fletcher G. Cohn and JJIr. Lewis F. Depro for the COlii- 11l1Sslon.

H all,sserrnann, Dav.ison Shattuck.; of Boston, :Mass., for re- . spondent.

"JVolfso. , Caton l11og'llel of New York City, for Book-of-the- ~1month Club, Inc. am. icus c1aiae.

COl\IPLAINT Pursuant to the provisions of the Federal Trade Collnnission Act and of the Clayton Antitrust . ct, and bv virtue of the authority vested in it by said Acts, the Federal Trade Commission having reason to believe that Little, Brown and Company, Inc., hereinafter referred to as respondent, has violated the provisions of Section 5 of the said Federal Trade Commission Act and Section 2 (a) of the said Clayton" Antitrust Act, as amended by the Robinson-Patman Act, approved June 19, 1936 (IT. C. Title 15, Sec. 13), and it appearing to the Commission that a proceeding by it in respect thereof would be in the public interest, hereby issues its complaint stating its charges in these respects as follows:

COUNT I PARAGRAPH 1. Respondent, Little, Brown and Company, Inc. , is a corporation organized and existing under the laws of the State :Massachusetts with its principal office and place of business located at 3-4: Beacon Street, Boston, :MassachuseUs. PAR. 2. Respondent is now, and for many years last past has been engaged directly or indirectly in the publication, sale and distribu- 1 For consent settlement of Count III of complaint, see 48 F. C. 869. (:. ; . :. , LITTLE BROWN &1 CO. INC. 61, 7GO Complaint Hon of popular fiction and non-ficfion books, commonly lnlown astrade books.of the major hook publishers of said trade books Respondent is one, in the United States. The name Little, Brown and Company caine into being in 1837. At that time it conducted a retail book store and. engaged in some publishing. . From 1847 on, it engaged primarily ilj i)publishing and with the turn of the century, Little. Brown was entrenched as one of the leading publishers in the general field. It. does not own its own printing. plant and its printing is done other concerns with whom it enters into contractual relationships. Respondent sells and distributes its trade books to retail book. sel1ei's for resale to the public, and to wholesalers 01' jobbers for resale to retail book stores and others, including public libraries and educational institutions. Editions of said trade books so sold and distributed are known as publisher s editions. Respolldent as part of its business, enters into agreements, uncler- 8~:andings 01' contracts with the authors of tl;ade books, whereby the respondent is granted by the authors the exclusive rights to make pn blish and sell in book form the literary works of said authors; including the right or privilege of making the hereinafterclescribed nnderstancliligs or agreements with book clubs. . P.m. 3. In the course and conduct of its business for many years, last past, respondent has been, and is now, engaged in commerce;, as. commerce '~ is defined in the Federal Trade Commission Act and. in the Clayton Antitrust Act, as amended by the Robinson-Patman. Act, in that it ships or causes to be shipped publisher s editions of saiel trade books, and printing plates from the States in .which said ttac1e" books and said plates therefor are produced, to purchasers or. to lessees thereof located in other States and in the District of. Columbia; and there is, and has been at all tiTHes herein mentioned a continuous currentoftrnde and commerce in: grid books between and among the several States of the Uniteel States. and in the District of Columbia. Also, by virtue of and plll'sunilt. to, the contrnctual relationship of respondent with book clubs, as hereinafter set forth, the latter, in the course and conduct of their businesses, are enabled to, and do ship or cause to be shipped from the. Sttltes in which they are published~ to pnrcha~ers located in other States and in the District of olnmbia, the book club edition of books printed from the plates of particular tjtles leased to them by the respondent. and which book club e.clitions are sold in saiel commei'ce in competition. with the aforesaid publisher s editions of such books. 762 FEDERAL TRADE COMMISSION DECISa:ONS Complaint 52 F. T. C.

PAR. 4. Except in so far as it has been affected, as hereinafter alleged, respondent, in the course and conduct of its said business in commerce, has been and is now in competition with persons, firms and other corporations some of which were and are engaged in similar businesses in commerce.

Also, except in so far .as it has been affected, as hereinafter alleged, many of said jobbers or wholesalers were and are, in competition, some in commerce, with each other, and many of said retail book sellers were, and are, in competition, some in commerce, with each other and with said book clubs in the retail sale of said trade. books.

PAR. 5. Respondent also, as part of its business, is now entering into and has, for many years last past, entered into agreements or understandings with so-called book clubs by which said clubs are granted exclusive delegated rights to publish, sell and distribute certain titles of said publisher s editions in what are known as book club editions. Book clubs are organizations engaged in the business of publishing trade books and in the sale and distribution thereof by the mail order method at retail. Among the book clubs with which respondent made said agreements or nnderstandingf: are. the Book-of-the-M:month Club and The Literary Guild of America, Inc. Under said agreements or understandings, the terms of which are hereinafter more particularly alleged, printing plates are leased by the respondent to the book clubs for use in printing book club editions. There is a publisher s edition of each title of which there is a book club edition, and both editions are contemporaneously available, are alike, the same, or practically the same, in design, format quality, size and appearance, and are sold in competition with e~. other.

PAR. 6. The said agreements or understandings between respondent and the book clubs provide that, inconsideration of leasing the aforesaid printing plates together with additional rights granted the book clubs as herein set forth, the clubs pay to respondent certain di-specified royalties, the total amounts of which are dependent, rectly or indirectly, upon the number of copies of book club editions sold by said book clubs.

Under the provisions of the agreements or understandings which respondent has with each of the book clubs, the club receives from the respondent the exclusive delegated rights to use the printing club for aplates of books of the particular titles selected by said specified period which usually is for two or more years. During such period, the book club is enabled to exercise such exclusive rights in producing, selling and offering for sale the books printed LITTLE BROWN & CO., INC. 763 760 Complaint from the plates thus selected, at any price and on any terms or conditions that the said club may determine.

Respondent, by suggestion or other means, has fixed and maintained specific minimum prices for the resale by its retail book seller customers of the publisher s editions of the books bearing the titles covered by the aforesaid agreements or understandings with the book clubs, from the dates of publication thereof. Said fixed resale prices, in some instances, are in excess of the prices which the book club charges its purchasers for the book club edition of the same ti tles.

Said agreements or understandings between respondent and the book clubs, on occasion, also provide that respondent shall fix and maintain specific .minimum prices for the resale of the publisher editions of the books bearing the titles covered by said agreements or understandings for certain specified periods. PAR. 7. Furthermore, in accordance with, and pursuant to . its understandings or agreements with said book clubs, the respondent has refused to offer, or to grant, such leasing of plates and such other rights to its retail book seller customers who, in selling or offering to sell the publisher s editions, compete with said book clubs in their retail sale of the book club editions of the same title. PAR. 8. The establishment and maintenance of said specific minimum resale prices, which respondent has fixed in the manner hereinbefore described, for the resale by its retail book seller customers o~ the publisher s editions of such books which are sold in competition with the book club edition of said books, gives the book club an unfair competitive advantage.

PAR. 9. As a result of the respondent leasing the printing plates for a particular title to a book club in the manner hereinbefore described, it is selling and distributing, and knowingly and intentionally granting the means of selling and distributing, in commerce for resale within the United States and in the District of Columbia a publisher s edition and a book club edition of the same book, which editions are, in effect, of the same grade and quality, and which are sold in competition one with the other. The respondent is indirectly discriminating between its retail book seller customers, to whom it sells, for the purpose of resale, such publisher s editions, and its book club customers, to whom it leases the plates from which it knows that such book club editions will be printed, by imposing the aforedescribed restrictions and conditions only on the resale of such publisher s editions by its retail book seller customers and by granting the leasing and other rights, hereinbefore set forth, only to its book club customers.

, . , .

764 FEDERAL TRADE COMMISSION DECISlIONS Complaint 52 F. T. C.

. PAR': 10. : The res~lt and effect of such understandillgs, agreements su~gestions, contracts, arrangements, discriminations and of the systerTi itself ' have been, and are; that the competition between the respondent' retail book seller and book club customers has been, and is 11OW, substri,ntial1y l~s~ened, that the said book club customers have re~eived an un:faircm11petitive advantage over said retail book seller cllstom.ers ancl have tended, and al e' now tending, to create in said book club customers a inonopoly in the sale ancl distributiml, in comlerce, 'in the books, the titles to which . said book clubs have leased th~ . printing plates. .

. PAR. 11." The acts, practices, methods. understandings, agreements ahd suggestions of . respondent, as hei~eindbo,~e alleged, al eall to tlle prejudice of the public., have a dangerous . tendency to, and have actually frustrated, hindered, suppressed, lessened, restrained and elil)li~lated competition in the sale and distribution in commerce of tl' ade books' within the intent and meaning of the Federal Trade Coll1nlissiOll Act; have resulted in an unfair competitive advantage tC) respondent's book club customers over respondent's retail book seller customers; have a dangerous tendency to destroy, hinder and e\ri:mt the resale by resi)ondent's retail book seller customers not only of publisher s editions of the books sold in competition with the book'dub editions of such books, but also of other trade, books; have tlle; capacity mld tendericy to restrain unreasonably and have restrallIed unteasonably interstate commerce in such products; and coiistitute unfair inethods of competition in commerce within the intent and nieaning of Section' 5 of the Federal Trade Commission Act.

COUNT II PARAGRAPH 1. The allegations ' o:f Paragraph 1 of Count I of this complaint are incorporated by. reference.e and made a part of the aHegations of this Count to the same extent as if. such allegations were set forth in . P~\R. 2. The allegationsfullof Pa:ragraphherein.:2 of Count I of this complaintare incorporated by reference arid made a part of the allegations of this Count to the same extent as if such allegations were set forth in full herein.

PAR. 3. The allegations of Paragraph 3 of Count I of this complaint are incorporated by reference and. made a part of the allegations of this Count to the same extent as if such allegations were set forth in full herein.

PAR~ 4. The allegations of Paragraph 4 of Count Iof this COll1- . plaint are incorporated by reference and made a part of the allega- . .

LITTLE, . BROWN & CO. , INC. 765: 760 Complaint tiol1s of this Count to the same ;extent as if' such allegations were: set . forth in full hei'ein.

PAR. 5. The ~llegations of Paragraph. 5 of Count I of this . COlllplaillt areincorporatecl by reference and made a part of the allegations of this Count to the same extent as if such allegatioils were set forth in full herein.

PAR~ 6. . Respondent, by contracts, agreei1ients, understandings snggestiorls 01' other ineans, has fixed and maintained, and now fixes ahdmaintains, at least for specified periods, the miilimum prices at ,vhic11 the publisher ~ editions of certain of its trade books are to be' esold by its retail book seller customers. . P..ut 7. . Also respondent, in some instances, illeg"ally has attempted. to fix and maintain . and has fixed and maintained, such minimum Prices at which the publisher's editions of certain of its trade books were to be resold by some of its retail book. seller customers, even though such customers did not enter into any contract 01' agreement Wit~l respondent regarding such prices but such contracts or agreements had been entered into within the same State by and between re.spondent and others of its retail book seller customers. FAn-. . The c.ontraets, agreements, understandings, suggestions. or other means whereby respondent has fixed and maintained and now fixes .and maintains, at le,ast for specified periods, the aforementioned miJiil1lll'm i~esaleprices for its publisher s editions of certain of. its trade books are also illegal, at least with reference to some of such books, including those the titles to which are selected and the printing plates for "rhich ' are leased by the. book clubs, in the manner hei' einbefote ' descl~ibed, in that they are not sold oI' resold in free and open coll1petitioll with commodities of: the same general class that is, with trade books produced or distributed by others. . Respondent ~s the only publisher of the publisher s editions of the trilcle,; books ,,;.hicIl it sells and distributes in the United1 States. , P~\.R. 9. .. Responde11t has maintained the direct observance of said fixed resale prices on the publisher s edition of stich books and has enforced indirect obsenrance by prohibiting, in connection with the resale thereof ntsaicl fixed prices, the granting of aJ~Y premium, gift di,ridend :my other.r thing of value. .

. PAR. 10. Under tlie provisions of the un~lerstnndings or agreenients which the respondent has with the book clubs, these dubs rcceiveclllot only thee.xclusive delegated rights for a specified period to llse the printing plates for the publication of the book club editioll for the particular titles wliicht-he elubhas selected, but the said dubs were permitted to, and do, sell: such editions in competition widl the said publisher s editions of the same titles at any price and 451524-59- FEDERAL TRADE COMMISSION DECISlIONS Complaint 52 F. T. C.

on any terms or conditions they may determine. Respondent's retail book seller customers have thereby been placed at a competitive disadvantage in the sale and distribution of such publisher s editions. PAR. 11. The acts, practices, methods, and agreements of respondent, as hereinbefore alleged, are all to the prejudice of the public have a dangerous tendency to and have actually frustrated, hindered, suppressed, lessened, restrained and eliminated competition in the sale and distribution of trade .books in commerce within the intent and meaning of the Federal Trade Commission Act; have resulted in an unfair competitive advantage to respondent's book club customers over respondent's retail book seller customers; have the capacity and tendency to restrain unreasonably and have restrained unreasonably interstate commerce in such products; and constitute unfair methods of competition in commerce within the intent and meaning of Section 5 of the Federal Trade Commission Act. COUNT III PARAGRAPH 1. The allegations of Paragraph 1 of Count I of this complaint are incorporated by reference and made a part of the allegations of this Count to the same extent as if such allegations were set forth in full herein.

PAR. 2. The allegations of Paragraph 2 of Count I of this complaint are incorporated by reference and made a part of the allegations of this Count to the same extent as if such allegations were set forth in full herein.

PAR. 3. The allegations of Paragraph 3 of Count I of this complaint are incorporated by reference and made a part of the allegations of this Count to the same extent as if such allegations were set forth in full herein.

PAR. 4. The allegations of Paragraph 4 of Count I of this complaint are incorporated by reference and made a part of the allegations of this Count to the same extent as if such allegations were set forth in full herein.

PAR. 5. Respondent in the course and conduct of its said business in commerce, has been for many years last past, and more particularly since June 19, 1936, and is now, either directly or indirectly discriminating in price between different purchasers of its said trade books by selling such products to some purchasers at higher prices than it sells such products of like grade and quality to other purchasers, and many of such other purchasers are engaged in active and open competition with the less favored purchasers in the resale of such products within the United States, except as it has been affected as herein alleged.

.

LITTLE BROWN & CO., INC. 767 760 Complaint Respondent has priced and sold its publisher s editions at list prices, which are the minimum resale price. fixed by contract or otherwise by respondent, less specific discounts allowed to each class of purchasers among which are jobbers or wholesalers. Respondent has priced and sold said books to some jobbers or wholesalers at said list prices with the following schedule of discounts being applicable ther~to:

Number of copies ordered Discount of same title: (percent) 2 - 24 ---- -- ----- - --- ----- 41 25-49 ----------------- --------------------------------- ------ 42 50-99 - - ---- 43 100-249 - 43~ 250-499 ----- ------------------------------------ 44 500-999 - -- - 000-2 499 - - - ------------------------- 45;2 500-4,999 -- - --- - -- - 461h 5~00and. over ---- ~--------------------------------------------- 47 Respondent has priced :uJ,Q. sold said.l.books to other jobbers or wholesalers who are in competition with those jobbers or wholesale receiving the aforementioned discounts above described, at said list prices, with the following schedule of discounts being applicable thereto:

Number of copies ordered Discountof same tl tle: (percent) 1-49 - -------- 43 ~0-99 - -- -- - -- -- - - 44 100-249 - - 441h 259-499 -------------------------------------------- -----~ 45. 500-999 -- - - ----- -- 45~ 000- 499 -- - -- - -- - --- 46 500-4,999 -- ---- --- ~------~------ ------- 47 000-9 999 - - - ~-- - - 48 10,000-24 999 --------------- ------------------------------------- 49 25,000 and over -------------------------------- -------------- 50 PAR. 6. The effect of the aforesaid discriminations or of any appreciable part thereof has been or may be substantially to lessen competition or tend to create a monopoly in the lines of commerce in which respondent and said jobbers or wholesalers are respectively engaged, or to injure, destroy or prevent competition with respondent or with said jobbers or wholesalers who receive the benefit of said discriminations or with the customers of either of them. PAR. 7. The aforesaid acts and practices of respondent are in violation of subsection (a) of Section 2 of -the Clayton Act, as . . , , 768 FEDERAL . TRADE' COMMISSION imCIS'IONS Decision 52 F. T. C.

amended.. by the Robinson -,Patman. Act, approved' J uile' . 19" 1936 (tT , Title 15, Sec. 13).

INITIAL DECISION BY FRANK EIEU, HEARING EXAMINER Pursuant to th~ provisions of the Federal Trade Commission Act (15 UB. A. 45) the Federal Trade Commission on tTune 29 1951, issued its complaint in this proceeding and duly served same upon respondent, a corporation organized anel existing. under the laws of the. Commonwealth of :Massachusetts, with its pr~incipal office: and place of business located at 3-1: Beacon Street, Boston :Massachusetts. . Said complaint was issued simultaneously with simihr complaints, charging substantially the same violations of la.w, against five other publishing firms one of which ,vas that aga.inst Doubleday &. Company, Inc., Docket 58D7. Counts I and II of the complaint herein ,were substantially similcn to Counts I and II in the Doubleday complaint. Counsel in all of: these .proceedings agreed that since the issues were substantinlly. the same in Counts I and II that the proceeding against Doubleday & Com:pany, Docket 5897, ,vould be fully tried first and ~lftel' the taking of evidence in that case . was closed, counsel in the other cases further agreed . that the record in the matter of Doubleday Company, Inc., Docket 5897, would be taken by them as the record in each of the individual cases. . Under date of August 31 , 1955 the Commission issued its final order in the Doubleday ca~e ;which order has not been appealed from.

Thereafter, on December 12, 1955, there ,,-as submitted to the undersigned exa.miner an a.agreement between the respondent and counsel supporting the complaint providing for the entry of R ~~sent order which is identical "ith the order of the CommlssiOll in the Doubleda.y case in so far as it applies to Counts. I and II of that case. By the terms of said agreement respondent admits a11 the jurisdictional facts alleged in the complaint served upon it; the pa.rties thereto agree that the record may be taken. as if findings ofs~lC.h jurisdictional.l facts had been duly made in accordance with such allegations; agr~e that such agreeI!lent disposes of this proceeding;' agree that the: answer of respondent herein to the complaint shan. be considered as having been withdrawn; agree that the retord on which the initial decision and the decision of the Comlllission shall be bas~d shall consist solely of the complaint and this agreement; agree that the agreement shall not become a part of the official record until. and unless it becomes a part of the decision of the. Cplllmission; agree that the agreement is for settlement purposes only and does not constitute an admission by re~ponclent ;; ; &; , , LI\f'TLif?" BROWN, CQ. , INq~ . 769 760 . Order that it has .violated the Jaw as alleged in the.c.omphtint. By such agreement respondent waives any further procedural steps before the hearing examiner and the Commission; the making of fin9.ings of tact or conchlsions of hiw; and all of the rights it majhave to challeI~ge or contest the validity of the order to cease and desist entei~ed irito in accordmice with this agreement. . Such agreelne11t further provides that the following order to cease and. desist may be enter.I ed in this proceedin~ by the CoRlmission . "\vithouf, rurther notice to the respondent, and that when so entered it shallhavetlie samerorce and~ffect as if entered after!; a full hearing; that it, indy be altered, modified or set aside in the manner provided ror other orders; and that the complaint mny be used in construing the terms of the; order.

The hearing examiner having considered the agreement and proposed order and being of the opinion that they provide an appropriate. basis for settlement and disposition of this proceeding, the agreement is hereby accepted. The hearing examiner further finds that the Federal Trade Commission has jurisdiction or the subject matter or this proceeding and of the respondent and that the pro;; reeding is in the public interest and in accordance with such agreement hereby enters the following order. ORDER It is ordered That respondent Little, Bro"'n and Company, Inc. a corporation, its officers, representatives, agents and employees directly or through any corporate or other device, in connection with the publication, sale or distribution of trade books in commerce, as "commerce." is defined, construed and understood in the Federal Trade. Commission Act (15 U. , Section 45) do forthwith cease and desist rrom:

Entering into, maintaining or continuing any contract, agreement or understanding of any nature with any book club or similar organization whereby respondent, while exempting sajd book dub or organization from any responsibility for resale price maintenance undertakes to fix ~ establish 01' maintain the resale price, terms or conditions of sale of any literary work which it publishes and sells and which it also sublicenses such book club or organization to publish and sell in any area wherein said book club or organization and retail booksellers purchasing from respondent compete with one another.r in the sale of such ,york. It is fw,they' onle1? That any and all other charges contained in the complaint are herewith dismissed.

770 FEDERAL TRADE COMMISSION DECIS\IONS Decision 52 F. T. C.

DECISION OF THE COMl\IISSION AND ORDER TO FILE REPORT OF COMPLIANCE Pursuant to Section 3.21 of the Commission s Rules of Practice the initial decision of the hearing examiner shall, on the 8th day of February, 1956 become the decision of the Commission; . and, accordingly :

It is ordered That the respondent herein shall, within sixty (60) 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 to cease and desist. : . . WESTBROOK STUDIOS 771 Decision