The C. H. Musselman Company et al.

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IN THE J.fatter m THE C. H. .ifCSSELMAN COMPANY ET AL.

ORDER, ETC. , IN REGARD TO THE ALLEGED VIOLATION OF THE l' EDEHAL TRADE CO nIISSION ACT Docket 6041. Complaint, Sept. 1952-Decision, dP1' , 1956 'Order dismissing, for failure to sustain the allegations, complaint charging more than 1700 apple growers and their trade associations and five corporate processors of apples in the "Appalachian Belt" with concertedly fixing and maintaining the prices paid to growers for raw apples and diverting shipments from one to another processor for the purpose of averting a price-break from the established prices by nny processor. Mr. Leslie S. Miller, Mr. William J. Boyd, h. ami Jh. Wilmer L. Tinley for the Commission.

Mr. Daniel R. Forbes of 1Vashington. D. C.. for Kational Fruit Product Co., Inc., and along with- Keith, Bi,qham, l1farkley, of Gettysburg, Pa.. for The C. II. .iInsselman Co., and JIr. J. P. Arthur of 1Vinchester, Va.. for Shenandoah Valley Apple Cider & Vinegar Corp.

llir. David Putney, of :Harrisburg, Pa. , ful' Knouse Foods Co- .operative, Inc.

lVhal'ton, Aldkizm' lVea'v8r of Harrisonhnrg, Vn.. for Bowman Apple Products Co., Inc.

Mr. Lyman 8. flulbert of 1Yashington, D. C.. for \ppalachian Apple Service, Inc.

IXI'l'AL DECISION BY ABXER E. LIPSC01\IB , IIE,\RTXG EX.UllXEH HISTORY OF THE PROCEEDl On September,r 8, 1952, the Federal Trade, Commission issnecl its complaint, charging the respondents namwl above \'i ith entering into an understanding, agreement and combination" to l'\strain trade in raw apples in interstate commerce in the ;'Appalachian are L of Virginia" ,Vest Virginia, Pennsylvania Hnd Jlarylancl' by (1) fixing, establishing and maintaining prices to be paid for apples for processing purposes; (2) fixing and establishing a matJwmatical perccntage pricing formula for caleulating the prices to be paid for various grades of apples and price differentials behycen mch Hles; and (3) diverting nl\V apples (rCIlJ one pr()l'e or to another for tlw, purpo e of laint(l lliJl;2' th(' price' thll' l'I1i set by THE C. H. MUSSELMA CO. ET AL. 1069 1068 Decision respondents, all in violation of the Federal Trade Commission Act. Answers were Jiled severally by all respondents, denying the above charges.

In due course counsel in support of t.he complaint complet.ed their presentation or evidence and rested their case, whereupon 1'e. spondents moved that the complaint be dismissed on the grounds of insuffciency and lack of snbstantiality of the evidence. By an initial decision issued on April 15, 1953, the hearing examiner then presiding herein granted respondents' motions. Appeal from his decision dismissing the complaint was taken to the Commission which, on September 15 , 1954, issued its order setting ftside the hearing examiner s initial decision and remanding the proceeding to him for further appropriate action.

Immediately thereafter, the hearing examiner' dis'lnaliJied himself from further participation herein, and, without objection from any of the parties, the proceeding was reassigned for adjudication to the hearing examiner now presiding. Hearings on behalf of the respondents were thereafter held in 1Vinchester: Virginia, and 'Vash ington, D. and on February 1955, counsel for the respondents rested their case. Thereafter proposed findings as to the facts and proposed conclusions \vero presented by all parties, and oral argument was heard thereon.

The length and complexity of the record herein necessitates a careful analysis of the many factors involved, together with a review of the structure of the Appalachian llrea apple industry in general, and the activities of each respondent in partic.uhu' IDEXTIFICATION OF RESPONDENTS llesponclent C. 1-1. l\1usselman Company is a Pennsylvania corporation, with its principal offce and place of business located at Biglerville, Pennsylvania, and is engaged in purch tsing raw apples from growers thereof and processing them into various food products, including canned sliced apples, applesauce, apple butter, jellies juice and vinegar, \with their processing plants located at BigleTville and Gardners, Pennsylva.nia, and inwood, \Vest Virginia. Respondent :National Fruit Product CompmlY, Inc. , is a Virginia corporation, with its principal offce a.nd place of business located at "YVinchester, Virginia, and is engaged in the sa,me type of business as Respondent C. H. ~lusselman Company, with processing plants at 'Winchester and Strasburg, Virginia, and .Martinsburg, '\Vest Virginia.

Hesponclent Knouse Food Cooperative, Inc. , is a cooperative organization inc.orporated Iarch 15 19M! under the laws of the State 451524--59-- 1070 FEDERAL TRADE C01t1.ivllSS10 DECISIOI\TS Decision 52 li' T. C. of Pennsylvania, with its principal offce and place of business located at Peach Glen, Pennsylvania, and a membership of 428 apple growers. It is likewise engaged in the purchase and processing of raw apples, with processing plants located at Peach Glen Chambersbnrg, Altoona and Scotland, Pennsylvania. Respondent Bowman Apple Products Company, Inc., is a Virginia corporation, with its principal omce and place of busine,ss located at fount Jackson, Virginia. It is similarly engaged in the business of purchasing and processing ra,,, apples, and operates a processing plant at :\fount J achon, Virginia.

Respondent The Shenandoah Valley Apple Cider & Vinegar Corporation is a Virginia corporation, with its principal offee and place of business located in 'Vinchester, Virginia. It is engaged in the same type of business as the other respondents hereinabove described, and opcrates a processing plant at 'Vinchester, Virginia. Respondent Appalachian Apple Service, Inc. , is a ,Yest Virginia corporation, with its principal ollce and place of business located at J\fartinsburg, 'Vest Virginia. It is essentially a growers' 01'ga,nization, with approximately 1 700 gro-wer-members in Virginia West Virginin, JIarylanc1 and Pennsylvania., and is supported in part by tax assessments collected by the State Apple Commission in Virginia and Maryland, and in part by direct dues paid by apple-growers in Pennsylvania L anel "'Vest Virginia. It is eligaged primarily in advertising and promoting the, sale of apples grown by its members, and in keeping its members informed of market conditions in the apple industry throughout the Appalachian area. lre APPLE IXDl;STRY OF 'Tile APPALACHIAN .AREA Approximately one-third of the apples processed annually in the United States, in the manufftCture of food products such as applesauce, cider, apple juice, jellies and vinegar, are grown in the orchards of the Appalachian area, which embraces parts of the States of Virginia, "Vest Virginia, Pennsylvania, and Iaryland. Of that one-third, approximately scyenty-five percent is processed by the five respondent processors na,meet herein. Although some apples are sold through brokers: the majority are sold directly by the gro-wers to these processors. and are delivered to the.ir processing plants some of -which are located in States other than the States of origin of the apples.

The apple-harvesting season generally extends over a period of approximately three months beginning south of Hoanoke, Virginia in August, moving nortlnvarc1 through the Shenandoah Valley to Ia.ryland and Pennsylval1ia and ending in t.he northernmost part THE C. H. MUSSELMAK CO. ET AL. 1071 1068 Decision of the area ill late October or early K ovember. The individual grower, however, has only, at the most, six ,,'celes during this period within which he must harvest and dispose of his crop. Because of this short harvesting season, the various apple growers compete keenly with each other in selling their apples. It is not nneommon for a grower to sell and deliver processing apples to several of the respondent processors. Fieldmen of the respective respondent processors maintain contact with thc grmycrs ihroughout the year and solicit and urge the growers to deli vel' apples to the particular respondent processor they represent. Not infrequently, the growers begin delivering apples to the processors before knowing what price they are to receive therefor. The record shows, however, that with apples selling at three dollars and twenty-five cents per hundredweight, a variation of five cents more or less would be suffcient to determine to which processor the particular grower would sell his crop. From this it is evident that the competition among the respondent processors is also keen.

In the Appalachian area processing apples are sold on a graded basis. An inspector from the Federal-State Inspection Service grades the apples for quality and size, using a machine and a sizing ring and grading representative samples of fruit from one crate of apples for each 100 crates delivered. The grades and sizes accorded these representative samples determine the grades and sizes for the whole load of apples.

In the Appalachian area it is customary for the respondent processors to issue a price scale announcement to the growers usually late in August or early in September each year, naming the prices which will be paid the growers at l'spondents ' plants for the various sizes, grades, and varieties of processing apples. The price announcements are usually mailed by each processor to all of the growers from whom apples are regularly purchased. It is customary, however, for each respondent processor to purchase apples frOlu a regular group of growers, which arc considered its growers. The prices named in the, announcement usually prevail throughout the season and are the minimum prices 011 which the processor bases his transaction "with the grower for an apples purchased. In addition to this minimum price: however, the respondent processors frequently make concessions of various kinds to individual growers, such as furnishing the grower with apple crates or transportation for his a.pples from orchard to processing plant; storing a portion of his crop; or accepting a higher proportion of cui1s than that originally announced as acceptable. Sneh concessions are obviously considerations of value which tend to 1072 FEDERAL TRADE COM::VITSSION DECISIONS Decision 52 F.

augment the minimum price to a greater or less degree, the amount of which varies from grower to grower.

Another factor which tends to result in different rather than identical prices paid to individual growers by respondent processors is the fact that in some years, at the end of the apple-harvesting season, respondent processors have paid bonuses, in yaryillg amounts to the growers, apparently for the purpose of retaining their good will and assuring themselves of a continuing supply of apples. BACKGROUND 01;' APPEAL.:\CHIAX APPLE SEIWICE , IXC. Respondent Appalachian Apple Service, Inc., was organized in 1936 as Appalaehian Apples, Inc., and was founded for the prineipal purpose of advertising and promotion of the sale of apples grown in the States of :Maryland, Pennsylvania, Virginia and ,Vest Virginia. Although membership is oped to anyone contrihuting over twenty-four dollars per year, control of the organization is vested in its n.apple-growing members. From 19;1G through l theit was primarilysale concernedof freshwith theapples.advertising and promotion of The gro\ver members in Pennsylvania and \Vest Virginia pay dues directly to the organization, but the growers ill Virginia and Maryland eon tribute indirectly through their State Apple Commissions, which support Respondent Appalachian Apple Senice Inc., by appropriating a portion of an apple tax assessed a.against growers in those States. In addition to assessments from its grower members this respondent, over the years hom 1037 through 1949: has received financial support from "Allied Industries," which includes concerns related to the apple industry, SHch as cold storages, processors, dealers: pac1mge people: spray material manufacturers and basket or crate manufacturers. Respondent Bowman Apple Products Company, Ineorpomted was an AJlied Industry member from 19'12 through 1949. Respondent The C. H. Musselman Company eontributed several hundred dollars a year to Respondent Appalachian Apple Service, Inc. , from 1936 through 1949. Respondent ational Fruit Company, Incorponlted contributed five thousand dollars to the support of the organization between 1943 and 1947.

THE L-'m;;ETING CLIXlCS Respondent Appalachian Apple Service, Inc" uswtlly holds a :Marketing Clinic, generally late in August each year, attended by seventy-five to one hundred representative growers, handlers, processors and others from the Appalachian area interested\l in buying THE C. H, russell\N CO. ET AL. 1073 1068 Decision and selling apples. The function of these clinics is to develop and present information and data concerning all prevailing condit.ions and circumstances which have any bearing on the marketing of the forthcoming apple crop, such as the size of the prospective apple crop and of particular varieties of apples, the carry-over of canned apple products and the price levels on such products during the preceding year, the general over-all economic outlook, and a,ny other factors which may affect the price structure of general seIJing of apples.

COOPERATIVE ACTH"ITIES DURING WORLD WAR II During the period from 1942 through 1946, the close relationship and cooperation between Respondent Appalachinn Apple Service Inc., and the respondent processors developed rapidly under the influence of the Offce of Price Administration, the United States Department of Agriculture, and the 1Var Food Administration. During this period a committee of growers and processors from the apple industry in the Appalachian area coopernted and rendered advice and assist,n,nce to the Government in the promulgation and administration of emcrgency measures relating to price controls fi,llocations and set-aside orders for the Armed Forces. These cooperative activities between the growers and processors during this period seem to have resulted in the formation in 1946 of the .Joint Grower-Processor Committee of Respondent Appalachian Apple Service, Inc. This committee consists of six grower representatives and six processor representatives. r;':!:01l the time of its org:anization throughout the period involved in this proceeding, this COHl- Inittee has held periodic meetings at which the various problems of grower and processor have been discussed, including the prices to be pn,ic1 for raw apple,s. Carroll R. 1:I11cl', the Secretary- Iallager of Respondent Appalachian Apple Service, Inc. , appears to have been primarily responsible for its formation and to have been the chief leader in promoting cooperation between grower and processor. From 1949 until the present, a11 respondent processors have had representation on this committee.

ACTlVI'l' IES l"RO::I 1947 '10 19;10 There is considerable evidence in the record concerning the activities of the Joint Grower-Processor Committee during the years 1947 to 1949, and of the efforts of thc Secretary-Manager of Appalachian Apple Service, Inc., to promote concerted price-fixing by the respondents. In fact, the activities of the Secretary-lVIanager during this period seems to have been designed to accomplish un- 1074 FEDERAL TRADE COMl\IISSIOK DECISIONS Decision 52 F. T. C. lawful concerted price control. There is, however, no reliable, probative or substantial evidence that such an ilcgal objective was accomplished.

ACTIVITIES IN I!) 5 The activities of the Joint Grower-Processor Committee and of the respondents, in 1950, relative to cooperative price control present, however, a more serious issue. In fact, it appears that it was such activities which formed the basis for the Commission s decision holding that, at the completion of the presentation of evidence in support of the complaint, a pri1na fade ease had been established. Now, for the first time, those crucial facts are being considered in the light of the entire, completed record, including the rebuttal evidence presented by the respondents. Three meetings of the .Joint Grm-vcr-Processor Committee were held in 1950. The first was held on August 15th, at which discussions took place concerning the current apple crop, its size in the Appalachian area and throughout the country, competitive crops, the increasing cost of production, available markets for both fresh and processing apples, processors' cost of production, and other subjects, including prices. In view of all the evidence relative to this meeting, and in the light of the subsequent meetings in 1950 at which prices were discussed. the conclusion is compelled that no agreement on price was reached at the meeting on August 15th.

The second of the three meetings in 1950 was held fls a marketing clinic. It was attended by a large number of gro\vers and representatives of processors. Various subjects concerning apples were discussed, including prices. It appears that the growers outlined to the processors their diffcnlty in meeting the cost of producing apples, and did their best to justify asking for a higher price for their apples. On the same day, the six grower-members of the Joint Committee adopted the following resolntion: After further study of all available information it is the judgment of the man growers' half of The Joint Grower-Processor Committee of this Appalachian Belt that it wil take a starting price scale based on not less than $3. per hundredweight for Class A , "C.S. 1 Canners 12 inches up to channel sufficient apples to processing from the present crop; assuming that Class Band lower sizes and grades carry the same dollars-and-cents differentials as last season.

The above resolution, and other evidence rebtive to the second meeting in 1950, indicate clearly that the growers were merely announcing a desired price, but that no agreement between them and the processors resulted at that time.

, , , THE C. H. :MSSELMA CO. ET AL. 1075 1068 Decision The day following the marketing clinic discussed above, the Secretary-Manager of Appalachian Apple Serviec, Inc. , notified the processor-members or the Joint Grower-Processor Committee that the grower-members or the Committee urgently requested a meeting of the full Committee to be held on Saturday, August 26th at the Shenandoah Hotel in Martinsburg, 'IV est Virginia. In response to his summons, the third meeting or the Committee in 1050 was held on Angnst 26th. This meeting was attended by ten persons, including thc Secretary-Manager of Appalachian Apple Service, Inc. , or the others, five were executive representatives of the processor respondents, one was an executive representative of a processor not a respondent herein, and four were growers. All testified under lengthy examination concerning what occurred there. Although all the witnesses admitted that prices to be paid by the processors to the growers for the forthcoming harvest or apples were discussed, they all denied that any agreement was entered into concerning those prices. \Vitness Stockda1e, a representative of Zero-Pack, a processor not a respondent in this proceeding, who was not, therefore, as directly an interested witness as the others ;rho testified herein in response to the direct question by the hearing examiner what did this meeting accomplish ?" , stated: othing, to my viewpoint, except that it has been pretty clearly-I felt pretty dearly that the growers represented there were tellng us that they believed $3.50 was the price; I felt pretty clearly that the ones that stipulated prices of the processors, which IIainly was Mr. Hunt, was $3.00, and I left there ann when I reported to my offce in Cincinnati I told them then, they asked me bow I thougbt the thing would wind up, and I said It looks to me like a $3.25 price; but as to the actual meeting, that was evolved in my own mind ont: of the various discussions that I beard at the meeting, but to say the meeting, itself, accomplished anything other than to bring forth these points discussion, I couldn t name any reason for it. In addition Witness Hauser, President of Respondent C. Il\iusselman Company and representative of that organization on the Committee, testified that the Musselman corporation condncted an orchard survey in the area, each year in order to determine the prices to be paid for raw apples, and that such a survey was conducted in 1950, before the meeting on August 26th. This testimony is confirmed by that of two grmYel's. This survey, according to \ 7itness I-Iauser, indicated that three dollars per hundredweight would be too Iowa price to be paid for apples, where s three dollars and fifty cents would be too high. He concluded that the growers would be happy with a price of three dollars and bventy-five cents. As a result or his company survey, 'Witness Hauser determined that his company would pay 1076 FEDERAL TRADE COM IISSIOK DECISIONS Decision 52 F. T. C. a top price of three dollars and twenty-five cents per hundredweight, weeks before the meeting on August 26th, and that he had caused his price announcement to that effect to be mimeographed before the date, intending to issue it regardless of the outcome of the meeting. He nevertheless delayed its release in order to see if he could learn anything new from the discussions at the meeting. After the meeting, however, he concluded that he had "hit the nail on the head. This latter testimony is corroborated by another witness, and also by Witness Bigham, who testified for respondents on rebnttal.

All the witnesses who attended the August 26th meeting, as well as an the witnesses who testified concerning the activities or the respondent processors, were una.nimous in stating that no agreement was made at the August 26th meeting or anywhere else, by them or by their organizations, ,yitlI the apple growers of the Appalachian area or with anyone eJse, concerning the prices paid for the 1950 crop of apples.

Tending, by implication to contradict the able8, testimony is the fact that shortly after the meeting on Augnst 2(jth each of the processors issued price announcements identical in aU respects for each of the sixteen classes and grades of apples purchased by them excluding prices for cuns. Such uniformity in the prices announced by competing processors following a meeting by them with growers at which price was one aT the principal topics of discussion, suggests that an agreement for the payment of uniform prices bad b2en entered into. On the other h tl1d, before such an inferenc:e C ln be drawn, fairness to respondents requires that consideration be given to all other relevant circumstances. TIle record shows very clearly that keen competi.tion existed among the few processors located in the relatively small Appalachian apple-growing areft, so that a difference of five cents per hundredweight could determine \which processor would get a grower s apples. This fact ,,-ould tend to compel each processor to meet tile price of the others, and therefore to result in uniform prices independent of any agreement. The 1'e. fact, therefore, that uniform prices \')ere announced by the spondent processors, in the light of aD the circumstances relevant thereto, does not of itself supply the basis for a trustworthy inference that respondents had agreed on such prices. Furthermore, the record shows that throughout the season the prices paid by the respondent processors were varied, and that respondent growers received, in many instances added considerations for their apples over and above the announced price, such as free transportation of apples from orchard to processing plant, storage THE C. H. MUSSj'JLMA CO. ET AL. 1077 1068 Deision facilities, free use of crates, and payment for cnts. In addition Respondent The C. H. Mnsselman Company paid a season-end bonus to growers, which had the effect or augmenting further the price already received by such growers for their apples. It is also a fact that many growers actuaUy sold their apples to these same processors for prices over and above the announced price. These facts clearly demonstrate that uniform prices were not maintained throughout the season, and also tend to refute the inference that any agreement setting such prices was ever made. In addition to the fact of uniform price announcements, counsel supporting the complaint insists that the letter written by the Secretary-Manager of Appalachian Apple Service, Inc. , on September 2, 1950, to the President of that organization, relative to the meeting of August 26 , 1950, should, because it was written contemporaneously with that meeting and before the beginning of this litigation, outweigh the unanimous and uncontradicted testimony relative to such meeting of aU the witnesses who had attended the meeting, and testified concerning it. The Jetter in question is as foUows:

You have the results of last Satm'day s .Toint Committee session. In general growers seem satisfied ,,,ith the scale, so far as I've heard. It was all that seemed justified at the time-and the door was left open for action later if warranted.

The processors were much more co.operative than ever before. We really negotiated with them, for the first time. It is conservative to say that grower organization pushed the price up from $2. 75 to $3.25 "top" and pushed the scale up proportionately. If the deal goes well, as it should, by another year we can probably mah:e Salle headway on these other questions ;-the differentials etc.

The above letter, which recites that "we (the growers' organization) reany negotiated with them (the processors)" and "pushed the price up from $2.75 to $3.25 'top,' " seems to show, by inference that an agreement concerning such prices had been reached t. the meeting on August 26th. It is necessary, however, in evaluating this letter, t.o consider the temperament of the writer; the relationship between the writer and the president. OT the growers organization, to whom he was 'writing; and the fact tllat the writer himself, in testifying, joined in the unanimous denial by all witnesses that any agreement had been reached. The writer of the lett.er, Mr. Carron R. "finer, demonstrated by his testimony and demeanor in testifying that he was a voluble type, prone to exaggerate the achievements of the. Committce which he had created and the value of his services to his organization. It is reasonable to expect, therefore, that he would, in a letter to his superior, pre,sent 1078 FEDERAL l' TRADE CO:\VfISSION DECISIOXS Conclusion 52 F. '1' . C. as facts accomplished, thc objects which he may have hoped to accomplish at the meeting on August 26th. Although this letter indicates that announcement of higher prices followed the meeting, the letter, like the testimony of its author, is ambiguous as to what caused the higher prices. In view of this ambit1itv. and of the unanimous testimony of all the witnesses: who attended the meeting on August 26th that no agreement as to price was there made, the letter cannot be taken as a basis for a conelnsion that such an agreement was entered into by respondents. FIRST CONCL "CSION Considering the entire record, it seems fair to conclude that there is no reliable, probative or substantial evide.nce therein to support the first allegation of the complaint: that the respondents entered into an understanding, agreement or combination to establish and maintain prices to be paid for raw apples in the Appalachian area. PRICIXG FORMULA The second allegation of the complaint avers that. the respondents fixed by agreement a mathematical percentage pricing formula, for calculating the prices to be paid for various grades of appl and price differentials between such grades. The record discloses that in 1943 , under the authority of the Offce of Price c1ministration such a formula w s established for raw apples. The record contains: however, no evidence that the rCf3pondents, by understanding or agreement, continued the 1943 matlwmatical percentage formula or that they ever, by agreement: established any similar lormula. Correspondence in the record shows that in 1950 \Vit.ness I-Iunt suggest.ed the adoption of changes in grades of apples rather than in prices; but aU me,mbers of the Joint. Gro\Yer-Processor Committee testified that this suggestion was not adopted by their Committee or by the respondents, and that no agreement was l1Hlde to establish such a formula or scale. Also, 1\-1'. : diller, in his let.ter to the President of Appalachian Apple Service, Inc., above referred , states that "by another year we can probflbly make some headway on * : * the differentials, etc. " thereby ta,citly admitting that his Comin.ittee had not agreed on clifIerelltia,ls. SECO D CO::TCL USIOK Accordingly, it must be concluded that there is no reliable, probative and substantial evidence in the record to sustain the second allegation of the complajnt.

THE C. H. MVSSEL:'N CO. ET AL. 1079 1068 Conclusion DIVERSION The third allegation of the complaint avers that the respondents by agreement, diverted raw apples from one processor to another for the purpose of maintaining the prices therefor and thus preventing a price-break during a period of over-production in one area and under-production in another. Although it was the normal custom of Pennsylvania processors: year Lfter year, to buy some of their apples in Virginia, the evidence concerning this charge refers solely to the 1950 apple season. During that season, the apple crop in Virginia and Divest Virginia was unnsually heavy, whereas the apple crop in Pennsylnnia was nnnsually light. As result, it appears that the two respondent processors located in Pennsylvania, The C. H. Musselman Company aud Knouse Foods Cooperative, Inc., were not receiving as many apples as they could normally process, whereas the respondent processors located in Virginia and IV est Virginia, particularly Respondent National Fruit Products Company, Incorporated, were receiving raw apples in excess of their normal and expected needs. Witness Hnnt, Vice-President of Respondent National Fruit Product Company, Incorporated, explained that under sllch circumstances it would have been simple for his cOlnpany to curtail its purchase of apples, but that such action would have resulted in a serious loss of the goodwill of the growers. According to his explana6on, respondent processors regard the growers from ,vho1l they buy regularly each year as "their:' grOTfers, and attempt to take care or" these regular suppliers. Growers will not sen to a processor in a lean year ir that processor does not buy all the apples they have to offer him in a year of abundance. Accordingly, \Vitness IIunt's company concluded that it was facing a serious problem. It must either buy more apples than it could economically process, or it must sacrifice the goodwill or its grower-suppliers. Not wanting to adopt either of these alternatives, Witness Hnnt requested the Secretary-Manager of Appalachian Apple Service Inc. , to call a meeting of the grower representatives to discuss the market situation." In response to that request, a meeting of the Joint Grower-Processor Committee was held on October 23 1950 at Hagerstown, 1\faryland.

At this meeting, 'Witness Hunt described thc market situation to those present and suggested that his company pay to the growers selling to it fifty percent of the announced price on delivery, with the understanding that if aU of the processed apples could be marketed at the current price, the remaining fifty percent would , , , , , 1080 FEDERAL TRADE COMMISSION DECr8rOKS Conclusion 52 F. 1'. C. be paid, bnt if the price for processed apples declined, the growers would get proportionately less than the announced price. 1Vitness Hunt characterized this proposal as a "trial balloon" to ascertain the reaction of the growers. When that reaction proved to be definitely adverse, the suggestion was abandoned. Thereupon representatives of Respondent Processors Knouse Foods Cooperative Inc., and The C. H. Musselman Company observed that the crop in Pennsylvania was light and that they could handle more apples to which the growers responded that it looked as if the thing to do was to send some of their fruit np to Pennsylvania. 1With regard to this suggestion, "\Vitness Hunt testified Now we were no party to that agreement." It is obvious that his use of the words that agreement " refers to the suggestion recited above rather than to any agreement in the sense of mutually-cxchanged promises among the parties; and his further testimony explains his meaning and the dilemma in which his company found itself, as follows: We could not say, "Don t send your fruit up there." And we couldn t agree to it. I would be foolish to say to a grower 'Vell, you take your fruit np there " because next year-I am going to put ;vou in a grower position againsnppose that I would say to you Well, I am sorry, we can t take any more of your fruit. You haul it up into Pennsylvania. " Then next year if it was a short crop, and for your information traditionally we have a short crop follow. ing a large crop for the reason that the Yolk Imperial which is the variety that we use in the largest volume is a biennial bearer and if I said to you in 1950 Sorry, we can t take any more of your fruit; you haul it to our competitor up in Pennsylvania " and then we came to 1950 and the crop was short, which by all the laws of averages it should be, and we got in a competitive situation fighting for fruit, and I went to yoll and yoll would say, "Well you didn t take care of my fruit last year; I am going to give it to the other man." We did not want to he in that position. So as a result, after the meeting we went home and the following day we went into a huddle as to what to do.

We decided this: to borrow more money anel continue taking apples. Finally, rather than risk losing the good win of their regulat grower-suppliers by refusing to purchase more of their apples, Respondent National Fruit Product Company, Incorporated borrowed a million, seven hundred fifty thousand clolhtrs and purchased more apples for processing in order to avoid diverting apples to other processors, and, but incidentally. lost money on the transaction.

One of the growers who attended the meeting testified that he thought some of the Virginia apples were delivered thereafter to Pennsylvania processors, but could not say definitely that this was true.

THE C. H. MUSSELJ\lA CO. ET AL. 1081 1068 Conclusion Following this meeting, the Secretary-Manager of Appalachian Apple Service, Inc., issued a bulletin, on October 24, 1950, in which he reported upon the October 23rd meeting as follows: NOT FOR PVELICATION: FOR ME IBERS' L'SE ONLY. S01\IE VIRGINIA CANNERS ARE FILLING: PENNSYLVANIA CANNEHS NEED FRUIT:

In 1949, "the apple crop was in Pennsylvania." This year, the apples are in The Virginias. The crop in The Virginias has been notably increased by the ample late rains; and percentage of packed fruit has been reduced by russet. ing. A result' of this is that several Virginia processors in the heart of the' Virginia production have received apples beyond early-season expectations, amy are approaching the limits of what they feel they can accept, hold either il! storage or otherwise, and process and sell. \Vhcn this limit is reached, the expect to shut off acceptance of apples, except those previously contracted for. Larger Pennsylvania processors, in the midst of Pennsylvania s short crop (which seems, as short crops do, to be getting smaller) are not facing tllis situation; wil need a considerable volume of apples from south of The Potomac. This is the reverse of 1949, when Virginia processors, in the middle of a short Virginia crop, took considerable fruit from Pennsylvania s large crop. 'l' he above is the result of a conference of The Joint Grower-Pt' ocessor Committee for Appalachia, held Monday at Hagerstown. Several Virginia processors noted that their pack-out so far was larger than e\ el' before at the same period; that their cold-stored apples, for later lu:e, were far above any previous holdings; that they are approaching the volume of pack, in both sauce and they slices, that they feel call be ,ven sold; and when that point is reached, must stop acceptance of any fruit not previously contracted for. Pennsylvania processors, in the middle of a light-crop area, have no such inventory of stored fruit nor of their finished product; and indications are that, by and large, they wil be in the rnarJ et for suffcient apples to "take up the slack" of Virginia s processable fruit. The above bnlJetin appeal's to be self-explanatory. It sets forth the condition of the apple crop in the entire Appalachian area, and the situation of the processors with regard to the amount of apples they wonld be able to process. K 0 mention is made of any agreement to divert apples from Virginia to Pennsylvania. In fact, the report states that the "* . '" indications are that, by and large they (the Pennsylvania processors) wi1 be in the market for s processab1e snffcient apples to 'take up the slack' of Virginia fruit." Such a statement does not reflect an agreement to divert nor does it constitute a diversion. Contrariwise, it appears to be a simple statement of existing market conditions and an exposition for the of the needs of the processors in the Appalachian area, information of all concerned. Furthermore, it would appear that in making such a statement, the Secretary-Manager of Appalachian Apple Service, Inc., was merely performing the function for which his organization was created, namely, the advertisement and promotion of the sale of apples. The only fair inference which can be 1082 FEDERAL TRADE CO.:nfISSIQX DECIS.IOKS Opinion 52 F. T. C. drawn from this docnment is that it does not warrant the conclusion that respondents agreed to divert, or actually did divert, any apples from Virginia to Pennsylvania.

A search of the record fails to reveal any reliable, probative or substantial evidence that any Virginia or ,Vest Virginia apples were actually delivered to any respondent processor in Pennsylvania as a result of agreement among the respondents, or for any other reaSOD.

THIRD CONGL US ION Accordingly, it must be concluded that the third allegation of the complaint, with respect to diversion of raw apples for the purpose of maintaining prices, is not supported by any reliable, probative or substantial evidence.

FINAL CONCLUSION In the light of the entire record, it appears that, for the reasons hereinabove set forth, the complaint herein should be dismissed. Accordingly, It is ordered That the cornplaint herein be, and the same hereby , dismissed.

OPL IOX OF THE OO:rDIISSION Per Curiam:

The hearing examiner s ini6al decision on the merits provides for dismissal of the complaint. Counsel snpporting the complaint has appealed from that decision and the case is presented here on the appeal, briefs in support of and in opposition thereto Rncl oral arguments of counsel.

The complaint under which this proceeding was instituted charges the respondents with entering into an unlawful understanding and combination to restrain trade and interstate commerce in nnv apples produced and processed in an area known as the Appalachian Belt comprising Virginia, 'Vest Virginia Pennsylvania and ~laryland. It further charges that, in effectnating their alleged combination and agreement, the respondents engaged in a planned common course of action for, among other things, fixing, stabilizing and maintaining the prices paid by the respondent processors to the growers. K named as parties are five corporations engaged in processing apples in the area and Appalachian App1c Service, Inc. The latter is a trade association and its membership has included more than 1 700 growers, who control its activities, and a, number of the area s canners including the respondent processors. Among the evidentiary matters relevant to the complaint's allegations of unlawful fixing of purchase prices for apples and dis- . THE C. H. MUSSELMAN CO. ET AL. 1083 1068 Opinion cussed in the initial decision were those relating to certain meetings held in the fan of 1950. In Augnst of each year, the respondent Appalachian Apple Service, Inc. , sponsors a clinic for excha,nging market information on the forthcoming apple crop which is attended by gro\vers, processors a,ncl hal1dleTs. Its Joint Grower- Processor Committee consists of six grower members and six representatives of processors. In 1950, all of the respondent processors were represented on the committee. During the clinic held on August 23 1950, the grower members of the Joint Grower-Processor Committee met separately and adopted it resolution to the enect that, on the basis of available market inf.ormlltion, it was their judgment that a starting price scale of $3. 50 per ewt. would be necessary to channel suffcient apples to processors. The committee convened on Saturday, August 2(L and the growers resolution \'as presented and discussed. On :Monday, August 28, one of the respondent processors issued a top price announcement of $3.25 per cwt., f. b. factory, with proportionately lower prices for other sizes: grades and classes of apples; and the others on August 29, 30 and 31, and September 1, announced prices identical thereto. Growers and processors' representatives who attendecl the meeting have testified that no pricing agreements were entered into there or elsewhere. The initial decision recognized nonetheless that the announcements of uniform prices by the respondent processors shortly after meetings ' where price was the princ.ipal topic. of cescussion indicated and suggested that the prices may have been adopted fis a result of agl'ceme,nts and understandings. It concluded however: that findings of collusive agreements \'e1'e not warranted when due weight was accorded to evidentiary matters negating inferences of agreement.

One evidentiary matter cited by the hearing offcer as tending to refute. conclusions of collusion by t.he processors jn promulgating their price announcements is the testimony indicating that respondent, The C. 1-1. l\Iusselman Company, had determined after n.n orchard survey and sometime prior to the, meeting of August 26 to pay a top price of 83. 25. Iimeographing of its announcement was completed prior to the meeting, and, according to a company offcial its release was intended :following the meeting irrespective of what occurred there. Various matters arc cited in support of the appea.l's contentions that this testimony 'iyas in part misrepresented in the initial decision and should be disregarded. ,Ve deem these. except.ions to be without merit, howe-ver, and think the heating examiner s B,.aluallon of this aspect of t.he evidence was substant.ally correct.

FEDERAL TRADE DnSSION DECISIONS1084 Opinion 52 F.

It also was concluded in the initial decision that paymenb or allowances above the announced prices were received by apple growers throughout the season, and that uniform prices were not maintained by respondent processors during that period. Tbe appeal states that the hearing examiner should have found instead that the prices were adhered to and that there WflS no showing in the record as to how often or to what extent the respondent processors may have departed from their annonnce,d terms. There can be no question but that a substantial amount of fruit was bought by the respondent processors at their announced opening prices. however ODe of the respondent processors paid a bonus of ",approximately $75 000 at the end of both the 1949 and 1950 seasons; and there is substantial evidence showing that this concern freqnently accorded special allowances for hauling ,md handling when purchasing its apples. :Moreover, the testimony of various growers is to the effect that allowances and concessions as to handling, culls and other price-related matters were made available by various other respondent processors.

In this situation we perceive no substantial error in the hearing examiner s findings to the effect that pricing departures were general; and when considered with related evidentiary matters, we share the initial decisions view that there is inadequate record support for conclusions that such uniformity as did exist wit.h respect to purchase prices indeed resulted from agreements maintain uniform prices. Those pricing departures tend also to refute inferences that the announced prices were originally e,stablished through processors' collnsion.

Additional allegations of the complaint charge that respondents have unlawfnlly fixed and maintained a mathematical pricing formula for establishing price differentials between tho. various grades of fruit and that they diverted raw apples from one processor to another for maintaininl( their allegedly collusive prices. These allegations and the evidence pertinent thereto are closely related to the previously discussed price fixing charge, and we find no error in the initial decision s conclusions that these additional charges likewise lack adequate record support. This case previously was considered by the Commission on an appeal from an initial decision rendered when the presentation of evidence in support of the case in chief was conclncled. The Commission then held that a prima facie case had been established and remanded the matter for further appropriate proceedings. The appeal argncs that the evidence received after the remand fails to rebut the evidentiary matters originally received into the record THE C. H. MUSSELMAK CO. ET AL. 1085 logs Olu.er and held by the Commission to establish a prima facie ease and that the initial decision is in erroneous conflict with the Commission s earlier interlocutory decision.

After the remand approximately 400 pages 01 evidence was received and thirteen witnesses appeared before the hearing examiner. In addition to testimony by growers, which is relied on by respondents as evidence that price competition existed on the processors' purchase of fruit, the rebuttal matters Includp 1 atements relative to bonus payments by a respondent processor ill certain years and policies adopted by other processors in purchasing fruit. The hearing examine-r manifestly gave weight to these evidentiary matters in reaching conclusions to the effect that the greater weight of the evidence does not support findings of unlawful combination and collusive action by the respondents. Not only was that evidence in major part relevant to the issues, but it obviously tended to place the evidentiary material previously received in its proper perspective and to corroborate certain factual aspects adverse to the position adopted earlier in the proceeding by counsel supporting the complaint. We do not construe the initial decision to be in erroneous conflict with the Commission s prior interlocutory decision on the basis of the present record. The appeal is denied and the initial decision affrmed. Commissioners Secrest and ICern did not participate in the decision herein.

FINAL ORDER Counsel supporting the complaint having filed an appeal from the hearing examiner s initial decision in this proceeding; and the matter having come on to be heard upon the record including the brieis and oral arguments of counsel: and the Commission having rendered its decision denying the appeal and affrming the initial decision:

It i8 ordered That the complaint herein be, and it hereby is dismissed.

Commissioners Secrest and Kern not participating. 451524-59- &, j 1086 FEDERAL TRADE COl\llISSIOK DECISroXS Complaint 52F.