Rocky Mouktain Wholesale Company

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Ix THE iA TTER OF ROCKY MOUKTAIN WHOLESALE COMPANY ET AI OlWER, ETC., I:\ REGARD TO THE ALLEGED VIOLATION OF SEC. 2 (C) OF Tile CI.AY'' O:- ACT Docket 6230. Complaint, June 30, 1954-Decision, Jmr. , 1956 Order requiring a wholesaler of sundries, candy, and tobacco products in Albuquerque, New Mexico, to cease receiving unlawful allowances or brokerage in violation of Sec. 2 (c) of the Clayton Act as amended, through sharing' as partner in two brokerage companies, brokerage received by them on purchases made for respondent's own account. illi'. Rice E. Schrimsher and 1111'. Peter J. Dias for the Commission. Mr. Louis O. Lujan of Albuquerque, N. Mex., for respondents. INITIAL DECISION By JA:.fes A. PURCELL, ll ARING EXA:SIINER The Federal Trade Commission issued its complaint against the above-named respondents charging them with violating Section 2 (e) of the Clayton Act, (U. C. Title 15, Section 13), as amended by the Robinson-Patman Act, approved June, 1036 which comph,int was duly served upon the respondents. The respondent, Jack Beatty was named as such in his individual capacity as well also as President of the corporate respondent, and owner of the controlling interest there- , and as a partner in the partnership firms of Consolidated Brokerage Company and G & Z Brokerage Company. No testimony or other evidence was received on behalf of any party to this proceeding, this Initial Decision being rendered upon motion of the attorneys in support of the coni plaint on the basis of admissions contained in the formal answer of respondents to the complaint herein. Specifically, the respondents Rocky Mountain ",Vholesale Company and Jack Beatty are charged with receiving and accepting payment of commissions in lieu of brokerage in connection with purchases of products made by them for their own account.

On August 2, 1954, respondent.s filed answer to t.he complaint admitting:

1. The status of the corporate respondent and the representat.ive and individual connections of the indidchwl respondent, as alleged in the complaint;

2. Interstate commerce; and 3. The payment and acceptance by n pondents of brokerage, or other compensation in lieu thereof, in connection with purchases of products made by the respondents on their 0'\1'11 account. \); j ROCKY M01;NTAIN WHOLESALE CO. ET AL. 1485 1484 Decision In and by said answer it ,vas admitted that such brokerage payments were made to the G & Z Brokerage Company, in which the individual.l respondent Jack Beatty participated as a copartner, but specifically denies tlmt he has ever received any brokerage or other compensation from Consolidated Brokerage Company. By way of further ans,ver to the complaint the individual respondent alleges, with respect to the G & Z Brokerage Company and the Consolidated Brokerage Compa-ny, both being copartnerships, in which the individual1 respondent owns respectively 51 % interest of the former and 50% interest of the latter, that he, the said Jack Beatty, during the period herein referred to, ha.s performed ihe type of services referred to in Subsection (e) of Section 2 of the Clayton Act through the instrumentality of the corporate respondent Hocky Jfountain "\Vhol6sale Company, in that he furnishes all of the bookkeeping services for Consolidated and for G & Z he furnishes oinee space, stenographic help, bookkeeping, and telephone service on all items handled by that firm and that he also wareholl es t.he goods, furnishes the services of receiving and shipping and carries advertising on an his trucks for both concerns; that the va.lue of the, sa.id selTices 13 in excess of any cOllpensfltion ,,-which he l'eceivesin lieu of brokerage as afore3a.id. And by way of affrmative defense, under t.he legalllaxill de minim, non C1J.rat lex sets up that the purchases made from the vendors represented by thc G & Z Brokerage Company total but 2.15% of his, the individual respondent's, total purchases per year and that from vendors represented by Consolic1aie,d Brokerage Company such purchases amounted to but .84% of his total business; that the total purchases for the year 1953 amounted to $695.21 on which the commission received by Consolidated Brokerage Company was 834. from which he, J aek Beatty, received nothing. On the basis of the foregoing ans"'cr containing the admissions set forth, the attorneys in support of the complaint filed a motion requesting the TIearing Exa,miner to issue an initial decision and cease and desist order based thereon. Thereafter the I-learing Examiner cancelled the date of the original hearing and accorded the respondents approximately 30 days within which to answer the a.foresaid motion and in said order extended to the respondents the privilege of supplementing their reply by filing a brief in support thereof or, in the alternative, extending a,n opportunity for oral argument, neither of which tenders was availed of by the respondents. Thereafter, on motion of respondents, the hearing Examiner granted them an additional 30 days within "hieh to answer, upon expiration of which time, that is to say October 19, 1954, the respondents filed a motion to dismiss the complaint on various grounds among such being: 45152'!- 5f1- 1486 FEDERAL TRADE COMMISSION DECISIO Findings 52 F. T. C.

(1) that at no time did they "knowingly and intentionally operate in violation of the Clayton Act * * * but that any transgression was entirely through Jack of proper information on their part" ; (2) that respondents believed that the rendition of services to Consolidated Brokerage Company and G & Z Brokerage Company \vas suffcient to comply with the exemption clause covering "senrices rendered" as set forth in the Act and thus to relieve them from the impact o(Subsection "c" of Section 2 of the Clayton Act as amended; (3) that upon complete and thorough study of the matters presented in the complaint * * * the respondents came to the conclusion that they must make certain changes in their operations in order to come into com pliance with the said Act, " Said motion goes on to delineate the steps which the respondents have taken to enable them to "come into compliance " wherefore it was prayed that the complaint be disnlissed. To the foregoing motion to dismiss the attorneys in support of the complaint did, on October 25, 1954, file an answer in opposition and renewing the motion for initial decision containing an order to cease and desist.

Upon consideration of the formal record as hereinabove recited the Examiner is of the opinion that the motion of the attorneys in support of the complaint for the issuance of a cease and desist order predicated or the admissions contained in the respondents' answer and also contained in the respondents' later motion to dismiss the complaint, should be granted, wherefore he makes the following findings of fact, conclusions and order.

FINDINGS OF FACT 1. Respondent Rocky :Tlountain \Vholesale Company is a corporation organized and existing lUlder the laws of the State of New Mexico, with its principal offce and place of business located at 314 South Second Street, AJbuquerque, ~ ew Mexico, and with branch aiIces located in the cities of Roswell, Santa Fe and Farmington Ne,v 1\lexica. The controlling stock interest in the respondent corporation is held by respondent .Tack Beatty who directs, controls and is responsible for its acts and practices. Said respondent corporation is engaged in the business of buying sundries, candy and tobacco products from manufacturers and reselling such products to retailers.

respondent Jack Beatty is an individual residing in Albuquerque Kew :YIexico, and is president of respondent Rocky JlOlmtain 'Wholesale Company. He is also a partner in Consolidated Brokerage Company and G & Z Brokerage Company, having a 51 % interest in the former company and a 50'7 interest in the Jatter. These two com- ROCKY :vODKTAIN WHOLgSALE CO. ET AL. 1487 1484 Conclusions panies located in Albuquerque e\v Iexico, are engaged in business as brokers of sundries, food a,nd ca,ndy products, in connection with the sale of such products to wholesalers.

2. In the course and conduct of their business as wholesalers, re. spondents are and have been engaged in commerce, as "commerce" is defined in the Act, purchasing products from vendors, whose places of business arc located in states other than New :Mexico, and causing them to be shipped to their pheces of business within the State of N ew 1:mexico. ' 3. In the course and conduct of said wholesale business in commerce, said vendors payor grant to respondents and respondents receive or accept commissions, brokerage, or other compensation, or anowances or discounts in lieu thereof, in connection with said purchases of products made on their own account. 4. For example, during 1053, one method by which respondents received or accepted the commissions, brokerage, or other compensation, or allowances or discounts in lieu thereof alleged in Paragraph Three involves Consolidated Brokerage Company and G & Z Brokerage Company. These companies act as brokers for vendors making sales of candy products and sundries to respondent Rocky J\1:Olmtain Wholesale Company. The money received as brokerage by these companies on such sales is shared by respondent Jack Beatty as a partner in said companies. Thus, as a buyer through his control of Rocky Mountain Wholesale Company, .Jack Beatty receives brokerage on purchases made for his own aCCOlmt.

CONCLUSIONS 1. From the foregoing it will be seen that the receipt of brokerage on purchases on their own account through ihe G & Z Brokerage Company are specifically admitted by the corporate and individual respondents, while denying that any such were received from the Consolidated Brokerage Company. However, in view of the admission that respondent J acle Beatty is the owner of a 51 interest in the Consolidated copartnership, and the admission in the a,nswer that Rocky \Iountain made purchases from Consolidated Brokerage on which the latter received bl'oh:erage fees, and the further fact that respondent J "ck Beatty is the controllng owner and factor in Rocky 1fountain, it' is clear that the buyer received lmIawful allowances or brokerages and that no wejght can be accorded this attempted defenseo 2. Referring to the allegations of the answer that respondent Beatty performs services through the respondent Hocky )rlountain on behalf of the G & Z Brokerage Company and Consolidated Brokerage and that the amounts paid him are insuffcient compensation for the serv- & \ . y, ; 1488 FEDERAL TRADE C01IMISSION DECISIOXS Conclusions G2 F.

ices performed, in addition to which that such services come within the "except for services rendered" clause of Section 2 (C): It is concluded that because of the relationships of the, parties sur,h a defense is unavailing to take the charges without the statute under the "exception clause " and in this connection the following excerpt from the Circuit Court of Appeals (Great A. P. Tea 00. v. F.T. 106 F. 2d 667. S&D 1939, p. 146, 154, 15G) is given: We entertain no doubt that it n."as the intention of Congress to prevent usual representation by agents purporting to deal on behalf of both buyer and seller. '" '" * The phrase " except for ervices rendered' is employed by Congress to indicate that if there be compensation to an agent it llHSt: be for bona fide brokerage viz" for actual services rendercd to !lis ' principal by the agent, The agent cannot serve two masters, simultaneously rendering services in an arm s length transaction to both, 'Yhile the phrf1se "for services r011uered, " does not prohibit payment by the seller to his uroker for bona fide brokerage scrvi(:0R, it requires that such service be rendered uy the broker to the person who has engaged l1ill. In short, a. buying and selling service cannot be combined in one liel'8rm (Emphasis supplied.

v. 11"1 F. 2-d Also in the case of Quality Bakers of A'meTica 393, the Court said:

The petitioners contend that by the language in paragraph (C), above quoted reading "except for services rendered in cOllllection ,,,ith the sale or purchase of goods " the Congress recognizes that a lhl 'er, or his agent, may perfOI'il services for the seHer in connection with the transaction for which the seller may pay and the buyer or l1is agent receive compensation hy way of a brokerage fee or commission on the sale. 1Ve do not take such a view of tlle parag-raph, The construction contended for makes much of its language meaningless; it does violence to the purpose of the Act and has been explicitly rejected ' in other circuits, It is plain enou.gh that the pamgraph, taken as a who/.e is framed to prohibit the pa,yment of brokc'/'uge in any gllise by one party to the other, or the other 8 agent at the same tiile exvres8l ' recognizing am) saving the right of either lmrty to pay his own agent for services rendered in connection ,yjth tlle sale or purchase, (Emphasis supplied.) (See also: Biddle Fn1"chasing Co. FTC, 96 F, 2d 687 , certiorari denied, 305 L. S. 634 j Oliver Brothe'1 F'l' 102 F. 2d 763; Webb-Crawford Co. v. FTC 10U F. 2d 268), 3. Referring to the unsupported asseveration of respondents' counsel, as contained in his motion t.o dismiss, that respondents have abandoned the practice complained of and are now in a state of compliance: It is ,yell settled law that discontinnance does not render the controyersy rnoot and thus bar an order to cease and desist. This is true whether the discontinuance is effected before or after issua,lice fOl'ne.r see Sears. Roeb1tcl-c 00. v. FTCof the complaint. For the Sle FTO ()oodywl' TiJ'258 Feel. 307- 310, Hnd for the latter rubber 00. 304: U.S. 257. This conc.lnsion is not intencled nor designed to impngn the good fait.h of respondents in their abanclollrnent of the practices but, under the facts immel, and bearing in mincl that ROCKY MOVXTAJN "\VHOLESALE CO. ET AL. 1489 1484 Decision the funct.ion of the Commission is not only in nature injunctive but as wen prophylactic, it is concluded that an order to cease and desist is indicated and required.

4. Concerning the attempted defense of de minimis it is concluded that such is unavailing. It is the character of the acts charged and admitted which t.he law denounces, not the extent thereof, be it small or great. (Louisia11jJ, Fanners Protective Union v. Great A. P. Tea Co. 131 F. 2d 419 , 4.22. White Bea1. Theatre Corp. v. State Theatr' Corp. 120 F. 2d 600- 605.

Certain it is that the machinery for violating the Act was all set up and operating; that commissions or brokerages were Retually paid and received, and it is no defense that such ,vas done unwittingly, without intent to violat.e. the Act and in ignorance of the la,v. 5. The acts and practices of the respondents, as above found, violate Subsection (c) of Section 2 of the Clayton Act as amended by the Robinwn.Patmau Act (FS.C. Title 15, Section 13). OUDEH 1 t is OJ'dcl' That the respondents Rocky :\Iountain ,Vholesale Company, a corporation, and .Tack Beatt.y, individually and as President of B.ocky :Mountain 'Vholesale Company, and as a partner of Consolidated Brokerage Company and G & Z Brokerage Company and their respective representatives, agents and employees, directly or t.through any corporate or other device in conned-ion ,with the purchase by respondents, or either of them, of sundries, candy and tobacco products in commerce as "commerce" is defined in the Clayton Act, do forthwith cease and desist from receiving or acce.pting, directly or indirectly, from any seller anything of value as a commission brokerage, or other compensation or any allowance or discount in lieu thereof, upon purchases of sundries, candy and toba.ceo products made by respondents or for their account.

DECISION OF THE C01\DIISSION AXD OI:DEH TO FILE REPORT OF COJYU'LIANCE Pursuant to Sec. 3.21 of the Commission s Rules of Practice, the initial decision of the hearing examiner shall, on the 7th day of .June 1956, become the decision of the Commission; and, accordingly: It i8 ordered That the respondents herein shall, within sixty (60) days after service upon them of this order, me with the commission a report in writing setting forth in detail the manner and form in which they have complied with the order to cease and desist. &;

1490 FEDERAL TRADE C01vL\IISSIOK DECISIONS Opinion 52 F.