Henry Rosenfeld, Inc., et al.

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IN THE MATTER OF IIEKRY ROSE~FELD, INC., ET AL.

ORDER, ETC. , IX REGARD TO THE ALLEGED 'VTOLATIOX OF SEC. 2 (d) OF THE CLA Y'ro ACT Docket 6212. Complaint, June 14, 1.954-Decision, June, 1956 Oral requiring a e\v York City distributor of women s suits and dresses to retailers throughout the United States, with an;'mll sales exceeding $10 000 000 in 1949-1951 , to cease discriminating in price in violation of Sec. 2 (d) of the Clayton Act, by making to some of its customers promotional allowances amounting to 50% of the retailer s local advertising costs up to $1.00 per garment in COIlnection with the resale of its dresses, while not making such credits or payments available to all other competing customers. lfr. Peter J. Dias for the Commission. lfarshall, Bratter, Klein, Greene Option of New York City, for re, pondcnts.

INITIAL DECISION By FRANK BIER, I-learing EXAMINER Complaint herein "vas issued June 14, 1954, charging respondents \with making promotional payments to aid in the resale of respondents: dresses to some of their customers but not making such payment.s available on proportionally equal terms to all of respondent. ' customers competing in the distribution of respondents product. violation of Section 2 (d) of the Clayton Act (V. , Title 15 See. 13). Respondents' answer admitted jurisdictional and descriptive facts alleged, denied violation and pleaded meeting competition in goodAftrfaithfiveashearingsan affrmativein ewdefense.Y ork, Philadelphia and .Washington court for pI:oponentr"-ted and cOUlsel for I:respondents moved to dismiss, asserting insuffciency ofthcrecordto constitute a prima facie case of the violation charged, which motion, after briefing, was denied by the hearing examiner. Thereafter, four more hearings in "ew York City completed respondents' defense and proof taking was closed on June 30, 1055. Thereafter, Proposed Findings of Fact and Conclusions were filed by all counsel and the case closed on August :24 , 1955. 17 poll consideration of the entire record herein and from his observation of the witnesses, the hearing examiner makes the following:

FINDINGS OF FACTS 1. Respondent., IIenry Hosenfe1d, Inc., is a corporation organized ?existing and doing business lwder and by virtue of the laws of the :B"'indings 52 F. T. O. State of New York with its warehouse, offce and principal place of business located at 498 Seventh Avenue, New York City. 2. Respondent, Henry l\osenfeld, is an individual with his principal offce and place of business located at 498 Seventh Avenue, K e\v Yark City and is now nnd, since its organization in 1942, has been president of Henry Rosenfeld, Inc., and, as such, controls, directs and is responsible for the acts and practices of respondent, Henry Rosenfeld Inc. Because of this lmity, both respondents are hereinafter treated jointly.

3. Respondent, Henry Rosenfeld, Inc., is nmv and has, for many years past, been engaged in the merchandising of -women s suits and dresses lmder the registered trade name of Henry Rosenfeld to retail outlets such as department stores and ,vomen s specialty shops a.nd dress shops in ten million dollar.r volUIne for resale to ,yearers. Such suits and dresses are widely advertised and otherwise publicized and are widely and favorably known to such resale outlets and to their customers.

4. Corporate respondents distribution of its ready-to-wear is in commerce, as "commerce" is defined in the aforesaid Clayt.on Act throughout the United States.

5. Respondents sell mainly through their New York City 8ho,,;rooms to which buyers for retail outlets come for inspection, selection and purchase, but they also maintain an aventgc of eight traveling salesmen who visit and solicit retailers throughout the cOlUtry. o. Dress manufacturers traditionally and customarily price their products wholesale in brackets of $5. , $6. , $8. , etc., on which the retailers ' markup to the consumer is customarily 400/. Respondents - prices range from $;'. 75 to $10.75 uniform to all purchasers without discounts of any kind, except for cash. Hespondents' dresses are not "fair-traded.

During the period from 1949 through 1951 and from 1951 through 1954, respondent Henry Rosenfeld, Inc. had five seasonal lines of its merchandise per year; and each line consisted of from 60 to approximately 100 dress styles, making an approximate total of from 300 to 500 different styles per year during each of the years aforesaid. 7. To promote both the sale and resale of their dresses, respondents engaged in cooperative localized advertising, stressing the name of Henry Rosenfeld and over the name of the customer. Respondents pay 500/ of the cost of the advertisement up t.o $1.00 per garment regardless of the size of the purchase, the size or character of the custorner, the present or past purchase volume of that customer an(l without any requirement that the customer purchase any minimum number of garments before qualifying for the contribution. HEKRY ROSENFELD ) INC. ) ET AL. 1537 15:i5 Findings The mechanics involve the store placing the advertisement over its name in a local newspaper and paying therefor, then submitting the receipted bil with a tear sheet of the advertisement to respondents with reimbursement up to 50% of the cost being made by the latter to the former, either by deduction from respondents' invoice for the garments sold or by respondents' separate reimbursement check to the customer.

8. These contributions by respondents, however, are only on three categories of garments:

(1) Those where respondents' profit margin is " huge. (2) Slow sellers, or unpopular styles.

(3) Those made from leftover or excess piece goods which respondents are anxious to get rid of.

9. It was re.spondents' practice to advise its salesmen, in its showrooms and in the field, which garments carried advertising allowances and, further, to hang on the display model thereof a tag marked 1\'1:- " signifying "I\fat. " R.respondents' salesmen were instructed to advise prospective purchasers which garments carried advertising allowances. Individual respondent testified he always did so, believed his salesmen did, and pointed out it was to the salesmens' interest to do so as it furthered the sale.

10. Respondents, hmvever, did not formally announce, publicize or circularize the policy set out above and the terms and conditions under which retailers could secure advertising allmnmces were never brought to their attention by respondents in printed form. Obviously the policy could not have been thus formalized becal1se it was highly flexible, subject to constant chal1ge and was decided upon solely by the individual respondent "when, as and if. " Although the "huge mark-up" nmnbers could be determined prior to or at the beginning of the season s offering, slow moving numbers and left-over piece goods numbers could not be ascertained until sales effort had progrossed far enough to evaluate results. The question of which style numbers would carry the allowance was, in the nature of things, in a. constant state of flux, with a particular model carrying no n110wance for weeks and then suddenly being promoted with one. There js, of course, no requirement in the law that a seller give adve.rtising allowances on a11 his products if he gives it on one-the re.qllirement is that, if he gives it on one or more, he make the same aUowance available on proportionally equal terms to aU buyers that product or products.

11. To sustain the complaint charge that these advertising al1mvances were not made available on proportionally equal terms by respondents to all their customers competing in the resale of respond- , .

Findings 52 F. T. C.

ents' dresses, there was offered a tabulation from respondents' records of its net annual sales for 1950, 1951, 1952, 1953, and 1954 and amounts of advertising allowances paid in each of these years by respondents to all purchasers in Baltimore, Philadelphia, ~ ewark and Boston. Without setting out here unnecessary detail, such tabulation shows that respondents paid advertising allowances to some of its customers in each city but not to others. Some of these advertising allowances were in substantial sums others insigniiicant. Some of the nonrecipients purchased in VCTY substantia.l amounts from respondents. There 1nis, as testified, no mathematical relationship between amount of purchases and amount of allowances paid. 12. During the years 1950- , respondents sold to two department stores in ewark, :Kew Jersey-I.. Bamberger & Co. and Halme Company-giving advertising allo)"a,nces in each year to the former but not to the latter and the buyers for each so testified, the buyers for I-Iahne & Co. stating that with one exception they were never offered any advertising allowance although one of them went to respondents showroom twice a month, the ot.her three or four times in two years. They testified there were only style tags on the dresses nothing else to show whether,I' or not the dresses carried an advertising allowance; that they were never told about such allowances except on one occasion. 1\ either of them ever asked for an allo)"ance. One of them had heard that such allowances were given by dress manufacturers.

13. The buyers for Bamberger s in Newark, which compete:: ,yiih IIahne & Co. on the resa.1e of respondents' dresses, testified on the contrary that they were always told 'what models carried advertising" allowances; that they were affrmatively offered them and received them; that they kne\v that dress manufacturers ofreT such allowances; that they had asked for them a,nd been refused on certain dress or suit numbers; and that all the buyers for other stores whom they kne,y were well aware of the practice among dress manufacturer3 of giving advertising allowances.

14. Substantially the same situat.ion \Vas developed in Philadelphia. There John ,Va-namaker, Bonwit Te11eT, Strawbridge &: Clothier and ot.hers received advertising allmyances from rc ponc1ents, whereas Snellen berg & Co. did not. Thc buyers for the latter store covering 1950 through part of 1954 al1 testified that they bought dresses from respondents at the latter s showroom, were ne,ither offered nor give, any advertising allm,nnce, although, on several occasions, the pnrchase was for a special promotion; that Snellenberg s on one or more occasion advertised the dresses at its own cost; that the same dresses ,were locally advertised by one of its competitors, Two of the three HEXRY ROSE)lFELD , INC. , ET AL. 1539 1535 Findings buyers did not ask for any advertising allowance from respondents; the third did and was refused but without explanation as to any terms conditions or restrictions on their grant. All of them kne\v that dress manufacturers did give advertising allowances and had obtained them from some, but tvw of them did not know that respondents gave them. On the other hand, the buyers for department stores and dress shops in Philadelphia, who received allowances from respondents on purchases which they resold in competition with Snellenberg, testified they asked for such allowances-at times received them and at other times were refused without explanation. They had all received allowances from other dress manufacturers at times and knew course that respondents did grant them because they asked for such allowances. Apparently the terms of 50% of the advertisement or $1.00 per garment were not mentioned with one exception. It was a case of individual negotiation between the buyer and respondents salesman in each instance as to the selection by the former as to which garment the buyer wanted to advertise. All but one of these buyers did not know \vhether an allmvance was available or on what terms until asking. The buyer for Bonwit Teller s was affrmatively offered advertising allmvances on certain garments; she did not have to ask for tl- 15. This testimony (1'1'. 12 and 14, supra) was denied, categorically in part by implication as to the remainder by the individual respondent, Henry Hosenfcld: who a,sserted he had never refused these stores (Hahne s and Snellenberg s) on advertising alJowa,nces had never given orders to do so, nor to his knowledge had his salesmen done so. l-Ie stated that when he sold personally he always advised prospective purchasers on what dresses such allmvances 'were ava.ilable that he always instructed his salesmen to do likewise and that he beheved they did and tlutt he believed these buyers who visited his showrooms knew such allowances were available. These testifying buycrs of IIahne and Snellen berg s did not deal with Henry Hosenfeld but with his salesmen and their testimony is positive and unequivocal as opposed to the belief of what happened given by the individual respondent. The preponderance is dearly with that of the buyers. Full credibility is given to all this testimony- it is a question of weight, decided as indicated, supra.

16. From this evidence it is found as a fact that respondents did not affrmative.ly oifer to PlLY advertising allmvances to all of its custOTners who bought for resale in competition with one another; that respondents did not. publicize the terms and conditions on which these allowances were granted in such mfllner that all of its customers were aware thereof in advance of purchase; that the terms themselve, 1540 FEDERAL TRADE CO::IMISSION DECISIONS Findings 52 F. T. C.

vary so constantly from garment to garment and from time to time solely at the direction of Henry Itosenfeld that they can hardly be said to be terms at all-certainly not any reliable standard by which to judge proportionality and that generally the requirements of the statute under which the charge is made have not been met. 17. COlilsel ror respondents stressed, during cross-examination or adverse buyer witnesses, that their purchases from respondents were small in amount. Since respondents' advertising allowances are neither based on, geared to, nor conditioned by, the amount of purchases, this is immaterial. The purchases or nOllrecipients were. certainly not de minimis. Equally immaterial on this record is the point that these buyers who ,were neither offered nor paid these allowances did not attend the "opening" showing of respondents' seasonal lines because respondents do not restrict, according to Rosenfeld s own testimony, advertising allowances to any season, any time or any particular line.

18. Hcspondents' counsel have consistently insisted throughout this case that if a buyer knows there are such things as advertising allowances in the dress manufacturing industry, the burden is upon such buyer to inquire as to each dress in which he may be interested or which he may be shown as to ,vhether or not he can secure an advertising allowance thereon, if he purchases it from each manufacturer with whom he deals. Heliance for this position is put on the admission by most of the witnesses that they knew various dress manufacturers do give advertising allowa,nces and by some of them that they knew these respondents gave them. Counsel supporting the complaint, on the contrary, contends that there is an affrmative burden on the grantor to advise his customers generally of the availability thereof and the terms of grant. The Commission has defmitely ruled in favor of the latter contention in the matter of Kay .Windsor Frocks, Inc. in Docket No. 5735. The conclusion here is accordingly the same.

19. As an affrmative defense, respondents assert and offered evidence from their competitors to prove that respondents' advertising allowances were granted to meet competition. At the outset of this dei'ensp, and since, counsel in support of the complaint has objected to such evidence contending that the provisions of Sec. 2 (b), limited as they are to " discriminations in price 01' se1'ruices OJ' facilities," obviously apply only to Sections 2 (a), 2 (e) and 2 (f) of the Clayton Act and not to Sections 2 (0) or 2 (d). This same contention was Jnadc to, and sustained by, the hearing examiner (then, a pristine issue) in Docket No. 5482, Carpel Frosted Foods, Inc. On appeal (the Commission then entertained case-end and case-wide appeals), HgNRY ROSENFELD , INC. , ET AL. 1541 1535 Findings the Commission held the tendered evidence "material and revelant for consideration by the Commission w"without regard to the question as to whether or not such evidence constitutes a substantive defense to charges brought under Section 2 (d) of the Clayton Act." Since such evidence can obviously not have any materiality except defensive and since it was so offered and argued, the hearing examiner in that case treated it as a defense and there was no reversal of such treatment. Hence, the objections of counsel in support of the complaint in this proceeding were overruled and are again overruled and the evidence of respondents on this point is hereinafter considered as a substantive defense. That evidence comes from five competitors respondents, all of substantial size and all selling nationally, one of them doing in excess of twenty million a year. 20. Margo-Walters, Inc., organized in 1950, selling casuals competitive with respondents in the $5. , $6.75 and $8.75 wholesale price brackets, paid Strawbridge & Clothier $7 725.00 as an advertising allowance in 1954 on purchases of $72 905.25; $7 008.13 on purchases of $58 158.50; $4 4;;0.00 on purchases of $92 951.50 in 1952 but no allowance in 1951 on purchases of $10 142.00. The basis was one-half the cost of the advertisement with no ceiling or no minimum amount of purchase to qualify. The primary purpose of the allowance was to sell and 1fargo- vValters, Inc. neither knew nor cared what was done by their competitors about advertising allowances. 21. Puritan Dress Company, organized in 1D13 a competitor of respondents on wholesale price line brackets of $5.75 through $10. gave advertising allmvances since 1950 in unknown amOlmts on unknown purchase volumes to L. Bamberger & Co. of Newark; Strawbridge & Clothier and John vVanamaker of Philadelphia for the purpose of getting business. The basis was 50% of the cost of advertising with a ceiling that varied from 25-509 per dress and without minimum amount of purchase. All of the recipient firms advertised Puritan dresses at times without receiving advertising allowances. 22. Jerry Gilden Specialties, Inc., is competitive nationally with respondents on wholesale price line brackets of $5.75 through $14. and gave advertising allowances to Strawbridge & Clothier in June 1950 and January 1954,; to tT ohn vVnnamaker on occasions between July 1949 to April 195.t; L. Bamberger & Co. on five occasions from April 1953 to July 1954, the basis being from 50% to 100% of the cost of the advertisement with a ceiling of 509 a dress, and to Bonwit- Teller in substantial amounts on five occasions fronl June 1951 to February 1954.

It was stipulated between counsel that lajestic Specialties, Inc. would testify substantially the same with reference to sales and 1.52 FEDERAL TRADE CQ1HdISSIOX DECISIONS Findings :52 F. T. C. advertising allmnmces in the four stores mentioned as did the offcials of Puritan Dress Co. and Jerry Gilden Specialties, Inc. 23. Likewise, McKettrick-1Villiams, Inc., organiz;ed in 1938 and selling casual dresses nationally at $5.75 through $10.75 in competition with respondents, gave a single advE'xtising allowrtnec of $1 000 to 'Wanamaker in Philadelphia on $38 564. 51 of sales; a single ad. vertising allowance of 62600 in UH53 to the same store on $49 183. of sales and four advertising allowances totaling 82680 in 19;j:1 on sales of 869 416.43. This was simply a contribution of 50% of the cost of the advertising which was sometimes less, and apparently personally negotiated between the inquiring buyer and the firm. No minimmn purchase was required and this firm had no general policy or over.a11 formula.

24. In each or the above instances! the advertising nJlo mncc was given only after it was asked for-no effort was made to advise buyers or its availability. There was no ceiling per garment fixed or allowed in some instances. From the evidence, the practice or t.these live competitors of respondents was typical and general throughout the dress manuracturing industry. All or these dress manuracturers made the selection or the garments on which advertising allowances would be awarded! which selection would shift 01' change from time to time and be affected by the size or the account flld insistence or the demand. There vms not shown specifically what style! type or price bracket any particular advertising allowance was granted upon. 25. In flddit.ion to this, the individual respondent, IIenry H,osenfeld, testified he had been selling dresses for 26 years; that his can. tacts with buyers and competitors were frcquent; that the five abovenamed firms were direct competjtors or his, as well as a number or others, and that advertising allowances were common in the industry since his advent therein; that they were indispensable to sales and volume; that if he did not give the,m he would lose both; that he offers them to buyers whether his competitors do or not; that he knmTs the firms to whom he ga,ve advertising allowances, nanlely, Bamberger, ,Vamunaker, Bonwit Teller s and Strawbridge and Clothicr, (lid get and could get such allowances from his competitors bemuse their buyers frequently told him so, although he did not knmy on what garments nor "\"hen, nor in what amounts except that the general basis is 50% of thc cost of the advertisement. lie also t.testified, however, that if a buyer Wfllts an advertising allowance on some low profit garment or on one which, for some other reason, he is not pushing, stating that she can get such an flllmvance from a com petitor' on a substantially similar garment, that he will reruse to give it because, he would Josc money. H. yas unable to cite an instance \ ) HENRY ROSENFELD INC. , ET AL. 1543 15:- Findings ,,,here a buyer refused to buy because he was re.fused an advertising allowance thereon, stating that he always is able to sell buyers what he wants them to buy. He stated categorically that in giving these allowances he was meeting competition generally, not specifically, obtaining or maintaining volume in an industry where, without high \0111n8, there is little or no profit. Hc denied that he had refused, or (1il'f'ctec1 A.ny refusal, of a,l1owances to those stores who received none, :?6. It is thus evident that advertising allowances arc rampant in the dress manufacturing industry; that they are granted on a shifting, indivjdual and unpublicized basis, in some instances on a wholly arbitrary basis; that they generally must be a,asked for and must be separately negotiated for; that they Rre customary with respondents eornpetitorsj that the,y are, in the main, aggressive rather than purely defensive implements used to obtain business; that they are allowed on unknown numbers or styles whose selection js entirely at the constantly changing whim of the grantor s chief oflicjal; that they are HE integral part. of the grantor s pricing policy. It is equally obvious that respondents do not grant an advertising allowance to meet exactly the same allowance 011 a closely similar garment by a particnhlr competitor in the same amount and for the sa,me duration. In short, respondents are here claiming to meet. competition generally, rat,her than specifically, meeting a practice rather than a pricedefense which has been frequently made and as frequently rejected the lat.est ruling thereon being that in Docket No. 5768 , C. E. iehofI &: Co, where the facts in support of such defense were far more persuasive than those 8ho,\"n by this record. LastlYI respondents' advertising allowances WE're aggressive rather than defpnsive merchandising Yeapons. Accordingly, the conelusion is that respondents defense of meeting competition in good faith is not made out. 27. Respondents have contended throughout this proceeding that t.o proceed against them alone for a practice which is rampant, trac1itiomd and customary in their jndustry, leaving their competitors free t.o continue giving anmvances on just as arbitrary or hit or miss ba,sis as theirs, is unfair. Of course "everybodis dojng it:' is no defense and the hearing examiner has neither responsibility for, nor a.authority over, administrative selection for prosecution, But the record1 sketchy as it js on the point, nevertheless sustains rcsponc1ent ' elaims on this score and presents a sorry pjcture of an jnc1l1stry- ,yide practice apparently as repugnant to Sec. 2 (d) of the Clayton Act RS anything found herein against, respondents. In only two other eases has the Commission proceeded: as here, against dress . T. C. ". A.. E. Stnlel/ Mfa. Co. 224 u. S. 74H. 2 J1ocl;et Xo. 5735. Kay" '\Yinusor Frocks, Inc., et .'1 Docket Xo. 621;' , JODitThan LOgi1T, Inc., etal.

1544 FEDERAL 'trade COMJfISSION DECISIO Order 52 F.

manufacturers. Dozens of others are apparently Jeft free to continue and the rationale of this selectivity does not appear. That is, as it must be, a matter solely for Commission attention or inquiry and the hearing examiner has neither authority nor discretion to suspend this case for possible Commission action on an industry-wide basis. Sneh a plea must be addressed to the Commission. Counsel for respondents has most vigorously and abJy presented this asserteel defense, as indeed he has the rest of the case, and has impressed the hearing examiner with his sincerity and the situation in which this leaves his clients, but the hearing examiner is not only bound by precedent but is limited in the exercise of both power and discretion.

CONCL DSION 1. R.respondents have granted, and are now gran6ng, advertising allowances to promote the sale of their dresses to some customers and not to others; hence, not on proportionately equal terms to all their customers competing among themselves in the resale of responclellts dresses.

2. The preponderance of the evidence indicates that respondents have not advised an of their customers or prospective customers of the availability of such advertising allowances and hence have not made them ava-iJable to all customers competing in the resale thereof as the law requires.

3. The defense of meeting competition _in good faith provided hy Sec. 2 (b) of the Clayton Act is not sustained where the claimant meets an industry practice rather than an individual and specific allowance situation.

4. The acts and practices of respondents tS found above violate subsection (d) of Sec. 2 of the Clayton Act, as amended by the Hobinson-Patman Act (D. , Title 15, Sec. 13). ORDER It is ordered That respondents, IIenry Rosenfeld, Inc., a corporation, its offcers, employees, agents and representatives, and 11enr)' Rosenfeld, individually and as president of Henry HosenfeJd, Inc" directly or through any corporate 01' ot.her device, in or in cOlUlection with the sale of women s clothing in commerce, as commerce is defiled in the aforesaid Clayton Act, as amended, do forthwith cease and desist from:

:TTaking or contracting to make, to or for the benefit of any customer any payment of anything of value as compensation or in consideration for any advertising or other services or facilities furnished by or RY ROSENFELD , INC., ET AL. 1545 1535 Opinion through such customer, in connection with the handling, offering for resale, or resale of products sold to him by respondents, unless such payment is affrmatively offered,d or otherwise made available to all competing customers in amounts determined by the same percentage of the same measurable base.

OPINION OF THE COMMISSION By SECREST, Commissioner:

The initial decision filed by the hearing examiner held that the respondents, \vhen granting advertising allowances to certain of their customers, had not made such allowances available to others who "ere competing in the resale of the respondents' dresses with those recipients, and that the respondents' acts and practices in that respect have been in violation of subsection (d) of Section 2 of the Clayton '-ct, as amended by the Robinson-Patman Act. The order to cease and desist contained in the initial decision, in effect, forbids the respondents from eompensating customers for facilities or services furnished by them in connection with the resale of respondents apparel unless payments on proportionally equal terms are affrmatively offered or otherwise made available to all others competing with those afforded allowances. The respondents have appealed and request that we reverse the initial decision. The respondent, Henry Rosenfeld, Inc., engages in the sale and distribution of women s dresses to retailers located in many cities including department stores and specialty and dress shops. Mr. Henry Rosenfeld, also a party respondent in this proceeding, directs and controls its policies and is its president. A very substantial portion of respondents' garments are sold through their show room located in New York City. The evidence received relat€d primarily to so.les practices pertaining to dresses on which respondents' wholeoale prices ranged from $5.75 to $10.75.

In promoting sales of the dresses, cooperative advertising has been engaged in stressing the name of Henry R.osenfeld and the name of the particular retailer sponsoring the advertising. Respondents, when they participate, pay 50% of the cost of local advertising engaged in by the retailer up to $1.00 per garment. Their policy has conternplatect however, that such promotional compensation to retailers be limited to purchases of three categories of dresses, namely, those carrying larger profit margins for respondents, garments which arc slow sellers, and those made from leftover or excess piece goods. The law imposes no requirements that a seller give advertising allowances on all his products if he elects to accord them on one or more articles. Wnen granting any promotional payments, however, the law requires 1,')46 FEDERAL TRADE COMMISSION DECISIOXS Opinion 52 F. T. C.

that he make them available on proportionally equal terms to other rescUers of that :nticle or articles who compete with recipients of t1H compensation.

Respondents contend at the outset in their appeal that thc only evidence which may be properly considered in determining the merit.s of this proceeding is that relating to the availability of respondents promotional allowances in the years 1049 1950 , and 10, ,,,which are the years expressly mentioned in Pal'agnLph 7 of the complaint. Such interpretation of the complaint is unduly restrictive, hO\\8V81'; and it is reasonable instead to construe the illstltllCeS of alleged violations particularized in that paragraph, as to those years, in the light of the compbjnt s precedillg allegations ic1ent.ifYl)1g those ads as ill11stl'ati'l- CllS-of practices follm'lecl by the respondents Ivhen compensating tamers for services and facilities furnished by them. Some of the C\Tidence received related to 1950, but. the testimony revealing detailed information on respondents transactions and dealings Ivith their accounts pertains to a period beginning in 1951 and continuing: into 1954. This evidence was properly received into the record and indica.tes that respondents' policies in respect to promotional.l a.llmvances did not differ materially in 1951 from those followed in succeeding years.

'With bearing aha on this aspect of the appeal is the fact that throughout the .hearjngs, respondents had notice that the hearing offcer deemed the evidence relating to activities subsequent to 1951 and up to issmtnce of the compbint to be relevant and material to the issues presented in the proceeding. The hearings were held at intervals and respondents \'ere afforded full opportunity to cross ex,nnine adverse witnesses and present their own case. That their rights of due process were fully observed is clear from the record, and there is no valid bn,sis for the appears contentions that our decision on the merits of this case be restricted solely to record matters pertainingto activity.es by respondents prior to 1952. Before proceeding to consideration of other aspects of the appeal brief reference to various additicmal evidentiary TnatteTs is warranted. The record includes a tabulation showing responclents net annual sales for various years from 1950 into 10;)4 to all customers in the areas of Baltimore, Boston, XC'Ivark and Philadelphia, together with the alnounts of advertising allowances acconlec1 by respondents tc those purchasers. It ltttests that respondents pai(l promotional allo\yanees to some of their customers in each of those c.ities but HOt. to others. Buyers and other pen:onnel it1entif1ec1 'Iyith both of responde.nts ret.ajl store accounts in Xelyark and certain of its customers in 'Iyitnesses and testified as to their yisits Philade.lphia also appeared as HE:\RY ROSENFELD , I);C. ) El' AL. 1547 1535 Opinion flncl dealings at respolldents show room at various times from ID51 into 1954-. Of the two :Ve vark department stores, one received allo\YHJ1Ces in each of the years noted above; but the other received none and its buyers testified that, except in one instance, no allowance ,YflS ever altered in the course of their various visits to the ew York show room. According to the t.testimony of the buyer rppresentative for a competing :Ke \alk store receiving respondents promotional allovmnccs, she \as informed antl guided as to what sjyle carried ac1yertising allmn.llces and aHirmatively offered them. The testimony relating to respondents dealings with their Phi1ac1elphia customers \while not identical, ,nis Sl1ostfl1t.ially 81m i lar in vein. The "appeal argues that the C\ jdence estabJjshes that the failure of the foregoing customers to secure promotional payments was clue in fact to their Jack of satisfaction with garments carrying advertising allowances or interest in conducting advertising promotions for the H.osenfeld nne. The initial decision s conclusions to a contrary effect have adequate support in the record, however. One of the un favored stores jylsertecl newspaper advertisements featuring the Rosenfeld name on at lea,st two occasions, and another, also at its own expense advertised them during at least one promotion. ol' is there merit in the appears contentions that the record supports conclusions that respondents' failure to afford promotional compensation to some stores was due to the inadvertence of respondents' employees and presents de 1nini1l i8 situation ,ya.rranting dismissal of the proceeding. On one or more occasions, it was the vice-prcsident of the corporate rcspondent \with whom the buyer for a store receiving no allowances conducted her dealings. This store s purchases were substantial and in 110 sense de 1nini1nz The appeal brief cmphasizcs, too, that buyers for lion- fa,vored stores did not regularly attend the seasonal openings at respondents' show room when optimum opportunity assertedly existed for buyers to obtain advertising allmnmces. This circumstance is nowise controlling, h01Vever. As found in the initial decision: respondents: terms varied so constantly from garment to garment and from time to time solely at the direction of the respondent, Henry nosenfeJd, that they could scarcely be regarded as t.terms at all. Testimony presented by respondents indicates that their customary practice W lS to allocate hvo higher profit items in each category of dresses for advertising allowance,s and, in iusta,needs when merchandising conditions warranter) : to include all garments in an entire group or category for promotional purposes. It is clear that respondents: flexible policies with respect to promotional garments insured the presence of va.rying but substantial numbers of them on the show room line throughout 1548 FEDERAL TRADE CQ::IMISSION DECISIOXS Opinion 52 F. T. C.

the season and rejected are the appears contentions as to the record being deficient in this respect.

The hearing offcer concluded that the respondents did not affrmatively oirer to pay advertising allowances to all their customers buying for resale competitively with others and that the respondents did not publicize the terms on which allowances were available in such manner that all of its customers were aware of them in advance of purchase. In our view, the hearing examiner s interpretation of the testimony of the buyer representatives was accurate and his appraisals of the credibility of the various witnesses and the evidentiary weight properly to be accorded to their testimony were justified and sound. The respondents' advertising allowances have not been granted by them on proportionally equal terms to their competing customers; and there is clear record showing that their failure to inform all accounts as to the terms under IV hieh allowances were being accorded has deprived those so disfavored of equal competitive opportunities in resellng the dresses. It follows, therefore, that respondents' promotional allowances were unavailable, as a matter of Jaw, among competing customers. Under the Act an allowance cQ,nnot be deemed available" to a reseller and a denial of opportunity to share therein occurs, when a seller fails to inform or otherwise offer promotional allowances to a customer while granting such payments for similar services to the reseUer s rivals. In the AI atter of 1: ay Windsor Frocks Inc., et al. Docket :No. 5735.

The appeal further contends that the hearing examiner erred in failing to find that respondents fully proved their defense that the allmvances were granted for the purpose of meeting competition in good faith and were thus excluded from the proscriptions of the Act. This evidence included the testimony of offcials connected with five competing distributors of dresses. It appears that the granting of promotional allowances on shifting, individual and unpublicized bases and, in many instances on wholly arbitrary bases, is widespread in the industry. It is apparent, too, that respondents' program is not limited to granting allowa,nces in individual situations where promotional assistance has been offered to a customer by a competitor on a closely similar garment. As held in the initial decision, respondents' allowances are aggressive merchandising weapons designed for securing business and forming an integral part of respondent' pricing policy. IIence respondents are essentially claiming to meet competition generally rather than specifically and they, in effect arc adopting and perpetuating the discriminatory patterns which they claim exist in the industry.

IIE::TRY ROSENFELD ) INC, ! ET AI. 1549 1535 Opinion Analogizing OUT rulings in Docket 57G8 C. E. lfielwff il C01npany to the instant proceeding the examiner correct:y held that respondents had failed to make out a defense of rnecting compebtion in good faith through their practices of meeting competition generally rather than specifically, meeting a practice rather than a price, aggressive rather than defensive merchandising methods. rlo\lever, the defense of good faith meeting of competition is not available to respondents in this proceoding \which charges only violation of Section 2 (c1) of the amended Clayton Act, as distinguished from the Niehoff case which involved charges of discriminations in price in violation of subsection (,,) of the amended Clayton Aet.

During the course of the proceedings, respondents asserted as an affirmative defense and oHered evidence from their competitors to prove that their aclvcrtising allowances were granted in good faith to meet the services and facilities fllrnishecl by their competitors. At the outset, counsel in support of the complaint objected to the introduction of such evidence, contending that. the provisions of Section 2 (b), limited as they are t.o " c1iscl'iJnination in price or services or facilities" obviously applied only to Sections 2 (a), 2 (e) and 2 (f) of the Clayton Aet and not to Sections 2 (e) or 2 (d). The hearing examiner observed that this same cont.cation had been made to and sustained by him (then a pristine i slle) in Docket 5+82 Carpel FTofsted Foods, Inc. that the Commission had overruled his findings therein and had held that the tendered evidence was "material and relevant for consideration by the Commission, without regard to the question as to whether or not such evidence constitutes a substanhve defense to charges brought under Section 2 (d) of the Clayton Act. The exam iner stated that he subsequently treated such evidence as a defense in the Cappel case, since it was so ouered and argued and could "obviously not have any materiality except defensive." The Commission did not decide the issue disposing of it by the finding that:

the respondent Carpel Frosted Foods, Inc. , has not rebutted the prima facie case nmde against it by showing that the said contra.cts ,were entered into by it in good faith to meet fl, compe6tiyc. offer by a " 3competitor.

The hearing examiner, in this proceeding, overruled the objections of counsel in support of the complaint and considered as a substantive defense respondent: s evide.nce of the practices of five of its competitors in offering similar advertising allowances. ,Ye deem this to be error as it is ani' de.cision that Section 2 (b) cannot be plead c1efcnsive- 3 Finding-s as to the ll acts and Conclusions, Page 10, Docket 5482, Carpel Frosted Foods eta!.

451521--59-- &, 1550 FEDER.\.L TRADE C01.JvIISSION DECISlOKS Opinion 52 IT, T. C.

ly in this 'pl'oeeec1ing Ivhich involves only charges of Hula-winlly grant ing promotional allo\vances.

Subsections (c), (d) and (e) of Section 2 of the amended Clayton Act are directed against specific forms of discriminatory concessions to :favored buyers. The Commission s Chain Store Investigation R.eport found that some lmyers ere securing price advantages concealed ns brok€lagc, advertising allowa,l1Ccs and services, and Congress in enacting these subsections directed specific provisions against such practices. Section:2 (c1) of the Act 'Ivas directed against payment of advertising allmvanecs as distinguished hom the furnishing of services of facilities specified under Section 2 (e). Therefore, Section 2 (d) applies only to payments for the benefit of the customer by or through hom the selTiccs are furnished as distinguished from the sellers actually furnishing the service or facility ,which is proscribed under Section 2 (e).

Judicial interpretation of these subsequent subsections has failed to integrate violations thereof with the standards applicable to the price discrimination provision of the Act. For example, the Third Circuit Court in the GTeat Atlantic Pacific Tea Company v. 106 F. 2d 667, held that there was no reason to read into sections (c), (d) and (e) the Jimitations contained in Section 2 (a). The court went on to state that:

In other words, paragraph (c) constitutes a specific prohibition of a specific act and the acts committed by the petitioner are within such prohibition. To read the words of paragraph (a) into paragraph (c) destroys the Congressional intent. For example the language of paragraph (b) Telates to proceedings brought pursuant to the provisions of pamgraphs (a) and (e) but ate not applicable to proceedings instit' ated undet paragmph (c) OT (d). Thus viewed, the provisions of a11 the paragraphs of Section 2 are consistent and deal JogicaJly with their respective subjects. The respective paragnlphs must be read with due regard for the provisions of each. The legislative history lends JiWe support to the examiner s treatment of the tendered evidence as a substantive defense. II, R. 8H2, as 1D35 contained in Sectionintroduced in the I-Iouse on June 11 2 (c) (1) the provision which ultimately became Section 2 (d) of the amended Clayton Act. The provision achieved its final tcxtwl. form as Section 2 (d) of the Dill when reported by the House Judiciary Conm1ittee (1-1. Rep. No. 2287, 74th Cong" 2d sess, ). The original Patman bill, as reported by the l-Iol1se Judiciary Committee then contained a section numbered 2 (e) which is identical \\ ith the . Biddle l'urchus"ing Co. v. F. C., 96 F. 2d GS7 (2d Cir. HJSS), Cert. den. 305 U. S. 354; Blizabeth Arden, 11lc. v. F. T. C. 156 F. 2d 306 (2 Cir. 194G) Ceft. den., 331 'C. S. 806. HENRY nOSEXFELD , INC. , ET AL. 1551 1535 Opinion prc::cnt section 2 (b) except it referred only to price and did not contain a reference to a sellers furnishing of services or facilities. Prior to the passage of the Bill, however, an amendment was offered on the floor of the l:rouse extending the application of the section to proceedings involving the furnishing of services or facilities as well as to proceedings involving charges of discrimination in price. 1)11'. IVlcLaughlin, in reciting the purpose of the amendment stated that: It silnply allows a seller to meet not only competition in price of other competitors but also competition for services and facilities furnished (80 Congo Ree. 8225)." A similar amendment was oiIered on the floor of the Senate by Senator Moore (80 Congo Rec. 6435) but the colloquy which followed the oiIering of the amendment did not explain its purpose.5 Aside from the bvo cited instances there is nothing further in the hearings, debates or committee reports to explicate the Ineaning of the added language. To the contrary, the discussion of the provjso in both the llouse and Senate appears to be limited to situations invoh ing price discriminations. This is to be expected, hOlyever, since neither the Hobinson nor Patman bills, as originally introduced, prm'ided for the defense of good faith meeting of competition and the proponents of the defense, in offering their amendments, limited its application only to price. The addition of the language relatjng the defense to services and facilities apparently \vas not considered a significant change, nor for that fact was the defense itself so considered, as it was interpreted by many as providing only a procedural as distinguished from a substantive defense. Despite this, the additional language has enlarged and broadened the scope of Section 2 (b), and as indicntecl by Congl'eSSnlUn A:IcLaughlin the language is now broad enough to cover not only discriminations in price but also services and facilities furnished. Faced with this exiguous legislative history, we are forced to the "bare-bones" language of the statute which provides: that nothing herein contained shall prevent a seller rebutting the primfL Lacie case thus made by showing that his lower price or the 5 " Senaior 1\00HI'. '" . '" The n i1k producers in New .Tersey feel that unless this amendment is fluopted all of their work for aU these years wil mean nothing; that trey wil go back again to where they were. The amendment merely provides that if they charge more to one persall than to another, or are accused of discrimination, they shall have It rig"ht to pro'" e justification. 1 think the amendment goes just a lithe farther them the Borah- Van Xuys alilenrlment or the amenllmrmt uf the Senator tr01l Oregon (M'I". McNary). :)11'. ROBI SOX. 3.1r. Prcsident, the amen(1ment of the Senator from New .Jersey appears to be consistent with the :\1c::a1' "- arnenrlrneut and other amendments which hayc theretofore been agreerI to. There is one feature of the amendment about which I am in doubt; and Uttle opportunity is afforded to study the propositioll, as I have not seen the amendment before it was urougllt forward here. I see no objection to its incorporation in the bil, so that the conferees may consider it along with the 3.IcXary Dnd Austin amendments which have theretofore been agreed to, H. R. Conf. Rep. 2D51 , p. 7, 74th Cong., 2d sess. 1552 FEDERAL TRADE CO:\L\HSSION DECISIOXS Order 52 F. T. C.

SCTV?:ces OJ' facilities to finy purcl1R,ser or purchasersfw' nishing of was made ill good faith to meet an equally low price of a competitor or the 8e?'1)ices or faoilities furnished by a competitor. It is onr conclusion that advertising allowances are not within the ambit of the statutory language and that Section 2 (11) cannot con stitute a substantive defense to a charge of violation of Section 2 (d) of the mncllcled Clayton Act. To this extent the examiner s findings are overruled and the initial dec.ision modified insofar a.s it reflects a contrary conclusion.

"Ve also ha,ve considercel the appears request that our decision of this case be suspended pending institution of trade practice conference proceedings in the respondents: industry and promulgation of appropriate rules. Trade practice rules, hmvever, are in the nature of advisory interpretations for the guidance of businessnwn. Such rules look to elimination of unfair practices by voluntary and coopenltive means and do not have the force and effect of law. Even though rules were ultimately promulgated by the Commission, respondent would be under no legal injunction to refrain from the unfair practices ,which the evidence shows were engaged in by them. It being our duty under the st.atute to insure c.essfltion of the practices which it proscribes, the request for suspension is not being granted. ,With the exception noted, we find that the hearing examiner substantial error. Respondentsrulings are correct and free from appeal is accordingly denied, and, as modified by this opinion, the initial decision is a.adopted as the Commission s decision. Chairman Gwynne concurs in the result.

FI K AL ORDER The respondents having med an appeal fronl t11c hearing examiner initial decision in this proceeding-; and the matter h tVing come on , including the briefs L1d oral a.arguments to be heard upon the record of counsel, and the Commission having rendered its decision denying decision as the decision of tho Lhe appeal and adopting the initial Commission except a.s modified by its opinion: It is ordered That the respondents shall, within sixty (GO) days file with the Commission a after service upon them of this order: report in writing setting forth jn detail the manner and form in \\"hioh they ha.ve complied ,with the order to cease and desist contained in the aforesaid initial decision.

Chairman G,\ynno concurring in the result.

O'L TBOARD IAHINE & MANUFACl.URIKG CO. 1553 Decision