J. C. Martin Corp.

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IN THE :ilATTER OF J. C. MARTIN CORP., ET AL.

ORDER. ETC., IN REGARD TO THE ALLEGIm VIOLATION OF Tile FEDERAL TRADE COMMISSION ACT Docket 6145. Complaint, Dec. 1958-Decisiof, June, 1956 Order requiring sellers in New York City of a variety of merchandise, including jewelry, silverware, ):itchcn utensils, and toilet articles, to cease using lottery devices in the sale of said merchandise through members of the public by means of pull cards they mailed to them, giving the purchaser the option of either pullng a tab or buying outright as many articles as he wished from the list in accompanying circulars giving description and price of each.

Mr. J. W. Brookfield, Jr. for the Commission. Mr. Edward L. Smith of .Washing-ton, D. for respondents. INITI DECISION BY \VILLIA r L. PACK, HEARING EXAl\:INER 1. The complaint in this matter charges the responuents with the use of lottery methods or games of chance in the sale and distl'ibutiOJ of their merchandise. After the filing of respondents' answer denying all the material allegations of the complaint, hearings were held at which evidence was received, both in support of and in oppositi01 the complaint. Proposed findings and conclusions were then submitted by counsel and the case argued orally. The matter is now before ich hearing examiner for fmal consideration and decision. 2. Respondent J. C. :\fartin Corp. is a corporation organized and doing business under and by virtue of the la,ys of the State of Kevi' York, with its offce and principal place of business located at 133 'Vest 20th Street, K ew York, New Yark. Respondents Jack Kaslow and Seymour Orenstein are oilccrs of the corporation and control its policies and sales activities. Respondent Ja,c;: Kaslow also trades as IC ,V. Sales Company, with his offce and principal place of business locat, at 20 ,Yest 17th Street, Ncw York, New York Respondent Seymour Orenstein also trades as L. & S. Sales Company, with his offce and E'.'"principal place of business located at 5DS Broadway, Kew York York. An of the respondents have cooperated with one another and acted in concert in carrying on the activities hereinafter described. 3. R.respondents are engH.ged in the sa.1e a,nd distribution in commerce, as that term is c1ei1necl in the Federal Trade Commission Act , jnc1udiJlg amongof numerous and varied articles of merchandise others, jmYelry silverwn.re, kitchen utensils and toilet articles. Prac- J. C. MARTIN CORP. ET AL. 1675 1674 Decision tica1Iy all of respondents' sales are made through members of the public, whose names and addresses are obtained by respondents from mailing lists. To such persons respondents mail circulars or catalogs describing and depicting certain articles of merchandise and containing a device commonly known as a pull card. This card contains a number of partiaDy perforated tabs under each of which is a feminine or masculine name, together with the name of one of the articles described in the circular and a statement of the price of the article. The information under the tabs is concealed frolll view, and persons pullng the tabs have no information as to the article they are to receive or the price to be paid therefor until the tab has been pulled or separated from the card.

4. Persons who pu1I the tabs pay to the individual circulating the pu1I card the respective amounts specified by the tabs, and their names are noted on the circular in a place provided for that purpose. After all of the tabs on the card have been pulled and the respective amounts paid, the individual circulating the card remits the total amount to respondents and receives the merchandise from them. The respective articles are then distributed by such individual to the persons entitled thereto. For his compensation the person circulating the pull card receives an article of merchandise selectedby him from a designated group or, if he prefers, he may elect to receive a designated amount of cash.

5. The three essential elements in a lottery are consideration chance, and prize. The first. two, consideration and chance, obviously are present here; the only question is as to the clement of prize. On this point the complaint alleged: "Some of said articles of merchandise have purported and represented retail values greater than the prices designated for them, but are distributed to the consumer for the price designated on the tab which he pulls. The prices of others of the articles are higher in proportion thml the articles first me, tioned. The apparent greater values of some of said articles, induces members of the purchasing public to purchase the tabs or chances in the hope that they wil receive articles of merchandise of greater value than the designated prices to be paid for same. 6. There is no evidence supporting these allegations in t.he complaint. It is the view of the hearing examiner, hmvevcr, that such evidence is unnecessary, that the allegations in question D1tty properly be regarded as surplus tge, and that the element of prize is present in respondents' method of Inerchanc1ising. This is so because the some forty articles which may be obtained through the pun card vary widelv in nature and might well prove to be either va,l11able or wortheei \T-less, depending upon th sit.uat.ion of the part.icula,r individual n 167(1 FEDERAL TRADE C01TMISSION DECISIONS Decision F. T. ing them. -L\.1 article regarded as a "prize" by one recipient might be wholly without use or value to another. For example, the cigarette lighter OffCTCd on one of l'f'spondents' circulars would oe of value t.o a smoker, while valueless to a nonsmoker. Again, a man receiving the ten packages of razor blades included in the list probably would get his money s worth if he used a safety razor rather than an electric shaver and jf the blades would fit his razor; otherwise the blades would be wholly without value to him.

7. It should be added that one sales circular formerly used by respondents (Com. Ex. 6) provided for the awarding of an additional article as a "grand prize" t.o the person who happened to pull the. tab bearing the same name as that concealed beneath the "grand prize tab.

8. There is no contention on the part of respondents that. the sales methods described above are legal. Respondents do urge, however that such methods were volunta.rily and completely abandoned approximately a year prior to the issuance of t.he Commission s complaint, and that the sf11es method thell Rdopted and now in use is unobjectionable. The sales circulars formerly used appear in the record as Commission s Exhibits 1 to 8, while the new circular appears in the record as COITl1tlission s Exhibit 9. Both the discontinuance of the former circulars and the adoption of the pre,sent circular were upon advice of respondents' legal counsel.

9. The principal distinction drawn by respondents between the former circulars and the present one is that, whereas t.heformc1' circulars contemplated that purchases of articles described in the circular would be made only through use of the pull card, the current circular gives the purchaser the option of pithe,r pulling a tab or buying an article outright from the list appearing in the circular, which describes the articles and states the price of e,ach. And purchasers may bU3' as many of any particular article as they wish. If the individual conducting the sale does not succeed in selling the complete !tssortment, he receives a cash commission on t.he articles sold. Should his sales exceed the amount represented by the assortm€mt, he receives the regular premium (or a cOImnissioll in lieu thereof) pins a commission on the excess. \ approximately 70 percent of the sales made by means of the Cll'lent circular (including both sales made through use of the pull card and sales nwde outright without use of the pull card) have beell ior the. amount, represented by the, complete assort- Ilent ($2, DD) :20 percent for alllOlmts excepding thatfigllre ann 10 perc.pnt for nnlOlmt; belolY that figl1l'C'. Ii). The Llta1 difli(' l.I1- y \Y11"1 l'e p()Jl(h' )l1S ' pCJ :i1 ion i tha tlw P;'('Sf-llt :-ale circ\i1nl' lij.:e diose pl''cec1illf! i1 , il1('1\ldp: tlu' Jolt!:!' \" (h-,\ic\ . tl1:'t J. C. l\fartin CORP. ET AL. 1677 1674 Appeal , the pull card. So Jong as a device of this nature forms a part of respondents' sales method it would appear to be immaterial that purchasers can, if they so desire, disregard the pull card and purchase particular articles outright. It seems clear t.hat while respondents have discontinued the use of particllla.r s 1,les circulars and altered their sales method in cert.ain details, there has in fact been no abandonment of the practice challenged by the complaint, that is, the use by respondents of lottery devices in the sale of their merchandise. COXCL USION The proceeding is in the public interest. R.respondents' sales methods involve. and contemplate the use of lottery devices in the sale and distribution of their merchandise to the public. Such methods are in contravention of the public policy of the lTnited States, are to the prejudice of the public, and constitute unfair acts and practices i1J commerce within the intent and meaning of the Federal Trade Commission Act.

DIllER It is O1'(Le1'ed That respondent T. C. :Martin Corp., a corporation and its offcers, and respondents .J ack Kaslow and Seymour Orenstein individual11y and trading as K. W. Sales Company and L. & S. Sales Company, respectively, or trading under any other name, and respondents' agents, representatives and employees, directly or through any corporate or other device, in connection with the offering for sale sale and distribution of any merchandise in commerce, as "commerce is defined in the Federal Trade Commission Act, do forthwith cease and desist from:

1. Supplying to or placing in the hands of others pull cards or any other devices \\'which are designed or intended to be used in the sale and distribution of respondents' merchandise to the public by means of a game of chance, gift en1erprise, or lottery scheme. 2. Selling or othenvise disposing of any merchandise by means of a game of chance, gift enterprise, or lottery scheme. ON -\APPEAL FRO::! JNITIAL DECISION Per Curiam:

This matter is before the Commission on an appeal from the initial decision of the hearing exalnincr holding that the respondents have violated Section 5 of the J.( ec1eral Trade Commission Act by supplying to others lottery devices for use in the sale of their merchandise. The issues raised on the appeal arc no different .)n essence, from those considered by the hearing examiner and on which he made definite and specific findings. In the opinion of the Commission those 451524-59- 107 1678 FEDERAL TRADE COM nSSION DECISIOJ\ Order 52 F.

findings, and the conclusions drawn therefrom, are fully justified by the record, and the order to cease and desist included in the initial decision is entirely appropriate.

Accordingly, the respondents' appeal is denied and the hearing examiner s initial decision is adopted as the decision of the Commission.

FIX AL ORDER The respondents having filed an appeal frOlnthe initial decision of the hearing exa.miner; and the matter having been heard on briefs and oral 1arguments of counsel; and the Commission having rendered its decision denying the appeal a.nd adopting the initial decision as its own decision:

It is ordered Tlmt the respondents, J. C. Yhrtin Corp., a corporation, and .Tack Kaslow and Seymour Orenstein, individuals, shall within sixty (60) days after service upon them of this order, file with the Commission a report in writing, setting forth in detail the manner and form in which they have complied with the order contained in said initial decision.

lI1MARYLAND BAKING CO. Err AL. 1679 Decision Ix 'lhe :\IA TTER OF l\AI YLA""D BAKUG COMPA""Y, ET AL.

ommn, ETC. IN REGARD TO THE ALLEGED VIOLATlOX OF SEC. 2 (a) OF THE CJ.4.YTON ACT Docket 6327. COinpla.int, AjJr. 1.955-Decisio' , .June, 1956 Order requiring one of the largest icc cream cone llanufacturers in the United States, with plant in Baltimore, ::d., owning or controllng for such purpose companies in New York City, Cllicago, and Charlotte, X. C., and capital stock ill other ice cream COIle phllts in Pittsburgh, Fa., and Oakland and Los Angeles, Calif., to cease discriminating in price by sellng ice cream cones to any purchaser at higher prices than those charged the latter s competitor as it did in Mayor June 1951 , at the time of entrv into the cake cone business of its single competitor in the area concerned and apparently in retaliation therefor, tl1rough reducing its price for rolled sugar coneswhich constituted only I1J % of its total sales-in the Washillgton-llaltimarc metropolitan area from GG to $5.00 pel' thousand, while maintaining its price of $7.16 per thousand for such cones in the Philadelphia metropolitan area and in the States of Delaware and !'e\\ .Jersey; witJJ reslilt that said sole competitor in the 'Vashington-Baltimore metropolitan area lost all of its sales of rolled jnIgHr cones to sornc of it3 fanner jobuer customers awl respondc1Jt virtually restricted to itself t.he jobber mfll'ket for rolled sllgar cones in that area.

JJir. Rice E. Schrirnsher for the Commission. Burke, Gel'bu &, fV ilen of Baltimore, Md. , and JJh. William Simon of ,Vashington, D. C., for respondents.

INITIAL J):ECISIOX BY EV:EHETT F. HAYCRAFT, I-IAIUNG EXAI\IIKER l'RELT::n \HY STATE)IENT The complaint in this case, which was issued in April 1955, cha.rges the respondent, a Maryland corporation located in Baltimore, Maryland, one of the largest ice eream cone manufacturers in the United States, with violation of Section 2 of the Clayton Act, as amended by the R.obinson-Patman Act, in the sale of rolled sugar cones in the metropolitan areas surrounding the cities of Baltimore, IIagers tOWIl and Frederick, )JaI'yland, and ,Vashington, D. C., begiil1ing in lYIay 1951. The compla.itlt also names ,Joseph Shapiro, individually, as a respondent and n.s it treasurer of the J\1maryland Baking Company, a.lleging that he "is primn.rily responsible for the acts and practices hereinafter alleged to be unlawful.' Testimony in support of the allegations of the c.complaint "as taken in the city of Baltimore at which time one of the offcials of the respondent and of one, Harry Findings 52 F. T. C.

Sandler, the only competitor of the respondent in the metropolitan areas described, testified.

Although the respondent corporation in its answer denied some of the allegations of the complaint, no testimony was offered in opposition to those allegations. However, at the conclusion of the taking of testimony counsel for the respondents filed a motion to dismiss the complaint before the hearing examiner, which motion, after oral argument, ,vas denied. It is contended by counsel for the respondents that the complaint with respect to the individual respondent Joseph Shapiro should be dismissed because it has not been shown that personally has been engaged in the sale of ice cream cones and, therefore, he has not been engaged in any conduct within the scope of jurisdiction of the Federal Trade Commission in enforcement of the Clavton Act. As to the corporate respondent, it is contended by its cmm;el that the complaint should be dismissed because of lack of proof as to the effect of the price discrimination required under the statute and the evidence shows purely a private controversy bebveen two competjtors and there is no public interest.

Due consideration having been given to the evidence adduced, the contentions of both counsel, and the proposed findings filed by them in accordance ''with the Commission s rules, the hearing examiner makes the following:

FINDINGS 01 FACTS A)''' CONCL1JSlOXS 1. Respondent The Maryland Baking Company (erroneously named in the complaint as "neary la,nd Baking Compa, ) hereinafter referred to as respondent corporation, is a corporation organized existing, and doing business under the laws of the State of l\Ia.ryland with its principal offce and place of business located at 1200 South Eutaw Street, Baltimore, Maryland.

2. Respondent Joseph Shapiro is an individual who is Chairman of the Board, a large stockholder in and treasurer of respondent corporation. 1-Ie is primarily responsible for the acts and practices herein alleged to be unla wfu!' 3. Respondent corponltion is now, rmd since 1926 has been, engaged in the business of manufacturing and selling ice cream cones for use consumption, and resale throughout the United States flnd in the District of Columbia. Its sales of such products for the years 1950, 1951 and 1952 were approximately $1 000 000 annually, une-quarter of which is sold in the metropolitan areas hereinbefore mentioned. It occupies a major position in the ice cream cone industry engaging therein on a nationwide scale and owning or controlling for that purpose the following companies: Eagle Cone Corporation, :f ow MARYLAXD BAKIKG CO. ET AL. 1681 1679 Findings York ew York; Northwest Cone Company, Inc., Chicago, Illinois; and the Maryland Baking Company of the Carolinas, Inc., Charlotte North Carolina. In addition it owns capital stock in the following companies which manufacture and sell ice cream cones: Keystone Cone Company, Inc. , Pittsburgh, Pennsylvania (preferred stock investment); 50 percent of thc common stock of :Vlaryland-Pacific Cone Company, Inc., Oaldand, California, which corporation owns all of the common stock of the Pacific Coast Baking Company, Los Angeles California.

4. Respondent corpomtion is now, and for approximately 30 years has been, engaged in commerce, as "commerce" is defined in the Clayton Act, as a,mended in that it ships ice cream cones or causes same to be transported from the State of manufacture to purchasers located in other States of the United States aud in the District of Columbia. In t.he course and conduct of its sajd business respondent corporations has been, and now is, competitively engaged with other corporations individuals, partnerships, and firms in the sale of ice cream cones. However, in the metropolitan areas hereinbefore mentioned it has but one competitor, 1-Iar1'Y Sandler, doing business as Sftndler R-Good Cake Cone Company, hereinafter referred to a,s Sandler, ,,,ith his principal office and place of business located at 4211 Menlo Drive, Baltimore, Maryland.

5. Respondent corporation manufactures and sells four different types of ice cream cones: (1) rolled sugar cones, (2) chocolate-coated rolled sugar cones, (3) cake cones, and (4) cake cup ice cream holders with a flat, rather conical, bottom. It sells its products principally to jobbers or distributors who rescl1 to the retail trade. Rolled sugar cones manufactured by said respondent are sold and delivered primarily to such customers located in the States of Pennsylvania, Maryland, Virginia, New Jersey, Delaware, and the District of Columbia. Such sales constitute a relatively small percentage or respondent's total sales of ice cream cones (1% percent). 6. The said Sandlcr is a rein.tively small manufacturer of ice cream cones whole sales are restricted to t.he said metropolitan areas, and prior to 1951 consisted exclusively in the sale of rolled sugar cones. 7. Beginning in :VIay or June 1951 , respondent corporation reduced its price for 1'011ed sugar cones in the said metropolitan area from 00 per thousand while maintaining a price of $6.66 per thousand to S5. $7. 16 per thous lncl for rolled sugar cones in the metropolitan Philadelphia area, including the States of Delaware and New Jersey. Th apparently 111 action on the part of the respondent corporation was retaliation ror the entry by Sandler in the cake cone business at or ::: _ ::_ :) $ !!! Findings 52 F. T. C.

about that time and has continued from that date to the time of the taking of testimony in his area.

8. As a result of the price discrimination herein set forth in Paragraph 7, the said Sandler lost an of its sales of sugar cones to some of its jobber customers, some during the year 1951 and others during the succeeding years. The following bLb1e is illustrative of the effect upon the sales of Sandler to some of its distributors as a result of the foregoing discriminatory price of rolled sugar COlles in the said metropolitan areas beginning in J\lay or June 1951. Sales of su.gar cones by R-Good Cake Cone Company to certain jobber customers jor the years 1950 through 1954 ""ame of jobber and Jocation --5 WASH1)oGTOX, D. c.

:\oneDerritt Distrjbuting Company__- I $7 612. 1 $4 953. 35 I 5317.H2 None "LTI OHE , MD Becker Pretzel DClkeo' 293. H7. XOIle Xone None Chef' s Tasten 401J, 47:J07 27. None1via= Company - 574. 198. None one Kone Quality Di trib\Jting Company"_ 426 53'). Xone Xone None RAGERSTOWX fD.

""eL s Bros-- 349. 2n. 28: 482, $14\). None 9. Beginning in November 1951, the said Sandler began to sell roned sugar cones to the retail drnggists trade. He also continued to sell rolled sugar cones to the retail outlets such as ice cream stores and frozen custard stands. The volume of business in roned sugar cones in the said metropolitan areas of 'Washington and Baltimore by respondent corporation and Sandler during the period 1950 to 1954 and the percentage of such sales enjoyed by each competitor are set forth in the following tabulation:

I RespondcJlt corporation GoodCompanyCake Cone Year Totalsa1es i Percent- i in area f: TotalslIles T'erCCJlt-age of I Total sales, totals I-'-' market: market $34, ;120. 91.3 30, 930. 87.

1677592 63, 920 24 58. ii!ijj!!!k " 1m!!880, I 41.8 7'0771 58. 574. 09 1\J54 _u_ _m_ : 23, Said Sandler s total bustness during the period 1850-19,)4 showed a substantial increase due principally to increased sales of chocolatecoated roned sugar cones which were sold by him to ice cream manu- :?IARYLAND BAKING CO. ET AI., 1683 1679 Concl\ISiOJl8 facturers who prefilled them and sold them to retail outlets such as drug stores and confectionery stores.

10. Sandler s price for rollcd sugar coues in May 1951 was $6.80 pci' thousand to distributors. This price has been reduced to $6.00 pci' thousand as a result of respondent corporation s djscrjminatory price of $5.00 per thousand to distributors as hereinbefore described. Sandler has been RbIe to maintain his price of $7.00 per thousand to frozen custard stands and retail ice cream stores and $8.00 per thousand to drug stores and confectionery stores. CLUSIOXS Thc effect of the discrimination in price by respondent corporation as herein found in Paragmph 7 may be substantially to Icssen competition anel definitely has injured competition with said Sandler and has tended t.o create a monopoly in the manufacture and sale of sugar cones in the respondent corporation in violation of Section 2 (a) of tJle Clayton Act, as amended. The evidence set forth in the foregoing findings of fa.cts shows conclusively that the sa,les of respondent corporat.ion s only competitor of rolled sugar cones in the area ,vhere they competed, substantially declined as a direct result of discriminatory price put into effect by the respondent corporation in Mayor June 1951 and continued since that time. This competitor although it lost its sales to distributors or wholesalers 'was only able to survive the adverse competitive condition resulting from the discriminatory price, by selling direct to drug stores and other customers of such distributors and increasing its business to other types of trade such as frozen custard stands and the sale of chocolate-coated cones to ice cream manufacturers. Furt.hermore responde,nes percentage of total sales of rolled sugar cones in the metropolitan areas surrounding the cities of Baltimore and \11 ashington has substantially increased even though its sa.Jes in this pal'ticuJar area, is a small percentage of its total sales of ice cream cones throughout the Gnited States. It believed that Section 2 (a) of the Clayton Act was intended to reach just such a practice as respondent corporation has initiated and followr.d in this ease. Although it was not completely successful in driving its smaller competitor Sandler out of business as its president respondent Shapiro threatened at t.he time discriminatory price was launched, it was successful in inflicting serious injury to this lone competitor, and in the light of the "ell-known :Federal Court decisions such a practice is a violation of Section 2 (aJ of the Clayton Act. Section 2 (a) of the Clayton Act provides that it shall bc unlawful for any person engaged in commerce, in the course of sllch commerce to discriminate in price betv,cen diflerent purchasers of commoc1itjes 1684 FEDERAL TRADE CO:MlISSIO:\T DECISIONS Conclusions 52 F.

of like grade and quality * * * where such commodities arc sold for use, consumption, or resale within the United States * * * and where the effect of such discrimination may be substantially to lessen competition or tend to create a monopoly in any line of commerce, or to injury, destroy, or prevent competition with any person who either grants or knowingly receives the benefit of such discrimination * * * In a Federal Court decisioll, E. B. 3hdlel' 00. , et al. vs. 142 F. 2d 511, 518, the court upheld an order of the Commission under the Clayton Act, as amended, where there was an injury to competition and a single cOlnpetitor was involved, and there was in that case as in the present case, an attempt to drive this lone competitor out of business. In another Federal Court case National Nut Oompany of Oalifornia vs. Kelling Nut 00. , et al. 61 F. Supp. 76, page 81, the facts were somewhat similar to the facts in the present case and the court held "a practice of underselling plaintiff in certain territory where plaintiff has an established business a.nd maintaining a higher level of prices in ot,her localities where competition with plaintiff or other companies is not so keen is a practice condemned by the antitrust laws.

It is not believed, however, that it is necessary for the order in this case to include thc individual respondent SJuLpiro although he is the principal stockholder and is responsible for the acts and practices set forth in the foregoing findings of fact. It is believed that the order in this case against the respondent corporation is adequate to prevent continuation of the illegal practice.

The outstanding case and the one relied upon by thc attorney in support of the complaint for the inelusion of officers of respondent's individually in Commissjon s orders to cease and desist is that of O. v. Standm'd Education Society, et al. 302 CS., 112. In that case, however, the court held that there were circumstances, as disclosed by Commission s finding, when further efforts of these individual respondents to evade orders of the Commission might be anticipated, and under those circumstances it was proper for the Commission to include them in its cease and desist order. The court commented on the fact that the three individually named respondents acted with the same freedom as though no corporation existed and that the Commission was justified in reaching the conclusion that it was necessary to include the individuals in each part of its order if the order was to be effective in preventing the unfair competitive practices which the Commission had found to exist. In the present case there are no such facts jn the record. The respondent is a large responsible corporation and there is nothing in the record to indicate MARYLAND BAKIKG CO. ET AL. 1685 1679 Opinion that there would be any attempt on the part of the respondent Shapiro to evade or not comply with the Commission s order to cease and desist.

It is believed that the order of the Commission should not be restricted to items covered by the specific allegations of the complaint and the evidence in the record. It is true that the only product as to which evidence has been received tending to indicate a violation Section 2 (a) of the Clayton Act is rolled sugar cones, but in the light of Federal Court decisions the Commission is justified in issuing an order broad enough to include other types of ice cream cones. Reference is made to Hershey Ohocolate OOTpoTation v. 121 F. 2d 968, 971-2; Lane v. /i. 130 F. 2d 48. Also, in the General Motors case involving spark plugs, Docket No. 5620, where it was contended by respondents that the Commission s order should not cover an AC products since they were not specifically named in the complaint and the findings, the Commission rejected this contention and issued an order including "other related automotive parts and accessories." In another case, :Moog Industries, Docket No. 5723 the Commission rejected a similar contention by including "piston rings" and "other related items" even though there was no evidence of price discrimination in the record on those items. Order It is ordered That respondent The :Maryland Baking Company, a corporation, and its offcers, representatives, agents and employees directly or through any corporate or other device, in connection with the sale or distribution of ice cream cones in commerce, as "commerce is defmed in the aforesaid Clayton Act, clo forthwith cease and desist from discriminating, directly or indirectly, in the price of such prod-ilcts of like grade and quality, by selling ice cream cones to any purcha.ser at higher prices than the prices charged any other purchaser engaged in the same line of commerce where, in the sale of said cones to such purchaser charged the lower price, respondent The :Maryland Baking Company is in competition with another seller. It isjrurther ordered That the complaint against Joseph Shapiro inc1ividual1v only. be. and the same herebv is. dismissed. OPIXID:N 01 THE CQ:Ul\fISSION By SECRES1', Commissioner:

This matter has come on for heating on the appeals of counsel supporting the complaint and counsel for respondents from the initial decision of the hearing examiner filed (January 30, 1956. , .

1686 FEDERAL TRADE COMMISSION DECISIO Opinion 32 F. The complaint charges respondent, The Maryland Baking Company/ a Maryland corporation, located in Baltimore, l\faryland, with violation of subsection (a) of Section 2 of the Clayton Act, as amended by the Hobinson-Patmau Act, in the sale of rolled sugar cones in the metropolitan' areas surrounding Baltimore, IIagerstown and Frederick, l\1maryland, and \Vashington, D. C., beginning in 1951. The complaint also names as a respondent Joseph Shapiro, individually, and as treasurer of The l\1maryland Baking Company, alleging that he "is primarily responsible for the acts and practices hereinafter alleged to be unlawful." 2 Testimony was received in support of the comphtint, but no testimony was offered in opposition thereto.

The Maryland Baking Company (hereinafter referred to as respondent corporation) is engaged in the business of manufacturing and selling ice cream cones for use, consumption, and resale throughout the l;united States and in the District of Colwnbia. Its sales of such products for the. years 1950, 1951, and 1952 were approximately 000 000 annually. About one-quarter of such sales were in the metropolitan areas mentioned above. Respondent corporation occupies a major position in the ice cream industry. It is engaged in this business on a nationwide scale, owning or controlling for such purpose the following companies: Eagle Cone Corporation, X ew York New York; Northwest Cone Company, Inc., Chicago, rJlinoi8; and the )laryland Baking Company of the Carolinas, Inc. , Charlotte North Carolina. In addition, it also owns capital st.ock in companies manufacturing and selling ice cream cones, including: ICeystone Cone Company, Inc. , Pittsburgh, Pennsylvania (preferred stock invest ment); 50 percent of the common stock of :Mary land - Pacific Cone Company, Inc., Oakla.nd, California, which corporation owns all of the common stock of the Pacific Coast Baking Company, Los Angeles California.

Respondent corporation manufactures and sens four different types of ice cream cones: (1) rolled sugar cones, (2) chocolate-coated rolled sugar cones, (3) cake cones, and (4) cake cups. Its sales of these products are made principany to jobbers or dist.ributors who resell to the retail trade, Roned sugar cones manufactured by the respondent are sold and delivered to customers locatpd in Pennsylvania :\fary land, Virginia K ew Jersey, Delaware, and the District of Columbia. Its sales of roned sugar cones are a relative small proportion of its total sales of ice cream cones, in the order of one and onehalf percent.

1 Erroneously named in tile complaint as "Maryland Baking Company, J! Respondent, Joseph Shapiro, is also Chairman of the Hoard and a Jarge stockholder in respondent corporation, _. _ ),IARYLAXD BAKIKG CO. ET AL. 1687 16i9 Opinion Respondent corporation has only one competitor in the sale of ice cream COllGS in the metropolitan areas surrounding ,Vashingtoll and Baltimore, R-Good Cake Cone Company, a partnership composed of Harry Sandler, his brother and his son, located in Baltimore, Maryland. This company is a relatively small manufacturer of ice cream COlles whose sales arc restricted in general to the said metropolitan areas.

Beginning in :May or .J une of 1951, respondent corporation reduced its price for rolled sugar cones in the metropolitan areas surrounding ,'Vashington and Baltimore from $6. 66 per thousand to $5.00 per thousand. Ieanwhile, its price for such COlles in the Philadelphia metropolitan area and in the States of Delaware and ew Jersey was maintained at $7;1(i per thousand. This action was apparently in retaliation for the entry of R-Good Cake Cone Company into the cake cone business at or about this same time. This pricing policy continued to the time t.testimony was taken in the case. As a result of this discrimination in price, H-Good Cake Cone Company lost all of its sales of sugar cones to some of its jobber customers, as illustrated by the following table: Sales of 8uqar cones by R-Goor1 Cake Cone Company to certain-jolJlJe1' customers jor the years 1950 through 1954 N,m, of jo ' ,nd "'tion 1950 1951 1952 l%:i 1954 WASIIIXGTOX, D. C.

Benitt Distributing Coropany__ , 642. IG $4, 953. 3.'i $317 82 Xone "!one PALT1MORE MD.

None None Xonc 147. 293. Bakery_Recker I'rctzel None None 27. 473. 400. te_ Chef' s Tll None :Kone 00 None 198. 12 574Mann Company-- None Kone None 539. 46,QUlll1ty Distributing Company_ 426. Weiss Bros- - - 349. 1, 2 9 1. 2 8 482. $149. None Good Cake Cone Company, after 1951, began to sell rolled sugar cones to retail drug stores and continued to sell to retail outlets such as ice cream stores and frozen custard stands, but, nevertheless, its sales of rolled sugar tones declined while those of respondent corporation increased in the said metropolitan areas surrounding "Yashington and Baltimore. The following tabulation sets forth the volume of business in rolled sugar cones in the said metropolitan areas during the period 1950 to 1954 and the percentage of such sales enjoyed by the two companies:

;::: _ Opinion 52 F.

Respondent Oood Cake Cone corporation Company Year T?talsales marp.a ! P"oent- ' I Percent- TotlJlsales agetotalof . TotalsaJes ' agetotalof market I IIarket 1950_ $37, 594. 274 211 !J1.3 201 8. $34 320. 1951____--_- 36, 245. 314. 930. 87. , 12. 325. 549. ' 36. 16, 775. 63. 41.5 920. ')8. 1954_- :::::::::::::::: :::: ::::::::: :::: I 272228723;674:09 302,63886. ,' 41.8 787. 58. 4.8 a result of the price discrimination of respondent corporation Good Cake Cone Company s sales of rolled sugar cones declined from in excess of $34 000 in 1950 to something more than 813 000 in 1954. At the same time, respondent corporation tripled its sales of rolled sugar cones in the 1Jetrop01itan areas affected. Additionally, though R-Good Cake Cone Company was able to minimize the adverse effect resulting from the price discrimination by selling directly to drug stores and other retail customers, it nevertheless was forced to reduce its price on rolled sugar concs to distributors from $6. 80 per thousand to $6.00 per thousand, and even then was practically foreclosed from the jobber market. Though thc total business of R-Good Cake Cone Company increased from 1950 to 1954, this increase was due principally to sales of chocolate coated rolled sugar cones to ice cream manufacturers who prefilled them and sold them to retail outlets as distinguished from the rolled sugar cones which are sold to retailers and then fined for sale to consumers. The hearing examiner in his initia.l decision concluded that respondent corporation had violated Section 2 (a) of the Clayton Act, as amended, but that the complaint against Joseph Shapiro, individually, should be dismissed. Accordingly he ordered that: respondent The .Maryland Baking Company, a corporation, and its offcers representatives, agents, and employees, directly or through any corporate or other device, in connection with the sale or distribution of ice cream cones in commerce, as "commerce " is defined in the aforesaid Clayton Act, do forthwith cease and desist from discriminating, directly or indirectly, in the price of such products of like grade and quality, hy sellng ice cream cones to any purchaser at higher prices than the prices charged any other purchaser engaged in the same lines of commerce where, iuthe sale of said cones to such purchaser charged the lower price, respondent The ::Iar;yland Baking Company is in competition with another seller.

It is further ordered 'l' hat the complaint against Joseph Shapiro, individually only, be, and the same is dismissed.

In its appeal from the hearing exa.1liner s jni6al decision, respondent corporation first contends that the evidence shows there was no prob.bility of a substantial lessening of competition. We disagree. MARYLAND BAKING CO. ET AL. 1689 16i9 Opinion The evidence clearly shows that, in the metropolitan areas in which respondent corporation charged lower prices on To11ed sugar cones, it substantially increased its sales of such cones at the expense of existing competition. The sole competitor of respondent corporation in the said areas lost aU of its sales of rolled sugar COl1PS to some of its former jobber accounts as a direct result of the price discrimination. It is clear from the record that the competitor, at the time of the taking of the testimony, was selling roned sugar cones to only one of its former jobber customers, whereas, respondent corporation, after effecting the price discrimination, began selling said products to many such accounts. It is apparent that respondent corporation by its action, virtually restricted to itself the jobber market for rolled sugar cones in the metropolitan areas surrounding "T ashington and Baltimore. The showing that the competitor did not lose a1l of its sales of rolled sugar cones because of its direct distribution to retail accounts does not detract from the fact that it was practically precluded from making sales of such cones in the jobber channel of distribution. The effect of the action by respondent corporation was to substantially lessen and injure competition in the line of commerce affected. Respondent argues that the effect of the discrimination, at most was to reduce the competitor s share of the rolled sugar cone market from 91. 3% to 58.29'0 which was to terminate a monopoly and create a competitive market. 'Vhile the competitor, R-Good Cake Cone Company, had a major share of such salcsprior to the effective date of the discrimination, it was, and continued to be, a small business by comparison with respondent corporation. The fact that the competitor could not maintain its relative position in the face of price cuts by the larger company shatters any contention that it had a monopolistic hold on the market. The Clayton Act proscription as to discrimination in price is not nullified merely because of a showing that the existing competition in a particular market had a major share of thc sales of the product involved. The appeal of respondent. corporation also questions the scope of the hearing examiner' s order. In the first place, it is contended, since the evidence and the findings are confined to rolled sugar cones, that it is beyond the Commission 8 stat.utory power to prohibit price discrimination in other types of ice cream cones. In carrying o1,t its function of preventing illegal practices in the future, the Commission is not limited to prohibiting the illegal practice in the prec1seform in which it is found to have existed in the past. Federal Trade Oommissian v. Ruberoid 00. 843 U.S. 470. The courts have consistently upheld Commission cease and desist orders relating not only to the products complained of, but other similar products as weU. American 1690 FEDERAl" TRADE COMMISSION DECISIOXS Opinion 52 F. '1' . C. Tack 00., Inc. , et rd. v. 211 F. 2d 239; Oonsume)' Sales Oorp. v. 198 F. 2d 404, 408, certiorari denied, 344 U. S. 912; lIershey Ohocolate Om'pomtion v. 121 F. 2d 968 , 971; P. LO'iilZa1'd 00. v. 186 F. 2d 52, 58-59; Eugene Dietzgen 00. v. 7'. 142 F. 2d 321, 329-330, certiorari denied, 323 U.S. 730. The Commission is entitled to make its order broad enough to prevent evasion. P. LOl'il lard 00. v. Federal Trade Oomrnission: supra and an order, in this case, covering only roned sugar cones, a small part of respondent corporation s total business in cone products, would not effectively prevent the practice found to be unla,yful. The hearing examiner properly applied the order to price discrimination in the sale or distribution by respondent corporation of ice cream cone products. It is also contended by respondent corporation that the order is too broad in its geographic scope since the evidence relates to an effect on competition solely in the areas in which it charged the lower price and there is no evidence as to what ll1ight be the effect on competition as to a price reduction elsewhere. The practice, however, of a national organization systematically charging 1011;01' prices, in first one area and then another, and thereby injuring local competitors was one which Section 2 (a) of the Clayton Act, as amended, was designed to prevent. An order would serve little purpose in prohibiting an area price discrimination in only the ierritory where a respondent was found to have charged a 10w81' price, leaving such respondent free to engage in a similar practice in other areas. Such orders are necessarily general and must be broad enough to prevent evasion. E. B. Muller Co. v. F.T. 142 F. 2d 511, 520. There is no validity to the argument that this order requires respondent corporation to have one price throughout the United States. The provisos of Section 2 of the Clayton Act, as amended, such as that pe.rmitting, in effect, price differences which merely make allowance for differences in the cost of manufacture, sale orclelivery, are implicit in the order. Federal Trade Cornrnission v. Rubel' oid Co. 343 U.S. 470, 475-476. The argument of respondent corporation that the order should be limited to the predatory type of price-cut charged in the complaint is also without merit. The complaint charges a violation of Section 2 (a) of the Clayton Act, as amended, in the sale of rolled sugar cones. Though relevant, the testimony that the declared purpose of the discrimination was to put a competitor out of business, if that indicates a predatory act, is not essential to the conclusion of illegality. It is suffcient that the required effect on competition ,,"as shown. The order, therefore, may properly prohibit such discrimination whether with predatory purpose or not. E. B. JhdleT 00" et al. v. Federal Trade Oommission, supra.

MARYLAKD BAKING CO. ET AL. 1691 1679 Order Counsel supporting t.he complaint appeals from the hearing examiner s initial decision dismissing the complaint as to individual respondent .J oseph Shapiro. The record does not reveal that Joseph Shapiro dominated respondent corporation or that he, in an individual capacity, was responsible for the acts and practices alleged to be unlawful. That he was Chairman of the Board and Treasurer of respondent corporation is not enough to sho\v an individual responsibility. There is no showing, moreover, of any special circumstances which would indicate a likelihood that Joseph Shapiro would cause an evasion of the order against the corporation. He is, in any event, bound by the order as a corporate offcer. In the absence of some speciall'reason for naming . Joseph Shapiro personally, the order against the corporation, and its oflicers, representatives, agents, and employees, would seem to be adequate.

The appeals of both the corporate respondent and counsel supporting t.he complaint are accordingly denied.

PINAL OHDEH This matter having been heard by the Commission upon the appeal of respondent, The Maryland Baking Company, and counsel supporting the complaint from the hearing examiner s initial decision, and briefs and oral argument of counsel in support thereof and in opposition thereto; and The Commission having rendered its decision denying the appeals: It is ordered That the findings, conclusions, and order contained in the initial decision be., and they hereby are, adopted as those of the Commission.

It is furthe?' orrle?'ed That respondent, The 11maryland Baking Company, shah, within sixty (60) days after service upon them of this setting forth inorder, file with the Commission a report in writing detail the manner and form in which they have complied ,,,ith the order contained in the initial decision.

&;

1692 FEDERAL TRADE COl\11ISSION DECISIONS Complaint 52 F.