Tidewater Paint Oil Company, Inc.

Text (OCR of the scan at left; may contain errors)

IN THE ~IA TTER OF TIDE"\VATER PAINT OIL CO:L\IPAKY, INC., ET AL. COX-SENT ORDER, ETC. , IX HEG..:\HD TO THE ALLEGED VIOLATION OF THE FEDERAL TIU.DE CO)Il\IISSION ACT Docket 67-1-1, COIH1J7aint, 1I1ar. 18, 195";' Decision, Sept, , 195" Consent order requiring a Norfolk, Va., seller of paints under its labels of Tidewater Marine Outside Paint" and "Tidewater Quality Exterior 'White to sl1ipyal'fls and small industries, but mostly to fnrmers, tobacco growers, and other rural dwellers, to cease representing falsely in letters and advertising literature mailed to prospecti\'e purchasers that a limited quantity of its paint was :1\ailable in the prospect's vicinity and was being offered for sale at a special reduced price, s:1\ing the purc:haser $2 per gallon, that it was high-quality all-purpose paint suitable for marine use, "guaranteed for many years outdoor exposure on every type of surface " and equal in (lurability to national brand paints; and to cease furthering such false representations b~- use in the brand names of the worc1f:' "Marine" and Quality.

.i.l11'. Garland S. FeJ'gu8on for the Commission. Breeden. J-Jow((.T(l c6 1.11ad1h71en by 1.111'. Edwa?yl L. B'I'eeden, J'I' Norfolk, Va., for respondents.

I~ITL-\L DECISION BY T. EARL Cox, I-IEARING EXAMINER The complaint charges respondents ,,-ith violation of the Federal Trade Commission Act by falsely and deceptively ach-ertising paint and a11iec1 products which they sell and distribute in commerce. After the issuance of the complaint, respondents, their counsel, and cOlinsel supporting the. complaint entered into an agreement containing consent order to cease and desist. which was approyed by the Director and the Assistant Director of the Commission s Bureau of Litigation, and thereafter transmitted to the I-Iearing Examiner for consideration.

The agreement identifies respondent Tic1e"\yater Paint &: Oil Company, Inc. as a Virginia corporation ith its office and principal place. of business located at the Flatiron Building, Norfolk, Virginia; and respondents Stanley D. Legum, Esther S. Legum and Alvin Legum as individuals and officers of s~id corporation, who formulate direct and control the policies and praetiees of the. corporate re- -spondent. All individual respondents have their oflice and principal place of business at. the same. location ns that. of the corporate Tespon d en t.

The agreement. provides among other things, that respondents :admit a11 the jurisdictional facts alle.ged in the complaint. and agree Order 54 F.

that the record may be taken as if findings of jurisdictional facts had been duly made in accordance with such allegations; that the record on which the initial decision and the decision of the Commission shan be. based shall consist solely of the complaint and this agreement; that the agreement shall not become a part of the official record unless and until it becomes a part of the decision of the Commission; that the complaint may be used in construing the terms of the. order agreed upon which may be altered, modified or set aside in the manner provided for other orders; that the agreement is for settlement purposes only and does not constitute an admission by respondents that they have violated the law as aneged in the c.complaint; and that the. order set forth in the agreement. and hereinafter included in this decision shall have the same force and aii'ed as if entered after a fun hearing.

Respondents waive any further procedural ste.ps before the Hearing Examiner and the Commission; the making of findings of fact or conclusions of law; and all of the rights they may have to challenge or contest the validity of the order to cease and desist entered in ac.cordance with the agreement.

The order agreed upon disposes of an the issues raised in the complaint, and adequately prohibits the acts and practices c.charged in the complaint as being in violation of the Federal Trade Commission Act. The agreement containing consent order to cease and desist. is therefore accepted as part of the rec.ord upon which this decision is based, and this proceeding is found to be in the public interest. Accordingly, It is o'IYler' That respondents Tide.water Paint &, Oil Company, Inc. , a c.orporation, and its officers, and Stanley D. Legum, Esther S. Legum, and Alvin Legum, individually and as officers of said corporate re.spondent, and respondents' agents, representatives and employees, directly or throug-h any corporate or other device, in connection with the offering for sale, sale and distribution in commerce, as "commerce" is defined by the Federal Trade Commission Act, of its Tidewater Quality Exterior Paint, or any other paint containing substantially the same ingredients or possessing substantially the. same characteristics, do forthwith cease and desist from:

1. Representing directly or by implication: (a) That the customary or regular price of respondents' said paint is any price which is in excess of the price at which such paint is regularly or customarily sold by respondents in the normal and usual course of business;

TIDEWATER PAINT & OIL CO. , INC., ET AL. 391 389 Decision (b) That the price at which respondents offer their said paint for sale constitutes a price below or a reduction in their customary price when in fact such price is the usual and customary price at which respondents sell their paint in the normal and usual course of business;

(c) That respondents have any quantity of paint warehoused or on hand, in the vicinity of prospective purchasers, when respondents do not in fact have such paint warehoused or on hand in the designated locality;

(d) That respondents' paint is a "high quality" or "all purpose paint or may be successfully used on every type of surface or is suitable for marine use;

(e) That respondents' paint will withstand adverse weather conditions for any period of time that is not a fact or misrepresenting in any manner the period of time within which it will not deteriorate; (f) That respondents' paint is equal in durability to national brand paints unless such is the fact;

(g) That purchasers of respondents' paint will save any amount from respondents' regular and customary price unless such is the fact; 2. Using the word "Quality " as a part of the brand name for its product now designated as Tidewater Quality Exterior Paint or representing in any manner that said paint is a quality or highgrade paint;

3. Using the word ":Marine" as a part of the brand name for its product now designated as Tidewater :Marine Outside Paint or representing in any manner that said paint is suitable for marine use. DECISION OF THE Could\IISSION AND ORDER TO FILE HEPORT OF COMPLIANCE Pursuant to Section 3.21 of the Commission s Rules of Practice the initial decision of the hearing examiner shah, on the 26th day of September, 1957 become the decision of the Commission; and accordingly:

It 1-8 once1' That respondents Tidewater Paint & Oil Company, Inc., a corpora60n, and Stanley D. Legum, Esther S. Legum, and Alvin Legum, individually and as officers of said corporation, shan 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 ordrr to cease and desist.

((.

392 FEDERAL TRADE COl\IMISSION DECISIONS Decision 54 F. C..

Ix THE l\IA TTER OF FOOD FAIR STORES, INC.

ORDER, ETC., I~ REGARD TO THE ALLEGED VIOLATION OF THE FEDEIL\.L TRADE COl\DIISSIOX ACT Docket 6-~SS. COlli plaint, Mar. ids, J Decisioll, Sept. 2" ID5'o Order dismissing-for the reason that respondent came within the definition of "packer" in the Pacll:ers and Stock~-ards Act of 1921 and as such was' subject to the exclusive jurisdiction of the Secretary of Agricultnre--com-. plaint charging a super'lunrket grocer~' chain of 238 stores along the Atlantie seaboard from :\ew England to Florida, with knowingly inducing and receiving from its suppliers, ' illegal ad\'ertising allowances whit-h those. suppliers had not made ayailnble on proportionally equal terms to all respondent' s competitors.

.:.11)'. Andre.w C. GoodllOpe, .:.1I1'.Fredric T. Suss and lIIi' . AJuz,n C. Edelson supporting the complaint.

Ste2~n: Stein Eng7e by .lit. IlowCtnl Enf/7e of .Jersey City, N. G1'((.'ve71c, lVlzit7od' Jlrl"i'l' ey: by Jlr. Louis A. (;:mvelle and IJozcrey &8i/7non by .111'. David C. JIw ' his 0 II of ,Yashington, D. , for the respondent.

INITIAL DECISION BY FR.\XK J-IIER, IIE.\HIXG EXX:\IIXEI~ In the midst of proof taking to support. the allegations of the complaint, and immediately subsequent to the issuance by the Commission of amended complaint, responcle. , by counsel, moyes for complete dismissal for lack of jurisdiction. Since jurisdiction can be questioned at any time and is not conferred by consent, waiver, or failure to raise. the point, at any previous time, the motion is timely and proper. The ground of the motion is that respondents acts and practices, including those chnl1enged by the complaint herein, are in the exe1usiye jurisdic.tion of the Secretary of A~r1'ieu1tule because respondent is subject to the Packers and Stockyards Act of 1921 c. un et seq.

Respondent herein is a supermarket grocery chain of ~:1S stores located along the Atlantit Seaboard from Xc",- England to Florida selling a full line of grocery and household products including fresh and canned meat HlHl meat products. Its gTOSS sales "-ere' about $475 000 000 for the. fiscal year ending April 28 , IHi)o. It ,.,-as organized about. 1D:3:3. The charge ag-ainst it in this proceeding' is that. it kno\yingly induced and recein'd from suppliers nch-ertising allo\yances ,yhich those suppliers had not made available on propor- 1 Amended and supplemental.

FOOD FAIR STORES, INC. 393' 392 Decision tionally equal terms to all of their other customers competing \\'ith respondent in the retail sale of such suppliers' products and that respondent knew this. In short, that respondent knowingly induced a violation of section 2 (d) of the Clayton Act by its suppliers. On July 13 , 1945, respondent acquired a meat packing plant 406 Allen Street, Elizabeth, New Jersey, at which place it has since. slaughtered lin~stock and prepared same for consumption, sellingand shipping in commerce to the extent of $25 000 000 or 95J)()0 000' pounds, for the fiscal year ending April 28, 1956. Responclenfs investment in said plant is $2 700 000. The products thereof are. federally inspected and respondent is listed and licensed by the Department of ,Agriculture as H. packer. Counsel supporting the complaint concedes that to the extent it operates its meat packing. plant in Elizabeth, New ~Tersey,:: respondent is a packer within the statutory definition set out in 7 V. C. 191 , 42 Stat. 160, which reads as follo,,' When used in this chapter- The term "packer" means any person engaged in the business (a) of buying livestock in comm~~rce for purposes of slanghter, or (h) of mannfnctni'ing or preparing meats 01' meat food products for sale or shipment fn commerce, or (c) of manufacturing or preparing Jive1';toek products for sale or shipment ill commerce, or (cl) of marketing meats, meat food products, livestock pror.1nct:::, dairy products, poultn', poultry products, or eggs, in commerce; but no person engaged in such business of J11ail11factnrin~' or preparing livestock l)rodnus or in such mnl'keting hnsiness shn1J ht' eom:idered n packer nuless- (1) Such per~oil is also engaged in any business referred to fn clause (a) or (b) of this section, or unless (2) Sncll person mnlS 01' (~oIltrol1';, directly 01' indirectly, through stock ownership or control or otherwise, b~' himsdf 01' through his agents, servants, or f'mpJo~' ees, any intere::,:t in any business refened to in e:Jause (a) or (I)) of this see-tion, 01' unless (3) Any interest in such business of IJHll111facturing or preparinp: li,estock proclue-ts, or in such marketing' business is owned or controlled, flil'eC'tI~' or ilHlirectl~' , through stock ownership 01' ('ontl'oJ 01' other'\Yise, hy hilw,:elf or through his fig-eIlts, sen'ants, 01' employee1'; , by any person engaged in an~' business r(:'1'ene(l to in clause (fl) or (b) of thi1'; section, or unless (-:I) Any person 01' persons .iointl~' 01' ~e\'erally, rlirectl~' or in(lireetJ~', throu~h stock ownership 01' control or otherwise, by themselves or through their agents, senants, 01' enlployees, own or control in the aggregate 20 percentullJ or more of the voting power or control in such business of manufacturing or preparing Jjyestock pi'odmts, or in such marketing business al1f1 also :.!O percentullJ more of such pfm'el' or control in an~' business n'felTecl to in clause (;1) or (b) of this section. .\ug. 15, 1921, c. 64 ~201 , 42 Stat. 160. Section 406 (b) of the same statute (7 li C. 227, 42 Stat. 169) proyicle.s ';on or after the enactment. of this Act, and so long as it remains in effect, the Federal Trade Commission shall have no pO\\er or jnrjsdiction so far as re)ahng to any matter which.h by this Act is made subject to the jurisdiction of the Secretary, except in eases in 394 iFEDERAL TRADE COMMISSION DECISIONS Decision 54 F.

which, before the enactment of this Act, complaint has been served under Section 5 of the act entitled 'An Act To Create a Federal Trade Comm.ission, to define its powers and duties, * * *' and except when the Secretary of Agriculture, in the exercise of his duties hereunder, shall request of the said Federal Trade Commission that make investigations and report in any case (August 15, 1921, Chapter 64, Section 406, 42 Stat. 169; 7 U.S. Code Section 227)." The two exceptions mentioned in the above code section are obviously inapplicable to this proceeding and it will be noted that jurisdictional exclusion is as "to any matter which by this Act, is made subject to the jurisdiction of the Secretary The 1riJatter above referred to is obviously that which is contained in Section 202, 7 U. C. 192 of that Act which reads as follows: Unlawful Practices Enumerated It shall be unlawful for any packer or any live poultry dealer or handler to :

(a) Engage in or use any unfair, unjustly discriminatory, or deceptive practice or device in conllnerce; or (b) :Make or give, in commerce, any lmdue or unreasonable preference or advantage to any particular person or locality in any respect whatsoever or subject, in commerce, any particular person or locality to any undue or unreasonable prejudice or disadvantage in any respect whatsoever; or (c) Sell or otherwise transfer to or for .any other packer, or any live poultry dealer or handler, or buy or otherwise receive from or for any other packer or any live poultry dealer or handler any article for the purpose or with the effect of apportioning the supply in commerce between any such packers, if such apportionment has the tendency or effect of restraining commerce or of creating a monopoly in commerce; or ( d) Sell or otherwise transfer to or for any other person, or buy or otherwise receive from or for any other person, any article for the purpose or with the effect of manipulating or controlling prices in commerce, or of creating a monopoly in the acquisition of, buying, selling, or dealing in, any article in commerce, or of restraining commerce; or (e) Engage in any course of business or do any act for the purpose or with the effect of manipulating or controlling prices in commerce, or of creating a monopoly:y in the acquisition of, buying, selling, or dealing in, any article in commerce, or of restraining commerce; or (f) Conspire, combine, agree, or arrange with any other person (1) to apportion territory for carrying on business in commerce ;

FOOD FAIR STORES, INC. 395 392 Decision or (2) to apportion purchases or sales of any article in commerce, or (3) to mani pulate or control prices in commerce; or (g) Conspire, combine, agree, or arrange with any other person to do, or aid or abet the doing of, any act made unlawful by subdivisions (a) - (d) or (e) of this section. Obviously the above broad proscriptions include the charge of the complaint here. There follows detailed provisions for complaint ans,ver, hearing, decision and order by the Secretary of Agriculture with right of appeal therefrom to the United States Circuit Court of Appeals-procedure closely follm\ing that of the Federal Trade Commission (7 D. C. 193--4-5) and indeed there is a. separate general provision (7 IT C. 222) adopting for the use of the Secretary of Agriculture in the enforcement of the Act, all of the implementing provisions of the Federal Trade Commission Act.. It was probably this which led to Fourth Circuit. Court of Appeals in United Oo1'jJora-tion, et al v. F. 110 F. 2d 473 to say: It wns doubtless because pJennry power o,er the unfair trade practices packers hnc1 bf't'll vest(ld in tJle Secretary of Agriculture by the Packers and Stockyards Act :mc! the Meat. Inspection Act, that Congress withheld jurisdiction over' packers from the li'edernl Trade Commission. Only confusion could result from nn overlapping jurisdiction, ns this case well illustrates. On the basis of the above, counsel for respondent contends that has an in pCl'sonnm immunity from supervision, investigation or correction by the Federal Trade Comnussion, being, by reason of its packing activities, subject in all of its operations exclusively to the jurisdiction of the Secretary of Agriculture. In a word, once in grace always in grnee. Counsel supporting the complaint, on the other hand, contends that the exelllsive jurisdiction of the Secretary of Agrieulture. is not. personal, but is only as to matters given to him exclusively, and that. the acts and practices of respondent challenged in the instfll1t proceeding nre not. snell a maher, 11is argument, so far fls the examiner understands it, proceeds as follo\'Is: (a) The Packers and Stockyards Act. 1YflS aimed directly against the lite big' packers yd1O in ID17, handled 70.5 of aJl animals slaughtered under federal inspection.

(b) That these same five packers \Yfre under a 1020 eonsent decree forbic1c1ino" them to eno-at:te in the retail distribution of grocery products including meat or meat produc.ts.

(c) That, therefore, the Packers and Stoekynrds Aet was and is confined in its operation to slaughtering, processing, preserving, selling, and shipping meat and meat products in commerce, and does not cover the retail distribution thereof, 528577--60---- , 396 FEDERAL TRADE COlV1l\:IISSION DECISIONS Decision 54 F. T. C.

(d) Therefore, there was never conferred on the Secretary of Agriculture any jurisdiction whatever over the retail activities of any business coming within the statutory definition of packer, and therefore he has no jurisdiction oyer the great bulk of respondents nets and practices.

The above quoted statutory provisions are dear and unambiguous and would seem to this hen ring examiner to require no resort to legislative history for c1nrification. But all counsel seem to think the contrary, and quote extensively from that legislative history to sustain their confiicting contentions.

",Vithout extensive quotations from that legislative history, it is plain therefrom that ,yhile the consent decree of 1920, which barred the five major packers from engnging in most. retail operations, was in the mind of Congress in 1921 , it is also clear that Congress ,vas legislating for all businesses doing any meat packing whatsoever that the bill "-as inteJlded to reach and regulate all phases of the business of any person, firm or corporation engaged in meat packing to a.ny extent. whatever, that the problem of "unrelated activities was squarely before Congress and thoroughly considered, that the statutory definition 01 "packers ~' in Section 201 of the Act. (7 V. 191) was made designedly broad so as to include all within its terms whatever the ramifications of his business, and ,vhat-ever the form of corporate organization ac1optecF or "if such person has infe?' est in a packing business, as (nboveJ defined or if a packer has. any interest in his business. It is apparent that Congress was not legislating in a 1921 yacumn, but was legislating for the future and. for an industry, and ,vas keenly aware of extensions into other fields nnd of other firms entering into the packing field. There is no evidence in this legislative history, that the Act ,vas intended to be confined to those whole sole or primary business was meat. packing. On the contrary, the I-louse. 01 Representatives ,vas pressured by the Farm Bureau to narrow the definition of "packer" to just mmmfaeturing or preparing meats .and meat products for sale-in other words, just to ment packing-but. this wns flatly rejected :-the expressed intention then being " to relieve from regulation (by the Secretary of Agriculture) those outside industries only ,,-hen having no affiliation with a packer. Afliliation': is a broa..d and significant word. Finally, on this point, it is most. significant to this hearing ex,unine.r that in IDES when Congress was enlarging the jurisdiction of the Federal Trade Commission by adopting the ",Vheeler-Lc,L Amendment, and then having before it the extensive hea..rings preeeding the Robinson-Patman Act., and their disclosure of new and devjol1s anti-eompetit ive practices which had c.ome to life. in the intervening years: "ith the knowledge of back"ard and fol'"\yard in- , .. ..

FOOD FAIR STORES, INC. 397 392 Decision tegration occurring during the 1920 decade, was most careful to except from the new grant of additional jurisdiction "persons partnerships or corporations subject to the Paekers and Stockyards Act, 1921, except as provided in Section 406 (b) of said Act.': This careful additional exclusion of jurisdiction, not there before and coming 18 years later in that setting: seems to this hearing examiner to refute any claim that Congress in 1921 was legislating only about five packers, lias not legislating as to retail activities, or "unrelated operations. :' It seems a re-affirmation of a firm intent to have the Secretary of Agriculture regulate all phases of any business in ,,'hatever primary field, connected in any wny, or operating to any degree in meat packing. There is, therefore, no necessity for deciding whether the exemption is in personam or merely in rem. This interpretation logically and inevitably leads, counsel in support of the compla..int contends, to absurd results enabling any concern to choose at will the regulatory authority, by simply acquiring or divesting itself of a packing plant. Or, put more crassly, by the simple expedient of buying a load of chickens ringing their necks plucking their feathers and se.lling their carcasses in commerce any business in the nation, even a.. tire or battery manufacturer, for instance, may escape regulation of its entire business by t.he Fedal Trade Commission, whose "expertise" in the use: for instance, of brokerage, advertising allowances ' service. grants and other devious nw~:n~; oJ competitive favoritism, is "idely recognized. Thus, in the instant case, alleged competitive discrimination in the use of advertising allmvances to push such non-agricultural products as floor wax, chewing gum and cleaning fluid is left exclusively to the Department of Agriculture. No law, says counsel, should be interpreted to achieve an absurd result.

The answer, of course, is that "here a law is cleaT and unambiguous in terms, command, and intent and where the latter is also clear from the legislative history, interpretation is uncalled for and no deciding authority may interpose his views and interpret it away The responsibility for thefrom that intent, regardless of result. , lieslatter, any duty to change, as well as the sole right. to change with the enacting aut,hority, Congress. That this is recognized b~' recent introduction for passagethat body is evidenced by the ConO"ress of S. 1356 to confer on the Federal Trade Commission the . b very jurisdiction contended for here, and by the statement of its sponsor:

I believe it is in the public interest that FeLlernl 'l'rafle Commission s control he exterHletl over packers who enter into other side- line hllsil1e~sps-1H1silJesses which no\v escape such control because of UnjU~d stntes Dppn 1'111W111 "f Agriculture s inaction, but whose competitors are subject to Federal Trade ('ommi8- 398 iFEDERAL TRADE COMMISSION DECISIONS Opinion 54 F.

sion s control. The same need for public control applies to food firms, especially food chains, which can now acquire packing plants, or a substantial interest in one, and thus escape Federal Trade Commission s supervision over their entire operations.

Despite distinctions of counsel, which are really not actual differences, the views expressed, and the language used in United Corporation, et al v. F. C. 110 F. 2d 473 (C. A. 4) (1940) and Docket 6409 Armour and Company (l\Iarch 30, 1956) are consonant "\with and, it is believed, fully support the views expressed, and the conclusion reached here, and these are precedents by which this hearing examiner is, of course, bound.

Express findings of this motion then are:

1. Respondent comes within the definition of "packer" as set out in 7 U. C. un, not only as to its Elizabeth, New Jersey.y plant but as an entity.

2. As such, the Secretary of Agriculture has exclusive jurisdiction of the acts and practices charged in the complaint to be illegal. 3. The Federal Trade Commission has no jurisdiction thereof. It follows that the motion of respondent to dismiss should be and the same hereby is granted.

Any and all requests for time to brief further the motion are denied.

ORDER It is ordered That the complaint and the amended and supplemental complaint in this proceeding be., and the same hereby are dismissed for lack of jurisdiction.

OPINION~ OF Tl-IE CO::\I:i\IlSSION By GWYNNE, Chairman:

The amended and supplemental complaint filed under Section 5 of the Fede.ral Trade Commission Act charges respondent with seeking and obtaining special discriminatory advertising allo\nmces from certain of its suppliers, while knowing, or having reason to know, that such allo\yances "-ere discriminatory, and with failure to use all of such allowances for advertising purposes. During the trial, respondent moved for dismissal on the ground that the acts and practices eomplainecl of are under the. exclusive jurisdiction O-I the Secretary of AgricuHl11'e lmc1er the Packers and Stockyards Act (D. C. Title 7, Sec. 181 et. seq. ). From an order sustaining this motion and dismissing the complaint, this appeal has been taken.

The jurisdictional facts are substantially as follmys: FOOD FAIR STORES, INC. 399 392 Opinion Respondent is a supermarket grocery chain operating 238 stores in the eastern part of the country, and seJIing a fuji line of grocery and household products including meat and meat products; its operations date from about 1933; on July 13, 1945, respondent acquired a meat packing plant in Elizabeth, New Jersey, and engages there in the preparation and distribution of meat products; respondent~s investment in the plant is 700 000; the plant is licensed by the S. Department of Agriculture as a packer and its products are Federally inspected; during the fiscal year ending April 28, 1956 this plant prepared and shipped 000 000 pounds of product of total sales value of $25 million, based on prices at the plant; about 1/10th of % of this product "as sold through respondent's own retail stores, the balance being sold to independent jobbers; the total of $25 million of sales represents about 5% of respondent' total retail sales.

The jurisdictional issue presented involves the following questions: (1) Does the complaint cover ?Twtters over which the Secretary Agriculture has been given jurisdiction (2) Does the definition of commerce contained in the Packers and Stockyards Act exclude from the Act the operations of respondent here involved, except as to certain specific products hereinafter refelted to (3) Does respondent come within the definition of packer" laid dOlyn in the Act? (4) If so, is the jurisdiction of the Secretary limited to those products traditionally included in the meat packing business? The Federal Trade Commission Act, as originally adopted in 1914 contained the following provision in Section 5 The Commission is hereby empowered and directed to prevent persons, partnerships, or corporations, except banks, and common carriers subject to the Acts to regulate commerce, from u~ing unfair metbods of competition in commerce.

After the adoption of various amendments, Section 5(a) (6) now provi des:

The Commission is hereby empowered and directed to prevent persons. partnerships, or corporations, except banks. common carriers subject to the Acts to re~I1Jate (,Ol11nlerc-(~. air carriers. and foreign-n Rir carriers subject to the Civil Aeronautics _.:\ct of 1938, and I)ersons, partnerships, Qr corporations subject to the Packers and Stockyards Act, 1921, except as provided in Section 406 (b) of sa id Act. from using unfai l' methods of competition in commerce and unfair 01' detepti,e acts OJ' practices in commerce. 400 FEDERAL TRADE COMMJSSION DECISIONS Opinion 54 F.

The Packers and Stockyards Act was adopted in ID21, following an extensive investigation by the Federal Trade Conunission and also hearings by several Congressional committees. The Act is comprehensive, covering certain activities of packers, stock.kyard owners and operators, market agencies, dealers, poultry dealers, handlers etc. Section 192 of Title 7 enumerates certain ac.tivities on the part of packers and live poultry dealers or handlers which are declared to be unlawful. It is dec.1ared unlawful to: (a) Engage in or use any unfai r, unjustly discriminatory or deceptive practice or device in commerce; or (b) ::\lake or give, in commerce, any undue or unreasonable preference or advantage to any particular person or locality in any respect whatsoever', or subject, in commerce, any particul:1l' person 01' locality to any undue or unreasonable prejudice or disadvantage in any respect whatsoever; or (c) SE'll or otherwise transfer to or for any otlJe1' packer, or any live poultry dealer or handler, or buy or otherwise receive from or for any other packer or any live poultry dealer 01' handler any article for the purpose 01' with the effect of apportioning tile supply in commerce between any such packers, if such apportionment has the tendency or effect of restraining commerce or of creating a monopoly in commerce; 01' (c1) Sell or otherwise transfer to or for nny other person, 01' buy or otherwise receive from or for any other person, any article for the purpose 01' with the errect of manipulating or COlltrulJing prices in culUwen:e, or of creating monopoly in the acquisition of, bll~-ing, selling, or dealing in, any article in commerce, or of restraining commerce; or (e) Engage in al1~' course of business 01' do an~' act for the purpose or with creating athe effect of manipulating or controlling prkes in commerce, or of monopoly in the acquisition of, buying, selling, or dealing in, any article in commerce, or of restraining commerce; or (f) Conspire, combine, agree, 01' arrange with any other person (1) to apportion territory for carrying on business in c()mmerce, or (2) to apportion purclwses or sales of any article in commerce, or (3) to manipulate or control prices in commerce: or (g) Conspire, combine, agree, or arrange with any otller person to do, or aid (c), (d),or abet the doing of, any act made unlawful hy subdivision (a), (b), or (e) of this section.

:l\lachinery is then set. up by "which the Secretary is to enforce the In.,y. Section 227 of Title 7 provides:

So Jong as this chapter rf\.mains in effect, the Federal Trade Commission shall have DO power or jurisdiction so far a:3 relating to any matter which by this chapter is made subject to the juri:::tlictioll of the Secretary except 'when the Se('n:tal'~' of Agriculture, in the exercise of his dutil's hereunder, shall request of the said Federal Trade Commission that it mal~e investigations and report in any case.

Congress has not removed all f1etivities of pac.kers from the jurisdiction of the Fe,c1E'rnl Trade Commission, as has been done in the It deniedFederal Trade. Commission, Act in the, case o:f banks, subject. to the jurisdictionjurisdiction only as to any matter mntle , FOOD FAIR STORES , INC. 401 392 Opinion of the Secretary by the Packers and Stockyards Act. The lVheeler- Lea 1~ct, passed in 1938, did not change the jurisdictional framework "Set up by the Packers and Stockyards Act. Prior to the lV~heeler- Lea Amendment, packers were subject to the A.ct only as to certain matters specifically set out therein. There is nothing in the vVheeler- Lea Act, or in its history, to indicate that Congress intended to confer other powers on the Secretary in addition to those given in the Packers and Stockya.rds Act.

An examination of the matters placed under the jurisdiction the Secretary by Section 192 indicates that such jurisdiction includes the matters which are the subject of the complaint in this case. II.

The Packers and Stockyards . \ct contains t,yO sections relating to the definition of commerce. Title 7, Section 182(6) states: The term "commerce" means commerce between any State, Territory, or possession, or the District of Columbia, and any place outside thereof; or between points within the same State. Territory, or possession, 01' the District of Columbia, bnt through any vince ontsic1e thereof; 01' within any territory, possession, or the District of Columbia.

This is a familiar definition, and from a geographic.al standpoint covers substantially every movement of goods over which Congress has jurisdiction under the commerce clause, From the standpoint of character of product, the definition is also all-inclusive and covers every product capable of being the subject of commerce. Section 183 states:

For the purpose of this chapter (but not in any wise limiting the definition in section 182 of this title) a transaction in respect to any article shan C'onsidererl to be jn commerce jf such article is part of that current of commerce US1WJ in the liyestocl;: and meat-packing jnc1nstries, whereby livestock meats, ment food1 products, livestock products, dairy products, poultry, poultry products, 01' eggs, are sent from one Strite with the e:\.'")Jectation that they will f'.nc1 their transit, after purchase, in another, including, in aclclition to cases within the above general description nil eases where purchase or sale is either for shipment to another State, or for slanghter of livestock within the State and the shipment outsi(le the State of the proclncts resulting from such slaughter. Articles normally in such current of commerce shall not be considered out of such current t11lough resort being had to any means or clevices intended to remove transactions in l'espf'ct thereto from the pro'\isions of this chapter. For the pn1'p08(~ of this section the word " State" includes 'J'erritor:v, the District of Colnmhia, possession of the rnitecl States, and foreign nation. From this it. is argued that. the grf\11t of power to the Secretary of Agriculture covers only the products specifically named bvestock meats, meat food products livestock products, dairy proc1uets, poultry, poultry products, or eggs. In other \yorc1s, Section 183 is a lim_itation on the broad grant or pmyer in Section 182 (6). 402 LFEDERAL TRADE COMMISSION DECISIONS Opinion 54 F.

. One difficulty with this argument is that it ignores the fact that Section 183 expressly says it is not a limitation on the previous definition.

Furthermore, the history of the legislation indicates rather clearly why Section 183 was adopted. It was designed to meet a situation peculiar to the meat produc.ing industry as it existed in 1921. This same situation, although in a lesser degree, exists today. The process begins ,with the animal, which has been raised on grass, being shipped to commission merchants at various stockyards throughout the country. There the cattle are un10added, cared for, and sold either to packers for shughter, to feeders ,,-ho fatten them further on grain in their own yards, or to dea1el's at the stockyard centers. In this chain of events, the stockyards and an who operate there play an important part. In its attempt to c.control the monopolistic practices of the big packers both as to cattle producers and as to meat consumers, Congress eonc.luded that it. ,vas necessary to bring stockyards under efiective control. Inasmuch as manv of the activities carried on at the stoekyards were local or intrastate in character, this posed an important constitutional question. Variol1s c.ommittee reports indicate the attention that was given to this problem. In f/wift Company v. 196 U.S. 375, the Supreme Conrt. had before it the question of ,vhether the business done in the stockyards between the receipt of the livestock in the yards and the shipment of them therefrom is a part of interstate eommerc.e or is so assoc.iated with it as to bring it within the power of national regulation. In commenting on this deeision, the House Committee on Agric.u1tl1re in He-port No. 77, 67th Congress, 1st Session, which accompanied I-LH. 6320 (the basis of the Act), had this to say: The bm makes it clear that Congress in treating this Question is attempting to regulate e,iJs which it has found to exist in respect to exorbitant charges n nd unreasona ble practices on the stockyards, resulting in a direct burden upon interstate commerce, and that in the whole bill it is treating the entire slaugbtering and meat-packing industry in all its ramifications as part of the "cnrrelit of commerce" referred to in the S\\-ift case. The bm in its definitions in section 2 repeats the language of the Swift case and contains a declaration articles normally~~ in such current of commerce shall not be considered out of such current through resort being had to any means or device intended to rf~move transactions in respect th('reto from the provisions of this act, This clearly expresses the intention of Congress that all devices, whether skillful manipulation of corporate organization, or the settin~ up of dummies, or otherwise. should not result in an enlsion of the act. If this great iu(lustry, bearing so impol.tant a relation to the welfare of the 1\-ation, an(l constituting so large a part of interstate commerce, can escape the power of Congress by such de- ,ices, the power granted by the Constitution to regulate interstate commerce means notlJing, a conclusion which:h tJle committee can not bring itself to believe is true.

FOOD FAIR STORES, INC. 403 392 Opinion In Stafford v. lVallace (1922) 258 U.S. 495, the Supreme Court upheld the constitutionality of the Packers and Stockyards Act. the decision (p. 520) the Court said:

It is manifest that Congress framed the Packers and Stockyards Act in keeping with the principles announced and applied in the opinion in tlle Swift case. The recital in Section 2, Paragraph (b), 'Title 1, of the Act quoted in the margin leaves no doubt of this. The Act deals with the same current of business and the same practical conception of interstate commerce. Set out in the margin of the opinion is the substance of Title 7 Sectjon 183.

It thus appears that the purpose of Section 183 was not. to limit Section 182, Subparagraph (6) but to explain and strengthen it. Its purpose was not to limit the operation of the Act to certain specified products but to make certain that it applied to the entire slaughtering and meat packing industry in an its ramifications as part of the current of commerce. referred to in the Swift case. Ill.

The term "packer" is defined in Section 191 as follows: ",Vhen w~ed in this chapter- The term "packer" means any person engaged in the business (a) of buying livestock in commerce foi. purposes of slaughter, or (b) of manufacturing or preparing meats or meat food products for sale or shipment in commerce, or (c) of manufacturing or preparing livestock products for sale or shipment in commerce, or (rJ) of marketing meats, meat food products, livestock products dairy products, poultry, poultry products, or eggs, in commerce; but no person engaged in such business of manufacturing or preparing livestock products or in such marl;:eting business shall be considered a packer unless- (1) Such person is also engaged in any business referred to in clause (a) (b) above, or unless (2) Such person owns or controls, directly or indirectly, through stock ownership or control or otherwise, by himself or through his agents, servants, or employees, any interest in any business referred to in clause (a) or (b) above or unless (3) Any interest in such business of manufacturing or preparing livestock products, or in such marketing business is owned or controlled, directly or indirectly, through stock ownership or control or otherwise, by himself or through his agents, servants, or employees, by any person engaged in any business referred to in clH1.lse (a) or (b) above, or unless (J) Any person or presons jointly or severally, directly or indirectly, through stock ownership or control or otherwise, by themselves or through their agents, servants, or employees, own or control in the aggregate 20 per centum or more of the voting power or control in such business of manufacturing or preparing livestock products, or in such marketing business and also 20 per centum or more of such power or control in any business referred to in clause (a) or (b) above.

,, .:\., 404 FEDERAL TRADE COl\1J\USSION DECISIONS Opinion 54 F.

Thus, the term "packer'~ ine1udes any person engaged in the business:

(1) of buying livestock in commerce for slaughtering, or (2) of manufacturing or preparing for sale or shipment in commerce meats or meat food products (an edible by-products). The inclusion of such persons is without. condition or reservation. Then the definition includes additional persons engaged in the business:

(3) of manufacturing or preparing for sale or shipment in COJ11merc.e. of livestock products (non-edible products), or (4) of marketing meats, meat food products, livestock products dairy products, poultry products, or eggs.

The above persons are not ineJuc1ed unconditionany and ,,'ithont reservation. They come under the definition only if certain other conditions exist, as set out in Subparagraphs (1), (2), (3) and (4). ,Vhnt Congress had in mind by this somewhat complicated definition is indicated by the. legislative history. For example, on February 5 , 1821 , the I-Iouse Agriculture Committee filed Report 1297 66th Congress, 31'd Session, to accompany S. ~;9-:1-.4, ,which the I-louse Commis"ee had amended. Speaking of the definition of packer, the report states:

T1Je Senate bill in section 2 declares tlwt the term "packer" means "any person engaged in the business of slaug'hteri ng li,cstock or prepa ring livestock products for sale in coll1l11eree, 01' of marketing liyestock proc1ueh as a sullsidiary of or an ad;illnet to any such slaugl1tering or preparing busilless." 'this ddillition so c1rmn1 would apparently,\- le,ne outside of all regulation many branches of the ~;lnu~:htering and me:1t pne-king ilHlnstr,\- It would seem that skillful reorganization of the existing forms of corporation organization would result in ese-aping the pro,isions of the Act, as for example tile orgnnizatioll of a marketing corporation which mnlS the Il1a iority of the stock of a corporation en;-aged in the slnug-Jltering IH1since~s. Such marketing coqwrntion would not seem to be within the definition of the act. inasmuch as it is not "a subsidiary of or an nd,iunct to" the slnughtering corporation. but the re,erse true, since the marketing colLlpan~' is Ow pa)"(~nt corporation. Nor does the delinition in the Senate bill inelude causes where neither corporation O'1'ns or controls n c1ollnr of stock in the otJH'I'. bnt the control of each is in the Jwnc1s of common stockholders. TJms, il' all the stock of corporation A. tng-ng-ell in the sl:nlghterjl1g 11118iness, f(1)(1 corporation J3. engngerl in the marketing business, "-ere o,yned by X, Y, and Z , il1cli,idnals, corporation B onld clearJ~' not he n " p:1('1;:el' sillc~~ in 110 sense cnn it be said to be a "snbsicliary of 01' an ad iunct to " corporation These defects are l'ellleclied in the committee amenclment (sec. 201). In R.eport No. , 67th Congress, 1st Session, of the I-louse Committee on Agriculture to accompany I-LH.. G320, the Conunittee said: Section 201 defjnE'S the term "padi:er " in such manner as to include all persons engaged in the business of buying livestock in interstate or foreign COill- FOOD FAIR STORES, INC. 405 392 Opinion lllerce for purposes of slaughter, or of manufacturing or preparing meats or edible meat-food pro!lucts for sale or shipment in such commerce. In order to bring within the terms of the bill the packer as thus defined, whatever the ramifications of his business and what e,er the form of corporate organization adopted and at the same time to avoid interference with businesses having no packer affiliations, it is provided that a person engaged in the business of manufacturing or preparing, for sale or shipment in interstate or foreign commerce, livestock products, or of marketing such products in such commerce, shall be considered a packer if such person has an interest in packing business as above defined, or if a pac);:er has any interest in his business, or if a common control amounting to 20 percent exists in each business. In thh manner nn independent tannery 'would not be a packer, but if a packer sets up a tannery business as a separate corporation it would be controlled. It seems clear from the language of the Act and from the legislative history that Congress designedly made the definition of packer a very broad one. The general purpose was to regulate certain practices of the meat packing business in all its ramifications regardless of its organization or unrelated activities. About the only persons Congress seemed to exempt '"ere those having no packer affiliations. Thus, an independent tanner would not be a paeker, merely because of being in the tannery business. Nor would an independent marketer, simply because he marketed meats, meat food products and livestock products, etc. But if either engaged in certain activities traditionally connected with the paeking business, or had a designated degree of afliliation therewith, they were included in the definition of pac.ker.

It should be noted also that the definition applies only to persons engaged in the business " etc. The genera1l11meaning of this language has frequently been explained by the courts. For example, in Dane v. B1' O'IIYJ1 70 F. 2c1 164 (1934), the court pointed out that such expressions as "pursue the practice of architecture engaging in the practice of b" " contemplate a. course of business and not single isolated instances arising from 1U1usual circumstances. So also an isolated instance. of t.he. driving by a corporation of a motor truck through Alabama in interstate eommerc.e was not engaging in such business "within the meaning of t.he constitutional provision in question. Dealers ' T1Yt.n-sport 00. v. Reese (1943) 138 F. 2cl 638. There are many eases pointing out that engaging in business or in a specified business implies a bona fide element of continuity or habitual practice-it means to be employed in the business-conducting, prosecutting and eontinuiJlg a business by performing progressively an the acts 110rmaJly incident thereto, not from time to time, but an the time.

In the instant. case. it appears that. respondent acquired possession of the pac.king plant in 1945 some years prior to the present contro- 406 FEDERAL TRADE COl\imission DECISIONS Opinion 54 F.

versy; that it has been recognized by the Department of Agriculture as being a packer and subjected to inspection as a packer; that it regularly carries on the business of preparing meat products and selling same in commerce. We conclude that its activities, as appearing in the record, bring it within the definition of packer" as that term was intended by Congress in the Packers and Stockyards Act. It is also argued that, even assuming that respondent is a packer nevertheless, the jurisdiction of the Secretary of Agriculture does not extend to those products not associated with its packing business which in this case cover the predominant share of the products handled by respondent.

The construction here urged would seem reasonable in the light present day conditions. Nevertheless, the law must be considered in the light of the problem existing in 1921 rather than the one in 1957. The investigation of the meat packing business, particularly the activities of the five large packers disclosed evils in the entire industry which Congress seemed determined to remedy. This posed serious problems, as the legislative history clearly demonstrates. Even in 1921, the industry which produced meat food products and livestock products was an extensive and complicated one. This was true not only as to the stockyards feature bnt also as to those allied industries which processed or used livestock products. That this matter was given attention clearly appears in the legislative record. For example Congressman tIaugen, Chairman of the I-Iouse Agriculture Committee, in explaining the conference report, said: The next amendment referred to was to amend the definition of the term live-stock products " so as to remove the objection that the bill subjected of animals, suchregulation many industries never engaged in the slaughtering as tanneries, fertilizer plants, woolen mills, automobile manufacturers, and many others using by-products of the packing industry. Although supporting the amendment for this limited purpose of his Committee to anChairman tIaugen expressed the opposition additional amendment urged by the Farm Bureau. At the same time, the Farm Bureau suggested that the definition of the term packer" be so amended as to contine packers to those manufacturing or preparing meats as meat-food products for sale and shipment in commerce. While recognizing the justice of the complaint that the definition in the original to include independent tanneries, fertilizerHaugen Bill might be construed plants, and other industries using by-products of the packing industry, but the Committee at once perceived that the adoption of the suggestion of the Amerito leave outside of all regulation suchcan Farm Bureau Federation would be of the packing industry. It there-industries when conducted lis subsidiaries to relieve from regulationfore amended the Haugen Bill in such manner as but leavingthese outside industries when having no affiliation with a packer, FOOD FAIR STORES, INC. 407 392 Opinion the pacl;:er to complete regulation, no matter what line of business he goes into. 61 Congressional Record, p. 4781.

As to the matters referred to in Sectjon 192, it was the intention of the Congress to give the Secretary broad powers so that the unlawful practices therein outlined could be effectively and efficiently handled. This is well expressed in the following from the Colllmittee report:

A careful study of the bill, will, I 2m sure, convince one that it, and existing Jaws, give the Secretar:r of Agriculture complete inquisitorial, visitorial, supervison" and regulatory power over the pacl;:ers, stockyards, and all activities connected therewith; that it is a most comprehensive measure and extends f:utber than any previous lnw in the regulation of pri\ate business, in time of peace, except possibly the interstate commerce act. After setting forth the various powers granted to the Secretary, the report states:

Tbe bill further coordinates the duties of the Secretary of Agriculture so that it prevents overlapping of authority and duplication of jurisdiction of other depnrtments of Government having regulatory powers which previously existed. Jt provides for ample court review for any of the orders or regulations of the Secretary of Agriculture so as to protect the industry from any mistakes of judgments or unwarranted use of the power thus c1elegatec1. In United Corporation v. Federal Trade Commission (19-10) 110 F. 2d 473, the order of the Commission required respondent to cease and desist from:

Hepresenting that the corned beef hnsh and deviled ham which it sells are made from products originating in Virginia, and using the trade name "Virginia Products Company" and using labels containing the words "Virginia" and from invoicing its sales from Richmond 01' other places within the State of Virginia. Prior to the entry of the order by the Commission, respondent acquired 20% of the stock of the suppliers who canned the products for it. The court held that upon the acquisition of this stock, respondent became a packer whose business was subject to the control of the Seeretary of Agriculture under the Packers and Stockyards Act. The court pointed out that the complaint charged an unfair practice in the marketing of meat food products by a packer and was a matter made subject to the jurisdiction of the Secretary by Title 7, Sections 192 and 193. "\Vhile the case involved only meat food products, we think the same rule would have applied to other commodiUes marketed by this respondent packer. In the Matter of AT1nour and Company, Docket No. 6409, the Federal Trade Commission held that e1aimed false advertising of oleomargarine by the respondent. packer came under the jurisdiction of the Secretary of Agriculture and accordingly dismissed the complaint. Insofar as 408 FEDERAL TRADE COl\Ll\IISSION DECISIONS Order 54 F. T. C.

Sections 192 and 193 are concerned, there is no evidence that Congress meant to draw any distinction between meat food products and other products marketed by a packer. Such a conclusion would make the law very difficult of enforcement. Based on the facts in this case, we conclude: (1) The matters involved in the complaint are matters over which the Secretary of Agriculture was given jurisdiction by the Packers and Stockyards Act.

(2) The definition of commerce" in the Packers and Stockyards Act does not limit such jurisdiction to livestock, meats, meat food products, livestock products, dairy products, poultry, poultry products, or eggs.

(3) R.respondent comes within the definition of packer" as announced in Section 191, Title 7.

(4) The jm'isdiction of the Secretary as to matters involved in this case is not limited to meat food products marketed by respondent. The appeal of counsel supporting the complaint is denied and it is ordered that the complaint and the amended and supplemental complaint be, and the same hereby are, dismissed for lack of jurisdiction. :Mr. Tait did not participate in the decision herein. FIN AL ORDER Counsel supporting the complaint having filed an appeal from the hearing examiner s initial decision granting the respondent's motion to dismiss this proceeding for lac.k of jurisdiction; and the matter having c.ome on to be heard upon the record, including the briefs and oral arguments of c.ounsel, and the Commission having determined for reasons stated in its acc.ompanying opinion, that such appeal should be denied:

1 t is ordered That the order contained in the initial decision which duly provides for dismissal of this proceeding for lack jurisdiction, be, and the same hereby is, affirmed. Commissioner Tai t not participating.

, UNITED CIGAR-WHELAN STORES CORP. 409 Decision