Hudson House, Inc

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IN THE MATTER OF HUDSON HOUSE, IXC., ET AL.

CONSE T ORDER, ETC., II\ REGARD TO THE ALLEGED VIOLATION OF SECS. 2(n) AND 2(c) OF THE CLAYTON ACT Docket 7215. Com1Jlu1 , A 11g. 1958-Decision, Feb. , 1959 Consent order requiring a large packer and wholesaler of foods and its subsidiary manufacturer of bakery and fountain supplies in Portland, Oreg., to cease discriminating in price in violation of the Clayton Act by such practices as charging certain favored buyers from 2% to 18% less for maraschino cherries than their competitors and also giving the fonner a jr discount for cash while the latter received only 1?c, thus violating Section 2(a); and by granting 12 % to 3'7(' discounts in lieu of brokerage to certain direct buyers purchasing for their own accounts, in violation of Section 2(c).

COMPLAINT The Federal Trade Commission having reason to believe that the parties respondent named in the caption hereof, and hereinafter more particularly designated and described, have been, and are now, violating- the provisions of subsections (a) and (c) of Section 2 of the Clayton Act (U. S. C. , Title 15 , Sec. 13), as amended by the Robinson-Patman Act, approved June 19 , 1936, hereby issues its complaint stating- its charges with respect thereto as follows:

Count 1 Charging violation of subsection (a) of Section 2 of the Clayton Act, as amended, the Commission alleges: PARAGRAPH 1. Respondent Hudson House, Inc. is a corporation organized, existing and doing business under and by virtue of the laws of the State of Oregon, with its principal1 offce and place of business located at 401 SE. Water Avenue, For1.and, Oreg. Jt is engaged in the purchase and sale at wholesale of produce groceries, fruits and bakery products, the packing of fruits and vegetables, the processing of frozen foods and the operation of a chain of retail grocery stores. Hudson House, Inc. was for many years the largest briner of cherries in the L'united States and still is a substantial factor in the processing and sale of brine Inc. has annual net salescherries. Respondent Hudson House, of approximately $31 500 000 and is directed and controlled by :);;

1226 F'EDERAL TRADE CO BlISSION DECISIONS Complaint 55 F.

respondents, Robert A. Hudson, Sr. and Francis T. Rowell who are responsible for its acts and practices. Respondent Gray & Company is a corporation organized, existing and doing business under and by virtue of the laws of the State of Oregon with its principal offce and place of business located at 401 SE. Water Avenue, Portland, Oreg., and being a wholly owned subsidiary of respondent Hudson House, Tnc. , it is directed and controlled by respondents, Robert A. Hudson, Sr. and Francis T. Rowell who are responsible for its ads and practices.

Respondent Robert A. Hudson, Sr. is an individual1 with an offce located at 401 SE. Water Avenue, Portland, Oreg. , and is president of respondent Hudson house, Inc., owning 100;:, of its stock.

Respondent Francis T. Rowell is an individual with an offce located at 401 SE. Water Avcnuc, Portland, Oreg., and is first vice president of respondent Hudson House, Inc. and vice president of respondent Gray & Company.

PAR. 2. Respondent Gray & Company is now, and has been since 1945. engaged in the manufacture and sale of bakery and fountain supplies including the processing- and sale of maraschino cherries dace cherries, broken cherries, jams, jellies, olives toppings, mincemeat, fruit mix and other such products. Respondent Gray & Company produces maraschino cherries from brine cherries ,which it purchases from its parent, respondent Hudson House, Inc.

Respondent Gray & Company sells maraschino cherries and other products on a nationwide basis. Except for the Portland Oreg. area where it se1Js through company salesmen, respondent Gray & Company sells its products through brokers to which pays 5 X: commissions for sales of maraschino cherries and commissions for sales of other cherries. PAR. 3. In the course and conduct of its business, respondent Gray & Company has engaged in commerce, as "commerce" i:: defined in the Clayton Act, as lLmended, in that respondent Gray & Company ships its products, or causes them to be shipped, from its plac.e of business in the Sbte of Oregon to purchaser. located in States other than the State of Oregon. PAR. 4. In the course and conduct of its said business in com. rce, respondent Gray & Company is now and has been ill competition with other corporations, partnerships, individuals. and firms engaged in manufacturing-, processing, selling and dis- ); :;;;

HUDSON HOUSE, INC., ET AL. 1227 1225 COillJlaint tributing maraschino cherries, and other cherries, bakery and fountain supplies.

Many of respondent Gray & Company s purchasers are likewise, directly or indirectly, competitively engaged with each other and with the customers of Gray & Company s competitors .in the resale of said commodities within the trading area in which respondent Gray & Company s said competitors, offer for sale and sell such commodities as those purchased from said respondent. PAR. 5. Since January 1954 , while engaj!ed as aforesaid in commerce among the several States of the United States, respondent Gray & Company has been, and is now, in the course of such commerce discriminating in price between purchasers of commodities of like grade and quality, which commodities are sold for use, consumption and resale within the several States of the United States, in that respondent has been, and is now, sc11ing such eommodities to some purchasers at higher prices than the prices at which such commodities of like grade and quality are sold by said respondent to other purchasers. Said favored purchasers are now competing and have competed since January 1954, directly or indirectly, with respondent Gray & Company nonfavored purchasers.

Respondent Gray & Company has sold, and now sells, its commodities through its brokers or its sales agents to some of its buyers at net prices from approximately 2% to 18;+ higher than it has sold and now sells commodities of like grade and quality to some of its favored buyers, many of whom are engaged in active, direct or indirect, competition with respondent Gray & Company s nonfavored buyers.

For example, specific ilustrations of representative discriminations in commerce and prices of certain commodities of like grade and quality s01d hy respondent Gray & Company during the year 1956 to its competing favored and nonfavored buyers are as follows:

During February 1956 respondent GI ay & Company sold maraschino cherries to its two favored purchasers in San Francisco Calif., Tierlemann & McMorran and A. Giurlani & Bros. , and to the following competing nonfavored purchasers who paid net prices which exceederl the net prices paid by Tiedemann & Mc- Morran for commodities of like j!trade and quality by the following percentag-es: R. Vannucci & Company, 7.4j Julliard Fancy Foods Co. and 10.8)'c; Peroni & Erminia and Riva . ;. ;; 1228 FEDERAL TRADE COM IISSION DECISIONS Complaint 55 F.

Distributing, 1. 8/,. The favored purchaser Tiedemann & Mc- Mon' an also received a discriminatory discount of 2 /' for cash while some of the nonfavored purchasers received 1 ?c.' for cash. During January and :l\arch of 1956 respondent Gray & Company sold maraschino cherries to its favored purchaser in Sacramento, Calif., Tiedemann & McMorran, and to the following competing nonfavored purchasers who paid net prices which exceeded the net prices paid by Tiedemann & Md10rran for commodities of like grade and quality by the following percentages: Lancaster Wholesale Grocery, 7.4S:; and G. ; Valley wholesale Grocery, 9.5)'(. and 6. 1 S;c' During January of 1956 respondent Gray & Company sold maraschino cherries to its favored purchaser in Los Ang-eles Calif., A. 1\1. Lewis, Inc. , and to the following competing nonfavored purchasers who paid net prices which exceeded the net prices paid by A. M. Lewis . Inc. , for commodities of like grade and quality by the following percentages: Certified Grocer, 8. /r' 17.9% and 8. X. ; ::1ayfair iVlarkets, 10. )i, During January, February, :varch and December of 1956 rcspondent Gray & Company sold maraschino cherries to its favored purchaser in Los Angeles, Cali!'., S. E. Rykoff & Company, and to the following competing- nonfavored purchasers who paid net prices which exceeded the net prices paid U)' S. E. Rykoff & Company !'or commodities of like grade and quality by the following percentages: Eckhard's Better Lemon Juice, 5,,; ; Tasty Products Company, 10 ; Western Restaurant Supply Co. , 10 Hollywood Bar Supply Co. , 5 ' ; ; Leake & Abbey Bar & Hcstaurant Supply, During January5jC1956 respoTIclent Gray & Company sold maraschino cherries for c1delivery in Spokane, \Vash. , to its favored purchaser Heg-ent Canfooc1 Company (a wholly O\\' ned buying subsidiary of Safeway Stores, Inc. ), and to the follo\ving competing 110nfavored purchasers who paid net prices which exceeded the net prices paid by Regent Canfood Company for commodities of like grade and quality by the following percentages: U. R. JI. Stores, 2. ; and 1.9 ); ; Sigman Food Stores and 4. During .January and February, 1956 Regent Can!'ood Company \vas also so favored in the purchase of maraschino cherries over its competitors in Butte, Montana, to the following extent: Gamble- Robinson Company, 1.7 and 5. Davidson Grocery Company, 1.7 r ;. and 2 (/r- HUDSON HOUSE , INC., ET AL. 1229 1225 Complaint The favored purchaser Regent Canfood Company also received a discriminatory discount of 2% for cash whiJe the nonfavored purchasers received for cash. During July 1956 respondent Gray & Company sold maraschino cherries to its favored purchaser in Salt Lake City, Utah, Utah Wholesale Grocery, and to a competing nonfavored purchaser Pacific Fruit & Produce Company, which paid net prices which exceeded the net prices paid by Utah Wholesale Grocery Company for commodities of Jikc grade and quality by 570. PAR. 6. The effect of such discriminations in price made by respondent Gray & Company, as set forth in paragraph 5 hereof may be substantially to lessen competition or tend to create a monopoly in the lines of commerce in "vhieh respondent Gray & Company and its purchasers are respectively engaged; or to injure, destroy, 01' prevent competition with respondent Gray & Company 01' with purchasers of respondent Gray & Company who receive the benefit of such discriminations. PAR. 7. The acts and practices of the respondent Gray & Company, as al1egecl above, violate subsection (a) of Section 2 of the Clayton Act as amended.

Count II Charging violation of subsection (c) of Section 2 of the Clayton Act, as amended, the COll1mission alleges: PAR. 8. Paragraphs 1 and 4 , inclusive, of Count 1 hereof are hereby repeated and made part of this Count as fully and with the same force and effect as though here again set forth in full. PAR. 9. In the course and conduct of its business as above described, respondent Gray & Company has paid or granted, directly and indirectly, to some of its customers commissions brokerage, or other compensation, or allo\vances, or discounts in lieu thereof, in connection 'vvith purchases of products by such customers from respondent Gray & Company in their own names and for their own accounts for resale.

For example, specific illustrations of such allo\vances made in lieu oJ brokerage are as follows:

During- the year 1956 respondent Gray & Company granted discriminatory allo\vances as described above in connection "'with purchases of respondent Gray & Company s products made for their own accounts to S. E. HykofI & Company of Los Angeles Calif.; Tiedemann & McMorran of San Francisco, Calif. ; Regent Canfood Company of San Francisco, Calif., (a wholly owned buy- Decision 55 F.

ing subsidiary of Safeway Stores, Inc. ), for delivery to Safeway Stores in Spokane, Wash., Butte, Mont., and Portiand, Oreg., part of which aJ10wances were made in lieu of one-half of the 5 % brokerage fee customarily paid by respondent Gray & Company to its brokers on such purchases.

During the years 1956 and 1957 respondent Gray & Company granted aJ10wances of from 3 % to 5 % in connection with purchases of respondent Gray & Company s products made for their own accounts to Fraering Brokerage Company of New Orleans La. , Mountain States Wholesale Company of Boise, Idaho, and Miles Distributing Company of Reno, Nev. , which aJ10wances were made in Ueu of 3 % and fj 70 brokerage fees customarily paid by respondent Gray & Company to its brokers on such purchases.

PAR. 10. The acts and practices of the respondent Gray & Company, as aJ1eged above, violated subsection (cJ of Section 2 of the Clayton Act as amended.

Aft. Yred,'ic T. Suss for the Commission. 1111. Rouert H. Huntington of Hart, Spence' . McCulloch Rock- 'Wood and Davies of Portland, are., for respondents. INITIAL DECISION BY LOREN H. LAUGHLIN, HEARING EXAMINER This proceeding involves alleged violations of subsections (a) and (cJ of Section 2 of the Clayton Act, as amended (L. in sub- Title 15, Sec. 13), it being charged in the complaint, stance, that Gray & Company, a whom1y owned subsidiary of respondent Hudson House, Inc., named therein, in the course of , including its business of selling bakery and fountain supplies maraschino cherries, glace cherries, broken cherries, jams, jellies olives, toppings, mincemeat, fruit mix and other such products in commerce, has discriminated in price between purchasers by granhng lower prices and by giving hig-her cash discounts to favored customers, and has made payments, grants, a11o\vances or discounts in lieu of brokerage.

On December 19, 1958, there was submitted to the undersigned hearing examiner of the Commission for his consideration and approval an "Agreement Containing- Consent Order to Cease and Desist " which had been entered into by and between respondents and the attorneys for both parties, under date of December 10, 1958, subject to the approval of the Bureau of Litigation of the Commission, which had subsequently duly approved the same. HUDSON HOUSE, INC., ET AL. 1231 1225 Decision On due consideration of such agreement, the hearing examiner finds that said agreement, both in form and in content, is in accord with S3.25 of the Commission s Rules of Practice for Adj udicative Proceedings, and that by said agreement the parties have specifically agreed to the following matters: 1. Respondent Hudson House, Inc., is a corporation organized mld existing under the laws of the State of Oregon with its principal offce and place of business located at 401 Southeast Water Avenue, Portland, Oreg. It is directed and controlled by respondents Robert A. Hudson, Sr., and Francis T. Rowell, who are responsible for its acts and practices. Respondent Gray & Company is a corporation organized and existing under the laws of the State of Oregon, with its principal1 offce and place of business located at 40J Southeast Water Avenue, Portland, Oreg. , and is a wholly owned subsidiary of respondent Hudson House, Inc. Respondent Robert A. Hudson, Sr. is an individual with an offce located at 401 Southeast Water A venue, Portland, Oreg., and is president of respondent, Hudson House, Inc., owning one hundred percent of its stock. The respondent Francis T. Eowell is an individual with an offce located at 401 Southeast Water Avenue, Portland, Oreg., and is first vice president of respondent, Hudson House, Inc. , and vice president of respondent Gray & Company.

2. Pursuant to the provisions of the Clayton Act. as amended the Federal Trade Commission on August 1 , 1958, issued its complaint in this proceeding against respondents and a true copy was thereafter duly served on respondents. 3. Respondents admit all jurisdictional facts alleged in the complaint and agree that thc record may be taken as if fmdings of jurisdictional facts have been duly made in accordance with such allegations.

4. This agreement disposes of all of this proceeding as to all parties.

5. Respondents waive:

(a) Any further procedural steps before the hearing examiner and the Commission;

(b) The making of findings of fact and conclusions of law; and (c) All of the rights they may have to challenge or contest the validity of the order to cease and desist entered in accordance with this agreement.

1232 FEDERAL TRADE COMMISSIO:" DECISIONS Order 55 F.

6. The record on which the initial decision and the decision of the Commission shall be based shall consist solely of the complaint and this agreement.

7. This agreement shall not become a part of the offcial record unless and unti it becomes a part of the decision of the Commission.

8. This agreement is for settlement purposes only and does not constitute an admission by respondents that they have violated the law as alleged in the complaint. 9. The following order to cease and desist may be entered in this proceeding by the Commission without further notice respondents. When so entered it shall have the same force and effect as if entered after a full hearing. It may he altered, modified or set aside in the manner provided for other orders. The complaint may be used in construing the terms of the order. Upon due consideration of the complaint filed herein and the said "Agreement Containing Consent Order to Cease and Desist " the latter is hereby approved, accepted aud ordered filed the same not to become a part of the record herein, hO\vever unless and until it becomes part of the decision of the Commission. The hearing examiner finds from t.he complaint and the said "Agreement Containing Consent Order to Cease and Desist" that the Commission has jurisdiction of the subject matter of this proceeding and of each of the respondents herein; that the complaint states a legal cause for complaint ul1rler the provisions of 82 (a) and (c) of the Clayton Act, as amended (L'. Title 15 , 813), against each of the respondents both generally and in each of the particulars alleged therein; that this proceeding is in the interest of the public; that the following order as proposed in said agreement is appropriate for the just disposition of all of the issues in this proceeding as to all of the parties hereto; and that said order therefore should be, and hereby is entered as follows:

ORDER It is ordered That respondents Hudson House, Inc., a corporation, and Gray & Company, a corporation, their offcers, respondent Robert A. Hudson, Sr., individually and as president of Hudson House, Inc., and Francis T. Rowell, individually and as first vice president of Hudson House, lnc. , and vire president of Gray & Company, their representati Yes, agents and employees, directly or through any corporate or other device in connection with the HGDSON !louse, INC., ET AL 1233 1225 Decision sale of maraschino cherdes, other brine cherry products, olives jams, jellies, mincemeat, or other bakery or fountain supplies in commerce, as "commerce " is defined in the Clayton Act, do forthwith cease and desist from:

(1) Discriminating directly or indirectly in price by selling any of said products of like grade and quality to any purchaser at a price which is lower than the price charged any other purchaser \vho in fact competes with the favored purchaser in the resale and distribution of respondents' said products; (2) Paying, granting, or allowing, directly or indirectiy, to any buyer, or to any onc acting- for or in behalf of, or who is subject to the direct or indirect control of such buyer, anything of value as a commission, brokerage, or other compensation or any allowance or discount in lieu thereof, upon or in connection with any sale of their said products to such buyer for his own account.

DECISION OF THE CO:l:lission AND ORDER TO FILE REPORT OF CO:lPLJANCE The Commission having considered the hearing examiner decision, filed December 30 , 1958 , accepting an agreement containing a consent order to cease and desist, theretofore executed by the respondents and counsel in support of the complaint; and The respondents, by letter received January 22, 1959 , having noted that the hearing examiner s statement in the first paragraph of the initial decision purporting to set forth the alleged violations of law involved in this proceeding includes certain allegations not contained in the complaint, and it appearing that said paragraph does contain an erroneous summation of the allcgations of the complaint and should be correctcd : It is onle1' That the initial decision be, and it hereby is amended by substituting for the first paragraph thereof the following:

This procecding involves alleged violations of subsections (a) and (c) of Section 2 of the Clayton Act. as amended (l;. in sub- Tit1c 15, Sec. 13), it being charged in the complaint, stance, that Gray & Company, a ,,,holly o\vned subsidiary of , in the course ofrespondent Hudson House, Inc., named therein its business of selling bakery and fountain supplies, including maraschino cherries, glace cherries, broken cherries, jams, jellies olives, toppings, mincemeat, fruit mix and other such products in commerce, has discriminated in price between purchasers by Decision 55 F. 'l.

granting lower prices and by giving higher cash discounts to favored customers, and has made payments, grants, allowances or discounts in lieu of brokerage.

It is further 01'de1' That the initial decision as so amended shall, on the 12th day of February 1959, become the decision of the Commission.

It is fUTthe1' o1'dered That the respondents, Hudson House Inc., and Gray & Company, corporations, Robert A. Hudson, Sr. individually and as president of Hudson House, Inc., and Francis T. Rowell, individually and as first vice president of Hudson House Inc., and vice president of Gray & Company, 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 the aforesaid initial derision as amended. EMARD PACKING CO. , INC., ET AI,. 1235 Complaint