Frito Company

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IN THE MATTER OF FRITO COMPANY, ET AL.

CONSENT ORDER. ETC., IN REGARD TO THE ALLEGED VIOLATION OF SEC. 2(c) OF THE CLAYTON ACT Docket 7239. Complaint, Aug. 1.958-Decision, Mar. 10 1959 Consent order requiring a Texas distributor of Mexican-style food products and jts subsidiary to cease violating Sec. 2((') of the Clayton Act by paying the customary brokerage of 5 % to a customer on direct purchases for its own account, and requiring said recipient, buying the products mainly for its own supermarkets and other outlets in Latin America and c1sewhere, to cease accepting such illegal payments. COMPLAINT Tbe 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 subsection (0) of Section 2 of the Clayton Act (D. , Title 15, Sec. 13), as amended by tbe Robinson-Patman Act, approved June 19 , 193G, hereby issues its complaint stating its charges with respect thereto as follows: PARAGRAPH 1. Respondent Frito Company, hereinafter referred to as F'rito, is a corporation existing and doing business under and by virtue of the laws of the State of Texas, with its offces and principal place of business iocated at 2GOO Cedar Springs A venue, Dan as, Tex. Frito, since 195G, has owned approximately 51 % of the voting stock of Texas Tavern Canning Company, controlling its sales and operational policies, and is charged with the acts and practices of Texas Tavern Canning Company as hereinafter described. Frito s net sales for 1957 were approximately $33 379 500, with net profits of approximately $1 049,295.

PAR. 2. Texas Tavern Canning Company, hereinafter rcfen"cd to as Texas Tavern, is a corporation existing and doingbusiness under and by virtue of the laws of the State of Texas ,with its offces and principal place of business located at Fair Park, Sequin, Tex. Texas Tavcrn is now, and for thc past several years has been, engaged in the business of manufacturing, selltamales, chicken tamales ing and distributing- bcef and pork menudo, enchiladas, fried beans, Spanish rice and other food products which it advertises as "ReaJ Mexican Foods, " and which FRITO COMPANY, ET AL. 1417 1416 Complaint are referred to hereinafter as Mexican-style food products. During its fiscal year 1957, Texas Tavern had net profits on the aforementioned Mexican-style food products of approximately $295 000 and sales of approximately $750 000.

PAR. 3. Respondent international Basic Economy Corporation hereinafter referred to as IBEC , is a corporation existing and doing business under and by virtue of the laws of the State of 1\ ew York, with its offces and principal place of business located at 30 Rockefeller Plaza, New York, N.Y. IEEC, among- other activities, purchases foodstuffs wbicb it distributes and sells througb wholesale and export operations. IBEC also distributes and sells such foodstuffs at retail to supermarkets Jocated in Latin America and elsewhere. The major percentage of sucb sales are to supermarkets or other outlets owned or controlled by IEEC.

During 1957 IEEC had net sales of foodstuffs and related products tbrougb its Merchandising Division which were valued at $6,072 510, with net profits on such sales of approximately $126,000. IBEC's consolidated sales for 1957 amounted to $70, 635,455.

PAR. 4. Respondent Texas Tavern sells and distributes its Mexican-style food products, hereinbefore mentioned, to customers located in the several States of the United States in commerce, as "commerce" is defined in tbe Clayton Act, as amended by the Robinson-Patman Act. Texas Tavern sells and distributes the major portion of its Mexiean-style food products to its customers through brokers located in the various States of the United States. Sales of Mexican-style food products are made direct to IBEC by Texas Tavern.

Respondent IBEC, among other activities, purchases foodstuffs from various sources including respondent Texas Tavern. These foodstuffs al' e subsequently sold to purchasers in the United States, Puerto Rico and Latin American countries. IBEC also sells such foodstuffs to supermarkets including- 1BEC controlled supermarkets in Latin America and Puerto Rico and to PESCA, an IBEC controlled wholesale and retail food outlet in Venezuela. PAR. 5. Respondents Texas Tavern when selling its Mexicanstyle food products through brokers, pays such brokers a commission or brokerage fee for their servjces amounting to 5 % tbe gross dollar volume of orders through such brokers. During and since 1956 Texas Tavern has g-ranted a commission or brokerage fee, or other compensation or allowance, or Decision 55 F.

discount in lieu thereof, of 5% of the gross dollar volume of sales made to respondent IBEC, which purchases Texas Tavern Mexican-style food products for its own account. PAR. u. The acts and practices of respondent Frito or respondent Texas Tavern in promoting the sale of Mexican-style food products by rebating to respondent IBEC commissions, brokeragc, or other compensation or allowances or discounts in lieu thereof, as set forth above, and the acts and practices of respondent IBEC of receiving and accepting from respondent Frito or respondent Texas Tavern rebates, commissions, brokerage, or other compensation or allowances, or discounts in lieu thereof as set forth above, in connection with the purchase of Mexicanstyle food products as aforesaid, are in violation of subsection (c) of Section 2 of the Clayton Act, as amended. M,.. Daniel A. Austin, Jr. for the Commission. MT. Jacle Johannes of Dallas, Tex., for Frito Company and Texas Tavern Canning Company.

Curtis, Mallet-P,.evost, Colt Mosie by MT. John French New York, N. , for International Basic Economy Corporation. I"ITIAL DECISION BY ABNER E. LIPSCOMB, HEARING EXAMINER The complaint herein was issued on August 28, J 958, charging respondent Frito Company (hereinafter referred to as respondent Frito) with the acts and practices of its subsidiary, respondent Texas Tavern Canning Company (hereinafter referred to as respondent Texas Tavern) in the manufacture, sale and distribution of beef and pork tamales, chicken tamales, menudo, enchiladas, fried beans and Spanish rice, which it advertises as "Real I\lexican Foods " (hereinafter referred to as "Mexican- style food products ) ; respondent Frito s net sales for J957 having been approximately $33 379 500 , with net profits of approximately 049 295 , and respondent Texas Tavern s sales for that year having been approximately $750,000, with net profits on the aforementioned Mexican-style food products of approximately $38,768. JO. The complaint alleges that respondent International Basic Economy Corporation (hereinafter referred to as respondent IBEC) purchases direct from respondent Texas Tavern said Mexican-style food products, which it sells to purchasers in the United States, Puerto Rico and Latin America, including IBECcontrolled supermarkets in Latin America and Puerto Rico, and to PESCA, an IBEC-controlled wholesale and retail food outlet FRITO COMPANY, ET AL. 1419 1416 Decision in Venezuela; IBEC's net sales of foodstuffs and related products in 1957 being valued at $6 072 510, with net profits thereon of approximately $126 000 , and its consolidated sales for that year amcmnting to $70,635 455. The complaint further alleges that respondent Texas Tavern bas, during and since 1956, granted to respondent IBEC a commission or brokerage fee, or other compensation or discount in lieu thereof, of 5 % of the gross dollar volume of sales made to respondent IBEC, which purchases respondent Texas Tavern s Mexican-style food products for its own account. The complaint charges respondents Frito and Texas Tavern with paying, and respondent IBEC with receiving, sucb discount in Heu of a commission, brokerage fee, or other compensation or allowance, in violation of S2 (c) of the Clayton Act (V. , Title 15, SJ3) as amended by tbe Hobinson-Patman Act approved June 19, J 936.

On J\ovember JO, 1958, respondent IBEC, its counsel, and counsel supporting the complaint entered into an Agreement Containing Consent Order to Cease and Desist, which was approved by the director and an assistant director of the Commission s Bureau of Litigation, and thereafter submitted to the hearing examiner for consideration. On December 31 , 1958, respondents Frito and Texas Tavern, with their counsel, each entered into a similar agreement with counsel supporting tbe complaint. Both of these agreements were approved by the acting director of the Commission s Bureau of Litigation, and thereafter were like\vise submitted to the hearing examiner for consideration. The first agreement identifies respondent International Basic Economy Corporation as a Ne\v York corporation, with its offce and principal place of business located at 30 Rockefeller Plaza, New York, N.Y. The second agreement identifies respondent Frito Company as a Texas corporation, with its offce and principal place of business located at Exchange Bank Building, Dallas Tex. The third agreement identifies respondent Texas Tavern Canning Company as a Texas corporation, with its offce and principal place of business located at Fair Park, Seguin, Tex. In all three agreements, respondents admit alj tbe jurisdictional facts alleged in the complaint, and agree that the rl'cord may be taken as if findings of jurisdictional facts bad been duly made in accordance with such allep:ations.

Hespondents ,vaive any further procedure before the hearing examiner and the Commission; the makinfr of finding;s of fact and conclusions of Ja\v; and all of the rights they may have Order 55 F.

to challenge or contest the validity of the order to cease and desist entered in accordance with the agreement. Alj parties agree that the record on which the initial decision and tbe decision of the Commission shall be based shall consist solely of the complaint and each agreement as to the parties signatory thereto; that the order to cease and desist, as contained in each agreement, when it shall have become a part of the decision of the Commission, sball have the same force and effect as if entered after a full hearing, and may he altered, modified or set aside in the manner provided for other orders; that the complaint herein may be used in construing the terms of said order; and that the agreement is for settlement purposes only, and does not constitute an admission by respondent. signatory thereto that it has violated the law as alleged in the complaint. After consideration of tbe allegations of the complaint, the provisions of tbe t.three agreements, each as to the parties signatory thereto, and the proposed orders, the hearing examiner is of the opinion that such orders constitute a satisfactory disposition of this proceeding. Accordingly, in consonance with tbe terms of the aforesaid agreements, the hearing examiner accepts the three Agreements Containing Consent Order to Cease and Desist; finds that the Commission has jurisdiction over the respondents and over their acts and practices as alleged in the complaint; and finds that this proceeding is in t.he public interest. Therefore It is o,.dered That respondent Frito Company, a corporation and respondent Texas Tavern Canning Company, a corporation its officers, agents, representatives and employees, in connection with the sale of food products, in commerce, as "commerce " is defined in the Clayton Act, as amended, do forthwith cease and desist from:

Paying or granting, directly or through any corporate or other device, to respondent International Basic Economy Corporation a corporation, its respective successors or assigns, offcers, representatives, agents or employees, or to any other buyer, anything of value as a rebate, commission, brokerage fee, or other compensation, or any allowance or discount in lieu thereof, upon or in connection with any sale of food products to such buyer for its mvn account.

It is her/he,. onlend That respondent International Basic Economy Corporation, a corporation, its offcers, agents, representatives and employees, in connection l'with the purchase of food FRITO COMPANY, ET AL. 1421 1416 Decision products in commerce, as "commerce" is defined in the Clayton Act, as amended, do forthwith cease and desist from: Receiving or accepting, directly or indirectly, from respondent Texas Tavern Canning Company, a corporation, or from respondent Frito Company, a corporation, or from any other intermediary or seHer, directly or througb any corporate device or hy any other means, anything of value as brokerage, or any rebate, allowance or discount in lieu thereof, in connection with the purchase of food products made for respondent International Basic Economy Corporation s O\Vl1 account. DECISION OF THE COMMISSION AND ORDER TO FILE REPORT OF COMPLIANCE The hearing examiner, on ,January 27 , 1959, having filed his initial decision wherein he accepted agreements containing consent orders, theretofore executed by the respondents and counsel in support of the complaint, and entered an order to cease and desist in conformity with said agreen1cnts, service of \which was completed on February 5, 1959; and Counsel for the respondents and counsel in support of the complaint, on February 25 , 1959 , having filed a joint motion requesting the correction of certain errors in the initial decision; and The Commission having determined that the corrections fered to should be made ancl that thereafter the initial decision wjll be adequate and appropriate to dispose of this proceeding: It is ordered That the first paragraph of the initial decision , and it hereby is, modified in the following respects: (1) by striking the pbrase "wholly owned" from the third Jine; (2) " in theby inserting the word "net" before the word "profits twelfth line; and (3) by striking "$295 000" from the thirteenth Jine and inserting in lieu thereof "$38 768.10. It is further onle). That the initial decision, as so modified shall, on the 10tb clay of lVarcb 1959, become the decision of the Commission.

It is fUTthe? on/e). That the respondents, Frito Company, Texas Tavern Canning Company, and International Basic Economy Corporation, shall, within sixty (60) days after service upon them of this order, file with the Commission reports, in writing, setting fortb in detail the manner and form in whicb they have c.complied with the order contained in the aforesaid initial decision.

Decision 55 F.