The Grand Union Company

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IN THE :n:L~TTER OF TI-IE GR.AND UNION CO:JiPANY ORDER , ETC. : 1::\1"REGARD TO THE ALLEGED nOLATION OF THE FEDERAL TRADE CO:::lDIISSION .\CT Docket 69')'3. CO1nlJlaillt, Dec. 195i' Decision, Aug. 1960 Order requiring a 340-store eastern supermarket chain to cease inducing or receiving from a number of its suppliers advertising payments and other benefits-not made available to all its competitors on proportionally equal terms-in connection with the suppliers' advertising on a "combined elec- THE GRAND UNION COMP ANY 383 382 Decision tric spectacular and animated cartoon display" in the Times Square area of New York City for which some 30 firms each paid Grand Union $1,000 a month for advertising one minute of each 20 of the sign s advertising cycle, receiving in return assurance of in-store promotion of their products agreement to take on additional items of their lines, or the handling their products on an exclusive or preferential basis. 111'1' . Donald R. ill OOTe and ili7'. Charles J. Steele supporting the complaint.

Sullivan rmn1L'ell by Ai?,. J olvn F. Dooling, J'I" and ilir. Frede1,ick A. Te7'~'Y, J1' of New York, N. , for respondent. INITIAL DECISION OF JOHN LEWIS, BEAHING EXAMINER STATE1\IENT OF PHOCEEDINGS The Federal Trade Commission issued its complaint against the above-named respondent on December 5 , 1957, charging it with 11a ving violated the provisions of Section 5 of the Federal Trade Commission Act (15 D. C. Section 45). A copy of said complaint with notice of hearing was duly served upon respondent. Said complaint charges respondent with having knowingly induced many of its suppliers to make payments to or for its benefit as compensation or in consideration for services and facilities furnished by or through , in connection with the sale of the products of such suppliers. It is alleged that such payments were not made available by the suppliers on proportionally equal terms to all their other customers competing with Grand Union. As an example, the complaint cites the inducing or payments by various suppliers for partic-ipation in an illuminated "spectacular" advertising sign leased to respondent by Doughs Leigh, Inc. (an advertising agency), which resulted in respondent's receiving advertising on the sign, as well as cash and valuable advertising in other media in exchange for time to which it was entitled on the sign. It is alleged that the suppliers, in addition to reee.iving advertising on the spectacular sign as a result of such payments, received additional services and facilities furnished by or through Grand Union in considern,tion of their participation in the sign, including special in-store promotional displays and an agreement in certain instances to exclude from respondent' s stores certain products competing ,with those of the participating advertisers. Following service of the complaint upon it, respondent appeared by counsel and filed ans',er to such complaint denyi1lg, in substance, the violations charged.

Following the holding of a pretrial conference on February 1958, and a series of postponements to enable counsel for the parties to negotiate a stipulation covering the material facts in the proceed- Findings G7 F..T.

ing, a hearing was held on April 29, 1958, in Washington, D.C. At said hearing a stipulation of facts covering certain of the facts in this proceeding was spread upon the record, in lieu of the calling of witnesses, and a number of documentary exhibits were offered subject to objection by respondent as to the receipt of several documents on grounds of relevancy and materiality. In lieu of further hearings to rec.eive testimony with respect to other facts at issue, a Supplemental Stipulation of Facts, dated July 14, 1958, was entered into between counsel which stipulation was made a part of the record herein by order of the undersigned hearing examiner dated July 18, 1958.

Pursuant to leave granted, proposed findings of fact, together with supporting briefs or memoranda, were thereafter filed by counsel for both sides. Counsel were also permitted to file replies to the proposals and briefs filed by opposing counsel. Thereafter, pursuant to request therefor, oral argument was had on January 8, 1959 , in Washington, D. , with respec.t to certain of the issues involved. The examiner has carefully reviewed and considered the proposed findings and briefs, the replies thereto and the oral argument. of counsel. Proposed findings which are not herein adopted, either in the form proposed or in substance, are rejected as not supported by the rec.ord or as involving immaterial matters. Upon the entire record in the case, the hearing examiner makes the following:

FINDINGS OF FACT 1. The Grand Union Company (hereinafter referred to as "Grand Union is a corporation organized, existing and doing business under the laws of the State of Delaware, and has its headquarters at 100 Broadway, East Paterson, N.J. Grand Union is and for many years has been engaged in operating a chain of retail grocery stores and supermarkets selling a great variety of edible and nonedible household products. It has approximately 340 stores (ineluding supermarkets) ",which are operated through five divisions located in Vermont, :Massachusetts, Connecticut, R.rhode Island, New Jersey, Pennsylvania and other eastern States. It also owns all of the stock of Carron' , Limited, which operates stores in Canada, and Square Deal :Markets, Inc. , m\lling stores in \Vashington, D. ~1:aryIand and Virginia. The gross sales volume of Grand Union and subsidiaries for the fiscal year ending :March 3, 1956, was $283 003 166.

2. Grand Union purchases for resale a variety of products, including food, grocery, dairy, and nonedible household products, from a large number of manufacturers, suppliers and handlers of such THE GRAND UNION COMPANY 385. 382 Findings products. Such suppliers are located throughout the United States. and a large part of the products are, under the terms of purchase shipped by the suppliers to Grand Union stores or Grand Union warehouses located in states other than those from which the supplier shipped the products. Grand Union maintains warehouses in the State of New Jersey and ships goods of the categories identified above from such warehouses into the State of New York for ultimate sale in retail stores to c.onsumers. Grand Union has purchased such products, including those transported across State lines, for resale at retail to customers of Grand Union stores. Grand Union purchases of these products, including its purchases of products shipped to it across State lines, are now, and for many years have been, constant and substantial.

To attract business to its stores Grand Union engages in advertising. It advertises primarily in daily newspapers, a fraction the circulation of which is in States other than the State of the newspapers' publication. Grand Union also, from time to time, uses local radio and television advertising and, when it does so, uses radio and television stations, the programs of which.h ean be received outside the state from which the broadcasts originate. It is concluded and found that Grand Union is engaged in commerce, as "commerce.e" is defined in the Federal Trade Commission Act.

3. Grand Union in conducting its retail stores is now and has been in competition with other corporations, persons, firms and partnerships in the conduct by them of their retail stores. At all times here in issue Grand Union c.ompeted with other chain-owned supermarkets and chain-owned smaller retail stores and with single-unit sl1permarketsand single-unit smaller retail stores in the New York metropolitan area. Such area includes parts of New Jersey and Connecticut r.djacent to New York City. Such competition was in the resale in such supermarkets and smaller retail stores of edible and nonedible household products, including products of certain suppliers who participated as advertisers on a Broadway spectacular sign in the manner hereinafter described. 4. Under date of August 6, 1952, Grand Union entered into a c.ontract with Douglas Leigh, Inc.. , pertaining to the "use and occupancy" of an electric. "spec.tacl1lnr~' sign located at the northeast corner of 46th Street and Broadway in New York City. Douglas Leigh, Inc.. (herein referred to as "Douglas Leigh"), is in the business of designing spectacular signs, locating suitable rental space on which to erect them and contracting with advertisers for the use of such spectacular signs. :Many of the spectacular signs erected in the Times Square area of New York City are Douglas Leigh signs. The spectacular sign which was the subject of agreement between Douglas 640968-63- 386 FEDERAL TRADE COl\1J.\lission DECISIONS Findings 57 F.

Leigh and Grand Union dated August 6 , 1952, was erected and operated by Douglas Leigh, which also owns the leasehold on the realty upon which the sign is located.

5. In the agreement of August 6, 1952, Douglas Leigh granted to Grand Union the "use and occupancy of our combined electric spectacular and animated cartoon display located at 1552-1554 Broadway, New York City, otherwise known as northeast corner of 46th Street and Broadway, New York". The display was described as being composed of "three units, an "illuminated roof bulletin, a "north panel on face of building" and a "south panel on face of building, which includes electronic animated cartoon panel". The following are the material portions of the agreement between Douglas Leigh and Grand Union:

a. The consideration to be paid by Grand Union was the sum of $50.00 and the securing of "the agreements n.nd consents of fifteen (15) participating advertisers to use the south panel animated cartoon part of the display, hereinafter referred to as the ' Epok Panel' for their advertising on this display, such advertising to be approved by you b. The term of the agreement was stated to be for a period of one year from the date of its full operation (which was estimated to begin within 60 days from the date of the execution of the agreement), with an option on the part of Grand Union to renew the agreement for two additional periods of one year. c. The agreement .was subject to cancellation by Douglas Leigh on or before August 15, 1952, in the event Grand Union was not successful in securing signed contracts from 15 participating advertisers for the use of the Epok panel.

d. The agreement provided that during its term and any extension thereof, Grand Union ,\'onld ';provide at all times the full quota of fifteen (15) participating advertisers for the Epok Panel without cost or expense to Douglas Leigh, Inc.

e. The illuminated roof bulletin was reserved for the advertising of Grand Union for the term of the agreement. The north panel and the Epok panel were to be developed in accordance with the layout and copy plans prepared by Douglas Leigh for the approval of Grand Union.

f. The Epok panel was to be in use for participating advertisers 75 percent or the hours of its operation and the remaining 25 percent was to be reserved for the advertising of Grand Union. During each 20-minute period of operation of the panel, participating advertisers were to have 15 minutes and Grand Union five minutes. Grand Union could use its five minutes for its own individual advertising or could elect to use it to advertise a brand of merchandise in which , THE GRAND UNION COMPANY 387 382 Findings it had an interest, or could exchange the time allotted to it for radio or television advertising.

g. All design, layout and copy to be used on the entire display were to be submitted for approval of Grand Union and would not be used unless approved in writing by Grand Union. The cost of the entire display was to be borne by Douglas Leigh. O. As indicated in the agreement, the so-called spectacular sign consisted of three portions. The first, which was referred to as the illuminated roof bulletin, consisted of a stylized representation of a Grand Union food market similar to a representation used in other Grand Union advertising, and measured 40 feet by 45 feet in its greatest dimension. The illuminated roof bulletin was 10 feet above the other two elements of the sign and was set back 25 feet from, and approximately parallel to, the plane of the south (animated) element. In addition to the replica of a Grand Union market, the roof bulletin contained the illuminated legend Save at , re-Grand Union Food :Markets . The second element of the sign ferred to as the "north panel", measured 21 feet by 34 feet, and contained a fixed, illuminated legend "Your Dollar Buys :More at Your Grand Union Store . The third portion of the sign, which was referred to as the "south paner', measured 311/2 feet by 34 feet on which was the electrically animated eartoon panel measuring 30 feet by 20 feet, which communieatec1 the messages of the participating advertisers. On the upper portion of the south panel, above the animated portion thereof was a stationary panel bearing the legend "For Grand Values, and below the animated cartoon panel was another panel bearing the ilhlminatec1 legend "Grand Union Food :Markets 7. Prior to the spectacular sign s going into operation, agreements were entered into between Douglas Leigh and 15 suppliers of Grand Union, which provided for such suppliers' becoming participating advertisers ori the spectacular sign. The general form of agreement between Douglas Leigh and the participating advertisers was submitted to Grand Union by Douglas Leigh before such general form \'las put into use. The agreements ,ten: signed in each instance by the participating advertiser and by Douglas Leigh. Grand Union did not sign such agreements, except in one instance in which it was itself a participating advertiser of a product sold in its stores. The form or agreement entered into between Douglas Leigh and the various participating advertisers recited that Grand Union had "leased from Douglas Leigh, Inc., an Electric Spectacular Display located at the northeast corner of 46th Street. and Broadway, one part of which it stated was known as the "Epok Panel". The agreement provided for the "use and occupaney of this Epok Panel by and for Findings 57 F.T.'C.

Participating Advertisers" in accordance with specified conditions which were:

a. Each participating advertiser would have one period of one minute s duration in each 20-minute period for its advertising. b. All copy-messages and cartoons to be exhibited on the panel for participating advertisers were "to be approved in advance of being used by Grand Union and only such copy-messages and/or cartoons approved by Grand Union shall be used on the Epok Panel" c. The term of the agreement was for one year commeneing from the first day of full operation of the display. However, the agreement was " (c.Jonditioned upon the basis that Grand Union Company will have secured fifteen (15) contracts from participating advertisers for the use of the EPOK Panel * * *". In the event fifteen signed contracts from participating advertisers were not secured by August 15 , 1952, Douglas Leigh had the right to cancel any contracts of participating advertisers that may have been signed. d. For its services rendered under the agreement the participating advertisers agreed to pay Douglas Leigh the sum of $1 000 a month. 8. Prior to the expiration of the agreement between Douglas Leigh and Grand Union, Douglas Leigh advised Grand Union by letter dated August 20, 1953, that the "first year of your existing Grand Union combined spectacular display on the northeast corner of 46th and Broadway expires on December 9, 1953 " and proposed that the original contract be renewed for a second year upon the same terms and conditions as the existing contract, except for certain modifications, which Grand Union accepted. The modifications were: a. Instead of there being fifteen participating advertisers each having one minute of advertising, per 20 minutes, with five minutes being reserved for Grand Union s advertising, there would be twenty participating advertisers, each to have a minute of advertising for each twenty minutes.

b. In lieu of the five minutes of advertising available for Grand Union s use under the original ' agreement (which it had had the right to use for its own advertising or to trade for television or radio advertising) Grand Union was to receive monetary compensation on the basis of five percent of all monies which Douglas Leigh received as monthly rental from the first fifteen participating advertisers, and all monthly rentals paid by the remaining five advertisers (after deducting Douglas Leigh's commission). The provision entitling Grand Union to a commission of five percent on the monthly rentals paid by the first fifteen advertisers was interpreted by the parties as existing only when there were at least fifteen participating advertisers using the sign.

THE GRAND UNION COM:P ANY 389 :382 Findings 9. By letter-agreement dated December 13, 1954, the arrangement between Douglas Leigh and Grand Union was renewed for a third year to run from January 1, 1955 through December 31, 1955. The agreement was renewed on the same terms as the original agreement of August 6, 1952, as modified by Douglas Leigh's letter of August , 1953. The December 1954 agreement gave Grand Union a further option to renew the arrangement for one year at a time for the next five years, from 1956 through 1960.

10. Following the expiration of the original agreements between Douglas Leigh and the participating advertisers, which were for a period of one year, Douglas Leigh entered into new agreements with partic.ipating advertisers for another year beginning approximately January 1, 1954. As in the ease of the original agreements between Douglas Leigh and participating advertisers, the revised agreements were likewise submitted to Grand Union by Douglas Leigh before the form was put into use. The form of agreement was signed by each one of the partic.ipating advertisers and by Douglas Leigh, and was not signed by Grand Union, except in the one instance in which Grand Union was itself a participating advertiser of a product sold jn its stores.

The new agreements signed by the participating advertisers in 1954 were substantia1Jy the same as the original agreements entered into with Douglas Leigh. The only change which need be noted is that made necessary by the fact that the basic contract between Douglas Leigh and Grand Union had been modified so as to provide for twenty participating advertisers on the Epok panel, instead of fifteen. The renewal agreement stated that it was " r c J onditioned l1pon the basis that Grand Union will have secured agreements from twenty (20) participating advertisers for the use of the Epok Panel" and that in the event the twenty signed contracts were not secured from participating advertisers by January 1 , 1954, Douglas Leigh would have a right to cancel any existing contracts with participating advertisers.

11. The arrangement between Grand Union and Douglas Leigh Ine., with respect to the spectacular sign terminated on December 31 1956 and, on or before that date, all arrangements between participating advertisers and Douglas Leigh, with respect to the spectaeular sign expired or were terminated. Neither Grand Union nor any of the participating advertisers has used the spectacular sign since December 31, 1956.

12. During the period that the Broadway spectacular sign was in use, i.e., from December 10, 1952 until December 31 , 1956, the fol- . \ __ Findings 5/ F., lowing suppliers became participating advertisers for the periods hereinafter indicated:

Advertiser Product Date Expirastarted tion PbiJIips Packing Co_--_u__u_------_u_- Phillips Soups_---_u-------------u_--- 12/10/52 12/31/55 Foster Canning Cou_u_u_---------_uu Snappy Dog Foodu_--uu__uu--_uu 1'2/10/.5'2 12/31/55 Continenlal Baking Co__uu_u_-u__n_- Wonder Bread--u__--_uu_------------ 12/10/52 12/31/55 Clinton Foods, Inc., Snow Crop !'vlarket;ers DiviSiOJ1_n______-_uu---_u_---_u- Snow Crop Frozen Foods__u_--___un- 12/10/52 1'2/31/54 National Paper Corp___--_---_u_-------- S\\' anee Paper Products__u_---_uuuu 1'2/10/52 1'2/31/56 Buitoni Foods Corp_u__--u_u_------_u Buitoni MacaronL____uu_-_u_---u_-- 12/10/52 2/31/r.,3 Lewal Industries, Inc.____-----uuuh-u Instant. Dip Silver C1eaneL--uu_uuu 12/10/52 12/:-11/.';3 Tbe Glamorene CoJP______nu__--u_---- Glamorcne Rug Cleam'Ln---_---------- 1'2./10/52 12/::Il/f,3 Pal Blades Co_----_u_u_u_----uu_---- Pal Razors & Blades___uu_u_ 12/10/52 11/10/53 Lever Bros. Co., Pepsodent Divisionu__- Clorodent Tooth Pasten__uu----- 12/10/52 12/31/53 HolidtlY Brands Incu__uh_-----h_----- I Holiday Instant Coffeen__--__--u----u l'1./J 0/52 12/31/53 AJlen B. Wrisley Cou__uu_----_u_----- Wrisley Soaps____--_u__u__u_ 12/10/, 12/31/;'3 H. Fox & company-_uu_-------_u---- ' libel. Syrup Flavors__nu_u_hu__h_-- 1'2/10/52 12/31/. Uddo & Taormina Co_----------u_---u- Progrto'sso I"porls_--------_oo_------------ 12/10/52 12/31/56 Seeman Bros. COn_u_uu_n___un_--u Nvlast, Hosier\' Cleamer_ -uu_----_u_- 1/'21 / f.3 1/20/. McCormick &.: CO___h_U____--_uu_-- icCorlTlirk Vanilla_u_un__uu_------ 1/1/. 12/31/,5(', Chock Full O' Nuts COn__--__----u__u- Chock Full O' :--;I11,s CoiTl'to'----_u_-_u-- 2/'23/.54 '2/22/55 Cott Beverages Ine_--____uu_----------- ' Cotts Ginger Ale-, u_----_U-___-h___u 3/ 3j. 5/31!fil; Silver Skillet Corpm__uu_------u_-_u- Siller Skillet Foods____u--_uuuu---- 3/101. 3/ 'J/f,5 James R. Barry COh_--_--_UU____hUoo Priority Tunan_u___--_uu_-_u_---_u 3/J,5/M 3/14/5.'i I-I. & l\J. Packing Co_----------_u_ --_u- CNonel Prune Juiceu___u_---------u 4/ '6/54 4/ 7f.;;.. Southern Biscuit, Co_--_u_-----_uu__u- F. . Craekprs--h_-__U-------------- 4/'23/,54 12/:n/. Chun :King Sales Inc____uuu_-----_uu Chul1 King Chow J\lein.__u_-----_u_u 5/21/. .5/~10!!i1) The Gerber Company- _uuu_--U_Uh_- Gerber Baby l\leatsuu_----_huu_un 7/I/5'! fI/30/D5 Klf~en\\'ay Products Inc---uu__-----uu- Kleen1\\'av S:md,,- ieh B:'gS___--u_uu_u i/13/Ed 7/1 '2/;:,, Knouse Foods Incuuoo_u_---- -..uu_-- I Luekv Lear Pie Fillin~s:_ _u_uu_u- 10/ 1/5'1 fI/30!:~(i hudson Du!lrtway Corp____u_- Room 1/ !/!j!i 12/31/.51\ CieaDl'I"-__u-----u- --uu- i Vaniih (.e1l(',rail\-.11115, 6/1.5/.5(\ Inc., O-Cel-O Dln~lOIL__- --_u_-----oo-- 3/15/:':; Bathspongl,s_u_----- 1 4/13/5:; 4/1 2/;,(i Seabrook Farms Frozen Foods_ Seabrook'O- CI'.I- O COunu______unuu_u __--u_uu_uoo C. Economou Cheese Corp___u_---_uu- Aspro Cheese Sabel Dressing__n __u_--- 11/ 7/.55 I 11/ 6/51; All of the above advertisers appear to be vendors of products which are sold in grocery chains. ,Vhile it has not been stipulated whether all of them were. suppliers of Grand Union, respondent has admitted in its answer that 28 of its suppliers contracted with Douglas Leigh as participating adve.rtise.rs on the sign. It ma.y be assumed therefore that all of the above 30 advertisers, with possibly two exceptions, were suppliers of Grand Union. 13. The participating advertisers 'were not supplied with copies the basic agreement between Grand Union and Douglas Leigh, dated August 6 , 1952, nor with the letter of August 20, 1953, amending such agreement. None of the par6cipating advertisers was advised by Grand Union that Grand lJnion did not pay to Douglas Leigh an amount commensurate with the relative advertising value of the spectacular sign to Grand TJnion or that Grand Union had rights with respect to the use of five of the 20-minute cycle provided by the contract of August 6, 1952, or that Grand Union was entitled to receive from Douglas Leigh a return in money as provided by the Jetter of August 20, ID53.

14. Grand Union interested certain but not all of the participating advertjsers in entering into contracts with Douglas Lejgh to participate in the sign. Some. participating advertisers were, interested in THE GHAND UNION CO:MPANY 391 382 Findings the sign in the first instance by Douglas Leigh and at least one participating advertiser was not soEeited either by Douglas Leigh or Grand Union, but approached Grand Union with a merehandising program that included participation in the sign. However, the contracts betwe,en the participating advertisers and Douglas Leigh were an made with the knowledge of Grand Union and its approbation. In most instances the desirability of using the spectacular sign was discussed between the prospective participating advertisers and Grand Union before the participating advertisers contracted with Douglas Leigh. In a number of instances, as part of the discussions with Grand Union concerning the prospective participating advertiser s becoming a participant on the spectacular sign, a specific. schedule of in-store promotions was arranged with Grand Union to tie in with the participating advertiser s use of the spectacular sign. In some instances the decision of participating advertisers to enter into a contract with Douglas Leigh to participate in the Broadway sign or to renew such participation was based on the specific. assurance and agreement. of Grand Union that they would receive the benefit of certain in-store promotions. In some instances the decision to participate was based on Grand Union s agreement to take on additional items in the supplier s Ene or to handle the supplier products on an exclusive or other preferential basis. 15. Examples of the part played by Grand Union in securing the participation of various of its suppliers on the sign and of the understandings had with them: as reflected in the documentary evidence in the record, are as follows:

a. Judson Dunaway Corporation:

(1) An interofllce memorandum from Grand Union assistant merchandise manager to its direetor of merchandising, dated September 13, 1954, contains reference to the following conditions sought by Judson Dunaway as the basis for its agreeing to participate in the Broflclway spectaeular sign:

'" In consideration of the Grand Union Company s stocking six (6) moth preventath" , one air refresher, King Size Vanish (we now stock the regular size), Delete Rust and Stain Remover, and Elf Drain Cleaner, Judson Dunaway would take the sign.

* * * The six moth preventatives would replace six items we now stock in this line under various labels at the present time. The Bug-a-boo Air Refresher would replace Airwick Air Mist. Acceptance of the Judson Dunaway proposition would mean the addition three items to our line (add 10 items and discontinue 7 similar items now stocked) .

* * * In consideration of the Judson Dunaway Corporation taking the Broadway Spectacular, they ask that the Grand Union Company stage four feature promotions throughout the year as outlined on the attached sheet. :392 FEDERAL TRADE COM:M:ISSION DECISIONS Findings 57 F.

The record does not contain any documentary evidence indicating whether Grand Union accepted the Judson Dunaway proposal. has been stipulated, however, that Grand Union did carry certain products competitive with some of the above products of Judson Dunaway, but that Grand Union did not carry during the period of that supplier s participation on the sign moth crystals or rust and :stain removers or moth repellant closet hangers directly competitive with Bug-a-boo l\1:oth Crystals, Delete Rust and Stain Remover, and Bug-a-boo Closet Hangers.

(2) Prior to the renewal of Judson Dunaway s participation in the spectacular sign, it had further correspondence with Grand Union indicating the basis upon which it would agree to renew its participation in the sign. In a proposal dated November 30, 1955, Judson Dunaway stated that during the current year: "The 'Broadway Spectacular' promotion was tied- in with the following 'in-store product. features" (referring to four in-store promotions which had been agreed on for 1955), and proposed to renew its participation on the sign for another year on the condition among others, that it receive certain specified in-store' product features " the following year. In a letter dated December 8, 1955, addressed to Grand Union .Judson Dunaway supplemented its presentation of November 30, by indicating that it had omitted to mention in the latter document that "we would like to continue with the exclusive arrangement on Bug-a-boo products during 1956. "\Von t you please make this letter a supplement to that presentation." The December 8 letter also referred to the fact that the company s advertising department had advised it that "we must renew our eon tract. for the Broadway Spec.tacular within the next couple of weeks, and it requested that Grand Union "advise us of your final decision concerning this promotion by December 16 if possible b. Swanee Paper Company:

(1) A memorandum from Frederick Gash, the broker for Swanee to the president of the company, dated November 2, 1953, a copy which was sent to Grand Union, indicates that in April 1952, Grand Union had discontinued the purchase of Swanee s toilet tissues at several of its branches but that " (aJs a result of your arrangement on the Broadway Sign deal in July of last year" Swanee had been able to sell facial tissues, towels and napkins to one of Grand Union branehs, and that in 1953 had been able to sell facial tissue and towels to two of the other branches. The letter further indicates that "since you went into the Broadway Sign deal and because of the various merchandising display deals, you have increased your business with this company" by 13 400 cases. Despite this increase THE GRAND UNION COMP ANY 393: 382 Findings the letter indicates that the account was "too costly for' the amount of business we are doing, but suggests that the solution was to increase the amount of its sales to Grand Union rather than "to cut down on the amount of money appropriated for this account". In a letter to Grand Union s director of sales, enclosing a copy of the above letter, Swanee s broker stated that when the Grand Union office.ial talked to Swanee s president "you will find that he is not much interested in cutting down the program with Grand Union as he is in getting more business for the money he has allocated to the account."

(2) By letter dated December 7, 1953, Douglas Leigh advised Grand Union that it had received advice from two participants the Broadway sign, one of which was Swanee Paper Company, that they "do not intend to renew on the Broadway sign. The letter suggested: "Perhaps you may be succ.essful in securing a reversal of these decisions (3) Apparently respondent was successful in securing a reversal of Swanee s decision not to participate in the sign. In a letter dated l\iarch 18, 1954, from Douglas Leigh to Grand Union reference was made to S'wanee Paper Company as being among those with whom arrangements had been completed for participation in the sign. The Jetter also contained the query: "Are there any other accounts that you have been "\working on who will be ready for me to see in the near future?"

(4) An interoffice memorandum from Grand Union s Grocery merchandising manager to its director of merchandising, dated September 8, 1955, indicates that in that year Swanee had again offered resistance to renewal of its participation on the Broadway sign under a contract which would expire in ~iarch 1956. The letter contains the statement that: "Swanee advises that, because of pressure from other concerns, they will be unable to renew for another year . The memorandum also contains reference to an offer to Grand Union by a competitor of Swanee to participate on the sign as follows: Hudson Paper Company is now wH1ing to take the Sign starting in March for one year at a cost of $12,000, providing 've stock their toilet tissue. If we accept this proposition, I ,vould ask them to sign up with Douglas Leigh at this time, with their participation starting next March. (5) A letter from Douglas Leigh to Grand Union dated November 16 , 1955, also refers to Swanee s reluctance to renew its participation in the sign which would expire February 14, 1956. The letter refers to the fact that the writer had talked to a representative of I-I hudson Paper, who had indicated that the latter was willing to enter into a. participation on the sign " , as, and when National :;, Findings 57 F.T:C.

Paper 1 may advise that National will not renew." The letter also inquired if there was anything which Douglas Leigh could do to aid in conversations which Grand Union had had with other suppliers exploring participation" in the sign.

c. O-Cel-O Division of General :Mills:

(1) An interoffice memorandum between Grand Union officials dated December 22, 1954, indicates that the O-Cel-O Division of General :Mills had submitted a proposal to participate in the sign project as follows:

'The O'Cello Company~' is willing to take the Broadway sign at $12 000 and a 500 participation in the January, February Sales Drive providing ,ve add their number 25C sponge and discontinue the Du Pont Sponge and the Nylonge and give them fh-e other promotions during the year. (2) A letter dated January 6, 1955, from O-Cel- s broker, Frederick Gash, to Grand Union indicates that Grand Union had accepted O-Cel- s proposal for participation on the Broadway sign on the condition that Grand Union would discontinue the sale of dupont sponges. Respondent did not, however, agree to discontinue the sale of Nylonge sponges, although it agreed to give "serious and sympathetie consideration to stock.king a competitive sponge of Cel- s when it was offered to the trade several months later. The letter contains the following provision with respect to the tiebetween O-Cel- s agreement to participate on the sign and the affording of in-store promotions by Grand Union: 'The O-Cel-O Company agrees to buy a participation in the Douglas Leigh spectacular sign. We are advised by the Douglas Leigh Sign Company that they have made an arrangement with the Grand Union Company that their participating aclvertiser will get from the Grand Union Company, what the Grand Union identifies as "five pay-day pay-offs . The "pay-day pay-off" is an obligated mass floor or basket display for one week. These displays will be scheduled periodically throughout the year, and no doubt will be timed to fit into O-Cel- s merchandising and ach"ertising program. , Inc.. d. Snow Crop l\Iarketers Division of Clinton Foods Correspondence between Grand Union and Snow Crop in July and August 1952, indicates that. an understanding with respect to the exclusive hand11ino" by Grand Union of nroc1ucts advertised on the Broadway sign by partic.ipating advertisers was a part of the agreement between Grand Union and at least some of the suppliers who agreed to take a partic.ipation on the sign, as follows: (1) In a letter c1a ted July 3, 1952, from the advertising mamlger of Grand Union to a representative of Snow Crop, which indicates that the Grand Union representative had discussed participation in 1 Swanee s former corporate Dame WDS National Paper Corporation. THE GRAND UNION COMPANY 395 382 Findings the spectacular sign with the Snow Crop representative, the following statement appears:

l,Ve can use an;\" of your products except the orange juice. The orange juice is eliminated because we are not scheduling any conflicting products and Flamingo has already signed.

(2) Following this Snmv Crop advised Grand Union by letter dated July 29, 1952, that it was not interested in participating in the Broadway spectacular sign. However, the matter was reconsidered after it became appnrent. that Flamingo was not going to participate in the sign. This appenrs to be the basis of a letter addressed to Grand Union by Snow Crop dated August 15 , 1952, in which it advised Grand Union as follows:

Confirming m~' phone con'\ersation with :\11'. F. S. Ferry in your office, I have discussed ,with lIlr. Stanley MacArthur of the Doug Leigh Organization the confliction that would arise from the showing of Flamingo Orange Juice and Snow Crop products on the same billboard. Upon Mr. MacArthur s assurance that Flamingo would remain completely out of the program and that no other Frozen Food or Citrus Concentrate would be represented on the program, we have decided to participate * * * (3) A letter from Douglas Leigh to Grand Union dated January , 1054, indicates that the former had received advice from Grand Union that "Snow Crop l\larketers has agreed to renew their participation on the Broadway sign for a second year. e. C. Economou Cheese Corporation:

(1) A letter dated October 5 , 1955, from the attorney for the above company to Grand Union indicates the following understanding with respect to in-store promotions:

'" * It is my understanding from you that as part of our renting this sign we wj)) be entitled to four in-store promotions In each of the Grand Union Stores during the year and also four newspaper advertisements in connection with the promotion of this product. 'Voulcl you please confirm this to me and further' indicate in how many newspapers these four yearly ads are to run * * * (2) A reply from Grand Union to the attorney for the above company, date.c1 October 17 , 1955 , contains the statement that wished toverify the fact that you will receive in return for participation in the Broadway sign, foul' in-store promotions during the year, at which times the Salad Dressing will also be featured in our ac1yertising. J.6. As a result of the operation of the sign under the terms of the letter of August 20, 1953, which provided that Grand Union would receive five percent of the monthly rentals paid by the first fifteen advertisers and all of the rentals (arter deduction of agency commissions) of the remaining five nc1vertisers Grand Union re- 396 FEDERAL TRADE COML\IISSION DECISIONS Findings 57 F.

ceived from Douglas Leigh between July 1954 and February 1955 the sum of $14 633.28.

In addition, Grand Union made certain time and space trades with others, under the provisions of the original agreement which allotted it five minutes of advertising time during every 20-minute cycle.. Such trades were made with WCBS-TV, II Progresso Newspaper and'VRCA-TV. In the case of 'VCRS- TV and 'VRCA- , Grand Union received, in exchange for the use of parts of the five I-minute. periods to which it was entitled, broadcasting time at "card rates (standard rates) equivalent to the spectacular sign time, the value. of which was computed at the rate of $1 000 for one minute per 20-minute cycle per month. The computed value of the spectacular sign time was approximately $39 000, and Grand Union received at card rates" approximately $39 000 worth of broadcasting time. In the ease of II Progresso: an arrangement was made under which Grand Union was to receive, in exchange for use of part of the oneminute periods to which Grand Union was entitled, a credit against the cost of advertising space in 11 Progresso, taken at the rate of 30i a line. The arrangement was that II Progresso should receive. one minute of the 20-minute cycle, the value of which was computed at the rate of $1 000 a month, and in exchange Grand Union was to receive 1 000 lines of advertising space a week, paying approximately $50.00 a week to II Progresso to make up for the difference between the values exchanged.

In addition to the cash received by Grand Union and the "trade time" in other media, as described above, Grand Union also received valuable advertising on the spectacular sign. The advertising value of Grand Union s portion of the sign was estimated by Douglas Leigh in letters to Grand lTnion to be approximately $10 000 per month. While Grand Union has not accepted this estimate, it agrees that the. advertising value of the sign was substantial. 17. Although the agreement of August 6 , 1952 between Grand Union and Douglas Leigh, estimated that the sign would go into operation within 60 days, and was subject to cancellation by August , 1962 if Grand Union did not secure the necessary number of participating advertisers, the sign did not actually go into operation until December 10, 1952. At the time the sign was turned on, representatives of the participating advertisers, the press and others were invited to a ceremonial initi ation of the sign, the expense of which was borne equally by Douglas Leigh and Grand Union. Just before the sign went into service, a press release was issued on November 28, 1952, with the approval of Grand Union, and sent to various newspapers in the New York metropolitan area and to nineteen trade periodicals. The release purported to be a joint THE GRAND UNION COMPANY 397 382 Findings :statement by Grand Union and Douglas Leigh and referred to the sj"gn as "a new venture in cooperative outdoor advertising * * * to promote Grand Union and fifteen different food store products. The release further stated: "This joint effort with fifteen of our manufacturers is a natural step which follows the success of cooperati ve radio and television shows * * * 18. In connection with efforts by Douglas Leigh and Grand Union to sen space on the animated portion of the sign, Douglas Leigh prepared an advertising circular as a sales aid, which it circulated to each participating advertiser and to Grand Union. The advertising circular referred to the sign as "The Grand Union Spectacular" and contained reprints of a number of newspaper articles, some of which referred to the sign as a "Grand Union Sign, or as part of a "new cooperative outdoor advertising program . The circular also contained pictures of the sign in actual operation and showed the animated portion with the products of each of the fifteen participating advertisers displayed thereon. One of the trade papers, an extract of which was contained in the circular, referred to the sign with the legend: "Sky s the Limit in Cooperative Advertising. 10. A copy of the above circular was received by Frederick Gash broker for a number of participating advertisers on the sign, including Swanee Paper Company and the O-Cel-O Division of General l\iills. Frederick Gash on February 11 , 1953, addressed a letter to Douglas Leigh stating that he found the circular "objectionable in every respect". The primary basis of the objection was stated to be that the sign "is not a Grand Union sign-it is a Douglas Leigh sign with participating sponsors including Grand Union . The writer objected to the fact that the circular "has now established the sign as a Grand Union Co-op deal and not a straight advertising proposition comparable to NBC's chain lightning or Storecast." The letter further stated that:

As a result of this stupid publicity every sponsor is now being put on the carpet by Grand Union s competition. And they are right because it has now been made clear as dayHght that Grand Union has been given a preference. The letter referred to the fact that Grand Union "was having trouble getting sponsorship because of the co-op angle" and concluded with the statement that the writer s four sponsors on the sign were now in jeopardy . A copy of Gash's letter was sent to respondent. 20. :Many of the particjpating advertisers had cooperative advertising and promotional allowance programs which were generally announced to their customers and which were available to such customers. Grand Union did not inquire concerning the advertising or other promotional arrangements or allo\\ances of the participating advertisers wjth other retailers add was not informed by the partici- Findings 57 F.

pating advertisers concerning such allowances or arrangements, except in the case of the announced programs of such advertisers. Grand Union believed it "as a prevalent practice to deviate from such announced advertising allowance programs. None of the participating advertisers had generally announced terms of sale or announced advertising allowance programs available to an customers that included provision for participation in a spectacular sign, and Grand Union "-as not informed of any such generally announced programs by said participating advertisers. The judgments of the suppliers concerning the desirability of participating in the spectaeular sign program were based, among other things, on the projeetions of sales and projections of the merchandising value of participating in the program.

21. In general: the arrangements for participation in the spectaeular sign by suppliers "-ere not negotiated as uses of any of the announced advertising allowance programs of such suppliers. Except in the case of the Snow Crop Division of Clinton Foods, Inc. the cost of participating in the spectacular sign was not specifically and directly charged against it, or specifically stated to be. in substitution for, a standard or regular advertising or promotional allmyanee stated to be offered by the participating advertiser to all customers alike. In one or more instances, suppliers who were participating advertisers on the sign contemporaneously entered into announced advertising allowance programs 1\~ith Grand Union distinct from the suppliers' participation in the spectacular sign. 22. So far as Grand Union was informed, none of its suppliers who 1\-as a participating advertiser, entered into any other spectacular sign program with any other suppliers in which the spectacular sign carried advertising of a customer of such suppliers competing in the distribution of the suppliers' products with Grand Union. 23. The record contains evidence with respect to the advertising allowance programs of specific suppliers of Grand Union, and with respect to whether it. had any knowledge of the nonavailability to other customers of payments made by such suppliers under the Broadway sign program: as follows:

a. O-Cel-O Division of General :J\lills, Inc. : (1) During the time it was a participating advertiser the O-Cel- Division of General l\lills, Inc. offered to its retail customers, ineluding those in competition with Grand Union, a cooperative advertising contract. under which O-Cel- agreed to pay for' specified advertising or promotional service an amount equal to five percent of the customer s purchase price of Cel- products during the period covered by the contract. Such contracts were initially limited to newspaper advertising but were later amended to c.over radio and THE GRAND UNION Camp A:t\-Y 399 382 Findings television advertising as well. The aforesaid arrangement was the only cooperative advertising program of O-Cel- generally announeed and available to all its customers. In 1955 Grand Union received from, or had billed to, O-Cel-O $881.30 under such contracts. (2) The amount paid to Grand Union under O-Cel- s cooperative advertising contract was distinct from amounts pa.id by O-Celto Douglas Leigh for participating in the spectacular sign. The latter amounts "\were not charged against or otherwise directly related to the amount payable under O-Cel- s cooperative advertising con tract.

(3) Except for the five percent cooperative advertising allowance described above, O-Cel-O did not payor offer to payor contract to pay to certain of its customers conducting retail stores in competition with Grand Union, anything of value to or for the benefit of such customers as compensation or in consideration for any services or facilities furnished by or through such customers, in connection with the processing: handling, sale, or. offering for sale of any Cel-O products.

( 4) As has been previously indicated in paragraph 15, one of the conditions of O-Cel- s agreement to participate in the Broadway sign was an agreement on the part of Grand Union to discontinue the purchase of dupont sponges, O-Cel-O had also sought to induce Grancl Union to cease carrying the Nylonge line of sponges, but Grand Union had refused to accede to this request and the arrangement was nevertheless concluded. In a letter dated January 6, 1955 addressed to Grand Union, O-Cel- s broker made the following statement:

Frankly, the O-Cel-O people were considerably let down when they heard that you would continue to stock Nylonge and it required some strong selling on my part to approve the deal. They feel that they have gone on the line for $14 500.00 in the next twelve months. The 1whole idea ot the deal was u.nprecedented and, when one thinks about it, is is very possible that Grand Union did not make a gross profit an of last year of much more than $14 500.00 on their entire sponge business. However, I assured my principals that my own experience 'with the Grand Union Company has been so exce))ent these past years that they would not regret going into this 1t11precedented kind ot a deal. (Emphasis supplied.

(5) General :Mills' O- Cel-O Division participated in the sign from l\lareh 15 , 1955 ~ to June 14 , 1956, and from September 15, 1956 to Deeember 14, 1956. It paid to Douglas Leigh approximately $18 000. b. Judson Dllnaw.ay Corporation:

(1) The advertising and promotional a))owance programs of Judson Dunaway Corporation in effect during 1955 and 1956 were set forth in various bulletins which the company sent to its brokers and sales representatives. For its line of products sold under the Bug-a- 400 FEDERAL TRADE CO:M:MISSION DECISIONS Findings 57 F.

boo label it offered to chain stores a 10 percent allowance based on their Bug-a-boo purchases, for fully paid advertising. A 10 percent promotional allowance was likewise offered on Bug-a-boo products in 1956.

For its products Vanish and Elf, it announced that during the spring of 1955 it planned to keep its cooperative advertising program to "an absolute minimum" due to its "increased national advertising and "because we know that most cooperative advertising is money wasted * * * " No provision for cooperative advertising was made in the 1955 fall program for Vanish and Elf. For the first six months of 1956 it announced that it would do "little if any co-op newspaper advertising on Vanish and Elf.

On its product Delete, it announced no cooperative advertising allowance program in 1955. For the first six months of 1956 it announced that for "Chains and co-ops" it would pay a "20~ per dozen cooperative advertising allowance on purchaces January 1 through June 30.

(2) Grand Union did not receive any allowance under the Bug-aboo promotional allowance program of Judson Dunaway described above or any premium or other arrangement with respect to other items in the Judson Dunaway line. At the time of its dealings with Judson Dunaway, Grand Union did not have specific knowledge as to the scope and nature of Judson Dunaway s Bug-a-boo promotional allowance program, or its premium or other arrangements with respect to Judson Dunaway s other lines.

( 3) Exee.pt for the promotional programs described above, Judson Dunaway did not payor contract to pay to certain of its customers conducting retail stores in competition with Grand Union, anything of value to or for the benefit of such customers as compensation or in consideration for any services or facilities furnished by or through such customers, in connection with the processing, handling, sale, or offering for sale of any Judson Dunaway products. (4) Judson Dunaway s participation in the sign extended from January 1955, to December 31 , 1956, and it paid the sum of $24 000 to Douglas Leigh. A Grand Union interoffice memorandum dated September 30 , 1954, indicates that because Judson Dunaway would be the nineteenth participant on the sign "all $12 000 ,,-ill be returned to Grand Union for our account." It does not appear whether this situation continued during the year 1956. c. Swanee Paper Corporation:

(1) The participation by Swanee Paper Corporation in the spectacular sign "Was distinct from Swanee s generally announced ad vertising and promotional program, and the money paid by S,,-anee to Douglas Leigh, for Swanee s participation in the spectacular sign , THE GRAND UNION COMY ANY 401 382 Findings was not charged against the amounts that Grand Union would. qualify for under Swanee s generally announced advertising and promotional program.

(2) In 1955, Grand Union received from Swanee, allowances for displays in Grand Union stores equal to $5.00 a month for each store or $2.00 a month for each store (depending on the size and nature of the store) based, respectively, upon a five-case and twocase display of Swanee s toilet tissues during a part of each monthly period in respect of each store to which the display payment or allowance related. Payments for displays on the same basis were made by Swanee to two other grocery chains. (3) Except for the . promotional programs referred to above Swanee did not payor offer to payor contract to pay to certain of its customers conducting retail stores in competition with Grand 1Jnion, anything of value to or for the benefit of such customers as compensation or in consideration for any services or facilities furnished by or through such customers, in connection with the processing, handling, sale, or offering for sale of any Swanee products. (4) As has already been noted Swanee advised Grand Union around September 1955 that it would not renew its contract on the Broadway sign, which was to expire in ~larch 1954 because of pressure from other concerns . The "pressure. from other eGncerns referred to by Swanee was to customers of Swanee competing with Grand Union. After further contacts between representatives of Swanee Douglas Leigh and Grand Union Swanee did agree to participate in the sign for another year. (5) In November 1953, during the first year of its participation on the sign, Swanee s broker advised the president of the company that since it. had gone on the sign it had increased its business with Grand Union by 13 400 eases and had paid out during this period $10 000 for the Broadway sign and about $8 000 in various display and cooperative advertising deals. The letter stated that despite the increase in sales the account was "too costly for the amount of business we are doing with them, and the writer suggested that the president in a proposed conference with Grand Union endeavor to increase the business with Grand Union suffieiently to justify the expense. A copy of this letter was sent to Grand Union by Swane. broker who, in his letter of transmittal, stated: The fact is that the Grand Union Co. is the costliest account that National Paper has on its books. It costs them too much money for the amount of business they get.

d. Seabrook Farms Co.

(1) During the time it \Tas a. participating advertiser Seabrook Farms had a regular cooperative advertising allowance of 5i per G-!O9GS-G8- 402 FEDERAL TRADE COMJ\lission DECISIONS Findings 57 F.

dozen, under which Grand Union was receiving payments. In addition Seabrook Farms gra.nted Grand Union a promotion allowance of 10~ per dozen. These payments were in addition to the payments made to Douglas Leigh 'for participation by this supplie-r on the Broadway sign.

(2) On July 8, 1955, a representative of Seabrook Farms wrote to Grand Union calling attention to the payments which had been made of 5~ per dozen under the regular cooperative advertising asprogram and the 10~ per dozen promotional allowance program, well as other concessions which had been granted to Grand Union and also referred to the fact that its participation in the Broadway sign was costing it more than 5~ per dozen and that it was likewise granting "quarterly speeiaJ Grand Union promotions" allmyances. The writer of the letter made the following proposal with respect to the 10~ per dozen promotional allowance: As you know, we established the lO(t prior to our cooperating on the Broadway sign. We believe that ,ye get additional value out of the sign, but based on current volume the cost of the sign is slightly in excess of 5(t per dozen. We suggest reducing this a))owance from 10(t to 5~. It does not appear what response, if any, Grand Union made to the request of Seabrook Farms to reduce the 10i-promotional allowance to 5~. I-Iowever, it does appear that Seabrook ceased to be a participant on the sign in ~larch of 1956 , after its one-year contract expired.

e. Snow Crop :Marketers:

(1) The only instance in the record involving payments for participation in the Broadway sign which purport to be made pursuant to a generally announced advertising program is that involving Snow Crop :Marketers Division of Clinton Foods, Inc. Snow Crop had a generally announced cooperative advertising agreement pursuant to which it agreed to reimburse ach-ertisers for advertising at various rates in an amount not to exceed 5~ per dozen of Snow Crop products purchased by the advertiser. In June 1952 when Snow Crop submitted its cooperative advertising agreement to Grand Union for signature, representatives of Grand Union conferred regarding the possibility of having Snow Crop participate in the Broadway sign by applying the. amounts to which Grand Union would be entitled under the cooperative advertising. It was estimated that Grand Union s annual purchases of about 390 000 dozen of Snow Crop products at a rate of 5~ per dozen would yield about $20,000 durinf!.L.- the term of the contract. (2) Grand 'Union advised Snow Crop by letter dated July 3 1952, that the cost of participation in the spectacular sign would THE GRAND UNION COl\fP ANY 403 382 Findings be $12 000 a year and that it. "could very comfortably work the $12 000 into the cooperative advertising agreement. we are holding. Snow Crop at first declined to participate in the sign because Grand Union at that time expected the Flamingo Company, another vendor of orange juiee~ to participate in the sign. flowever, when it became apparent that. Flamingo would remain out of the sign program, Snow Crop agreed to participate on the understanding that the $1 000-a-month contribution toward the sign would be paid out of its regular cooperative advertising program. The arrangement was handled on the basis of Grand Union s signing a contract with Douglas Leigh for the advertising of Snow Crop products on the spetaeular sign, with payments' to be made by Grand Union and to be reimbursed by Snow Crop out of the regular cooperative advertising allowance of 5if, per dozen.

(3) The cooperative advertising agreement which Grand Union entered into with Snow Crop recited: "This agreement is available on proportionately equal terms to an other customers of Seller eompeting in the distribution of said Snow Crop products in the same trac lllg area.

24. Grand Union s purchases from certain of the suppliers who participated in the Broadway spectacular sign for the periods previously indicated are as follows:

Judson Dunaway Swanee Paper Cel- 1953--n- nO -- - nn - n - - 0- - - - n- 0 $14 , 5S6. 00 $222, 752. $14 913. 1954-- --- - -- - -- - 505. 266 284. 75 19, 092. 1955. - -- - - - - -- - - - - -- - - - n - - - - -- - - - - 0 - - - - - - - - - 94, 632. 255, 178. 45, 861. 80 1951L_- - - - - -- - - - n- - - - n_n - - n - n ~' 101 935. 221 119. 402. rotal- - - n - --- - - - -- - $~32, 658. 77 905, 335. 44 140 270. 25. The total purchases by Grand Union and subsidiaries from all suppliers during the same periods were as follows: Fiscal year ending Feb. 28 Amount 1953 ---------------------------------- $151 872,444 1954 ---------------------------------- 164 362 836 1955 ---------------------------------- 177 879 811 1956 ---- ------------------------------ 229,442 899 26. It has been stipulated and it is, accordingly, found that the transactions between Grand Union on the one hand, and the O-Cel- Division of General :Mills, Inc., Judson Dunaway Corporation and Swanee Paper Corporation, respectively, on the other hand, were in commerce2, as defined in the Federal Trade Commission Act. Findings 57 F.

CONTENTIONS AND CONCLUSIONS The complaint. charges respondent with having violated Section 5 of the Federal Trade Commission Act by knowingly inducing or receiving certain payments and benefits from suppliers which were not made available on proportionally equal terms to its competitors. The making of such discriminatory payments by the suppliers, if established, 1\70uld constitute a violation by them of Section 2 (d) of the Clayton Act. This proceeding in effect, therefore, charges respondent with having knowingly induced various of its suppliers to violate Section 2 ( d) of the Clayton Act. respondent contends that counsel supporting the complaint have failed to establish a violation of law on its part. because (a) the payments made by its suppliers toward the Broadway speetacular sign were not illegal under Section 2 (d) of the Clayton Act, (b) that even if such payments were found to be a violation of Section 2 ( d) in a proceeding against the suppliers, the record fails to establish the knowing inducement by Grand Union of any illegal payments, and (c) that in any event, the knowing indueemcnt of payments which are illegal under Sec.t.ion 2( d) of the Clayton Act does not constitute a violation of Seetion 5 of the Federal Trade Commission Act. It is also contended, additionally, that no cease ~1nd desist order should be issued, even if a violation of law exists, because the infraction terminated prior to the issuance of the complaint. To a consideration of these contentions, the hearing examiner now turns.

a. The Alleged 2( d) V ioZations The basic elements of a Section 2( d) Clayton Act violation are (1) the making of a payment "to or for the benefit of a customer (2) "as compensation or in consideration for any services or facilities furnished by or through such customer, and (3) the failure to make such payment "available on proportionally equal terms" to all other customers competing with the favored customer. As applied to the fac.ts in this case it would be necessary to show that the payments by Grand Union s suppliers toward the Broadway spetacular sign were "to or for the benefit" of Grand Union, that they were made in return for services or facilities furnished by or through Grand Union, and that the suppliers had failed to make such payments available on proportionally equal terms to competitors of Grand Union with whom they dealt.

Respondent contends that the payments made by the suppliers did not violate Section 2 (d) because the "financial and other bene- , THE GRAND UNION COMPANY 405 382 Findings fits to Grand Union from the sign represented a fair return for its contribution to the Douglas Leigh sign project and ",ere not in fact payments' or 'consideration J"'eoeived lrmr& the Participating Advel' tiseTS but were in return for "services rendered by Grand Union * * * to Douglas Leigh, Inc. and not to the Participating Advertisers . Respondent's argument, in effect, is that the first two of the above requirements or a Seetion 2( d) violation have not been met since (a) there has been no showing or a payment to Grand Union" by the suppliers, and (b) "the only merchandising services involved (the in-store promotions and the alleged 'exclusives ) were not a term or, or a consideration for, pa.rticipation in the sign (by the suppliers) but an exploitation or its value in an overall integrated merchandising program "'\Vhile it is true that no payments were made by the participating advertiser-suppliers directly to respondent., it is sufficient under Section 2 (cl) if the payments were made "for the benefit of" Grand Union. There can be no question that as a. result or the suppliers payments respondent received very substantial benefits, including (a) valuable advertising on the Broadway spectacular sign at nominal cost, (b) valuable advertising in other me.dia in exchange for the advertising time to which it vms entitled on the sign and (c) substantial cash payments. There is also no question that as a result of the payments made by them the participating advertisers received not only valuable adver6sing time on the Epok panel, but. in many instances in-store promotions and, in some instances, exclusive or preferential handling of some or all of their products. Although not clearly spelled out, respondent's position appears to be similar to that taken by its supplier, Swanee Paper Corporation in a separate proceeding brought against that company for violation of Section 2( d) or the Clayton Act, in which the supplier urged that the payments made by it were not /01' the benefit of Grand Union because they ,were not made with the intention or purpose of benefiting Grand Union, but \,ere made solely in consideration or the advertising service furnished by Douglas Leigh. The supplier pleaded ignorance of the provisions of the separate contract between Douglas Leigh and Grand Union, and therefore contended that had no knowledge that Grand Union would receive the various benefits referred to above, in return for a nominal payment on its part. It was further urged that the in-store promotions received by the supplier were not furnished by Grand Union in return for the supplier s agreement to participate in the sign because they were not an explicit provision of any agreement ,,-iththe supplier and were Findings 57 F.

not intended to be a quid pro quo for the supplier s payments toward the sign.

In his initial decision in the Swanee Pape1' case, .filed August 18 1959, Docket No. 6927, this examiner has found these contentions to be without merit. The facts in the instant case are, if anything, stronger than those appearing in the S1oanee Paper record, insofar as establishing that the suppliers' payments were made in violation of Section 2( d) of the Clayton Aet. As pointed out in the Swanee decision, it is now established that Section 2 ( c1) "does not coneern itself ,with motive or intention, but only "with the consequences which flow from an act. If those consequences eventuate, the aet from which they result is forbidden. P. Lorillard 00. v. FTO 267 F. 2cl 439, 4"14 (CA 3, 1959). It is the fact of paying or contracting for the payment for the services or facilities * * * (which) proscribed", and the lack of " any ulterior 1Tlotive on the part of the supplier or the fact that there was no intention to favor the customer is immaterial. State 1Vholesale Grocers v. The Great Atplant-ic Pacific Tea 00- 258 F. 2d 831, 837 (CA 7, 1958), cert. denied sub 1101111. General Foods Oorp. v. State 1Vholesale Grocers 358 S. 947 (1959).

As in the instant proceeding, the Lorillard case involved two separate groups of contracts, one between a broadcasting company and various grocery suppliers, and the other between the broadcasting company and certain grocery chains. In addressing itself to the argument of the petitioners that in assessing the consequenees of the arrangement the Commission was restricted by the technical principles of private contract law which would be applicable in a private suit between the contracting parties, the court of appeals stated that (at 444)- :It * * the real question involved .;. * * is whether the petitioners have made payments to someone which actual11y are of benefit to their customers and not whether1' they have bOllllfl tl1emselt:es to do so by a legally enjoy1"ceable contract . (Emphasis supplied.

It is unmistakably e1ear that the payments made by the suppliers were of substantial benefit to Grand Union, irrespective of whether it was the intention of the suppliers to benefit Grand Union or mer~ly to pay for their own advertising. Such payments constituted the sale financial support of the program and but for them the plan would not ha"'Te gone into efiect or have survived. It is also clear that, in addition to receiving advertising on the sign, the partieipating suppliers received various services or benefits from Grand Union, irrespective of whether Grand Union had bound itself to furnish such services or benefits "by a legally enforceable. contract" THE GRAND UNION COMPANY 407 382 Findings or not. There would appear to be no question, therefore, that. the payments of the suppliers fall within the proscription of Section 2( d) of the Clayton Act, unless they were made available. on a proportionally equal basis among all their other customers who were competitors of Grand Union. The record establishes that generally speaking they were not made so available. I-Iowever, even if it were necessary to find as a fact that the payments made by the suppliers were made with the intent and purpose of benefiting Grand Union, in order to establish that they were for the benefit of Grand Union, there is ample evidence in the record to support such finding. The argument that the suppliers' payments were not intended to be for the benefit of Granel Union rests largely on the fact that the arrangements concerning the sign projacts were handled in two different groups of legal agreements, one between Grand Union and Douglas Leigh, and the other between Douglas Leigh and various of Grand Union s suppliers. Because of this it is insisted that the suppliers were ignorant of the benefits accruing to Grand Union as a result of their payments and that, so far as the suppliers were aware, Grand Union was paying for its own advertising (mainly on the static portions of the sign), while the suppliers were paying for their own advertising on the Epok panel. The hearing examiner cannot accept, as valid, this version of the fads which seeks to artificially fragmentize and compartmentalize an essentially unitary transaction. In the somewhat similar Chain Lightning cases (Doeket No s. 6592-6600), of which the Lorillard case was one, the respondent-suppliers likewise sought to hide behind the rampart of the separate contrac.tual arrangements but the Commission " refuse (d J to wear blinders and insist (ed J that the series of contracts be viewed as a whole. P. Lo'rill.ard v. FTO supra at 443.

Viewing the transaction here as a whole, there is no doubt that the suppliers understood that. they were participating in a sign project which for Grand Union s benefit and that their contributions were making it possible for Grand Union to obtain such benefits. is also dear that they made such contributions because. they expected to receive in return various services and benefits from Grand Union in addition to advertising on the sign. The very contracts between Douglas Leigh and the suppliers advised the latter that Douglas Leigh had leased the entire "Electric Spectneular Display (not merely the stationary portions) to Grand Union, and that while the suppliers were to have the use of the Epok panel portion of the sign, their advertisements had to be approved in advance by Grand Findings 57 F.

Union.2 The contract also advised the suppliers that unless Grand Union secured "signed contracts" from 15 (later 20) of them, the whole arrangement would not take effect. I-Iow it can be said, in the light of such provisions in their own contracts, that the suppliers did not know that their contributions were helping support a sign from which Grand Union was benefiting is difficult to understand. The active part which Grand Union took in securing the participation of its suppliers, and in inducing some to change their minds about renewing a participation, must have made it evident to the suppliers that Grand 1Jnion had more than an aeademic interest in their participation.

Any doubt which the suppliers may have entertained concerning Grand Union s beneficial interest in the sign certainly must have been dissipated by the physical aspect of the sign, which gave every appearance of being a Grand Union sign. Its name dominated the sign and the products flashed on the Epok panel were obviously being advertised as being for sale in Grand Union stores. The publicity issued regarding the sign by Douglas Leigh eharacterized it as a Grand Union sign, and it was so regarded in the trade. The correspondence between Grand Union and a number of the suppliers also makes it clear that the supplie-rs were aware that they were contributing to a Grand Union sign and that they did so because of their desire to confer a benefit on an important customer and not merely because of any general desire to advertise their products on a Douglas Leigh sign project.

Even if it were assumed that the suppliers were not aware of all the benefits Grand Union was receiving from their participation and that they thought Grand Union was making a contribution toward the sign, at the very least they knew they were contributing to a cooperative advertising project in which their. contributions made it possible for Grand Union to keep its name before the public. Their contribution in this respect was no different from that of any supplier who contributes towa-rd an ordinary cooperative newspaper advertisement with a customer. Such contributions are clearly proscribed unless made proportionally available to competing customers. The fact that the supplier receives an advertising benefit commensurate with the amount paid by him does not prevent his contribu- :! ReSlJOndent calls attention to the fact that while the agreement with the participating ad"\'ertisers refers to the fact that it had "leased" the sign from Douglas l.eight, itfi ()wn . agreement with Douglas Leigh grants it the " use and occupancy" of the sign. In the opinion of the examiner, this is a distinction without fi difference. In either event, it clear that the beneficial use of the entire sign was coll"\'eyed by Douglas Leigh to Grand Union, subject to certain stated conditions. &:

THE GRAND UNION COMPANY 409 382 Findings bon from also being for the customer s benefit. State Wholesale Orocen v. The Oreat Atlantic Pacific Tea Co. supra. There can be no doubt that the suppliers understood that as a result of the payments made by them, they would receive various services, facilities and other benefits from Grand D union. Not the least of these was valuable advertising on the sign itself, in which Grand Union had a substantial benefieial interest. Other benefits included instore promotions and, in some instances, the preferential handling of their products. From the discussions which took place with Grand Union, prior to the suppliers' agreeing to participate on the sign, with respect to Grand Union s affording them in-store promotions, it may be inferred that this was an important consideration in the suppliers' decision to participate. In the case of some of the suppliers this need not be left to inference since the correspondence c1iseloses that Grand Union gave some of them an express commitment to afford them in-store promotions in return for their agreeing to go on the sign. In the case of other suppliers a quid pro quo for their agreement to participate was Grand Union s commitment to add various of their products to its line and, in some instances, to handle their products on an exclusive or otherwise preferential basis.

It is accordingly concluded and found that a number of Grand Union s suppliers (a) in the course of commerce paid or contracted to pay something of value for the benefit of their customer, Grand Union, by their contracts with Douglas Leigh to participate in and contribute. toward the Broadway "spectacular" sign; (b) that the payments made by said suppliers were for Grand Union s benefit in that the latter received, as a result thereof, valuable advertising on the sign, valuable advertising in other media and substantial cash returns; (c) such payments were made as compensation or in consideration for services or facllities furnished by or through Grand Union to said suppliers in connection with the handling, sale or offering for sale of products manufactured by said suppliers, such services or facilities consisting of the advertising of their products on the Broadway "spectacular" sign, the furnishing of in-store promotions in Grand Union stores, the handling of additional products of said suppliers and the handling of the proc1l1ets, or of some of the products, of said suppliers on an exclusive or preferential basis; and (d) the payments or consideration made or furnished by a number of said suppliers were not made available on proportionally equal.1 terms to an other c.customers competing in the distribution their prochwts with Grand linion.

Findings 57 F.

b. The linow-tng Inducement In order. to establish a violation of law by respondent, as the customer, it must not only appear that it induced a payment by its suppliers which violated Section 2( d) of the Clayton Act, but that it did so knowingly. Respondent contends that in order to establish the latter fact it must appear that it had actual or construetive notice that the payments by the suppliers (1) were not made available on proporionally equal terms to competing customers and (2) were not cost-justified under Section 2 (b) of the Clayton Act. Respondent' s contention with respect to the nec.essity of establishing that the payments were not cost-justified is based on the holding of the . court of appeals in Shnplicity Patte1'n 00. , Inc. FTO 258 F. 2d 673, which has since been reversed by the Supreme Court, 360 U.S. 55. It is, therefore, unnec.essary to belabor the point that the cost-justification defense under Sec.tion 2 (b) is not available. in proceedings under Section 2 (d) or (e) of the Clayton Act. Aecordingly, it is unnecessary to establish, in a proceeding against the customer, that it had knowledge of the lac.k of costjustification on the part of its supplier. The only issue remaining therefore is whether respondent induced payments by its suppliers which it knew or should have known had not been made available on proportionally equal terms to all other customers of the suppliers competing with it. That respondent most instances induced the partic.ipating advertiser-suppliers to participate in the sign project is clearly established by the record. Its contracts with Douglas Leigh obligated it to obtain the participation of the requisite number of participating advertisers, at no cost or expense to Douglas Leigh. ~Iost of the participating advertisers were respondent's suppliers. ,Vhile there is some ambiguous referenc.e in the stipulated facts to the effect that respondent had "interested certain but not all of the Participating Advertisers in entering into contracts with Douglas Leigh, Inc., to participate in the sign the c.correspondence and other documentary evidence in the rec.ord establishes that for the most part Douglas Leigh relied upon respondent to interest its suppliers in participating in the sign and used respondent, in some instances, to bring pressure on suppliers who were reluc.tant to renew their participation in the sign. The question to be decided is whether in inducing a number of suppliers to participate respondent had reason to believe that they had not made equivalent payments to other customers. Respondent apparently concedes that actual knowledge on its part of the nonavailabjIity of the payments to other c.customers need not be ~ho,,' , but that "constructive notice" is sufficient. Under the THE GRAND UNION COMPANY 411 382 Findings Supreme Court's decision in a related situation, knowledge may be imputed frolll "trade experience" or from the fact that. the circumprudentstances "should have provoked inquiry in the mind of a v. FTC 346 U.S. 61 (1953).businessman. A1.l. t0'7natic Canteen 00. 'Vhile there may be some question as to whether the Court' s holding in that case with respect to the Government's burden of going forward with the evidence should be applied here in view of the manis costsfest difference between expecting a buyer to know his seller and expeeting him to know whether his seller has made similar payments available to other buyers, the hearing examiner will nevertheless regard the rule in that case as being applicable here. In the opinion of the hearing examiner, counsel supporting the eompla.int have adequately established that respondent knew or should have known that the payments which it induced its suppliers to mn.ke y,ere not being made available to its competitors. It has been stipulated that many of the participating advertisers had eooperative advertising and promotional allowance programs which were generally announced and available to their customers. It has also been stipulated that, with one possible exception (Snow Crop :l'.farketers), the arrangements for participation in the spectacular sign program ,,-ere not negotiated as a use of one of the announced advertising allowance programs. There is specific evidence that in the ease of at least three suppliers (O-Cel- Swanee Paper and Seabrook Farms) respondent ,vas the recipient of advertising al- Imvances under such generally announced advertising allowance programs. It seems clear, therefore, that. it knew or should have known thn.t the additional benefits which it was receiving under' the Broadway sign program were not part of any general advertising progrfll11 which WfIS being made available to its eompetitors. The stipulated fact that respondent "believed it was customary to does not n~gatedeviate from such announced ad,-ertising programs" , atthe fact that it was in possession of information which should the very least., have put it on guard as a prudent man familiar with trade conditions and procedures in the handling of advertising allowances. Since it was receiving benefits from some suppliers under both a generally announced program and the special Broadway sign program, there would be no reason for it to expect that these suppliers "ere offering their other customers benefits equivalent to tho~e under the Broadwa.y sign by deviating from their generally announced programs. In fact, there is evidence that in several instances respondent was advised and actually knew that the benefits under the sign program were not generally available to other customers of its suppliers. Thus O-Cel- s broker advised it that "the deal wns unprecedented". Swanee s broker advised it that as a result. Findings 57 F.

of the advertising allowances of which respondent was receiving the benefit, it was the "costliest account" on Swanee s books. It was also later advised that Swanee did not wish to renew its participation " because of pressure from other concerns, which could only be interpreted as meaning that other customers were not receiving similar benefits. Despite this it prevailed upon Swanee to renew its participation. Respondent also was advised that the payments toward the sign by Seabrook Farms were in excess of a generally announced advertising allowance and an apparently special promotional allowance. There is no indication that respondent acceded to the request that the special promotional allowance be cut to give recognition to payments being made under the sigri program. From the fact that Seabrook dropped out of the sign program when its contracts expired, it may be inferred that its proposal was unaceeptable to respondent.

Respondent has attempted to explain away various of the facts in the record as being subject to an innoeent interpretation. Thus it characterizes as mere "puffing" and as a hearsa.y argument, the statement in the letter of the broker for various participating suppliers that pressure was being put on sponsors to give equivalent allowances to Grand Union s eompetitors. However, while each fact might, if considered in isolation, be explained away, the cumulative effect is such that they inevitably impel the conclusion that respondent was aware or the general nonavailability of the sign benefits to other customers.3 The facts must be interpreted in the light of the fact that respondent was not a mere passive recipient of normal advertising allo\\"ances: but was an instigator and cooriginator or the sign project and, as such, must have been aware that it involved a specially "tailored", negotiated program which it would be very difficult to make generally available on a proportionally equal basis to its competitors. Atalanta T1'adi-ng Oopp. Doeket No. 646-1, December 20 , 1056.

Perhaps most decisive of the issue of knowledge is the fact that the whole program "as devised as a method or avoiding the necessity for suppliers ' having to proportionalize their payments. There can be no doubt that. the idea of t1\- O separate groups of contracts was conceived as a device for supporting the claim that the plan did not involve cooperative advertising allowances of the type which would hate to be made available to other customers. The plan wa.s apparently patterned a.iter the so-called chain lightning advertising plan in the broadcasting industry which had not yet been declared 3 The letter abo\"c referred to is considered to have evidentiary value not as proof of the facts therein asserted, but as evidence which sbol1ld have put respondent on notice as to how the program was being interpreted in the industry. THE GRAND UNION COMPANY 413 382 Findings illegal by the Commission. ,Yhile it may be that the parties were acting in good faith, in the belief that by setting up the plan in the way they did no violation of Seetion 2 ( d) would be involved, the fact remains that the whole idea behind the plan was that supplier participation would be encouraged by the assurance that the payments did not have to be proportionalized. It seems clear, therefore that respondent ,vas proceeding on the assumption that, generally speaking, participation in the program would be outside of regular advertising programs and that the benefits thereunder would not ordinarily be tnade available to other customers. It is accordingly concluded and found that respondent induced or received from a number of its suppliers advertising payments and benefits, as heretofore found, "Which it knew or should have known were not being made available by such suppliers, on proportionally equal terms, to all other customers competing with respondent the sale and distribution of the products of said suppliers sold to respondent.

c. Sufficiency of 001nplaint Respondent contends that. the knmring inducement or receipt of a discriminatory advertising allowance is not an unfair method of competition in violation of Section 5 of the Federal Trade Commission Act. Respondent's argument is based largely on the fact that whereas Seetion 2 (f) of the Clayton Act makes it illegal to knowingly induce or receive a discriminatory price. (the granting of which would be illegal under Section 2 (a) of the Act), there is no equivalent provision in the Act with respect to the knowing inducement or receipt of an adveirtising allowance, the granting of which would be illegal under Section 2 (d) of the Act. Respondent contends that this omission was deliberate and is indic.ative of an intent on the part of Congress not to make the knowing inducement of a discriminatory advertising allowance an illegal act.

In the opinion of the hearing examiner there is no merit to respondent' s argument. There is no question that Section 5 of the Federal Trade Commission Act is broad enough to encompass conduct such as is here the subject of complaint. Congress deliberately left the standard of "unfair methods of competition" broad, general and flexible in order to make it applicable not only to practices which were considered illegal at. common law, but to practices and methods of competition yet to be devised by aggressive and vigorous entrepreneurs. FTO v. I( eppel B'J'o. , Inc. 291 U.S. 304, 310-312; R. R.ep. No. 1142, 63d Congo 2d Sess. 19 (1914). The Act was designed to supplement and bolster the Sherman Act and the Clayton Act" FTO V. ill otion Pictu1~e Advertising SeT'vice 00., Inc. 344 ...

Findings 37 F.

S. 392, 394 (1953). Practices of the type which run counter to the policy of the Clayton Act have been held to constitute unfair methods of competition under the Federal Trade Commission Act even though they may not teehnically fall within the scope of the former Act. FTO v. illotion Picture Advertising Service Co. , s'llp-ra at 397; Fa.shion Originato.rs G1tild of .America, Inc. v. FTC, 312 S. 457; Ocl'J'ter OarbUl' eto' l' Oorp. v. FTO 112 F. 2d 722 (C)~ 8 1940) .

It is the opinion of the hearing examiner that one who knowingly induces another to commit an act which is illegal under the. Clayton Act is himself engaging in an unfair method of competition, within the meaning of the Federal Trade Commission Aet, unless Congress deliberately intended to exe1ude such conduct from the category of illegality. The examiner finds no evidence of any such intention on the part of Congress. Such evidence as does exist suggests that the omission of a provision in the Clayton Act with respect to inducing a Section 2( d) violation, similar to that contained in Seetion 2(f) with respect to inducing a Section 2 (a) violation, vms inadvertent rather than deliberate since at the stage when Section 2 (f) was added to the Act the fate of Section 2 ((1) and (e) 1\-as uncertain. Even if this evidence be disregarded as not constituting reliable legislative history, certainly there is no evidence or a deliberate intention on the part or Congress to exelude such conduct from the category of illegality. Such an intention cannot be inferred from the mere failure to ine1ude such conduct in Section 2 (f) or from the failure to ine1ude an equivalent provision in the Clayton Act with respect to the knowing inducement of a 2 ( d) type of violation. Absent convincing evidence of any such specific intent, and in the light of the intention of Congress in phrasing Section 5 of the Federal Trade Commission Act in broad, general terms to give it wide scope and to leave it to the Commission and the courts for definition and on the basis of existing precedent declaring conduct of the type proscribed by the Clayton Act, but not technically falling within it as being encompassed by the term "unfair methods of competition there would appear t.o be no doubt that the knowing inducement of an advertising allowance in violation of Section 2 ( d) of the Clayton Act constitutes an unfair method of competition under EJection ;) of the Federal Trade Commission Act. It is accordingly eone1udec1 that the complaint states a cause of action. 4 Dunn. New York State Bar Association, Robinson-Patman Act Symposium, Sections 2 (d) and (e) (CCH, 1946) pp. 55, 61. THE GRAND UNION COMPANY 415 382 Order d. The Issue of 11/ ootness Respondent contends that no cease and desist order should issue in view of the fact that its participation in the Broadway sign project ceased as of December 31, 1956, almost a year prior to the issuance of the complaint herein. Counsel supporting the complaint contend that there has been no showing of any unusual facts which would prevent the issuance of the usual cease and desist order. They have also offered to prove that respondent did not discontinue its part in the program until after an investigation by the Commission early in 1956.

In the opinion of the hearing examiner there has been no showing of such unusual or exceptional circumstances by respondent, as to warrant a dismissal of the complaint on the ground that respondent has discontinued the ' practices alleged therein. Sheffield ill erchandise, Inc. Docket 6627, July 7 1958; lVard Baking 00. Docket 6833, June 23, 1958.

CO?~CLUSION OF LAW In lmowingly inducing or receiving payments or the benefit of payments from its suppliers, as hereinabove found, which were not made available on proportionally equal terms to its competitors respondent engaged in acts and practices which are to the prejudice and injury of competitors and the public; which have the tendency and effect of obstructing, hindering, lessening and preventing competition in the sale and distribution of food, grocery, dairy and nonedible household products; which have the tendency to obstruct and restrain and have obstructed and restrained commerce in such products; and which, accordingly, constitute unfair methods of competition and unfair acts and practices in COn1l11erce, in violation of Section 5 of the Federal Trade Commission Act. It is eoncluc1ecl that this proceeding is in the public interest and that the following order should issue.

ORDER It ~'.s ordel' That respondent The Grand Union Company, a corporation, its officers, employees, agents or representatives, directly or through any corporate or other device, in or in connection with the purchase in commerce (as "commerce is defined in the Federal 5 The motion of ref:ponclent for :J. f:eparate hearing on the form of the order, in the event of the issuance thereof, is denied for the l'(~ason that no need therefor has been demonstra ted.

Opinion 57 F'-T.

Trade Commission Act) of grocery products or related merchandise do forthwith cease and desist from:

Knowingly inducing, receiving or contracting for the receipt of anything of value as compensation or in consideration for advertising, promotional displays or other services or facilities furnished by or through respondent in connection with the sale or offering for sale of products sold to respondent by any of its suppliers, when Buell payment is not affirmatively offered or otherwise made available by such suppliers on proportionally equal terms to all their other customers competing with respondent in the sale and distribution of the suppliers' products.

OPINION OF THE COl\il\IISSION By SECREST Oorn'1nissione1' The complaint herein charges respondent with violating Section 5 of the Federal Trade Commission Act by knowingly inducing or receiving from suppliers special payments and benefits which were not made available on proportionally equal terms to respondent' competitors. The hearing examiner in his initial decision held that the allegations of the complaint were sustained and ordered respondent to cease and desist from the practices found to be unlawful. Respondent has appealed from this decision. Respondent is a Delaware corporation engaged in the operation of a chain of retail grocery stores and super markets, which sell a wide variety of food, dairy and household products, in the Eastern part of the United States. Respondent' sales are substantial amounting to $283 003 166 for the fiscal year ending l\Iarch 3, 1956. On August 6, 1952, respondent entered.d into an agreement with Douglas Leigh, Inc., an advertising agency, whereby the latter granted to respondent the use and oeeupancy of a "combined electric spectacular and animated cartoon display located in the Times Square area of New York City. As part of the consideration, respondent agreed to secure the consent of fifteen participating advertisers to use the animated cartoon display portion of the sign known as the Epok panel, the static portion of the sign being reserved for the advertising of respondent. The Epok panel was to be used by the participating advertisers for 15 minutes out of each 20-minute period and respondent wa,s entitled to use the remaining 5 minutes for its own advertising or could e:s:change all or any part of the time allotted to it for radio or television ach-ertising. The term of the agreement was for a period of one year with respondent having an option to renew the agreement for two additional periods of one year.

THE GRAND UNION COMPANY 417 382 Opinion The following year the contract ,vas renewed with certain modifications. It was agreed that respondent could sell the 5 minutes advertising reserved to it to five ac1ditional participating advertisers and in lieu thereof would receive all monthly rentals paid by such advertisers (after deducting the agency's commission) and 5 percent of the payments made by the first fifteen advertisers, when there were at least fifteen participating advertisers using the sign. The participating advertisers entered into agreements with Douglas Leigh to use the Epok panel, with each advertiser having one minute in each 20-minute period for its advertising. Each advertiser agreed to pay $1 000 per month for services rendered by Douglas Leigh. The contract also provided that the advertising to be exhibited on the sign was to be approved in advance by respondent.

During the 4-year period, beginning December 9, 1952, when the sign was being operated pursua.nt to the aforementioned agreement between respondent and Douglas Leigh, thirty different firms used the Epok panel as participating advertisers. The participation most of these firms was obtained by respondent. At least twentyeight of them were suppliers of respondent. In some instances, the decision of a supplier to use the sign as a participating advertiser was based on the specific assurance that an in-store promotion its products would be furnished by respondent. In some instances, the decision to participate was based on respondent's agreement to ta.ke on additional items in the supplier s line or to handle the supplier s products on an exclusive or other preferential basis. The hearing examiner held that the payments made by a number of respondent's suppliers to Douglas Leigh under the aforementioned contracts were " for the benefit" of respondent and that they were made in consideration for advertising and other promotional services provided by or through respondent. He also concluded that the payments or consideration made or furnished by many of these suppliers were not made available on proportionally equal terms to all other customers competing with respondent in the distribution of their products, and that their participation in the sign program therefore, constituted a violation of Section 2 (d) of the Clayton Act. He further held that respondent induced or rec.eived such payments or benefits from a number of these suppliers knowing that they had not been made proportionally available to its competitors. The first question presented,cl on this appeal is whether the knowing inducement or receipt of discriminatory advertising allowances which are prohibited by Section 2 (c1) of the Clayton Act constitutes an unfair trade practice under Section 5 of the Federal Trade G40DGS-63-- , \\ Opinion 57 F.

Commission Act. Respondent concedes that the knowing induceconstitutes ament or receipt of a prohibited price discrimination violation of Section 2(f) of the Clayton Act. It contends, however that Section 5 cannot be used to extend the scope of Section 2 (f) to encompass the knowing inclueement or receipt of allegedly disproportionate payments for merchandising services. It is clear from the legislative history of the Federal Trade Commission Act and the long line of court decisions interpreting Section 5 of the Act that the Commission has the authority, subject to review by the courts, to determine in any factual situation before it conduct is an unfairwhether a particular practice or course of method of competition or an unfair trade practice. The courts have consistently held that the phrase "unfair methods of competition bedoes not admit of prec.ise definition but is a flexible concept "to defined with particularity by the myriad of cases from the field of , Inc.business. Fecle1,(ll T1'Clde Oo17unlssion. v. R. F. f(eppel cO B1' also held that this concept of291 U.S. 30':1: (1934). The courts have unfair methods of competition is not restricted to conduct eonsidered illegal at common law or to methods of law violation dis- T1'adedosed by prosecutions under the Sherman Act. F ede1Yll Go1J1.lnission v. R. F. f(eppel, Inc. , 8'llp.J'(l. ; Federal T-trade Om711ni88ion v. Beech-iY'ut Packing 00. 257 U. S. 441 (1922); Fedv. Cement Institute, et al. 333 U.S. 683etal T1'ade 001n1n,z/3sio-n (lD-18) Respondent eoncecles the general validity of this principle but contends that it applies only to the evolution of concepts of unfair competition in the llon-anti-trust field. It argues in this connection that Section 5 does not operate to extend the policy, scope or range of application of the Sherman Act or the Clayton Act. ,Ve cannot accept respondent's contention that the Commission s authority in this field is limited under Section 5 to established illegal practices previously condemned by the. antitrust laws. V,T e think that the court decisions are uniformly opposed to respondents position. In the Beech-1V,ltt case 8'llp-J'a the Supreme Court sustained a cease and desist order against a resale price maintenance plan which had not theretofore been deelared to be illegal. The court pointed out that the Sherman Act "as not involved in the proceeding brought under See.tion 5 "except insofar as it shows a dec.laration of public policy to be considered in determining what the. Fe.de,ral Trade Com- are unfair methods of competition hieh mission is empo"\Yerec1 to condemn and suppress. Similarly, in Garte?' CaJ'D"IlTeto?' Corp. v. Pede'i'Cd Trade 001n1nission 112 F. 2d 722 (19-10), the court. upheld the. Commission s order in a Section 5 &:

THE GRAND UNION CO:MPANY 419 382 Opinion proceeding against a coluse of conduct which had not been considered illegal prior to the enactment of the Clayton Act, declaring that "Sections 2 and 3 of the Clayton Aet reflect the intent of Contendency to create agress to prevent courses of action having a monopoly before actual monopoly has been aecomplished and the effectuate theFederal Trade Commission Act supplies means to intent."

The Supreme Court in the Oe117~ nt Institute case supra stated that the legislative history of the Federal Trade Commission Act shows a strong Congressional purpose to supplement the enforcement of the Sherman Act through the administrative process of the Federal Trade Commission. It also observed in that case that the re.ports and statements of those in charge of the Federal Trade Commission Act "reveal an abiding purpose to vest both the Comat eve-ry t-ra.demission and the courts with adequate powers to hit practice, then l:.xistin.g m' thel'eafte1' conti'ived which restrained eomstopped in its in-petition or might lead to such restraint if not in Federal T1Yfde Oom-cipient stages. (Emphasis supplied. ) And 1nls8ion v. jllotion Pict'llTe Advertising Se' J"'vice, Inc. 344 U.S. 392 (1953), the court in a Section 5 proceeding involving exclusive dealing arrangements succinetly concluded:

The "unfair methods of competition " which are condemned by S 5(a) of the Act, are not confined to those that were i11legal at common law or that were condemned by the Sherman Act. Federal Trade CO1nnJ,ission v. Keppel Bro. 291 U. S. 304. Congress advi!':edl:-.' left the concept flexible to be defined with particlllarit~T by the m:niacl of cares from the field of business. ld. pp. 310-312. It i~ also dear that the Federal Trade Commission Act was designed to supple- (see Federal 'l'radement and bolster the Sherman Act and the Cla~Tton Act Commission v. Beech-Nut Co., 257 U.S. 441, 453)-to stop in their incipiency acts and practices which, when full blown, would violate those Acts (see Fa.shif)"/1, Guild v. Felleml Trade Commission 312 U. S. 457, 463, 466), as well as to condemn as "unfair methods of competition " existing violations of them. See Federal 'tmde Commission v. Cement Instit1tte 333 U. S. 683, 691. 'Ve believe that this and the other decisions cited clearly delineate the authority c.onferred by Congress upon the Commission to prohibit praetiees adversely affecting competition in violation of the policy of the antitrust laws, although the practices may not be specifically prohibited by the language of such laws or have been previously adjudged to be il1legal by the courts. Re.spondent argues, however, that the cases outlining the Commission s broad powers to define and prohibit unfa.ir competitive practices have no applicability to conduct that. Congress has intentionally refused to forbid and has excluded from a specific statutory scheme. It contends in this connection that where Congress has affirmatively prohibited certain acts and at the same time has in- Opinion 57 F:T.

tentionally and expressly declined to render unlawful different but conceptually related acts, there is no room to argue that the acts exempted from proscription may, nevertheless, be considered illegal under the broad and ambulatory language of an earlier law. Since this argument is based on the premise that Congress intentionally and expressly declined to render unlawful practices related to those eneompassed by the Robinson-Patman Act, it is nece.ssary to determine whether this premise is sound. \Ve think it is not. The history of the Hobinson-Patman Act discloses that one of the evils at which the legislation was directed was the use of enormous purchasing power by large buyers to obtain from their suppliers. discriminatory coneessions in the form of advertising allowances. This point is brought out clearly in the following statement by :Mr. I-I. B. Teegarden, author of the original Patman Bill, at a hearing . before the Honse Judiciary Committee on July 10, 1935: 1. Question. Is this an "antichain store" bill? Answer. This is an anticbain store bill only insofar as the chains abuse their pri.dlege of serving the American public, and it is aimed at such abuses equally whether practiced by chains or by others. 2. Question. .What are the abuses at ,,-hieh the bill is aimed? Answer. The use of large buying power in concentrated hands to compel the granting of prices, terms of sale and other concessions and discriminations in connection therewith which are not warranted by corresponding economies in the stream of food and merchandise distribution, which for that reason the seller cannot afford to grant proportiona))y to a)) his customers, and which therefore result in unfair preference and advantage to those who exercise this power as against their weaker and less fortunate competitors. 4. Question. Why is the bill aimed at abuses of buying power rather than of selling power? Answer. Because buying power is the source of the evil. The seller is merely an innocent victim compelled usual))y in self-defense to grant the concessions demanded. The greater his selling power the less is his compulsion to do so, for the less does he then depend upon the particular business of the buyer demanding the concession.

6. Question. 'Vhy does the bill pick out quantity prices, brokerage and advertising allowances for suppres~ion? Answer. Becau~e the~e are the three favorite disguises under which large buyers wring their exactions.

Prior to its amendment by the Robinson-Patman Act, Section 2 of the Clayton Act was directed at certain predatory practices of large sellers "which would result in injury to their weaker competitors. The Robinson-Patman al11endment hoVi"ever, was designed primflrily to curb the predatory use of bargaining po\ver by large buyers. Congressman Patman stated in this connection that the bill is designed to aeeomplish what so far the Clayton Act has THE GRAND UNION COMPANY 421 382 Opinion only weakly attempted, namely, to protect the independent merchant, the public whom he serves, and the manufacturer from whom he buys, from exploitation by his chain competitor. 79 Congo Rec. 9078. I-Ie further observed that "there has grown up in this country a policy in business that a few rich, powerful organizations by reason of their size and their ability to coerce and intimidate manufacturers have forced those manufacturers to give them their goods at a lower price than they give to the independent merchants under the same and similar circumstance and for the same quantities of goods. Is that right or wrong '? It is wrong. * * *" 80 Congo Rec. 811l.

In explaining the purpose of the Robinson Bill, Senator Logan stated:

"\Yhile I do not claim to be a prophet or to have ability to foretell the future, it appears to me to be obvious that the tendencies of those who control large purchasing power are eventua))y to create a complete monopoly affecting the necessities of life. If great units having tremendous purchasing power are ,a))owecl to use that po,ver unfairly and obtain goods, wares, and merchandise at less than the sma))er businessman can obtain them, in the course of time these large units will completely drive out of existence those who are engaged in Hke business with smaller capital. When that is done there will be a complete monopoly, and for the lack of legitimate competition, the consumer will be compelled to buy at prices fixed by the monopoly' The bill does not interfere in any way with legitimate competition. It recognizes that those controlling large aggregations of capital ma:y secure a legitimate advantage by reason of great purchasing power, but this advantage should be restrained by the adoption of sound economic rules, which will not allow the practice of using large purchasing power to destroy those with lesser purchasing power, thereby destroying competition and when, by such practices, competition has been destroyed, then monopoly will result. 80 Congo Rec. 3117. The ioIlowing statement with respect to the competitive situation which led to the enactment of the Robinson-Patman amendment appears in Federal T1'ade .oomrniss-ion V. ShnlJlic.ity Pattern 00. Inc. 360 U.S. 55 (1959):

A lengthy investigation conducted in the 1930's by the Federal Trade Com- 1l1i~sion disclosed that several large chain buyers were effectively avoiding S 2 by taking advantage of gaps in its coverage. Because of their enormous purchasing power, these chains were able to exact price concessions, based differences in quantity, which far exceeded any related cost savings to the se))er. Consequently, the se))er was forced to raise prices even further on smaller quantity lots in order to cover the concessions made to the large purchasers. Comparable competitive ac1vantflges were obtained by the large purcha!':ers in several ways other than direct price concessions. Rebates were induced for "brokerage fees " even though no brokerage services had been performed. "Advertising allowances" ,"ere paid by the sellers to the large buyers in return for certain promotional services undertaken by the latter. Some , 422 FEDERAL TRADE CO:M.i\lission DECISIONS Opinion 57 F.

sellers furnished special services or facilities to the chain buyers. Lacking the purchasing power to demand comparable advantages, the small independent stores were at a hopeless competitive disadvantage. The court also observed that the Act was amended to eliminate these inequities.

Respondent contends, however, that the. following comment by Congressman Utterback reveals that Congress deliberately exempted from the reach of the amended Clayton Act practices of the type charged in the complaint in this matter:

The closing paragraph of the Clayton Act, for which Section 1 of this bill provides, makes equally liable the person who knowingly induces or receives affords a valu-a discrimination in price prohibited by the amendment. This able support to the manufacturer in his efforts to abide by the intent and purpose of the bill. It makes it easier for him to resist the demand for sacrificial price cuts coming from mass-buyer customers, since it enables him to charge them with the knowledge of the iJ)egality of the discount, and equal it is in excess of any differential whichliability for it, by informh1g them that his difference in cost \vould justify as compared with his other customers. kno\vingly inducing or receiving This paragraph makes the buyer liable for theany discrimination in price which is unlawful under the first paragraph of amendment. That applies both to direct and indirect discrimination; and where, for example, there is discrimination in terms of sale, or in allowances connected or related to the contr~ct of sale, of such a character as to constitute or effect an indirect discrimination in price, the Jiability for knowingly inducing or receiving such discrimination or allowance s clearly provided for under the later paragraph above referred to. 80 Congo Rec. 9-:1:19 (1936). This statenwnt, however, is at best ambiguous and may well be interpreted to mean that the knowing inducement or receipt of c1) of the disproportionate allowa.nce in violation of Section 2( It cannot in anyamended Act is unlawful under' Seetion 2(f). event be construed as a clear expression of Congressional intent to exempt the practice in question. In view of the clear purpose of the bill, a more plausible argument, advaneed by counsel supporting the complaint, is that Congress intended to include th~ knowing inducement or receipt of a disproportionate allowance within the purview of Section 2 (f) and that. its failure to do so was the result of an oversight. (See Dunn Section 2( d) and (e), New York State. Bar Association, Robinson-Patman Act Symposium (CCH, 1946) 55 , 61.) ,Ye think that the most that ean be said on this point from the legislative history and from a reading of the Act itself is that the practice charged in the complaint is not specifically prohibited by the Aet. Certainly, it cannot be inferred from this fact that. Congress countenanced a practice which so ele.a.rly 'dohttes the spirit. of the statute.

THE GRAND UNION COMPANY 423 382 Opinion In the absence of evidence of Congressional intent not to render unlawful practices. related to those specifically prohibited by the Robinson-Patman Aet, there is no substance to respondent's argument that the Federal Trade Commission Act cannot be extended to proscribe discriminatory practices which do not come within the purview of the Robinson-Patman Act. The rule of statutory construction is that general and specific statutes should be read together and harmonized, if possible, and that the specific statute will . prevail over the general only to the extent. that. there is conflict between them. There is no dispute as to whether the specific provisions of the Robinson-Patman Act are controlling insofar as they specifically prohibit certain practices. There is nothing in the Act itself, however, which conflicts with the Commission s broad authority under Section 5 to define and proceed against practices which it deems to be unfair, including those which may come within the periphery of the laterAet, although not within its letter. For he foregoing reasons, it is our opinion that it is the duty of the Commission to "supplement and bolster Section 2 of the amended Clayton Act by prohibiting under Section 5 practices which violate the spirit of the amende,d Act. Consequently, we believe that if a buyer knowingly engages in a course of conduct that accomplishes the result which one of the provisions of the Act is intended to prevent and which Congress has declared to be injurious to competition pep Be such course of conduct runs counter to the policy of the Act and, as such, is an unfair trade practice within the purview of Seetion 5 of the Federal Trade Commission Act. is that The second argument presented in respondent's appeal Section 2 (d) of the Clayton Act is not applicable to the sign program since the payments made by its suppliers under this program were for advertising services rendered by Douglas Leigh and that the benefits which respondent received under the program were in V\T e consideration for services which it rendered to Douglas Leigh. agree with the hearing examiner that this argument is an attempt to "artificially fragmentize and eompartmentalize an essentially unitary transaction. "'\Ye also concur in his conclusion that payments benefit of the re- made by participating advertisers were for the spondent and that such payments were made in consideration for services and facilities furnished by or through respondent to the participating advertisers in connection with the handling, sale or See P. Lo1'illard offering for sale of said advertisers' products. Company v. Fede1' al Trade Co1n1niss-ion 267 F. 2d 439 (1959); In the ~latter of S1canee Paper Corp. Docket 6927 (1960). Opinion 57 F.

Respondent also argues that there is no evidence that it knew or should have known that such payments by its suppliers were not made available to its competitors on proportionally equal terms. The record shows, first of all, that payments made to respondent by certain of its suppliers had not been proportionalized. The record also shows that respondent was not a passive recipient of these discriminatory payments but that it had, in fact, solicited them. Respondent, and not the suppliers, originated the plan under' which the payments were made and in most instance.s respondent approached the supplier with the plan. The record shows that suppliers entered into eontraets with respondent on the basis of inclividual negotiations and that in some instances respondent made special arrangements to secure the supplier s participation, such as by agreeing to handle its products on an exclusive or other preferential basis. There is also evidence that respondent brought pressure to bear on suppliers who "ere reluctant to renew their contracts under the sign program and did so successfully. There can be no doubt from the facts of record that discriminatory payments were made to respondent by its suppliers as a result of respondent' solicitation and inducement.

In this same connection, the record shows that respondent knew that the sign program was a coopcTative advertising arrangement. It also knew that. certain of its suppliers had promotional allowance programs which were available to their customers. Responddent also knew that, in general, the arrangements for participation in the sign program were not negotiated as part of such announced advertising allowance programs. It also kne'v that, with one exception, the arra.ngement was a specially tailored or negotiated deal outside of the supplier s generally announced program. The record also shows that in some instances respondent received from the supplier an allowance under the supplier s generally announce.d advertising program in addition to the benefits ~;which it received from the sign deal. ,Ye think that these circumstances should have at least provoked inquiry in the mind of a prudent businessman A 1.tto- 'lnatic cantee' n Co. v. Fede1'al Trade 00 m.1rd/3 s ion 346 U.S. 61 , 66 (1952) ~ and that respondent should have iquired whether the participating suppliers "ere proportionalizing the payments made under the sign arrangement.

The sign deal was not limited to a single transaction, but was a program continuing over a period of four years. During that time respondent was urging its suppliers to become participating advert1sers~ and the record shows that certain of these suppliers, by partieipating, granted respondent allowances which they did not make THE GRAND UNION COMP ANY 425 382 Opinion available to respondent's competitors on proportionally equal terms. Under these circumstances, it would have been remarkable if these suppliers had not informed respondent during the course of the negotiations that it was receiving preferential treatment. There is ample evidence in the record that respondent was so informed. The letters of the broker, Frederick Gash, which are referred to in the initial decision, certainly placed respondent on notice that it was receiving benefits under the sign program which were not available to other customers of the participating suppliers represented by Gash.

It is our opinion t.hat the hearing examiner s findings and conclusions with respect to the knowing inducement and receipt of discriminatory allowances are supported by the evidence and we fully concur therein.

respondent also contends that the practices challenged by the complaint have been terminated and that a cease and desist order is therefore unnecessary. To support this contention respondent relies on the fact that the sign deal between respondent and Douglas Leigh was terminated on December 31, 1956. In so arguing respondent is apparently of the opinion that a showing that a practice has been discontinued is sufficient to render the controversy moot or that such a showing easts upon counsel supporting the complaint the burden of proving that respondent intends t.o renew the practice. 1Ve think this argument must be rejected. As we pointed out In the l\latter of lFmyl Baking Company, Docket 6833 (1958), the Commission is vested with a broad discretion in the determination of whether the practice has been surely stopped and whether an order to cease and desist. is proper. The fact that the sign deal was terminated does not support the conclusion that respondent has abandoned the practice of knowingly inducing or receiving discriminatory allowances. Despite the respondents protestations of innocence, the most charitable view which can be taken of its sign program is that was a plan whereby its suppliers could attempt to cireumvent Section 2 (d) of the Clayton Act to respondenes advantages. The fact that this program was terminafed after investigation had begun certainly does not create any inferences favorable to respondent. :Moreover, respondent has not given any assurances that it will not again engage in the practice challenged by the complaint or some similar practice, nor can it be said that competitive conditions have so changed that respondent is not likely to engage in such practice. The appeal on this point is therefore denied. The final question presented for our determination concerns the scope of the order to cease and desist. Although respondent does Dissenting Opinion 57 F. not suggest how the order should be modified, it apparently believes that it should not be prohibited from knowingly inducing or receiving a discriminatory allowance directly from a supplier but that the order should be limited to situations where respondent or its supplier acts through a third person. In other words, its contention seems to be that the order should go no further than to prohibit respondent from engaging in the il1legal practice by the means which it had previously employed. "\Ve think that such a prohibition would be of little value and that to be effective the order "must proscribe the method of unfair competition as well as the specific acts by which it has been manifested. Ii eJ'shey Chocolate Corpo-ration v. Federal Trade CO'l7'uniss'ion 121 F. 2d 968 (1941) ; Federal Trade CO'lnmission v. Ruberoid Company, 343 U.S. 470 (1952). Respondent's appeal is denied and the initial decision will adopted as the decision of the Commission. Commissioner Tait dissented to the decision herein. DISSENTING OPINION By TAIT C07nn~i88ionel':

This ease was charged and tried on the theory that it is unlawful under Section 5 of the Federal Trade Commission Act for a buyer knowingly to induce or receive allowances of thb type which are prohibited under Section 2 (d) of the Robinson-Patman Act. able colleagues seem not to have relied upon this theory as had the hearing examiner in reaching his initial deeision. It is unlawful under Section 2(f) of the Robinson-Patman Act for a buyer in the course of commerce. knowingly to induce or receive a discrimination in price which is prohibited by the section. Itis also unlawful under Section 2 (c) of such Act for a buyer to receive or accept certain types of brokerage pa-yments or allowances or discounts in lieu thereof. It is not unlawful under such Act, however for a buyer knowingly to induce or receive allowances proscribed by Section 2 ( d) . The maj ority deeision makes this latter practice on the part of buyers illegal and, in effect, legislates a- new antitrust prohibition. This, I believe, is beyond the authority of the Commission.

But the majority goes even further, for without requiring any factual showing of probable injury to competition, this ruling under the Federal Trade Commission Act applies to a buyer s practice a per se doctrine which Congress, for reasons of its own, directed only against a practice on the part of sellers. The majority agree,s that where there is a conflict between a specific and a general statute the specific statute shall govern. In the , THE GRAND UNION COMPANY 427 382 Dissenting Opinion light of the specific provisions of the Robinson-Patman Act itself and the inferences to be drawn therefrom, together with an agreed awareness of Congress as to abuses of buying power, the majority should argue that the policy of the specific statute, the Robinson- Patman Act, should govern here. The specific provisions of this Act concededly do not apply to this respondent. And looking at the Act as a whole we see no reason why the policy should differ from the specific provisions. In the same vein it is interesting to note that the failure to include the instant practice under Section 2 (f) was considered as a. legislative "oversight". Is the majority suggesting that it has the power to correct a Congressional "oversight" where the "oversight" concerns a substantive violation of law? Surely the majority is not advancing the novel theme that when Congress actseven as fully as it has acted here-it had best explain away any inaction or else this Commission may step in to plug self-asserted gaps and loopholes.

Refusal to adopt the majority thesis does not render the Commission incapable of preserving fair competition. Congress gave us a road to travel in dealing with disproportional allowances and at the same time handed us a very forceful weapon against the sellers to combat the practice. On the very facts which gave rise to this case the Commission proceeded against various suppliers of respondent in accordance with the Congressional mandate of section 2( d). I ha. ve no disagreement with the concept that "unfair methods of competition" under Section 5 of the Federal Trade Commission Act is not restricted to conduct considered illegal at common law or methods of law violation disclosed by prosecutions under the Shermall also agree to the further general proposition that the Act." I Commission s authority in the field of antitrust is not limited' under Section 5 "to established illegal practices previously condemned by the antitrust laws." But neither proposition is decisive here. And both propositions are a far cry from the majority s subsequent crucial pronouncement . . . it is the duty of the Commission to 'supplement and bolster' Section 2 of the amended Clayton Act by prohibiting under Section 5 (of the Federal Trade Commission Act) practices which violate the spi1oit of the amended Act." (Underscoring supplied. ) The cases alluded to by my colleagues concerned the well-known inci piency doctrine, the soundness of which is unquestioned; however, this doctrine and the cases cited are completely irrelevant here 1 See, for example, Matter of Swanee Paper Corporation, FTC Docket No. 6927; Matter of General MHls, Inc., FTC Docket No. 6926; 1\13 tter of Judson DuDaway Corporation, FTC Docket No. (\925. complaints issued October 31, 1957. :! 428 FEDERAL TRADE COl\.fMISSION DECISIONS Dissenting- Opinion 57 F. both from a legal and factual standpoint, since this case-as charged in the complaint and as tried before the hearing examiner-is not founded upon any theories of "incipient" violation of the Sherman Act or the Clayton Act.

Nor are the various cases cited any precedent for the failure show probable competitive harm. Cases such as jJf otion Pictu. Advertising Service, Inc. , l(eppel B11 , Inc. , Beeclt. Nut Pacldng 00., Fashion Guild and Cement Institute 2 all contained findings by the Commission that the challenged practices had adverse competitive effects. In the il1otion Pictu1' e AdveT'tising Se,rvice case, for example, it was found that the respondent's exclusive contracts unreasonably restrained competition and tended to monopoly. The Commission determined in the respective cases on the basis of injury evidence that the practices constituted unfair methods of competition and the courts agreed. There is no such factual situation here, and no such findings have been made. ~loreover, in these authorities cit, the courts did not go so far as to hold, as the majority action herein seems to imply, that the Commission is empowered to declare as unfair methods of competition all practices which it may consider to be contrary to "the policy of the antitrust laws" or "which violate the spirit of the amended (Clayton) Act". I am concerned by what the majority does; I am fearful of the implications of what it says. If the Commission s authority is so broad that it can declare unlawful any practice which it believes contrary to the spirit of the antitrust laws, it is apparent that all of the provisions of the Robinson-Patman amendment were not needed. Certainly, Section 2(f) dealing with the knowing inducement or receipt of price discriminations was unnecessary. Any alleged gaps which may appear in the Clayton Act provisions, under this principle, will not require legislation; the Commission merely has to declare them contrary to the spirit of the Clayton Aet. Furthermore, a businessman in seeking to comply with the often difficult requirements of the Robinson- Patman Act, will now have not only the Act to contend with in this antitrust area, but also declarations of per se illegality by the Commission under Section 5. In other words, in attempting to comply with the law, t.thousands of businessmen must first determine if the business practice is legal under the Robinson-Patman Act. Then they must also determine whether the practice is legall1nder a vague standard, herein stated to be "the spirit of the amended Act". I in vigorous disagreement with an approach to the law which has Federal T1"adc Col/imission v. Motion Pict1l1"e Advertising Service, Inc. 344 U. S. 392 (1953) ; Fe(/enil 1'ta(/e Commission v. R. P. J(elJpel d': Bro. , Inc., 291 U. S. 304 (1934); Fer/.eral1'mde Commission v. Beech-N1/.t Packing Co. 257 U. S. 441 (1922) ; Fashion Guile! v. Federal, Trade Comlllissfnn 312 U. S. 457 (1941); and Federal Trade Commission Cement Institute.. 333 U. S. 683 (1948). NORTHEAST CAPITAL CORPORATION ET AL. 429 382 Sy))abus too much sail and too little anchor, or too much supplement and too little bolster.

As previously indicated, the majority have adopted a rule under which the practice challenged here is even held to be illegal without any showing of adverse competitive effect. Congress,. in enacting Section 2 ( d), in effect found that practices covered thereby were harmful to compet.ition and banned them outright; hence no showing of an adverse effect on competition is required to prove a charge against sellers. But Congress did not ban the practice here challenged of a buyer s knowing inducement of a Section 2 (d) violation. Is competitive injury to be imputed in a vacuum? :1\loreover, if the practice is compared to a Section 2 (f) case, it will be observed that the proof of a violation of that subsection requires a showing of a violation of Section :2 (a), which itself requires proof of probable competitive injury. Congress was clearly most chary of imposing pe?' se sanctions.

I would dismiss the complaint.

FIN' AL ORDER This matter having been heard by the Commission upon respondent's appeal from the hearing examiner s initial deeision, and upon briefs and oral argument ill support thereof and in I opposition thereto; and the Commission hayjng rendered its decision denying the appeal and adopting the initial decision: It is onlered That respondent, The Grand Union Company, shall within sixty (60) days after service upon it of this order, file with the Commission a report, in writing, setting forth in detail the manner and form bl which it has complied with the order to cease and desist.

Commissioner Tait dissenting.