Perfect Equipment Corp.

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

IN THE MATTER OF PEHFECT EQr.IP IENT COHP.

CONSEKT order, ETC. , IX HEG.:\HD TO THE ALLEGED VIOL,\TION OF SEC. 2(a, OF THE CLAYTON \CT Docket 7701. Complaint, Dec. 1959-Decision, Ja- , 1961 COllsent order requiring a mlll1llfac:tl1ler in KokollO , Ind. , sellng automobile repair parts, supplies, alil tools for replacement purposes, to cease discriminating in price in violation of Sec. 2(a) of the Clayton Act by granting cumulative annual rebates based all volume of purchases to independent jobbers and gl.onp jobbers, as a result of which practice independent jobbers buying in lesser volume were charged higher and less favorable net prices than their competitors buying greater quantities. C01\PLAIKT The Federal Trade Commission, having reason to believe that the party respondent llamed in the capt.ion hereof, and hereinafter more particularly desjgnated and described, has violated and is now violating the provisions of subsection (a) of Section 2 of the Clayton Act (;81-2::7- Complaint 38 F.

as amended by the Robinson-Patman Act, approved June 19, 1936 (U. , Title 15 , Sec. 13), hereby issues its complaint, stating its charges with respect thereto as follows:

PARAGRAPH 1. Perfect Equipment Corp., respondent herein, is a corporation organized, existing and doing business under and by virtue of the laws of the State of Indiana with its offce and principal place of business located at 804 IV est Morgan Street, Kokomo Indiana.

PAR. 2. Respondent is engaged in the manufacture and sale of automobile repair parts, supplies and tools including wheel weights knee action shims, idler arm kits, coil spacers and tools for installng the parts produced. Respondent's total annual sales in 1957 exceeded 800 000.

PAR. 3. Respondent, at all times referred to herein, manufactured its products in its plant in Indiana and sold and shipped products to customers located in each of the States of the United States and in the District of Columbia. Respondent has at a11 tin1CS relevant herein been, and is Jleld, engaged in c.commerce as "commerce" is defined in the amended Clayton Act.

PAR. 4. The principal purchasers of respondent's products are automobile repair parts TVholesalers, who are commonly referred to in the trade as jobbers. Such jobbers nornmlly ,wd principally resell to retailers such as repair garages cat dealers and gasoline service stations. Respondent sells its products to more tlmn 2 000 such jobbers.

Among respondent' s jobber customers are many who are banded together into orga,niztLtions commonly referred to as "buying groups Such customers aTB hereinafter referred to as "group jobbers" and those not affliated with a buying group are referred as as "independent jobbers PAR. 5. In the sale and distribution of its products, respondent , and at all times mentioned herein, has been, in substantial and continuons competition with other sellers of smiliar products. In many trade areas respondent' s independent jobber customers compete with eac.h other and with responc1enes group jobber customers.

PAR. 6. In the course a,nd conduct of its business in commerce responcle,nt has been, and is now, in each of several trading areas discriminating in price in the sale of it.s products of like grade and quality hy selling them to some independent jobbers at higher and less favorablc prices than it sells them to other independent jobbers and group jobbe,rs with ,,,hom the non favored independent jobbers com pete.

___ PERFECT EQUIPMENT CORP.

Complaint More particularly, during 1956 and 1957, respondent effected discriminations between independent jobbers by granting or paying to such purchasers a cumulative, fuUy retroactive volume rebate in accordanceAnnualwith the foUowingPurchasesschedule: Rebate $ 100 to $ 999 - 1000 to 1999 20/0 2000 to 2899 -------- 30/, 3000 to 3099 40/0 4000 to 4999 ---- 50/, 5000 to 5999 60/0 6000 and over 70/0 Through the operation of respondent' s pricing and rebate system as above described, independent jobbers buying in lesser volume were charged higher and less favorable net prices than other competing independent jobbers buying in greater volume. :Moreover, during 1956 and 1957 respondent effected discriminations in price between its group jobber customers and many of its independent jobber customers by paying or granting to said group jobbers a rebate in accordance with the schedule set out above but computed upon the aggregated total annual.l purchases of all members of each particular group. Thus, aU of respondent' s group jobber customers were aU owed the maximum rebate of 7'10 without regard to their individual annual purchase volume. PAR. 7. In further particularity, respondent, in 1958, revised its pricing policies and placed into effect the unlawful program currently in use. The volume rebate pricing system, hereinbefore described, was discontinued as of J'tnuary 1958, but all customers who received the top volume bracket rebate of 70/0 in 1957 were granted, and stil receive, a 7% discount from published list prices. Such favored customers are allowed to deduct the 7% discount from their remittances. Customers who did not receive the 7'1 rebate in 1957 are not allowed any discount and must pay the higher prices contained on respondent' s published price lists. Through the operation of this phase of respondent's pricing program many of its independent jobber customers are required to pay higher net prices than other larger independent jobber customers and aU group jobber customers. PAR. 8. loreover respondent' s revision of its pricing program in 1958 included the institution of an additional unlawfully discriminatory pricing method. It designated many of its larger independent jobber customers and the "group headquarters" maintained by many of its group jobber customers as "' Warehouse Distributors." Customers designated as "1V warehouse Distributors are allowed discounts from published list prices of no less than 20'1. The customers FEDERAL TRADE co:\\trSSiON DECISIONS DpC'"ioll 58 F.

selected by respondent as " ,y o.1'ehouse Dist.ributors" arc not true warehouse distributors as tlmt term is understood in the automotive. after-market and do not, for the most part, redistribute or reseH goods purchased from respondent to other jobbers but resell them in c.ompetition with other jobber cust.omers or respondent. PAR. D. The ofleet of respondent's discriminations in price, as above alleged, may be substantially to lessen, injure, destroy orpre.vf', nt competition oet\\-ecn respondents and competing sellers of similar automotive produc.s and bet.,,-een fmd among respondents independent and group joblJer customers.

PAR. 10. The acts and pmctices of respondent, Perfect Equipment Corp. , as above a1Jeged, constitute violations of subsection (a) of Seetion 2 of the Clayton Act (D. , Title 15, Sec. 13), as amended by the Robinson-Patman Act, approved June 19, 1936. Richard B. Jfathias, E8q. supporting- the complaint. of J(irl,iand, Ellis, Hodson, Chaffetz. and ,John C. Butler, Esq. Jfastel's of Chica,go, 111., for respondent. INITIAL DECISION BY LEON R. Gnoss, HEARING EXAl\INER The complaint was issued in this proceeding on December 22, 1959 charging respondent with violating 1;2 (a) of the Clayton Act as C. Title 15 , 813) byamended by the Robinson-Patman Act (D. discriminating in t.he price at which it sells its products, of like grade and quality, in interstate commerce, by selling them to some independent jobbers at higher and less favomble prices than it sells them to other independent jobbers and group jobbers with whom the non-favored independent jobbers compete. A true and correct copy of the complaint. vas served upon respondent as required by law. Thereafter respondent appeared by counsel and agreed to dispose of this proceeding without a formal hearing pursuant to the terms of an agreement dated October 31 , 1960, containing consent order to cease and desist. The agreement was submitted to the undersigned hearing examiner on November 18 , 1960 , in accordance with of the Commission s Rules of Practice for Adjudicative Proceedings. The agreement purports to dispose of this proceeding as to the respondent and contains the form of a consent cease-and-desist order which the parties have represented is dispositive of the issues involved in this proceeding. The agreement has been signed bv the secretary treasurer of respondent corporation and by the atto neys for the parties and has been approved by the Associate Director and Federal Tradethe Director of the Bureau of Litigation of the Commission. In said agreement respondent admits all of t.he jurisdictional facts alleged in the complaint and agrees that the record. PERFECT EQUIP:\IENT CORP.

(65 Finding-s may be taken as if findings of jurisdictional facts had been lllade in accordance with such allegations. In the agreement the respondent waives: (a) any further procedural steps before the hearing examiner and the Commission; (b) the making of fmdil1gs of fact or conclusions of law; and (c) all rights respondent may have to challenge or contest the validity of the order to cease and desist entered in accordance with the agreement.

The parties further agree, in said agreement, that the record on which the initial decision and t1H decision of t.he Commission shall be based shall consist solely of the complaint and the agreement; that the agreement shall not become a part of the offcial record unless and until it becomes tt part of the decision of the Federal Trade Commission; that the order to cease and desist entered in this proceeding by the COlYlInission may be entered without further notice t.o respondent, a,nd when so entered such order will have the same force and effect as if entered after a full hearing. Said order may be altered, modified or set aside in the manner provided for other orders. The complaint may be used in construing t.he terms of the order.

The parties have covenanted that the said agreement is for settlement purposes only and does not constitute an admission by responc1- ,ent that it has violated the law as alleged in the complaint. This proceeding having now come on for final consideration on t11e complaint and the aforesaid agreement containing consent order and it appearing that the order which is approved in and by said agreement disposes of all the issues presented by the complaint t.o all of the parties involved, said agreement is hereby accepted and approved as complying with Sso.21 and 0.25 of the Commission Rules of Practice for Adjudicative Proceedings. The undersigned l1eating examiner, having considered the agreement and proposed order and being of the opinion that the acceptance thereof will be in the public interest, makes the following fiudings and issues the following order:

:FISDIXGS 1. The Federal Trade Commission has jurisdiction over the parties and the subject matter of this proceeding; 2. Respondent Pericd Equipment Corp. is a corporation existing and doing business under' and by virtue of the laws of the State of Indiana, with its offce and principal place of business located at 804 West Morgan Street, in the City of Kokomo, State of Indi,ma; 3. li,espondcnts are. engaged in commerce as "commerce" is de.fined in the Federal Trade Commission and the Cla.yton Acts; Decision 58 F.

4. The complaint filed herein states a cause of action against the respondent under both the Federal Trade Commission and the Clayton Acts; and this proceeding is in the puhlic interest. Now therefore It is ordered That respondent Perfect Equipment Corp., a eorporation, and its offcers, representatives, agents and employees, directly or through any corporate or other device, in or in connection with the sale for replacement purposes of automobile repair parts, supplies and tools in commerce, as "commerce" is defined in the Clayton Act do forthwith cease and desist from:

Discriminating, directly or indirectly, in the price of such products of like grade and quality by selling to anyone purchaser at net prices higher than the net prices charged to any other purchaser who in fact, competes with the purchaser paying the higher price in the resale or distribution of respondent's products. It is further ordered That the term "purchaser" as used in this order shall include any purchaser buying directly or indirectly from respondent by means of group buying or any related device, but shall not be construed in this proceeding to include original equipment manufacturers purchasing automotive parts from respondent for replacement use or sale.

It is further ordered That the allegation in the complaint that the effect of respondent's discriminations in price may be substantially to lessen, injure, destroy or prevent competition between respondent and competing sellers of similar automotive products be dismissed.

DECISION OF THE COMMISSION AND ORDER TO Fll,E REPORT OF COMPLIA The Commission having considered the hearing examiner s initial decision, fied November 23, 1960, accepting an agreement containing a consent order to cease and desist, theretofore executed by the respondent and counsel in support of the complaint; and It appearing that although the respondent is charged only with having violated subsection (a) of Section 2 of the Clayton Act, as amended, the initial decision recites that the complaint states a cause of action under both the Federal Trade Commission Act and the Clayton Act, and further, that the respondent is engaged in commerce, as "commerce" is defined in both of said Acts; and The Commission being of the opinion that these misstatements should be corrected:

It is ordered That the initial decision he, and it hereby is, modified by striking therefrom paragraphs "3" and "4" of the section entitled Findings.

, , MURRAY Ball HOUSE Findings It is further ordered That the initial decision as so modified shall on the 12th day of January, 1961 , become the decision of the Commission.

It is further ordered That the respondent, Perfect Equipment Corp., a corporation, shall, within sixty (60) days after servce upon it of this order, file with the Commission a report, in writing, setting forth in detail the manner and form in which it has complied with the order to cease and desist contained in the aforesaid initial decision.