Smith Grain Company, Inc.

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IN THE 1fatter OF SMITH GRAIK COMPANY, INC., ET AL.

CONSENT ORDER, ETC., IX REGARD TO THE .\ALLEGED nOLATlON OF SEC. 2. (c) OF THE CLAYTON ACT Docket 7641. CO'IHplaint, Oct. 195.9-Decision, June, 1961 Consent order requiring wholesale distributors of a variety of products, including grain, animal feecl ingn,dien1s, citrns fruit products, sugar, and phosphate, with offce in Limestone, Tenn., to cease violating Sec. 2(c) of the Clayton Act by sneh practices as accepting illegal Rllowanees on direct purchases of citrus fruit products from Southerll Fruit Distributors, Inc. of Orlando, Fla., on which they received " trade discounts " or price lcn.uctiOIlS in lien of brokerage of 2% to 3% or more and totaling over SfLOOO; and requiring said wholesalers and their two controlled corporate brokers in Tampa, Fla. , and Atlanta, Ga., respectively, to cease recei,ing from sellers commissions Oil transactions where said brol;:ers "ere acting for the buyer respondents.

CO:MPLAINT The Federal Trade Commission, having reason to believe that the parties respondent named in the caption hereof, and hereinafter more particularly designated and described, have been and are now violating the provisions of subsection (c) of Section 2 of the Clayton Act as amended (U. C. Title 15, Sect.ion 13), hereby issues its complaint, stating its charges with respect thereto as follows: COUNT I PARAGHAPlI 1. Respondent Smith Grain Company, Inc. , herein after sometimes referred t.o as buyer respondent, is a corporation organized, existing and doing business under and by virtue of the SYrITH GRAIN COMP fui, INC. , ET AL. 1059 105S Complaint laws of the State of Tennessee with its offce and principal place of business located at Limestone, Tennessee. Since April 1, 1955, aforesaid buyer respondent has been engaged primarily in business as a wholesale distributor handling a variety of products and eommodities, including grain, animal feed ingredients, citrus fruit products sugar and phosphate.

PAR. 2. Respondent ,Villiam F. Smith is, and has been, at all times mentioned herein, President and Treasurer of buyer respond- PDT. Respondent .James J. Smith, t.he brother of respondent William F. Smith, is and has been, at all times mentioned herein, Vice President and Secretary of buyer respondent. The capital stock of buyer respondent is owned as follows:

Hespondeot Wiliam F. Smith: 1 230 shares Florence C. Smith wife of reSvoTHlent William F. Smitl1: 950 shares Hpsponclent JUIles J. Smith: 1 250 shares At all times mentioned herein the foresaid individual respondents exercised substantial, if not complete, authority and control over the business conducted by respondent Smith Grain Company, Inc. including the formulation and direction of its purchase, sales and distribution policies hereinafter referred to. The individual respondents have t.their offces and principal places of business lecated at the same address as the buyp.r respondent. PAR. 3. Respondent Alexander-Smith, Inc., hereinafter in Count I sometimes referred to as broker respondent, is a corporation organized, existing and doing business under and by virtue of the laws of the State of Florida with its offce and principal place of business loeat.ed at 915 South ,Vater Street, Tampa 2, Florida. Since April 1 1955 aforesaid broker respondent has been engaged in the brokerage business dealing primarily in sales of grain and animal feed ingredients.

PAR. 4. Respondent William F. Smith is and has been, at all times mentioned herein, Preside,nt and Treasurer of broker respondent. The capital stock of broker respondent is o\Vned as follows: HcspoJ)1eilt 'Yiliam F. Smith: 71j;3 shares F10l' ('l1' e C. Smith, wife of respondent ,Yillflm F. Smith: 71 shares Eesr;oIHlent James .T. Smith: I:' shares Huuert K. -\lexf1UdCl: 1:J :,lwres -:Jol'ic s. ).lexul1(lel': 16 slwl'es At all times mentioned herein, the aforesaid individual respondents exercised substantial, if not complete, authority and control (lver the business conducted by respondent Alexander-Smith, Inc. 1060 FEDERAL 'trade COMMISSION DECISIO::S Complaint ,)8 F. including the formulation and direction of policies relating to its transactions for or with respondent Smith Grain Company, Inc. , as hereinafter referred to.

PAR. 5. During the period April 1, 1955, to the present, aforesaid individual respondents, through corporate respondents, and each of them, continuonsly made purchases of products and commodities from, or sales of products and commodities for, sellers located in various states of the United States. In the course of Euch transactions, said respondents, both individual and corporate, directly or indirectly, caused such products and commodities, so purchased or sold, to be transported from various states of the United States to various other states. There has been at all times mentioned herein a continuous course of trade in commerce, as "commerce " is defined in the Clayton Act, in such products and commodity.ies, across state lines between individual respondents through corporate respondents and each of them, and the sellers of such products and commodities. PAR. 6. In the course and conduct of the businesses of the broker respondent and buyer respondent, as aforesaid, the buyer respondent, acting through the broker respondent made numerous and substantial purchases of products and commodities, including purchases of grain and animal feed ingredients, from seDers. Aforesaid scum' paid and broker respondent, or the individual respondents herein received commissions, brokerage, or other compensation, or allowances or discount.s in lieu thereof, on transactions where the broker respondent was acting for or on behalf of the buyer respondent, or where t.he broker respondent was subject to the control of buyer respondent or the individual respondents herein. For example during the period July 1957 to Kovember 1958, buyer respondent purchased through broker respondent quantities of grain and animal feed ingredients from The Sherwin-\Villiams Company, on which sales aforesaid seller paid commissions to the broker respondent amounting to in excess of $400. , at least a part of which was received by the individual respondents in t.he form of salaries and dividends by virtue of employment and stock ownership as hereinbefore alleged.

PAR. 7. The acts and practices of respondents, and each of the, as hereinbefore alleged, are in violation of subsection (c) of Section 2 of the amended Clayton Act.

COUKT II PAR. 8. The allegations of Paragraphs One and Two of Count of this complaint are hereby adopted and incorporated herein by SMITH GRAIN COMPA1XY , IXC. , ET AL. 1061 1058 Complaint reference and made a part of this Count II the same as if they were repeated herein verbatim.

PAR. 9. Respondent Heard-Kinard-Smith, Inc. , hereinafter in Count II sometimes referred to as broker respondent, is a corpora.tion organized, existing and doing business under and by virtue of the laws of the State of Georgia with its offce and principal place of business located at 3240 Peachtree Road, Northeast, Atlanta 5 Georgia. Since September 1 , 1956, aforesaid broker respondent has been engaged in the brokerage business dealing primarily in sales of grain and animal feed ingredients.

PAR. 10. Respondent William F. Smith is and has been, at all times mentioned herein, President of broker respondent. The capital stock of broker respondent is held as follows: Respondent 'Viliam :F' . Smith: 15 shares Respondent .Tames J. Smith: 15 shares Wil 1. Kinan1: 30 shares .T. LuJ e Heard: 30 shares At all times mentioned herein, the aforesaid individual respondents exercised substantial, if not complete, authority and control over the business conducted by respondent Heard-Kinard-Smith Inc., including the formulation and direction of policies relating to its transactions for or with respondent Smith Grain Company, Inc. as hereinafter referred to.

PAR. 11. During the period September 1 , 1956, to the present aforesaid individual respondents, through corporate respondents and each of them, continuously made purchases of products and commodities from, or sales of products and commodities for, sellers located in various states of the United States. In the course of such transactions, said respondents, both individual and corporate sodirectly or indirectly, caused such products and commodities, purchased or sold, to be transported from various states of the United States to various other states. There has been at all times asmentioned herein a continuous course of trade in commerce, commerce" is defined in the Clayton Act, in such products and commodities, across state lines bet-ween individual respondents through corporate respondents, and each of them, and the sellers aT such products and commodities.

PAR. 12. In the course and conduct of the businesses of broker respondent and buyer respondent, as aforesaid, the buyer respondent acting through the broker respondent, made numerous and substantial pm'chases of products and commodities, including purchases of grain and animal ieed ingredients from sellers. Aforesaid sellers 1062 FEDERAL TRADE COMMISSION DECISIOKS Complaint 58 F.

paid and broker respondent, or the individual respondents herein received commissions, brokerage, or other compensations or allowances or discounts in lieu thereof, on transactions where the broker respondent was acting for or on behalf of the buyer respondent, or where the broker respondent was subject to the control of the buyer respondent or the individual respondents herein. For example during the period January 1958 to December 1958, buyer respondent purchased through broker respondent quantities of grain and animal feed ingredients from the Graham Grain Company, on which sales aforesaid seller paid commissions to the broker respondent amounting to in excess of $450. , at least a part of which was received by the individual respondents in the form of salaries and dividends by virtue or employment and stock ownership, as hereinbefore alleged.

PAR. 13. The acts and practices of respondent.s, and each of them as hereinbefore alleged, are in violation of subsection (c) of Section 2 of the amended Clayton Act.

CO"GNT III PAR. 14. The allegations of Paragraphs One ann Two of Count. I of this complaint are hereby adopted and incorporated herein by reference and made a part of this Count III the same as if they were repeated herein verbatim.

\R. 13. During the period April 1 , 1833 , to the present. aforesaid individual.l respondents, through corporate respondents, and each of them, continuously made purchases of products and commodities from, or saies of products and commodities f01\ sellers located in various states of the "Gnitec1 States. In the COUTse of such transactions, said respondents, both indiviclna.l and corporate, directly or indirectly, caused such products and commodities, so purchase,d or sold, to be transported from various states of the United States to various other st.ates. There hrs been at all times Jlrnt.ioned herein a continuous course of trade in commerce. as '; commerce " is defined jn the Clayton Act, in such products and commodities, across state lines between individual respondents through corporate respondpnts and each of t.hem, and the sellers of sllch products and cornmoditiefO. PMt. 16. In the course and conduct of its business, as afore fluid buyer respondent Smith Grain Company 1 1n('- 1 ilnd t.he indi'i'jdual respondents Ilamed herein, have made and arc llow making substantia.l direct purchases of citrus fruit juices and other Illiscel1:11WOHEi products and commodities, for their own account for resale from seHers, on which purchases said respondents have received and ac- &;

S:with GRAIN CO:NIP1L , IXC. , ET AL. 1063 1058 Decision cepted, and are now receiving and accepting, directly or indirectly, from said sellers something of value as a commission, brokerage or other compensation or allowance or discount in lieu thereof, or have been given lower net prices which reflect the allowance of a commission or brokerage on said purchases.

For example, during the period January 1956 to December 1958 buyer respondent, and the individual respondents named herein have purchased from, among others, Southern Fruit Distributors Inc., of Orlando, Florida, substantial quantities of citrus fruit products. Aforesaid purchases have been made by respondents for their own account and in their own name and on these purchases respondents have received and are now receiving, a "trade discount " or other reductions in price, in lieu of brokerage. Aforesaid "trade discounts':' or price reductions, range from 2% to 3% or more. From January 1956 through December 1958 respondent Smith Grain Company, Inc., received "trade discounts" in lieu of brokerage from Southern Fruit Distributors, Inc. , in excess of $8 000.00. PAR. 17. The acts and practices of respondents, and each of them as hereinbefore alleged, are in violation of subsection (c) of Section 2 of the amended Clayton Act.

Mr. Ross D. Young for the Commission. Milligan, Silmen Coleman by Mr. N. R. Coleman, Jr. Greeneville, Tenn. , for respondents.

INITIAL DECISION BY VVALTER R. JOHNSON , HEARING EXAMINER In the complaint. dated October 29 , 1959, the respondents are charged with violating t.he provisions of subsection (c) of section 2 of the Clayton Act, as amended.

On March 8, 1961, t.he respondents and their at.torney entered into an agreement with counsel in support of the compla.int for a consent order.

Under thc foregoing agreement, the respondents admit the jurisdictional facts alleged in the complaint. The part.ies agree, among other things, that the cease and desist. order there set forth may be entered without further notice and have the same force and effect as if entered after a full hearing and the document includes a waiver by the respondents of all rights to challenge or contest the validity of the order issuing in accordance therewith. The agreement further recites that it is for settlement purposes only, does not constitute an admission by the respondents that they have violated the la,\' as aUeged in the complai.nt, and that. sa.id complaint may be used in construing the terms of the order. , .

1064 FEDERAL TRADE COMMISSIOK DECISIONS Decision 38 F.'l'.

The hearing examiner finds that thb content of the agreement meets a1l of the requirements of section 3.25(b) of the Rules of the Commission.

Respondent Heard-Kinard Sales Company, Inc., a corporation consents that t.he service of fl. true copy of said complaint upon Heard-Kinard-Smith, Inc., shall have the same legal force and effect as though it were served upon said respondent; and said respondent will be, and is legally bound by said service upon corporate responde ent I-Icarc1-Kinard-Smiih Inc., as though it were served upon it; and that Heard-Kinard Sales Company, Inc., be made a party respondent to this cause, so as to be fully and completely bound as respondent to the order as hereinafter set forth. The agreement also provides that since respondent 'Yilliam F. Smith has disposed of all of his stock in Heard-Kinard- Smith, Inc. (now known as Heard-Kinard Sales Company, Inc. ), the complaint be dismissed as to him as President of this corporation. The hearing examiner being of the opinion t hat the agreemeJ1t anu the proposed order provide an appropriate basis for disposition of this proceeding as to all of the parties, the agreement is hereby accepted and it is ordered that the agreement shall not become a part of the offcial recoru of the proceeding unless and until it becomes a part of the decision of the Commission. The following jurisdictional findings are made and the following order issued. 1. Corporate respondent Smith Grain Company, Inc., is a corporation organized, existing and doing business under and by virtue of the laws of the State of Tennessee, with its offce and principal place of business locat.ed at Limestone, Tennp-ssec. Corporate respondent Alexander-Smith, Inc., is a corporation organized, existing and doing business under and by virt.ue of the laws of the State of Florida, with its offce and principal place of business located at 915 South ,Vater Street, Tampa 2, Florida. The named corporate respondent, Heard-Kinard-Smith, Inc., was a corporation organized, existing and doing business under and by virtue of the laws of the State of Georgia, with its offce and principal place of business formerly located at 3240 Peachtree Road Atlanta 5, Georgia. (The address was incorrectly sta.ted in the complaint as 3240 Peachtree Road ortheHst UJanta 5, Georgia. Prior to August 22, 1959, individual respondent ,VjJiam F. Smith '\vas President and a principal.l stockholder in this corporation. Prior to August 22, 1959, individual respondent James .T. Smith was a princ.ipal stockholder in this corporation. SMITH GRAIN COMPANY, INC. , ET AL. 1065 1058 Order Attached to said agreement are affdavits attesting to the fact that on August 22, 1959, individual respondent "William F. Smith transferred all of the shares of stock owned by him in Heard-Kinard- Smith, Inc., to that corporation and tendered his resignation as its President, said resignation being accepted; and on August 1959 individual respondent James J. Smith transferred all of the shares of stock owned by him in Heard-Kinaru-Smith, Inc., to that corporation.

Also attached to the agreement is an affdavit stating that on Kovember 20, 1959, through an amendment of the corporate charter the name of said corporation was changed from Heard-Kinard- Smith, Inc. , to Heard-Kinard Sales Company, Inc. , and J. Luke Heard was named as President of Heard-Kinard Sales Company, Inc. In the order contained in the agreement, Heard-Kinard Sales Company, Inc., is named as respondent, this being the correct present legal name of the corporation formerly known, before the amendment to its corporate charter, as IIeard-Kinard-Smith, Inc. Heard-lCinard Sales Company, Inc. , is a corporation organized existing and doing business under and by virtue of the laws of the State of Georgia, with its offce and principal place of business located at 3240 Peachtree Road, Atlanta 5, Georgia. Heard-Kinard Sales Company, Inc., agrees to stand in the place and assume all obligations and rights of corporate respondent Heard-Kinard-Smith Inc., and to be bound by the order contained herein when and if said order is issued by the Commission and becomes final. Individual respondent "\Villiam F. Smith is President and Treasurer of Smith Grain Company, Inc. and president and Treasurer of Alexander-Smith, Inc. Individual respondent James J. Smith is Vice President and Secretary of Smith Grain Company, Inc. Individual respondents exercise subst.antial, if not complete, authority and control Dver the business conducted by said corporate respondents, including the formulation and direction of policies. 2. The Federal Trade Commission has jurisdiction of the subjed matter of this proceeding and of the respondents. ORDER It is ordered That respondents, Smith Grain Company, Inc. , a corporation, and its offcers agents, representatives and employees and vVilliam F. Smith and James J. Smith, individually and as offcers of said corporation, and their agents, representatives and employees, directly or through any corporate or other device, in connection with the purchase or sale of any products or commodities 1066 FEDERAL TRADE COMMISSIO?- DECISIO)JS Order 58 F.

in commerce, as "commerce" is defined in the aforesaid Clayton Act, do forthwith cease and desist from:

Receiving or accepting, directly or indirectly from any seller anything of value as a commission, brokerage or other compensation or any allowance or discount in lien thereof, upon or in connection with the purchase of any product or commodities for their own account, or on purchases where the broker respondents, Alexander- Smith, Inc., or Heard-Kinard-Sales Company, Inc. (the name to which corporate respondent Heard-Kinard-Smith, Inc. , has been changed by charter amendment); or any other brokerage concern are the agents, repl'csentatjves or other intermediaries acting for or in behalf of, or subject to the direct or indirect control of the buyer respondents.

It is fu.rther oTdel'ed That respondents --'\Jcxancler- Smith, Inc" a corporation, and Holtrd-Kinard Sales Company, Inc., a corporate:on (the name to which corporate respondent IIeard-Kinal'd- Slnith, Inc. has been changed by charter amendment), flnd their OflCf'TS, agents representatives flnd employees, directly or through any corporate or other device; and ,Villiam F. Smith, individually and as an offcer of Alexander-Smith, Inc., and James .r. Smil:h, inclh'iclually, in connection with the purchase or sale of any products or commodities in commerce, as "commerce" is defined in the aforesaid Clayton Act do forthwith CNLse and desist from:

Receivhlg or acce.pting, directly or indirectly, from any seller anything of value as a commission, brokerage, or other compensation or any allowance or discount in lieu thereof, upon or in connection with any purchase or any products 'or commodities for the,ir own account, or by or for the account of Smith Grain Company, Inc. so long as any relationship exists, either through ownership or control, between Srnith Grain Cornpnny, Inc., or I,Villiam F. Smith, or James .r. Smith, as buyers; and Alexrmc1er-Smith, Inc. , or Heard- Kinard Sales Comp lJY, Inc. (the name to ,,-which corporate respondent I-Iearcl-IGnarcl-Smith, Inc., has been changed by charter amendment), or I,Villiam F. Smith or J ames J. Smith, as brok rs; or receiving or Dcccpting, directly or indirectly, 1'1'0111 any seller anything of value ns L commission, brokerage, or other compensation or any allowance or discount in lieu thereof, upon or in connection with any purchase of any products 01' any rOHlmo(lities made by any other buyer where the respondents are the agents, repreEcntatives or other intermediaries acting for, or in behalf of, or subject io the direct or indirect control of such buyer. FELLER' , IKC. , ET AL. JC67 1058 Complaint It is further ordercd Thflt the comp1fint be: and it hereby is dismissed as to ,Yilliam F. Smith as President of Heard-Kinard- Smith Inc. (noVi' kn0'n1 as I-Ieard- Kinarc1 Sales Company, Inc. DECISION OF THE CO:lDIISSlON AND ORDER TO FILE HFI'UHT OF COl\lll-\XC:E Pursuant to Section :1.21 of the Commission s Hules of Practice the initial decision of the heating examiner shall, on the 8th day of .June: 1961 , become the decision of the Commission; and, acc.ordingly:

It is oiylered That all of the respondents herein, except ,Villiam Smitl1 as President of I-Iearc1-Kinard-Snlith: Inc. (now known as Heard-Kinard Sales Company, Inc. ), shall within sixty (60) days after ::ervice upon them of this order, file with the Commission a report in writing setting forth in detail the manner and form in which they have uHnplied with the order to cease and desist.