National Retailer-Owned Grocers, Inc., et al.

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

IN Tile 1\1:.\ TI' ER OF XA TIOXAL HETAILER-OWXED GIWCERS, INC., ET AL. ORDER, ETC. , IX REGARD TO THB ALLEGED VIOLATION OF SEC. 2(c) OF THE CLAYTON ACT Docket 1121. C01Jl;/'a-int, Apr. 16, 19/'i8- Decision, Jlay 14, 1962 Order requiring a cooperative purchasing organization and its 35 grocery wholesaler members, operating warehouses jn 16 midwestern and southern st.ates to cease accepting unlawful brokerage in violation of Sec, 2(c) of the Clayton Act, such as lower prices, discounts, and promotional allowances received from suppliers of private label merchandise and shared in by such members in the form of patronage diyjdends; and dismissing the complaint as to Xational Retailer-Owned Grocers, Inc. , the cyidence being insuffcient to justify;-' an order against it.

IPLA TXT The Federal Trade Commission, having rf',ason to believe that the parties named in the caption hereof and he.reinafter more particularly designatell and described as respondents herein, have violated and are now violating the provisions or subsection (c) of Section 2 of the _ _ ;

KATIOKAL RETAILER-OWNED GROCERS, INC., ET AL. 1209 1208 Complaint Clayton Act (U. C. Title 15, Sec. 13), as amended by the Robinson- Patman Act, hereby issues its complaint, stating its charges with 1'e. spect thereto as follows:

PARAGRAPH 1. Respondent ational Retailer-Owned Grocers, Inc. sometimes hereinafter referred to as respondent T ational, is a corporation organized and existing under the laws of the State of Delaware with its principal offce and place of business located at 141 west .Jackson Boulevard, Chicago 4, Ill.

R.esponclent National is a cooperative corporation owned and controlled by a group of wholesale grocers many of which are named hereinafter as parties respondent and which, in turn, are owned by retail grocers.

PAR. 2. Respondent Central Retailer-Owned Grocers, Inc., sometimes hereinafter referred to as respondent CROG, is a corporation organized and existing lmder the la ,vs of the State of Illinois, with its principal offce and place of business located at 155 orth 1V Reker Dri ve, Chicago 6, Ill.

Respondent Crag is affliated with respondent National and was organized in 19-18 by respondent National as Central Division, National Retailer-Owned Grocers, Inc. On or about uly 20, 1954, its name was changed to Central Retailer-Owned Grocers, Inc., but its membership has been composed of a group of retailer-owned wholesale grocers -who own the stock of said respondent and who are also Inembers of respondent :K ational.

PAR. 3. Each of the follmving respondents is a. corporation organized and doing business under the laws of the state specified and whose principal offce and place of business is located at the address shown opposi te each name:

Name of respondent Stateo/incorpora- Offce and place of business tion A. G. 'l' ick Stock Stores, Inc_ u_----- ).ichigann n 1608 E. Warren Ave. , Detroit 7, Michigan.Allied Grocers of Indiana, Inc_--n Indiana " n - 1030 E. Ninth Street, Indianapolis, Ind.Associated Grocers Co. , Inc- n MISSOUfL_ --_--_-- 5030 Berthold Ave. , St. Louis 1missouri. Associated Grocers, Jnc- --_----_n--H "\Visconsin _u- 445 . Broadway, )"filwaukee, Wis. Associated Grocers, Inc_ _---------_n--- j\missouri_ n- 2901 S. 22nd St. , St. Joseph, Mo. Associated Grocers, Incn__ - Kansas 725 E. 37th St., Wicllita, Kansas. Associated Grocers 01 Alal.Juno, Inc__n_ -- Alabama-- - P. O. Box #1169 , 114 a. 14th St. , Rirmingham. Ala.

Associated Grocers of Colorado, Jnc_ - Colorado_ 1400 IV. 3rd Ave., Denver, Colorado. Associated Grocers Coop., Inc-- - Georgian 638 Lee St., S. , Altanta, Georgia Associated GrocersofEast).fjchigan Inc-u Micbigau ---- P. O. Box #448, 501 IV. Kearsley St. Flint, Michigan Associated Grocers of Oklahoma, Jnc- ' Oklahoma_ - - P. O. Box #629, 1810 E. Ja,.';per, Tulsa, Oklahoma. Associated rocers of Tort Artbur, Incn -- xas-- - -- -- -- -- -- . P. 0 " Box #1380, Port Arthur exas. Associated Grocer:; "\\wholesale Co-- -- Obli-- _u--__ u-- 3903 dlckney Ave. , Toledo, Ohio. Associated "\YhoJesalc Grocers Co., Inc- - :;..rlssourL___n--. ! 1933 'frODst, Kansas City, Mo. Associated IVbolesaJe Grocers of Dallas, Texas- ; 9001 Ambassador Row, (P. O. Box #52(3) Brook Ballow Industrial DIstrict Dallas Texas.Inc.

__. __ _ , 1210 FEDERAL TRADE COMMISSION DECISIOKS Complaint 60 F. T.

Kame of respondent StateoffncorporB- Office and place of lmsiness tion I Georgia- H_U_- O. Box #1366, 4GIJ Albert Street, l\IaconBibb Grocery Co. ) Inc--_-- Georgia.

Central Grocers Coop. , Inc_ --_--_n_----_- Ilinois-- 2101 S. Carpenter St" Chicago, 11.Dixie Saving Stores, Inc_-- TCIlIH'ssee-- _--- !loo East Twelfth St. , Chattanooga Tenn. Grand Rapids Wholesale Grocery Co- - -- Micbigan: 1501-19 Buchanan .-\venue, S.1\' ., Grand Rapids, Mich.

Grocers 'Wholesale Coop. , Ine...o u Iowa- 334 S."\Y. with St. , Des :\loines, lo\\" Kansas Service Grocers, Inc_ - Kansas_n-- Sunshine Hoad at 7th Street, Kansas City, Kans.

Lake Erie Coop. Grocers COlllpany-uuu Obio-- 4070 West 1.';0 St. , Cle\'eJancJ , Ohi(). Miami Retail Grocers, Inc--n_ --n Floridaun 2400 ),' W. 23rd St. , :'liami, "Florida. Muskegon \Vholesale CrnnpfilY, COOp-_n- ylichigan- _ unn 176.1 CrestolJ St. , :\luskegoD, Mich. 0. Box #1299, 5"2 -:T . Fairfield St.Panhantlle Associated Grocer, Inc-- I Texas__- 1' Amarillo, Tex L';. Progressive Associated Grocer, IDC-- Ilinoisu.--n----- Staunton, Il. O. Box #2019 , 810 S. Hosmer St.Redman Bros. of Lansing, Inc-- )"Iicbigan- P.Lansing, Tllicl1. South Plain Associated Grocers, Inc_-- Texas_ .u.- , 2505 Avenue " A" , Lub- i P The Sylvester Company_ _--u--u--_u "'isconsin 1149 E. \Vi1 St. , Madison, 'Vis. The Tusco Grocers, Inc_ u- Ohio-- 404::. rain St., Ubricbsvile, Ohio.United A- G Stores Coop. , Inc_ Ne1Jraska- 7312 Jone St. , 01naba, ::cbraska.United GroCt-rs Coop. A --_uu_-- Wisconsin_ n---- 1117 oW. 'Vashingtoll St. , Appleton Wis. V'(eona Food Stores, Inc_ u--u---- Tennesseen_ 5708. Cooper, :'Iemphis, Term. "'bite Villa Grocers, Inc_--_ -- Ohio_ --- 537 :E, Pearl St., Cincinnati, Ohio.Central Florida Cooperative, Inc----n---- Florida-- p. . Box #1171 , 1224 S. Orange Ave. Ocala l'florida. Said respondents are Rll engRgecl in the wholesale grocery business a.nd are members of respondent CROG and also of respondent Nn t.ional a.nd are sometimes hereinafter referred t.o as respondent members. The stock of respondents J\'ationnl and CROG is owned by wholesale g-Tocers, the businesses of which are o"ned by retail grocers. PAH. 4. Respondent :Kational was organized in 1934 as a buying agency for its various wholesale grocer members, buying from various suppliers for the benefit of its members. Its opera60ns "ere conducted nation-wide through three regional divisions, covering the enstern, central and "estern areas of the L:Tnited States. In 1048 said respondent caused its three divisions to become separate corporations and the funct.ion of buying for the members of each has beell performed by sllch divisional or regional corporations. Among the regional corporations is respondent CROG, formerly the Central Division of respondent :Katiollal.

Respondent at,ional has o\ynership of and control over certain brand names which are used by the members of both respondent ",abonal and respondent CROG on Jabels describing a majority of the grocery products handled by such me111bers. Said respondent )Iational by agreement licenses respondent CROG to use such brand names as private brands on labels and )ther"\\"ise in connection wit.h various food products purchased by respondent CROG froln various suppliers, thus permitting the merchandising of food and grocery products under such brands.

KATIO?-,TAL RETAILER-OWNED GROCERS Il\~ ET AL. 1211 1208 Complaint In addition to control over brand names respondent K ational also acts as an insurance broker for its various members. Respondent Crag since 1948 has been engaged ill the purchase of food and grocery products from various suppliers on behalf of the member ,,,ll-lesale grocers constituting the owners of said respondent. For the year ended May 31 , 1955, said respondent's purchases of such products amountcd to approximately $17 500 000. PAR. 5. R.respondent K ational and respondent Crag have been, and arc now engaged in commerce as "commerce:' is ddincd by the Cla.yton Act in that they cause food and grocery products to be purchased Lnd shipped from various sellers located in different states to wholesale grocers, members of said respondents and including the respondent members, located in other states and in the District of Columbia and there is now and has been a constant current of commerce in such products, and these respondents are instnlmentalities in the stream of interstate commerce.

Respondent mcmbcrs are also engaged in commerce as "commerce is defmed in thc Cbyton Act in that they purchase food and grocery products from yariol1s sellers located in states other than the states where slich respondent members are located and shipment of such products is made into the states where such respondent members are located, and there is now and has been a constant current of commerce in such products.

PAR. 6. Respondent Crag is now, and has bccn since 1048 , COIltinuously engaged in the purchase of food and grocery products from various sellers for and 011 behalf of respondent mClnbers, whereby orders are placed by such members through respondent CR.OG with shipments being made direct from the supplier-seller to the respondent members involved and ''with respondent. CROG being invoieec1 direct and payment made by it to the seller or sellers involved. Said rcspondent re- in voices its members for the merchandise purchased and E;old. In some instances respondent members place orders directly with suppliers, but in all such instances elearance or eonfirrnatioll of such orders IDust be obtained from respondent CROG prior to shipment.

In connection with such purchases respondent CROG makes arrangements with various sellers of food and grocery products for the furnishing to them of labels bearing t.he private brand na,mes owned and controlled by respondent ational. The use of such labels and brand names is granted by respondent National to respondent CR.OG in connection 1\"itll products sold by sneh sellers to respondent Crag for resale by its Dlembers, respondent members herein. Also respond- 1212 FEDERAL TRADE COM:ISSION DECISIONS Complaint 60 F.

ent CROG designates certain sellers as approved suppliers and demands that such sellers invoice CROG for all sales. Respondent CROG does not permit respondent. members to have access to the labels bearing the controlled brand names so that such respondent members are thereby precluded frolll making arrangements separately with suppliers of their individual choice. PAR. 7. Respondent National has also been engaged directly in the acts and practices described and set fort.h in paragntph 6 herein with respect to respondent CROG, in connection with the purchase and sale of food and grocery products from various suppliers for resale by and through its member-wholesalers.

PAR. 8. Respondent CROG, in engaging in the acts and practices heretofore alleged, has been, and is now, perfonning services commonly rendered by independent brokers which said respondent replaces in a large number of such transactions of purchase and sale. Respondent National also has engaged directly in acts and practices which constitute services commonly performed by independent brokers, which respondent K ational has replaced in a large number of such transactions of purchase and sale.

PAR. 9. In consideration for such acts and practices of respondent CROG many sellers payor grant to saiel respondent and respondent receives and accepts from such sellers sums of money as brokerage or as allowances and discounts in lieu of brokerage. For example one of its suppliers contracted to pay and did pay a sum of $9 000. for the year 1955 to said respondent in connection with the furnishing of food products packed under brand names controlled by respondent National as allowances in lieu of brokerage. Also respondent National in consideration for such acts and practices which it has directly performed in the purchase and sale of food and grocery products for its various members, has likewise received and accepted sums of money as brokerage or as allowances and discounts in lieu of brokerage froln many sellers paying or granting such sums to said respondent.

The amounts received by said respondents from various sellers have been substantial and have usually been equivalent to fixed percentages of the purchases from such sellers.

PAn. 10. The sums received and accepted by respondent CROG as brokerage or as allowances and discounts in lieu of brokerage are used by it, together with other funds received from respondent members to defray operating expenses, with the excess of such amounts received being distributed to respondent members in the form of patronage dividends. For example, in 1955, said respondent distrib- NATIONAL RETAILER-OWNED GROCERS, INC. , ET AL. 1213 1208 Initial Decision uted approximately $230 000 received from various sellers, to its members in the form of patronage dividends. PAR. 11. Respondent National, through its ownership of brand names used by respondent CROG and respondent members in the merchandising of food and grocery products and also through its and its con-organization of and affliation with respondent CHOG, Ilpetion with respondent members has been and is both directly and indirectly engaged in the aforesaid ads and practices in violation of subsection (c) of Section 2 of the Clayton Act, as amended, and since about 1948 sa.id respondent has been, and is nmv, indirectly engaged in the same practices through the operations of respondent CHOG and respondent members as referred to hereinbefore. PAR. 12. The acts and practices of respondents and each of them as alleged and described arc in violation of subsection (e) of Section 2 of the Clayton Act as amended by the Robinson-Patman Act. Mr. Lewis F. Depro ancUh. Oecil G. llIiles for the Commission. Litsinger, Gatenbey and 8p"11e1' by ilfr. Andrew W. Gatenby and Mr. FTed 11. La?u, Jr. of Chicago, Ill., for all respondents except Associat.edGrocers of Colorado, Inc.., and Assoc.iated Grocers of East J'Ichigan . Inc.

ili1' . F'/ ed Fishburn of Den vel' , C010., for respondent Associated Grocers of Co10ntdo, Inc.

No appearance for respondent Associated Grocers of East :l\ichigan Ine.

INITIAL DECISION BY LOREN H. LAUGHLIN HEARING EXA:JIIXER , as This proceeding is brought under g 2 (e) of the Clayton Act amended by the Robinson-Patman Act (U. C. Title 15, S 13), and involves charges of unhnvfu1 receipt by respondent corporations of brokerage, or allowances and discounts in lieu thereof, paid to them by suppliers for purchases upon respondents' own accounts, which charges respondents deny. In this jnitial decision the said charges are found to be sustained and a cease-anel-desist order is issued as to all respondents.

The complaint was issued April 16, 1058, and duly senedupon all respondents. On August 4, 1058, respondent National Retailer-Owned Grocers, Inc. (usually hereimdtel' referred to as KR.oG), and respondent Central R.retailer- Owned Grocers, Inc. (usually llereinafter referred to as Crag), filed their sepamte answers. All of the 35 other respondent corporations, except Associated Grocers of Colorado, Inc. and Associated Grocers of East xlichigan, Inc., had filed their joint answer on June 4, 1058. And also, on July 10, 1058, Associated 1214 FEDERAL TRADE COMMISSION DECISIOKS Initial Decision 60 F.

Grocers of Colorado, Inc., had filed its separate answer. Respondent Associated Grocers of Eastl\Iichigan, Inc., filed no ans-.ver and entered no appearance, and therefore has been and still is in default. 'Vhile counsel representing ot.her respondents, undoubtedly in good faith, made a statemcnt upon the record that this particular respondent " is out of business" (R. 8), there is no evidence or stipulation in the record to that effect, and disposition of this proceeding us to this respondent will be made on the basis of such default. Alll'espondents "\which appeared herein, other than Associated Grocers of Colorado, Inc., have been represent.ed throughout by the BamG counsel. Respondent Associated Grocers of Colorado, Inc., appeared by its executive vice president, ,,,ho sat throughout most of the hearings. He eross-exllmined no witnesses and presenteclno evidence on his C01'poration s behalf, but indicated a willingness to abide by any ultimate arclel' ,,,hioh might be entered upon the evidence presented upon thc whole record.

Prior to hearings a subpoena duces tecum was issued to lIaTold 'V. Garbers, the gcncral manager of CROG, which was opposed by his corporation but not by Garbers personally. He appeared at the first lmd subsequent hearings, testified at length, and in dne course produced all documents requested of him, and the subpoena was fully satisfied. Jlearings ill this proceeding -were held on fifteen various dates, commencing October 22, 1058, and ending l\Iay 25, 1960, all such hearings being held either in Chica,go, Illinois, or ill )Iihvfl,ukee, ,Visconsin. At the close of the case-in-chief the respondents severally moved for dismissal of the complaint. These motions were resisted, and on :.farch iTna facie case, 1D60 they 'were denied on the basic ground that a jJl had been definitely established. Hespondents then presented evide,ncc purporting to support their respective defenses lUlder their separate ans,yers, and all parties rested.

Proposed findings, conclusions and order 'were submitted by counsel sUPPOliing the complaint and also by counsel for all respondents who actively pa-rticipated in the case. ,Vhilc ample opportunity was given for the presentation of such matters by respondent Associated Grocers of Colorado, Inc. , this respondent submitteclno proposals. On November 1"1, 1860, counsel for the contesting parties presented their oral arguments in \Vashington, D. , and the proceeding ",-as submitted for decision.

Al! proposed findings of fact and conclusions of law submitted bv sa.1cl respective parties which are not incorporated herein, either as su mitted or in substance and effect, have bee,n rejected. The proposed order submitted by cOillse1 support.ing the compla,int is adopted herein. , NATIONAL RETAILER-OWNED GROCERS , INC. , ET AL. 1215 1208 Initial Decision The hearing examiner has carefully and fully analyzed the whole record, taking into consideration his observation of the appearance conduct and demeanor of the witnesses who appeared before him. All procedural matters have been thoroughly reviewed, and, inasmuch as rulings wore reserved on certain objections to evidence and motions to strike evidence made by counsel for the contest.ing respondents, the sanlC are hereby each a,nd all sustained. All arguments, proposals and briefs of cOlUsel have been studied in the light of the entire record. Upon the whole record the hearing examiner finds generally that the Commission has fully sustained the burden of proof incumbent upon , and has established by reliable, probative and substantinJ evidence and the fair and reasonable inferences drawn therefrom, all the material allegations of the complaint; and further finds that evidence subm.itted by or relied upon by respondents fails to establish facts constituting any vnJid defense to the charges of violations contained in the conlplaint.

In these 2 (c) cases a decision "depends on the circumstances of each case (F. C. v. Henry Broch il Company, 363 U.S. 166 (1960), 175-176; sustaining (1959) 54 F. C. 673). :YIuch of the long record herein is devoted to identification of numerous documentary exhibits and to objections, motions and rulings. The numerous exhi.bits received in evidence, of course, are not in dispute. Counsel supporting the complaint presentee! the testimony of offcials of eleven suppliers with reference to various discounts and allowances made to respondent CROG, and also covering their use of brokers in connection with sales to other buyers as well as to members of CROG in certain situations. Counsel supporting the complaint also examined CHOG's general 111manager Garbers at length respecting respondents' corporate relationships and activities. Respondents presented evidence by a number of their offcials. 1Vhen imnlateriallninor differences between the parties arc disregarded we think that the controversy here is over conclusions to be deduced from the facts rather than over the facts themselves, as stated by Circuit Judge Parker in one of the earliest!? 2(c) cases Oliver B?'others, Inc. , et al. v. C. (1939 A. 4th), 102 F. 2cl 763, 766; sustaining (1937) 26 FT. C. 200. More specifically, upon due consideration of the whole record, the hearing examiner makes the following:

FINDINGS OF FACT Re,spondent National Retailer-Owned Grocers, Inc., is a corporation organized and existing under the laws of the State of Delaware, with 1216 FEDERAL TRADE COMMISSIOK DECISIONS Initial ))edsion 60 'l' its principal offce and place of business located at 141 Vest Jackson Boulevard, Chicago 4, Ill.

Respondent Central Retailer-Owned Grocers, Ine., is a corporation organized and existing under the laws of the State of Illinois, with its principal offce and place of business located at 155 North Vacker Dri ve, Chicago 6, Ill.

All of the other respondents herein are corporations, and each is incorporated and Inaintains its principal place of business in one of sixteen Midwestern and Southern states. All such corporations are correctly named and referred to in the complaint, except that respondent Grand Rapids Vholesale Grocery Co. has since changed its name to Spartan Stores, Incorporated (R. 33, 1187), and also respondent Central Florida Cooperative, Inc., has since cha.nged its name to Certified Grocers of Florida, Inc. (R. 988). In order clearly to identify another of such corporate respondents, it is noted that ,,' while the respondent South PJaill Associated Grocers, Inc., is always referred to by that corpomte name in the pleadings of both parties, the evidence shows the correct name of this corporation to be South Plains Associated Grocers, Inc. (R. 989-991, 993, and CXs 2-E and 172-D) ; and it so appears in the proposed findings, both of counsel supporting thc complaint (page 5) and of respondents (page 19). Although the witness Garbers estimated a somewhat higher total number of such C01'pomtions (E. 1169), this is immaterial, as no defect of parties is claimed or could properly be claimed by any party to this proceeding. All of these 35 respondents, other than NROG and Crag, h,we been and now are engaged ill the operation of warehouses for their numerous retail-grocer owners. These 35 warehouse corporations are all stockholder members of respondents NROG and Crag, and are accordingly, for the sake of brevity, referred to in this decision either as members or as respondent members. Each of these respondent members has been and is jointly owned by numerous retail grocers in the area in which it operates. The witness Garbers testified that the total of such rebil groccrs approximated one thousand at the time of hearings (R. 1194). Representatives of respondent members covering about two-thirds of these retailers appeared and testified for respondents during the hearings.

Respondent NROG was orga,nized in 1934 as a buying agency for various wholesale grocer members throughout the entire Uniteel States. These Inembers owned all 'Of the stock in said corporation and rejected its directors, and at all times controlled its activities. From 1934 to 1938 NROG operated as a broker for various suppliers but upon objection to such practices by the Federal Trade Commission NATIONAL RETAILEH-OWKED GROCERS, INC. , ET AL 1217 1208 Initial Decisioll after the passage of the R,obinson-Patman Act ROG, in 1938 ostensibly desisted fronl such practices, and thereafter purported to act as a buyer for its members until 1948. During this ten-year period it did buy from various suppliers of groceTY products throughout the COll1try for the benefit of its members. Its methods of operation however, included the receipt by it of various allmvances rrOln sellers as hereinafter-r more fully stated. R.OG, from its beginning in 1934 up to 1948 , ope,rated through three regional divisions, which, respectively, covered generally the Eastern, Centra.l and ",Vestern areas of the United States. In April, 1948, due to internal dissensions as to its metllods of doing business, and varying demands and conditions in the several sections of the country, NROG' s directors, by resolution authorized its respondent members to organize independent corporations in the Bastem and Central areas of the country. ,Vhether prior authoriza6on by ROG was necessary for such action is immaterial. The -western members had already organized a separate corporation named Pacific JIercantile Company. The eastern group of wholesale grocers proceeded to incorporate as "Eastern Division National Retailer-Owned Grocers TIle ,yholesa.le- grocer members of NROG who had been doing business in the central area of the country likewise fonned the respondent corporation Crag, a corporation separate from ROG and respondent members here own all of the stock of CROG. It was originally called " Central Division ational Retailer-Owned Grocers, Inc. , which name was cha,nged several years later to its pre,sent title, Central Retailer-Owned Grocers, Inc. Each of these three separate regional corporatlons, in its own manner, thereafter proceeded to carry out., in its own area, the purchasing and certain other functions theretofore handled by KROG. Each of these corporations, however, was perllltted by NHOG, through corporate resolution, to use the food-product labels owned by it, as ,veil as to receive the benefit of its group-insurance programs and services. This permission continued in force through the years subsequent to 1948 until during 1959. In 1959, and about a year aft.er the hearings herein began, all concerned adopted another corporate device for handling the NROG label, more specifically discussed hereinafter. But this docs not alter the findings herein made nor evn.cle the issua11ce of an a.appropriate cease-anel-desist order against all respondents herein.

Since Pacific i\iercantile Company and Eastern Division ational Retailer-Owned Grocers, Inc., are not parties respondent, we are only incidentally concerned with their operations subsequent to 1948, and , \ , 1218 FEDERAL TRADE COMi\fISSIO)/ DECISIONS Initial Decision 60 F.

then only insofar as the order herein issued against respondent KROG affects all of its members.

The foregoing general statement of the corporate relationships of the several respondents has been substantially agreed upon by counsel in their several briefs. The basic dispute in the ease arises from the interpretation which should be given to the facts and circumstances relating to the various substantial sums of money which were, beyond question, directly received by respondent CHOG from various suppliers, and indirectly received by CROG' s respondent members as patronage dividends. Respondents freely concede that these sums ,were paid to CROG by suppliers, but refer repeatedly to theln by various names other than "brokerage, such as "promotional allowances service allowances sales promotion promotion", discounts :' and other similar terms. The management of respondent CROG, a,nel the representative offcials of several suppliers who testified, an avoided the terms "brokers,j and "brokerage" like the plague, and much of their testimony and argUlTlCuts consist of discussion of semantics and do not strike at the basic question to be determined. Respondents are so obsessed \\'ith t.he idea that "broker is a ,,'orcl taboo, that they f'xen object to its use with reference to \"\hat is here tile rather immaterial and incidental group life and casualty insurance service rendered by NROG, although the evidence unquestionably shows NROG to have been essentially a broker in so servicing its nlembers. In any event, brokera.ge fees "are not changed in nature by calling them somet.hing else, nor Inade legal by an agreement for their payment" (Quality Eaken of A1J1eTioa, et al. v. (1940), C. A. 1st, 114 F. 2d 393, 399; sustaining (1939) 29 F. 1328). An in The Great At/antic Pacific Feet C01npaT(Y v. !i. 106 F. 2d 667 (1939 , C. A. 3rd), cert. den. 308 U.S. 625 (1940), rehearing denied 309 1).S. 694 (1940); sustaining (1937), 26 F. 486, it was held (106 F. 201 at page 670) that the change of the respondent corporation s brokers' names, after t.he enactment of the Robinson- l:Jatman Act, to "purchasing age,nts" and other like terms did not change the nature of their dut.ies and actions. The complaint charges, in the language of the statute, that respondent CnOG ha,s received and accepted such sums of money " brokerage or as allowances and discounts in lieu of brokera,ge . The uncontroverted fa,cts presented in detail in the case-in-chief justify a finding that the various sums to be received by CR.QG, used in part for its operations, and distributed in part as pat.ronage dividends to its members \\ ere received by respondents as "allmvances and discounts in lieu of brokerage . Respondents have endeavored to avoid NATIONAL RETAILER-OW:-ED GROCERS , INC. , ET AL. 1219 1208 Initial Decision the charges based upon these facts by explaining thell1. Their principal defense is that the status of CROG is entirely different from that of other buying organizations in that it is a "unique:' organization and that, in the several instances specifieal1y established by the evidence, the substantial sums received by it from suppliers are explainable either as volume discounts offered to all large buyers by the seller, as payments by sellers for promotional services rendered by CnOG to them, or as reduced prices granted by sellers to CROG in common with all other controlled-label accounts. It is therefore claimed that the activities of CROG and its respondent members are not violative of g B(c).

On behalf of respondent members it is further inlplausibly urged that they have nothing to do with CROG:s dealings with suppliers and are, in efiect, innocent bystanders who have had no know ledge of what was ta.king place. But the respondent menlbers of Crag holding all of the stock in CIlOG, elect its Board of Directors, through whom the executive offcers are then elected or appointed and policies are made and approved. CROG is the buying agent of the respondent members, each of whonl is bound by CROG:s acts. The sale purpose of CROG' s organization in 1948 was to permit its members in the 11iclwcst a,nd Southenl regions of the country to retain the advantage of the "ell-established "Shnrfine" ancl other private labels of XROG as testified by Garbers, in order to get quality nlerchandise under "the controlled hLbel that he (each mcmberJ so badly needs to meet chainstore competition" (R. leg). 1Vithont these private labels, there was no reason for the organization of CROG. ,Vl1ile there is some slight refercnce in the record to CROG's subsequent development of certain private labels of its own, there is no indication that they have ever been substantially or widely accepted by the member respondents. Insofar as the evidence materially discloses, aU of CROG's business relates to NROG' s private labels, and CROG's procurement from suppliers of various products under such labels for its members. The evidence clearly shows that CROG handles only about 1070 of the total business done by its members. The members cannot buy the Shurfine" and the other controlled-label products of NROG except remaining DO% of their respective purchasesthrough CROG. The are made by the respondent nlembcrs cHrectly from suppliers, or from the suppliers through their regular brokers, all at the suppliers' regular prices, including brokerage. It is only for the private-label business dong by them through CROG that they receive the benefit of any discounts or allowances. :Many of the products bearing the suppliers own packer labels are of like grade and quality to those ca.nnec1 by them 719-603--64-- Inital Decision 60 P.

under CROG's labels, and are sold without discOIUlt or allowance to the member respondents as well as to other wholesalers and jobbers within the geographical areas of the operations of CROG and its members.

CROG buys some 2 000 different items of grocery products from between 300 and 400 different suppliers. All such prorlucts bear the said private labels of NROG so controlled by CROG. It makes contraets with these suppliers, or has well-established understandings witll them, covering substantial volumes of business over specific future periods. It is able to do this because its members indicate to it in advance how much of a particuhlr product they will probably need during the ensuing year or other future period of time. \Vhen CROG receives these estimates from its members, it consolidates them and then advises t.he suppliers. As hereinbefore stated, the members cannot order products bearing "Shurfine" or other private labels of NROG directly from the suppliers, but must oreler them through CROG. 'When CROG transmits such orders to the supplier, it advises such supplier to ship such Inerchandise clire,ct to the member involved but all merchandise so sold by the supplier through CROG's orders is billed to CROG, which pays the supplier aud in tUnl bills the member at cost plus a mark-up. The operating expenses of CROG are paid out of the total income received by it during its fiscal year, which consists of the usual mark-up charged the respondent nH mbers on the CROG controlled-label merchandise, plus the lmlny substantial discounts and allowances CROG admittedly has received from the suppliers. After salaries, rent and all other expenses incidental to CROG' s operation have been paid, the balance remaining is then distributed to the members in proportion to the a.mOllllt of business they ha,-e done through CROG during that ymr, and is usually called a "patronage dividend"

CROG, like NROG before it, has never owned any warehouses, and only on ra.re occasions, when delivery of merchandise, such as foreign inlports, could not be eiIected inllnediately to its members, has it leased public warehouse space, or space in some member s ,nlrehouso, on a temporary basis for the short-term storage of such merchandise pending delivery to the consignee members. It has never bought on its own account any quantity of ll1erchandise and held it in its own storage pending resale to wholesalers or others. In short, it has never operated as a legitimate broker or jobber, although it has received from its nnl1E"rous snpplieTs large sums by way of discounts and allowances which ate parallel to similar broke.rage payments lnade by these saine suppliers for similar services performed for them by their regular &, NATIONAL RETAILER-OW ED GROCERS , INC. , ET AL. 1221 1208 Initial Decision legitimate brokers in selling Inerchandise of like grade and quality offered under the suppliers' own "packer brancr' labels in the ordinary course of business.

Before analyzing respondent.s' various contentions in detail, it is approprillte to review briefly the htw rehting to 2(e). Shortly after the passage of the Robinson-Patman Act ill 1936, the Connnission vigorously instituted and pursued to successful conclusions a considerable number of proceedings t.o interpret, implement and enforce t.he provisions of this ne,v Act. A substantial number of these cases involved 2(c) thereof. In the period from 1038 to 1042 scores of cases brought under this section were decided by the Commission, and a substantial number of them were adjudicat.ed and enforced by the Courts, \which in every instance sustained the Commission s interpretation and application of the Act against sellers, sellers' agent.s and brokers, independent brokers, buyers, and buyers' agents and brokers. Ahnost. every conceivable situat.ion involving the selling and buying of grocery products in particular was covered by t.these decisions. These early cases are collated in the annotation at 149 ALR 657- 677 (1044). It ,,-ould be supereroglttion to mlllzye Itnd discuss even a representative nl1l1ber of these cases in this initial decision other tllln aptly to cite or quote from a few. After this eltr1y period of activity the COI11nission successfully continued it.s said program and in some instances its later cases also reached the Courts, with like results. To the present. time no final judicial decision has ever reversed any holding of the Commission that any respondent has viojltted 2(e). The jlttest of these cases, Itnd the only one which has ever been adjudicltted on the merits by the Supreme Court of the v. Henry BToch Company, supm. ThatUnited States, is C. decision, in substance, has ratified the \yell-established earlier law and forged the last judicial link in the chain encompltssing a11 relationships of buyer and seller which mlty be involved in 2(c) cltses. It was held in tlmt eltse thltt the seller s broker could not legally pass on Itny part of his commission to a buyer as a concession to such buyer to effect the one sale involved. In the course of the opinion the Court referred approvingly to many decisions of the Commission and the lower courts, interpreting the "in lieu of" provision of 2 (c) Itnd its application to evidence and contentions in various situations which are similar to or like the evidence and contentions of respondents in the instant proceeding.

From t.he very begin1l1ing the Commission, in its decisions under 2 (c), lms held consistently that the payment of "ltnything of vltlue as a commission, brokerage, or other compensation, or any allowance , 1222 FEDERAL TRADE COM,\IISSION DECISIONS Initial Decision 60 F.

or discount ill lieu thereof" by or for a seller to a buyer or l.myer agent is absolutely prohibited by said 8 2 (c), and that the exception clause of said section, authorizing payment for services rendered in connection with the sale or purchase of goods, wares or merchandise does not permit the buyer to give, directly or indirectly, to the seller or the seller to receive, directly or indirectly, from the buyer, any commission, brokerage or other compensation or any allow"ance or discount in lieu thereof when it is claimed the discriminatory price given to the buyer resulted from the rendition of services by the buyer to the scl1er, or resulted from savings in distribution costs to the seller. Affrming the Commission s interpretation and application of S 2(c), the Courts have repeatedly held that this " in lieu" clause was intended by Congress to permit the buyer to pay his own agent or broker and the seller to pay his own agent 01' broker; but to preclude any payment for brokerage service 01' its equivalent by either to the other, either directly, or indirectly through its broker or agent. "Ye luay not serve two masters. " See The Great Atlantic Pacific Tea COJnpany , sup7' pages 674-675. As the Commission a,nd the Courts have so frequently pointed out, Congress never intended to leave a,n)' loophole whereby the purpose of the Aet could bc nullificcl. In each case, therefore, the acceptance by the buyer, directly or indirectly, from the seller of anyt.hing tantamount to brokerage, by ",yhaten r mnne it might be called, ,vas held to be a violation of the Act. As has been briefly referred to, at the close of the Commission case-in-chief, a JHima facie case under g :2 (c) had been definitely established. It was proved that the respondent CROG and its respondent members had received, directly and indirectly, various discounts and alJmnmces which could justifiably be inferred to be in lieu of brokerage. If the impact of such proof were to be avoided, it then became incumbent upon respondents to brilJg thellsel ves within the statute exception. To bring a respondent within such exception "the burden of proof that the exception applies is upon the one who so contencls (F. O. v. Washington Fish dJ OY8tel' Oompany, Inc. (C.A. D , HJ60), 282 F. 2d 6D,\ 5D7; enforcing (1946) 42 F. C. 119 , and citing F.T. v. Morton Salt 00. 334 S. 37, 44). The respondents have utterly failed to bring themselves within the exception. The basic tenet of their defense, as hereinbefore stated, is that CROG is a unique organization, whose operations do not fall within the provisions of 2(c). Respondent.s claim that CHOG is ullique in that there is llo other organization set up and doing business in the manner ill which it operates, whereby its "Shurfille:' and other private labels enable its suppliers and its respondent members to , NATIONAL RETAILER-OWKED GROCERS , INC. , ET AL. 1223 1208 Initial Decision achieve marked special advantages over and above those a.vailable to others in the usual courses of trade. The features of respondents organiz ttion and operation, taken either individually or collectively, arc neither unique nor legal insofar as they concern the receipt from suppliers or any discounts or allowances, by whatever name. " 2(c) contains no classification provision nor is there anything in it which would justify the conclusion that it would not be uniformly applied. It in no way supports the theory that the relative size of businesses coming within its purvimv or other differing plans of organization determine the question as to whether or not violations of the statute occur. Biddle Purohasing Co. et al. v. C. (C. A. 2, 1938), F. 2d 687 600; cert. clen. (1938) 305 U.S. 634; sustaining (1937) 25 C. 564. Sce also the companion case OZ.i er Brothers, Inc., et al. v. , supr(( 102 F. 2d at page 771, where respondent corponttions argument that the statute was directed solely at the practices of chain stores, and not against independent c1ealers was summarily rejected. 1Vhile every case thus far adjudicated has certain peculiar characterist.ics of its own 2 (c) was so broadly fnnned as to preclude a.ny avoidance or compliance with its provisions by any subterfuge or , et al. v. under any guise . See Qucdity Bakers of A'l/'erica supra b F. 2cl at page 398. This certainly includes respondents claim of being "unique . After long consideration the I-Iearing Examiner has been unable to envision any type or buyer organization which could rightfully claim that by reason of its different or unique character, it can receive special discounts and allmvances from any seller in complete immunity and exemption from the clear mandate of the slfttute.

Genel'nl manager Garbers of CROG testified In the case of CROG the members are ,yholesale grocers. . . They perform a wholesale grocer s function, owned by retnilcrs. Actually, it is a chain-store set-up in reverse :I :" (R. 1201). The decisions are many ,,,herein usual corporate chain-store grocery organizations and their buying agents have been prohibited from receiving from sellers anything of value a brokerage, or ftny allov;ance or discount in lieu thereof. See fo!' example The Great Atlantic (0 Pacific 1'ea Oompany Y. supra, auc1/ndelJendent Grocers Alliance DistTib'Utin,q Co. v. F. (C.A. 7, 1853) 203 F. 2cl 941; sustaining (1852) 48 F.TC. 884. These cases make no distinction, and there is no ilegal distinction under S 2 ( c), between corporations owned from the top or from the bottom. Respondent member corporations are aJl coopcrat.ively owned by their retail grocer members. They have made no claim based there, to exemption from the provisions of 2 (c), nor would such clai1l1 1224 FEDERAL TRADE COMMISSIOK DECISIONS Initial Decision 60 F.

be valid, as cooperatives ate dearly ,vit.hin the inhibitions of sflicl statute. See Quality Baken of Ame1'ica, et al Y. , supra 114 F. 2cl at pages 399-400. That case alone disposes of respondents claim that CROG and its members const.itute a unique organization. In that case, the purchasing stockholders, TVholcsale bakeries, \"ho owned the Service Company, their buying organization, were locate(l in 25 different states and bought through their said buying agent from some 200 sellers located all over the country. The said buying agent either bought outright and resold to its stockholders, or placed orders with sellers for shipment direct to its stockholders. the instant case the member owners of CROG are located in sixteen states, and CROG buys for its members from some 300 to 400 suppliers located throughout the country, assuming liability to the suppliers for payment, but having the goods shipped directly to the members, who pay CROG a marked-up price for such goods. There is no material factual distinction between the Quality Bakers case and the case at bar.

As to the claim of respondents that their suppliers had benefited by CROG's activities on behalf of its members in obtaining and submitting to such suppliers annual estimates of the products needed by reduction in the sellers' billing work and credit risks, by shipping advantages, by the circulation of advertising material, and by pro~ motional meetings and conventions held by CROG for its members all such matters are concomitants of ordinary business, occurring frequently in transactions between suppliers and wholesalers or jobbers. The seller is ahvays eager to dispose of his merchandise at the best profit he can make, and the buyer is just as eager to buy to his best advantage. How can CROG' s operations, then, be so unique if they comprjsc the sort of services ,,-which are. rendered practieally every day by or to everyone who engages in such business? Furthermore, whatever advantage or benefit the sellers get from any such transactions are purely incidental to the beneficial servjces CROG \vas bound to render to its members, for whom it is the buying agent. See, for example Oliver Brothers Inc., et al. v. , 8npra 108 F. 2d at pages 770-771; The Great Atlantic & Pacific Tea Oompany, et al. v. l'. , supra 106 F. 2d at pages 672- 673; Quality Balcer8 of Ame1'ica, et al. , supra 11+ F. 2c1 at pages 398-399; and Modern Marketing Service, Inc. , et .01. v. (C. A. 7, 1945), 149 F. 2d 970, 974-978; sustaining (1943), 37 F. 386. In Southgate Brokerage 00. , Inc. v. C. (C. A. 4, 1945), 150 F. 2d, 607-608; cen. den. (1946) 326 U. S. 774; sustaining (1944) 139 F. C. 166, an offer of evidence of such alleged services by the NATIONAL RETAILER-OWNED GROCERS ) INC. , ET AL. 1225 1208 Initial Decisioll buyer to the seller was held properly rejected by the Commission as irrelevant. Also this decision discloses (at page 608) that j,trge quantities of goods were contracted for in advance with packers and eanners. There is no uniqueness in CROG' s similar practice here. There is nothing unique, either tbout NHOG' s private labels used by CROG and its members. Lse of prinlte labcJs is a common practice which has been before the Courts in S 2 (c) cases several times. See Independent GToCe1'S Alliance D-istl?nding Co. v. 1'. 1'. s"pra at pages 943-944; Southgate Brokerage Co. , Inc. v. supra 150 F. 2d at pages 607-608; and il adem ill arketi11g Service Inc. , et al. v. , supra 149 F. 2d at page 977. litany suppliers are glad to pack private-label products, just as the suppliers are happy to get this type of business from CHOG in the present case. But in respondents' operations, the furnishing of the priva.te label to the suppliers is essential to all selTices rendered by CROG to its members, and whatever benefit accrues therefrom to the suppliers is purely incidental to this fairly ordinary, and certainly not. unusual business transaction.

There is therefore no basis for respondents' contention that they are exempt from the provisions of S 2 (c) by reason of the uniljuc character of their organization. But they have also raised other ljuestions ancillary thereto, which will now be disposed of. Hespondents argue that the Brach case supra shows tlmt the Supreme Court made a distinction between the situation of the seller broker there involved and a case involving buyers such as respondents herein, quoting particularly the Court's dictum (363 U. S. at page 174), "The buyer s intent might be relevant ,were he charged with receiving an allowance in violation of S 2 (c)." The Court, at best only indicated the mere possibility of relevance of intent on the part of the buyer, and did not indicate that such intent was eontrolling 01' decisive. Furthermore, S 2(c) is purely a malwm prohibitum statute, and intent to violate it is not made requisite thereto. And in 1110dem Mrtrketing Service, Inc. , et al. v. , 8"1'1' 149 F. 2d at page 978, it was expressly held "that where such relationship (between seller and buyer s broker J exists it is immaterial whether the services rendered the seller were genuine or fictitious and whether they were incidental or otherwise. Even good faith on the part of both the broker and the seller cannot be utilized to escape the condemnation of the provision . Intent to violate 2(c) was held immaterial, ancl the buyers and their broker and all other respondents were found to have violated S 2 (c).

\\ , 1226 FEDERAL TRADE COMMISSIO:\ DECISIONS Initial Decision f,Q F. But is is urged here, in eH'ect, that since there is no direct evidence that these respondents were a,vare that they we.re receiving preferential prices, they .were innocent of any wrongdoing. In any view the position of respondents is an anomalous one. They have claimed throughout that since Crag performed valuable services for the sellers, respondents could receive these allowances. If this position were sound, respondents would, of c.course, be bOllnd by the imputed knm ledge of their principals, the sellers. But they then contend that, since they are acting for the buyers, they are distinctly separate from the sellers, and are not bound by any knowledge the sellers ma.y have. These two contentions ate mutually exclusive, and without merit.

Even if such knowledge were necessary to pro\"e violation by respondents, the evidence itself clearly compels the inference that respondents knew ,,,hat was going on. During ten years or marc of dealing -with numerous suppliers and bargaining ,with thenl for better prices, discounts and allov,ances, CROG"s offcers and members certainly kn8\v they were enjoying substantial adnlutages that the smaJ1 wholesale.rs ill competition ,vi1.h respondent 111Clnbcrs were unable to obtain. CRaG's general manager Garbers, its buyer, IViJiam A. Stolte, and Mike Rabinmdtz, one of the chief organizers of Crag and its president on seycral occasions, and currently president of NROG and also manager for the member respondent Associated Grocers of Oklahoma, Inc., testified extensively hereill as accredited ropresent:Jti\ es of all the corporate respondents, \i-ho cannot now deny that accreditation. These three experts were closely observed by the Examiner. They \were not naive beginners in the merchandising of food products. Their evidence discloses that, as THature nwn who had spent practiertlly a.ll the years of their adult lives in the groce.ry buying and distributing business, each is highly competent, experienced and successful in that. field. They knew aU the practices of the trade, from the producers all the way through the channels of t.trade to the ultimate consumer. They knew that their members were paying more for packed, labeled goods than for NROG-labeled goods of like grade and quality. They kne\y that their suppliers used brokers in dealing with others, and that smaller independent \yholesale grocers were not getting the same buying advantages as respondents. In fact, CHOG was organized for the express purpose of effecting savings for its wholesaler members by bulk purchasing to reduce the prices ordinarily paid by ,Yho1esa1ers to suppliers for grocery products (Articles of Incorporation, Commission s Exhibit II-A). As stated in thc Brach case supra at page 174 The powerful buyer ,,,ho demands a price conces , NATIO:ral RETAILER-OIVNED GROCERS INC., ET AL. 1227 1208 Ini tial Decisi on sian is eonce,rned only "it.h ge,tting it." Respondents also knew that small ,,-wholesale houses could not afford private.e labels. That was precisely why XROG was organized, and later its labels continued in use by CROG. General :.Hanagel' Garbers testified with reference to the ability of the respondent members to compete with the chain-grocery brands: ""lve supply them (respondent membersJ ,,-it.h a controlled label merchandise program * * ::: on a, ba.sis that is eompa.rable to the chain operation, hecause individually these \yarehollses eouJcl not embark upon a private label or controllecllabel program. "' ".. (Ilt would cost thell so nluch more money, it -would be uneconomica1. They can t auord to buy t.he labels necessary in order to get. the right price" (R. 1195). Respondent.s knew absolutely that the leverage of the private NROG labels ,,-ould give them advantages that these small competitive wholesalers were unnble to get. As so ,yoll said in JIid- State Distributors, et at. v. C. (C.A. 5, 1961), 287 F. 2d 512, 520: (OJne caught in the middle cannot, to 'ward off his huge and orel' powering rival, injure, even unwittingly, a smaller one. A Commission decision ilfm:n Fish Cmnpany, lnc" 1936, 53 F. , is relied on by respondents to support another argument that since respondent is not the only customer which the suppliers seJ! cErect ,vithout the intervention of brokers, and as to some suppliers their sales through brokers constitute an insignificant portion of total sales, this indicates "the lack of a clear pattern relating the prices, discounts and allowances involved t.o brokerage pa:yments . This is c.aimecl an imporiant factor to be considered in determining whether a ,-violation of (c) has been proved. There is nothing unusual in this; and it would indeed be strange if all suppliers had exactly the same pattern as others for all qualities and grades of merchandise handled by them. It is clear from reading the l1ain Fish case that the circumstances are quite different from those in the case at bar, because in that case there was no varia.nce bebyeen list prices for aJl customers and prices paid by all customers, and the product t.here involved "-as a perishable prod~ uct, on which the prices varied from day t.o day. The essence of that holding is that there \\-ere many transactions shown in evidence \\'herein there was no difference bebyeen the price charged by respondent to its preferred and non-preferred cllstOlners for the same grade and quality of fresh fish; hence no violation of 2(c) 'Yas established. In the opinion of the Commission sustaining the order issued by t.he EXflminer dismissing the complaint, at page 97, it is pointed out, among other things Beca,use so many factors normally influence the prices of this perishable commodity, its merchandising differs c.onsidera,bly from the sale of st.able commodities. " The comp1n-int "' as dismissed on the Initial Decision 60 basis that the facts in the record showed no direct evidence of unb wful pa.yment of brokerage by respondent, and did not warrant an inference thereof. In the case at bar, however, we are dealing with "stable commodities which ate placed by the suppliers in cans or other containers bearing the NROG private labels. The evidence here shows long-standing contracts or understandings between such suppliers and the I'respondents for the granting of substantial discounts and allowanees designated by various names during the very times when the said suppliers were charging regular brokerage to other customers and also to respondent members, for goods of like quality and character. In many of these instances respondents were the only customers of the seller who received any such discounts or allowances whatsoever, and it was established, in each and every instance presented in evidence, that there was a fixed, continuous, long-term program of favoritism by the suppliers to the respondents as against other buyers.

Respondents presented evidence from their records which reflected that all of the business done with CROG for the fiscal year ending May 31, 1957, by the eleven suppliers whose evidence was presented herein amounted to but 0.073% of CROG's total business done that year ,,-ith a11 of its 300 to 400 suppliers. Upon these facts it is contended, in substal1ce\ that the evidence of the COlTlnission, at best only esta.blishes a de 1nini171iB mnount of alleged brokerage received by respondents. Since the evidence shows that the total purchases of CROG for the fiscal year emled May 31 , 1955, were $17 500 000; for the fiscal year ended Nlay 31, 1957, $24 491 427.59; and for the fiscal year ended May 31 , 1959, approximately $36 000 000, any brokerage premised upon even 1 % of such purchases would be substantial in any that the brokera,ge of those years. 'lhe evidence 'shows, however, va.riec1 from 10/0 up to even 7% and 80/0 in some instances, usuaDy being about 5%. \Vhile it is impossible to determine precisely, from the evidence, just how much of the total vohulle of respondents' business "' as obtained on the basis of any particular amount of price reduction in lieu of brokerage, any percentage of 'any of these many rnillions of dollars is exceedingly substantial, and call hardly be called 1l0tconCerl1 itself with de 'In.ini1n?:S m/u8 j\loreover, 9 2(c) does nor require that the Commission establish that the amount of preference to respondents is exactly equal in every instance. Under the Jaw the granting -and receipt of sllcha.allowances in any -anOlmt is positive.ly prohibited. Furthermore, if even one transaction had been established wherein such favoritism appeared, that would be suffcient to warrant a cease-and-desist order, since in the 1l10st recent case, the NATIONAL RETAILER-OWNED GROCERS , INC. ) ET AL. 1229 1208 Initial Decision Broch case supra the Supreme Court sa,id the Act was viola,red a,nd a,n order wa,rranted when only one $814.73 brokemge tmnsa,etion wa,s involved (363 U.S. a,t pa,ge 168). There is no such defense a,s minimis in tlus type of ca,se.

Respondents contend further that the brokerage allowed the suppliers' brokers for such products, in ma,ny dealings shown by the evidence, does not precisely equal the discounts or allo\vances receivoo by CROG on behalf of its members. This is immaterial. While in several of the cited decisions the brokerage incidentally happened to be exactly equivalent to the discounts allowed a mass buyer, there is no precedent which holds that the establishment o.f a 92(c) violation depends upon such equality. To the contrary, mathematical commensuration of price reductions to a, favored buyer with brokerage included in price to non- favored buyers is unnecessary. Thomasville Ohair Oompany, Docket No. 7273; Commission s opinion Iarch 15 1961.

Respondent members contend that whatever discounts and allowances CROG received from the sellers were intermingled with the funds obtained by it from its resale to buyers of its private-label products at marked-up prices, a-nd that when the annual patronage dividends were paid to the members, only a small portion of such dividends was attributable to such discounts and allowances; and that since such payments were so intermingled vdth CROG' s other earnings the members, upon receiving the dividends, did not know what portion thereof derived from such discounts and allowances, and that, in essence, such amounts were de 'lninim'ts anyway. It is immaterial whether the said discounts and allowances received by CROG from t.ho suppliers could have been passed on immediately to its members, or retained and used in the operation of CROG's business with other currently available funds. Since the members own tnd control CROG, and it is therefore their alter ego they could "elect to receive the greater part of the brokemge in a, foi1n other than ca,sh; but they et al. v.receive it nevertheless (Quality Bakers of America, supra 114 F. 2d at page 398). This contention is without merit. Respondent NROG presents an additional and sepamte argument in its Q\vn defense. It contends that it has not been engaged in commeTCB for nlany yea. , since it has not handled merchandise for its members since 1948. From 1938 to 1948, however, it did buy mercha.ndise for its members, and did receive substantial sums as promotional a.allowances and the like from numerous suppliers. Thereafter its services to CROG and the two other regional corporations and their respective members, except for its insurance program, not here in- , , 1230 FEDERAL TRADE CQ:MMISSIOK DECISIONS Initial Decision 60 F.

volved, were limited to granting them the right to use KR.OG' s "Shurfine" and other private labels. But these labels were the since qua non of CROG' s very existence. As said in 11 ode1' 11 orket,:nq Service Inc. , et al. v. , supm 149 F. 2d at pagcs 977, 979 , a case closely paraLleling the ono at bar Without the use of these brands :Modern 1iilrketing (t.he purchasing agent for numerous wholesalersJ could not exist" * * (AJJI of lIodern Marketing s income was the result directly or inc1ircct1y of the license agreement and its right t.o use the labels of Red and 'White. 'Without such use it could not have existed. In the present case, had NROG refused to permit CROG to use the NROG labels: there would have been no reason to organize CROG in the first place. AJI through the years after 1948, when NROG ceased buying merchandise for its nle111bers, it has pe.rmittec1 CROG to occupy substantially its old position in the :Vlidwest and South through the exclusive use of NROG' s private labels. 'Whether NROG received any money for the use of its labels is inul1aterial. Its members, who were -also me111bers of CROG, certa.inly received the substantial benefits derived from the use of the la.bels.

In 1959 , more than a year after the complaint herein vms issued and after hearings had begun XROG assigned all of its interest in the labels and trademarks used by its members to n. new corporation called "Shllrfine Foods, Inc. . KH.OG's Board of Directors .organized this new corporation, which is o,,'necl in equal shares by the three regional corporations, Pacific 1.erc.antile Company, Eastern Division National Hetailer-Owned Grocers, and CH.QG. The president of this new corporation Shurfine Foods, Inc. , is also the president of Spartan Stores, Inc., of Grand R.apids lichigan, a respondent herein which concerll is a member of respondents NROG ,and CROG. There may have been good internal corporatc reasons, as indicated by connsel for t.he respondents, for the organization of this ne," corporate device, but irrespective thereof, the material fact remains that NROG, after supplying CROG, so to speak, with the munitions of war, cannot now unihttera11y ,,'ithclraw itself from t.he conflict by disclaiming any responsibility for the unlawful acts of CROG and its respondent members. NHOG has made no separate treaty of peace with the Federal Trade'. Commission by ,y,ny of an agreement consenting to the issuance of a cease-and-desist order, but, in efiect, merely noncha1nntly no\\ declares that it has no furt.her interest in the illegal activities which it has so generated and kept ,alive. It is well established that a cease-and-desist order issued by the Commission should be suffcicntly comprehensive to cover all possible future violations by any or ll respondents, related or similar to those proved. To permit NATIONAL RETAILER-OWNED GROCERS, I , ET AL. 1231 1208 Initial Decision XROG to absolve itself thus casmdly of any violations of law for which t,he evidence shows it is basically responsible, by attributing uch acts to others, would be to nullify the ,whole intent and purpose of the sth tute.

Respondent CROG a.ncl its respondent members have been and now are engaged in commerce, as ';col1merce" is defmed in the Clayton Act in that they have caused grocery products to be purchased and shipped in substant.ial quantities from various sellers located in many states across state hnes to the buyers thereof, the respondent members. Payments therefor have been transmitted in commerce by CROG to such various sellers. Respondent XROG like\vjse has been engaged in commerce as defined in the Clayton Act, in that it has heretofore enga,ged in like puurchasing and shipping of grocery products across st.ate lines to its respondent and other members. Furthermore, respondent NROG has furnished its private labels to respondent CROG and its respondent members for ,all of the controlled-bmnd grocery products that have been purchased and shipped in commerce CROG to its respondent mmnbers as aforesaid. R,respondents arc now and have been for lllauy years, ma,into.ining a constant current and course of tra,de in comnlerce in such products, and all respondents are equally responsible therefor.

The hearing examiner, after mature considerat.ion of the whole record, makes the following conclusions of law: 1. The Federal Trade Commission has jurisdiction over the acts and practices of the respondents as herein found; 2. The said acts and practices of respondents are violative of 52(c) of the Clayton Act as amended by the Hobinson-Patman Act (D. Title 15 513).

Upon the foregoing findings and conclusions, the following order is issued.

It is ordered That the respondents, National Hetaiier-Owned Grocers, Inc., Central Heta:iler-Owned Grocers, Inc. , A. G. Tick Stock Stores, Inc., Allied Groce-rs of Indiana, Inc., Associated Grocers Co. Inc. , Associated Grocers, Inc., ('Vis. ), Associated Grocers, Inc. pio. ) , Associated Grocers, Inc., (Kans. ), Associated Grocers of Alabama, Inc., Associated Grocers of Colorado, Inc., Associ tted Grocers Coop., Inc., Associated Grocers of East :Michigan, Inc., Associated Grocers of Oklahoma, Inc., Associated Grocers of Port Arthur Inc., Associated Grocers IVholesale Co., Associated IVholesale Grocers Co. , Inc., Associnted Wholesale Grocers of DaUas, Inc., Bibb Grocery Co. Inc. , Central Grocers Coop., Inc. , Dixie Sa,ving Stores Inc., Grand Rapids 'Wholesale Grocery Co., Grocers IVholesale Coop. Opinion 60 F.

Inc., ICansa.s Service Grocers, Inc. Lake Eric Coop. Grocers Company, Miami Retail Grocers, Inc., Muskegon \Vholesale Company, Coop., Panhandle Associated Grocers, Inc. , Progressive Associated Grocers, Ine., Redman Bros. of Lansing, Ine., South Plain Associated Grocers, Inc., The Sylvester Company, The Tusco Grocers, Inc. l7united A-G Stores Coop., Inc., l7united Grocers Coop. Assn. , 'V eon a Food Stores, Inc., ,Vhite Villa Groccrs, Inc., and Central Florida Cooperative, Inc., all corporations, their offcers, directors, representatives, agents and employees, directly or througll any corporate.e or other device, ill connection with the purchase of food and grocery products and related products, in commerce, as "commerce" is defined in the Clayton Act, do forth with 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 lieu thereof, upon any purchase made by respondents X ational Retailer-Owned Grocers, Inc., or Central Retailer-Owned Grocers, Inc., for their own account or for resale to their stockholder members, or upon any purchase made by any of said members for any purpose.

OPINION OF THE CO)DIISSIO By DIXON Cowmissioner:

The complaint herein charges respondents with violation of Section 2 (e) of the Clayton Act. The hearing examiner in his initial decision held the allegations of the complaint supported by the evidence and the matter is now before the Commission on appeal of responc1 ents 1 from that decision.

Specifically in issue in this proceeding are sums of money received by respondent Ccntral Retailer-Owned Grocers, Inc., hereinafter referred to as Crag, from suppliers of private label merchandise in the form of lower prices, discounts or promotional allowances. The complaint alleges that Crag, (1, cooperative purchasing organization, received such sums as brokerage or discounts and allowances in lieu t.hereof und that such allmvances have been used by Crag to defray its operating expenses, tile excess being distributed as patronage dividends to the 35 retailer-owned ,,'a.rehousing distributing units ' who hold the stock of Crag and are also named lane of the respondents herein, Associated Grocers of East lIUchigan, Inc., which, according to counsel for other respondents, is defunct and has never made an appearance in this proceeding. has not joined in the appeal. The hearing examiner held this respondent in default for want of specific evidence on this point, and we see no reason at this time to disturb his ruling.

Hereinafter referred to as respondent members. &, NATIONAL RETAILER-OWNED GROCERS, INC. , ET AL. 1233 1208 Opinion as respondents in this proceeding. In addition, the complaint charges that respondent National Retailer-Owned Grocers, Inc. hereinafter referred to as HOG, has been directly and indirectly engaged in the receipt of brokerage or allowances in lieu thereof through the operation of Crag and it.s member warehouses. In this connection, the complaint cites J\rROG' s o\vnership of the labels used by Crag and its respondent members, NROG's participation in the organization of Crag, and its affiliation with the latter s members.

The threshold question among other issues presented by respondents in their appeal is their contention that thc reductions from general list prices, discounts a,ncl allowances, shown by the record as having been granted t.o CHOG, were not intended to and did not constitute commissions, brokerage or other compensation or allowances or discounts in lieu thereof, but were granted because of cost differences other than savings of commissions and brokerage. In this connection, respondents strongly urge that the record lacks evidentiary support for a finding that either respondents or their suppliers intended the price reductions, allowances or discounts granted CHOG t.o constitute brokerage or amounts in heu thereof. Respondents apparently rely on thc fact that the record discloses no express characteriza,tion of these sums as brokerage or as sums in lieu thereof by the parties to the transactions, as well as their denials and those of their suppliers that brokerage was involved. The fact that neither suppliers nor respondents have expressly defined theso amounts granted to CROG by certain of its suppliers as brokerage or amounts in lieu thereof does not preclude a finding that receipt of such amounts was violative of Section 2(c) of the Clayton Act. The fact that the parties to the sale do not openly employ the tern1inology of brokers' dealings does not preclude the inference that payments have been made in lieu of brokerage. 111ain Fish C011pany, Inc. 53 F. , 88 , 97 (1956). The nature of such payments must be determined from all circumstances surrounding the transactions in issue. In 1'e Whitney Company, 273 F. 2d 211 (9th Cir. 1959). Crucial in this inquiry, therefore, is the nature of the interrelationship between Crag and its n1members, and the functions performed by these respondents in the purchase of private label goods. Fundamental to respondents' argument is their assertion that CROG has not acted as intermecliary, agent, or broker for its members because the respondent members purchase private label merchan dise directly from CROG, and in no case through CROG from any other seller. Respondents apparently rely heavily on the fact that , 1234 FEDERAL TRADE COMMISSION DECISIO::TS Opinion GO F.

at one point in these transactions CROG takes theoretical title to the goods, since it transmits its members' orders to the suppliers, who make direct shipments to the Jnembers involved but bill and receive payments direct from CROG, while the latter bills and receives payments at various markups fr01n its members for the goods purchased. Other salient facts surrounding the transactions, however, nlake it abundantly clear that CROG is acting in the capacity of a controlled intermediary of its members in the purchase of private l Lbel H18rchanclise. The unrealistic nature of the conlpartmentalized approach to CROG' s purchases of private label goods of which respondents here seek to persuade us is highlighted by the testinlony of respondents own -witness, CROG buyer \Villimn Stolte, who, several times in describing his negotiations with suppliers, stated on the record that: * pl'marily we buy and sell to ourseh- es * * * Of particular importaJlce ill determining "whether CROG'S purchases are, in fact, made independently of its Inembers are its Articles of Incorpol'f1tion, whjch state ill pertinent part: " .; * the purpose 'of this corporation shall be;- to provide a purchasing organization for the mcmher retail grocers and to effect such savings by bulk purchasing and distribute such savings to the member retail grocers, Qna patronage l1percentage basis of purchases.

The .\.articles of Incorporation make it abundantly clear that CROG in making purchases, far from acting independently, is 1naking such purchases in order to secure savings for its nlenlbers. Obviously, the sole reason for CROG' S operation in the light of the stated purpose of the Articles of Incorporatioll is to act as the agent or intermediary of its member.rs in purchasing operations.

The record further discloses tlmt CROG resells goods to no onc negotiations with suppliers l,re based onexcept its members; its advance estimates furnished by its members, and since it does not 3 it can, as a practimtl mauer, make no warehouse the 1nerchalldise purchases from suppliers except pursuant to the ardor of its members. CROG's negotiations in purchases of private label goods clearly are geared solely to the needs of its members and to hold, under these circurnstances, as respondents argue, that CROG's purchases of private label goods 'were made ill an independent capacity and not as an intermediary under!' the control of' its Illembers would confuse form witll substance.

Respondents concede that the member respondents 0)"11 all the stock of CROG and hence control CROG in the formal sense, since they vote Such warehousing as has been performed by CROG has been insignificant find Is not relevant to the issues under consideration. . . . . . . . 1\ATIO AL RETAILER-OW ED GROC INC.. ET AL. 1235 1208 Opinion "t slmreholders' meetings "nd elect the Board of Directors. N otwithstanding this admission, respondents assert that the direct or indirect control of intermediaries receiving or accepting a comnlission or brokerage or discounts or allowances in lieu thereof envisaged by Section 2 (c) must be restricted to actual control of the purchasing operations in connection with which the brokerage or sums in lieu thereof are granted, claiming that this element is lacking in the instant case. Although contact with the suppliers herein may have been delegated to CROG's staff, the Board of Directors, and therefore ultimately the members who elected them, are empowered by the by-lav.,!s to exercise all the powers of the corporation, and, therefore, must be charged also with the ultimate responsibility for CROG's purchasing operation irrespective of whether or not they are involved in these transactions in detail. In this connection, it may be noted that the only Director who is not a Warehouse Manager of one of CROG' respondent members is Ihrald Garbers, CROG' s General Manager. Furthermore, respondents' witness, Mike Robinowitz, Manager of respondent Associated Grocers of Oklahoma, Inc., stated that the member stockholders' concern at annual mcetings was to see that CROG was operated profitably and to get the reports on its operations. In this connection he stated significantly, " the larger the patronage, the better we like it. . .." Although respondent members may not be directly involved in negotiations with suppliers or even conversant with the detail of such transactions or the identity of the supplier involved, in view of their eoneern with the profitable operation of CROG and their desire for large patronage dividends at the end of the year, they cannot escape responsibility for the manner of CROG' s operation. The respondent members as stockholders cannot abdicate such responsibility nor can the responsibility be delegated away by the Directors elected by them. The foregoing facts further make inescapable the conclusion that CROG is a controlled intermediary of its members for the purpose of purchasing private label merchandise and has dealt with suppliers in that capacity.

Pertinent at this point in our discussion is the definition of the broker s function in the report of the House Judiciary Committee accompanying the enactment of the Robinson-Patman Act, stating: The true broker serves either a-s representative of the seller to find him market outlets, or as representative of the buyer to find him sources of sup- -ply.

4 n. R. Rep. 2287, 74th Cong., 2nd Bess. 1936. 119-603-64-- 1236 FEDERAL TRADE COMMISSION DECISIOKS Opinion 60 F.

CROG, therefore, when securing sources of private label goods for its members, clearly acts in the capacity of a buyer s broker. The fact that CROG in its representative capacity has by implication demanded sums in lieu of brokerage in the form of price reductions is documented by the t.testimony of respondents' witness, CROG buyer Willam Stolte, describing his approach to certain CROG suppliers in purchasing negotiations. This witness testified the suppliers \were informed that because of the unique ,yay in which CHOG did business, savings would accrue to them and that these should be reflected in the purchase price. The 1ritness stated that it was pointed out to such suppliers that CROG obtained rcquirements for all members in advance, that the label and credit risks were controlled, an assured volume of business oiIered, and that they need look for payment to only one offce. In effect, by demanding price concessions all this basis, CHOG required compensation for the tasks it performed in purchasing private Jabel goods on behalf of its members. The rea,sonable inference to be drawn from the circumstances surrounding these transactions is that this constituted simply a demand for sums in lieu of brokerage irrespecti VB of the terminology used by CROG and its suppliers in connection with these purchases. An analysis of the reasons given by certain suppliers for savings claimed in dealing with CROG in justification of resultant lower prices also makes it clear that in reality such suppliers 'were pa.ying for services rendered by this respondent in its intermediary capacity in behalf of its members. For example, Robert Gordon of VV. O. Sommers, Inc., testified that in determining CHOG's prices he took into consideration the fact that CROG gave a yearly contract and that it. promoted his product by putting on special.ls, but in this connection it. must be not.ed that the merchandise in question promoted by CI was under private Iabel and, therefore, this service was performed primarily on respondents own behalf. Another witness, Kenneth Chalmers of the Olds Products Company, stated he felt savings to his company stemmed from the fact that hc did not have to deal with accounts directly and that his company did not have to undertake the work of soliciting, selling and taking- of orders with CROG necessary in the case of other customers. In their appeal, respondents argue that the lower prices, alJown.llces and discounts were not granted for services but for savings arising out of CROG' s unique \\ ay of doing business, but it is clear from our review of the foregoing circumstances surrounding these transactions that, in fact, the unique or distinguishing charac.teristie, if any j of t.he respondent. buying coopern. KATIONAL RETAILER-O\V ED GROCBRS , INC. , ET AL. 1237 1208 Opinion tive s business lllethods arose solely from services performed in securing sources of private label mercha,ndise for its members. CROG' s rec.eipt of lower prices, allowance.es, or discounts for services performed jn its intermediary capacity ate clearly in contravention of Section O3(c) of the Clayton Act, as amended, since the Act prohibits payments for services rendered by a broker who is related to the opposite party in any of the ways designated in the statute. 1110dern lial'ket-ing Set'"uice, Inc. , et al, V. Federal Tnlde Commission 149 F. O3d970 (7th Cir. 1945).

Furthennore, the fact Omt CROG selected the private label suppliers for particular items of merchandise supports a finding that this ill and of itself constituted an inducement to its members to buy the goods of certain suppliers rather than those of their competitors. The activities of a cooperative when acting as an intermediary of its members in inducing the members to handle n supplier s products are, of course, equindent to the functions of brokers and compensation fol' such service is in lieu of brokerage. \Vhere such intermediary acts in behalf of the buyers, it is unlawful, under Section O3(c) of the Clayton Act, for it to receive compensation in lieu of brokerage. controlled intcrmediary of the buyer, although a cooperative, is no more entitled to reccive compensation for activities of this nature than a chain store would be entitled to receive compensation from the seller in requiring individual stores in the chain to stock a particular line of merchandise. See Carpel P,'asted Pooch, lnc" et aZ. 48 F. C. 581 6003 (1951).

The fact that savings may 11a ve been rcalized by suppliers from services rendered by GR, GG to its members \\'which, inl'respondents: terminology are described as the buying cooperative s unique ,vay of doing business, is immate.rial. Since \ve hate found that the sums received by CROG for such services were ill lieu of brokerage, the attempt to segregate such cost savings and ascribe them to CROG's business methods in order to rebut an inference that these sums constituted sa ings in brokerage is irl'clenmt. Furthermore, in v1mv of the fact that CROG performs brokerage funct.ions ill behalf of its members, and the fact that its suppliers, according to the record, Hse brokers in vare'ing degrees, the. allegation of the complaint that CROG, by virtue of its operations, has repbeed independent brokers is sustained, although this is not prerequisite to violat.ion of the statute. In light of the above record facts, it is unnecessary to document a pattern whereunder the lower prices, al1mv,tllCes a.nd discounts granted 5 At Ilny rate, the evidence with l'e:opect to cost savings on which respondents apparently rely is not endowell with s!lffeient prerision tn serve as a foundation for any finuing. 1238 FEDERAL TRADE CO::fNIISSIO DECISIONS Opinion 60 F.

CROG may be correlated mathematically with the brokerage rates of CROG' s suppliers in order to infer the payment of brokerage or anlounts in lieu thereof to that respondent. The inferences to be drawn from the interrelationship of CROG ,me! its members and the manner of their transactjons with CROG:s suppliers are conclusive on this point. Further, we have previously ruled that a finding that the price difl'erential be arithmetically commensurate with the amount of brokerage is not prerequisite to such an inference. Thomusville Ohair Oompany, Docket No. 7273 (1961). However, the facts of record showing a correlation behvecn price differences fa vDring CROG and .a supplier s usual rate of brokerage with respect to certain of respondents' suppliers give additional support to our finding that CROG' receipts of lower prices under varying forms, in fact, constituted the receipt of payments in lieu of brokerage.

These facts arb particularly persuasive in the case of the TharingeT Macaroni Company, which has brokers in areas where CROG members arb located and whose usual brokerage rates are 3 and 5 per cent on bulk and package goods, respecti,.ely. The record shows that in the ease of this supplier these brokerage rates very closely approximate the price differences favoring CROG ,md its members as opposed to Tharinger s customers generally.

In the same connection, the pattern evidcnced by Plochman & Harrison s sales to CROG in the Grancl Rapids, Michigan, area, as contrasted to this supplier s dealings with its broker and other customers is also noteworthy. This supplier granted CROG a 3 per cent "promotional allowance" on purchases while Plochman & I-Iarrison s broker in the Grand Rapids, Thiichigan, area received 2 per cent brokerage on the shipments to the respondent member in that location; on sales to customers other than the CROG member in that area, this broker received commissions of 5 pci' cent. Even though the record discloses that Plochman & Harrison had been granting CROG a 3 per cent promotional allowance some time prior to taking on the broker in question the mathematics inherent in this situation compel the conclusion that in fact, this supplier was passing on to CROG a saving in brokerage. In the case of certain of the suppliers involved in this proceedingspecifically 1\. Steffen, Inc., Baker Food Company, and Plochman & Harrison-respondents argue that the allowances granted CROG may not be construed as sums in lieu of brokerage because they were granted to all private label buyers. This contention is supported only by the statement, largely hearsay, of respondents' wit.ness "\ViJlimn St.olte, a buyer of respondent CROG, and is not supported by the supplier witnesses. Such statements are insuffcient to rebut. the inferences reaSOl1- 1\ATI01\AL RETAILER-O\VNED GROCERS, INC. , ET AL. 1239 1208 Opinion ably to be dra\'Il1 from the circumstances surronnding the transact.ions namoly, that CROG, as the controlled intermedi lry of its members performed brokerage funct.ions for \'Ihich it was gi ven sums in lieu of brokerage. The se.1f-scrving nature of Stolte s statements in this regard is emphasized by the, contradictory st.atement of Carl 11. Plochman, partner in the firm of Plochrnan & I-Iarrison, stating that he did not l'ecnJ1 arrangements similar to the 3 pcr cent allowance gnllted to CROG in the ease of other customers.

respondents also deny t.hat the record contains evidence indicating that any of the aJ10wances ilnd discounts granted to CROG are, in turn transmitted to its members in the form or patronage dividends or otherwise. Respondents ' argument is ,vithout merit.. As respondents concede in their brief, CROG's by-laws rcquire that patronage dividends, viz., the ba.lance remaining after the expenses and costs of operation, are to be paid to members of the cooperative on the basis of their participation in making purchases from CRGG. These facts in and of t.themselves ate suffcient to support a finding that such payments constit.ute,a a passing on of the sums received in lieu of brokerage by CR,GG. It is not prerequisite to a Sectjon 2(c) violation that sums in lieu of brokerage be passed on directly by the intermediary. For example, brokerage may be received in forms other than cash, such as credits for membership dues as well as payments of dividends on stock nel operating expenses. , et al. v. Federal Q1rality Bake1's of America Tmde Commission 114 F. 2d 8D8 (1st Cir. 1D40). Brokerage may be passed on in the form of services, including advertising a-110wanc.es and stock dividends. lnrlepende' nt (;TOCCT8 Alliance IJish'iln.Jting Go. Fedeml Tmde Commissio. 208 F. 2d 941 (7th Cir. 195:1). As held by th8 Seventh Circuit, the fact that payments are not direct but lllore subt.le in form does not preclude a finding that brokerage or sums in lie,ll t.hereof h lxe been passed on. Sce lllodo' n Jl(('l,et/n,q, Inc. , et ol. v. Fede-)ul Trade OOm,?nir8i:on, 81&JYI' here the Court ruled that passing on a part of brokerage receipts as advertising allowances for pointof- sa,le ac1vertjsing satisfied the c.criteria of Section:2 (c). ,yjth respect. to this issue it. is signiiica.nt that in the case of ' cert.ain suppliers, including \1'. O. Sommcrs, Inc., payments received under promotional contnLcts have been allocated for opera.ting costs and patronage dividends:: to CHOU' s members according to the finn.ncia.l statements of the respondent buying cooperative. Respondent NROG argues separately in its O\vn behalf that in any case the initial decision and order are inapproprjate as fa.r as it is concerned, since the record does not substantiate t.he finding t.hat it received brokerage or amounts in lieu thereof from CROG and its sup- 1240 FEDERAL TRADE CO rnISSIO:; DECISIONS Opinion GO F.

pliers. In effect, the hearing examiner held on this point that the use of NROG' s labels were prerequisite to CROG' s business practices if not its very existence, and, further, that KROG's members, who arc also members of CR.OG, received subst.antial benefits as a result of CROG' s use of tile labels orbranclllames.

These facts, in and of themselves, are insuffcient, however, to support an inference that brokerage has been passed on to NROG, and we axe cOlllpclled to disagree 'iyith the hearing examiner on t.his question, for the re.cord is devoid of evidence that NI10G- received brokerage directly or indirectly on private label purchases by CROG on behalf of its members. Since 1950, according to the eyidellCe, the only compensation inuring to X.ROG for the use of its labels or brands by the regional corporations/ inelncling CHOG, has be.en a charge of one- tenth of 1 percent of the cost of such labels, the receipts to be funneled into a reserve fuud until a total of ;;10 000 had been accumulated, t.he fund then to be maintrincd at this Jevcl. Although NHOG- in the period 1934-1939 did accept brokerage for its Dlcmbers and, subsequently, in the period19:i9 to 1048, purchn,sed merchandise in its own name for its members possibly in mudl the 111anller of Crag, such evidence at this late date is insuffcient to justify an order against this partieubr respondent. Fnrthennore, as the hearing examiner fOllnd, since 1959, more than a year after the issuanee of the compht.nt, NHOG assigned all of its interest and control over Jnbels t.o a new corporation called "Shurfule Foods, Inc. , ow"ned by the three regional corporations, Eastern Division ROG , Pacific leTcantile Co., and CROG. Since that time KROG apparently has had no interest in or functions to perfonn in connection with the private labels formerly controlled by it. The hearing exalniner held, in effect, and correctly so, that these circumstances do not support a defense of abandonment. HO\yever, it is our view that the question of abandonment does not arise since, on the basis of this record, we are Ul1able to find that NHOG has received brokerage on private label purchases negotiated by CR,OG for its members.

'Ye Imve already determined, as he,retofore ,'Stated, that t.he receipt by CROG anu its respondent members of brokerage, or amounts in lieu thereof, contravenes Section 2( c) of the Clayton Act, as amended. The recurrence of sneh violations can be adequately prevented by a proper cease and desist order covering the activities of CROG and its members. Under these circumstances, absent the showing that I) E stern Division XROG, Pacific lercflnti1e Cn. , aud CHOG; only CROG is iuyoivcd in this proceecling.

:\ATIONAL RE'IAILER-OWXED GROCEHS. I ) ET AL. 1241 1208 Dissenting Opinion NROG has received brokerage or amount.s in lieu thereof all private Jabel purchases by CROG, to place that respondent" under order mere,ly because its membership is composed ill part of CR.OG's Inernbel'ship would be an exercise in formalism not in the public interest. H.esponclents also argue that in any case the order entered by the hearing exanliner is too broad in scope as fat as the respondent me11bel's of Central Retailer- Owned Grocers, Inc., are concerned. In this connection, respondents object strenuously to the inclusion in t.he order of the phrase "upon any purchase made by any of sttid members for any purpose This phraseology would put within the prohibihons of the order purchases by the respondent members made individually and without the intervention of Central Hetailer-Owned Grocers, Inc., or other controlled intermediary, agent, or representative acting in the capacity of buyer s broker. An order 01' such breadth is not required by the circumstances of this case; t.he complaint does not allege and the record contains no evidence indicating that re,spondents have received or are likely to receiye in the future sums in lieu of brokerage on pnrchases made by thelma individually without the intervention of an agent, representative, or some other controlled llltermediary performing the functions of a buyer s broker.

,Ve hold, therefore, that an order with prohibitions limited t.o situat.ions where Central Hehtiler- Owned Grocers, Inc., or some other intermediary performs the functions of a buyer s broker will be sulle-ient to proscribe the viohtion of law '\' e have found here as Yell as such other related activities which.h may be in c.ontravention of Section 2( c). For claritis sake, the order accompanying this opinion will be limited to that situation.

The appeal of respondents is denied with certain exceptions noted in this opinion. To the extent that the findings of the hearing examiner are deficient and not in conformity wit.h our opinion, the initial dec-ision is modified to include the ffwtua.l findings with reasons and basis therefor embodied in this opinion. '\Vhere the record evidences changes in the corporate name of certain of the respondent members since the issuance of comphlint, the correct llame will be utilized in the order accompanying this opinion.

Commissioner EJmnn dissented to the decision herein. DlSSE?\fTING OPINION By ELMAN Commwsioner:

It seems to me that the Commission s decision stretches Section 2 (c) ofthe Robinson-Patman Act far beyond the limits ofits language &, 1242 FEDERAL TRADE CO::ISSIOK DECISIONS Dissenting Opinion 60 F.

and mv,nifest purpose" to a point where it now threatens to swallow up nHlch of the territory coveted by the lnore general statutory provisions which it was intended to supplement. At the same time, ironically, t.he Commission has issued what may 'well be the death warrant of a business practice designed t.o enable t.he independent grocer to compete in some degree with the large chain stores-the very objective of the Robinson-Patman Act itseH.

Section 2(c) of the Robinson-Patman Act makes it unlawful for any person. . . to payor grant. . . anything of value as a commission, brokerage, or other compensation, or any allowance or discOlmt in lieu thereof, except for services rendered in connection with t.he sale or purchase of goods. . . either to the other party to such transaction or to an . . . intermediary therein. . . ." The legislative history of this section has been the subject of too much recent exploration to require extensive restatement here (see Edwft.rcls The Price Discrindnat.ion Larw (1959), pp. 46- , and Rowe Prlce DiscTZ1nination Undet the Robinson-Palnum Act (1D62), pp. 382-337). Its purpose and relation to the scheme of the Robinson-Patman Act were summa.rized by the Supreme Court in Fer/etal Trade Com.lnission Henry Eroch 00. 363 S. 166, 168-169 (1%0). The Court there said:

The Robinson-Patman Act was enacted in 1936 to curb and prohibit an devices by wukh large buyers gained discriminatory preferences over smaller ODCS by virtue of their greater purchasing power. A lengthy investigation l'eyealed that large chain buyers were obtaining competitive advantages in several ,,-ays other than dired price concessions add were thus a,oiding the impact of the Clayton Act. One of the favorite means of obtaining an indirect price concession was hy setting up "dummy" brokers who were employed by the buyer and who, in many cases, rendered DO services. 'lbe large buyers demanded that the seller pay "brokerage" to these fictitious brokers who then turned it oycr to their employer. This practice was one of the chief targets of 2 (c) of tbe Act. But it was Dot the only Ileans by which the brokerage function was abused and Congress in its wisdom phrased 2(c) broadly, not only to cover the other methods then in existence bnt all other means by which brokerage could be used to effect price discrimination.

The purpose of the "in lieu thereof" provision was also explained by the Court:

In the Final Report on the Chain-Store Investigation, . . C01Jgress h:ld be-fore it. examples not only of large buyers demanding the payment of brotel'age to tlwir agents but also instances where buyers demanded discount::, flllo,nllceB, or outright VI'ice rednctionsbasl'(l on the t.theory that fe\ver brol,eri1ge ser,ices \were neeued in sales to these partieulDl' buyers, or that no bl'okcl' age ser,ices were necessary at all. . . . These lransactions \\e1'e described in the l"21JOrt as discOUlltLS) in lieuthe gi'\ing of "allowlmces ill lieu of orokerage .. " or " brol;;erage. "

ATIOKAI RETAILER-OWNED GROCERS , INC. , ET AL. 1243 1208 Dissenting Opinion In prohibiting indirect price concessions through "dummy" brokers or payments in lieu of brokerage, Congress deliberately precluded the defenses ava.ilable under the other sections of the statute. It considered the false brokerage device a means of evasion which-because of its covert nature -as a camouflaged or disguised price concessionshould be unconditionally prohibited; Congress thus sought to bring price discrin1inutions, ,,,here they exist, into the open. As the court put it in Biddle Purchasing 00. v. Federal Trade Commission 96 F. 2d 687, 692 (2d Cir., 1938) :

!fa price discount is given as a brokerage payment to a C'ontrolled intermediary, it may be and often is C'once aled from other customers of the seller. One of the llain objectives of section 2 (c) '\ as to force price discriminations out into the open where they would be subject to the s-crutiny of those interested, particularly competing buycl's.

In the light of these statutory purposes, it would appear that the price concessions received by CROG were in violation of Section 2 (c) if shown by the evidence to come within either of two categories: 1. If the price concessions were nade as "brokera, " pa.yments by the sellers to CROG; , or 2. If the price concessions were based on savings made by the seners because they did not sell to CROG through their regular brokers, and thus were "in lieu of" brokerage.

Although the basis for the COlllnission s decision is not altogether clear, its principal reliance appears to be upon what is ill effect an inversion of the first category. For, instead of finding that CROG has accepted price concessions disguised as brokerage pa.yments, the Citing this case, the Supreme Court in discussing' another Robinson-Patman Act subsection stated:

Congress could ver. well ha,Q felt that sellers would be forced to confine their discriminatory practices to price differentials, where they conl(1 be more readily de.tected and where it would be much easier to make accurate comparisons with any allegerl cost savingo;." Fer/eral TI' ade Commission v. Simplicity Patten Co. 360 U.S. 55, 68 (1!J59). The principal "buying group " cases under Section 2(c) have im-olved allmitted pay- , in Independent Groceo;ments of "brokerage" to the buying' orgflnizations. For example Anini/co V.istl"buting Co. Pederal 'tmde CO!lijd, sion 203 1' 2d 941 (7th Cir. 19(3) ; Modern JJarl,etin.g Service, Inc. v. Ferleral TI'acle Commission 149 F. 2d 970 (7th Cir. 19.1G) ; and Qua/,ity Ira/,eis of limniea v. Pedem/' 'lrarlc COll!llli88' ()Jl 114 F, 2d 393 (1st Cir. 1!J40) , the issue 'Was not whether the sellers ' pf1 ments were made as o;brokerage !Jut 'Idwther the intcorlledillries to whom they were ila(lc were COJltro!1('rl by the hllyer find whether the pflyments y.-ere justified by services actually rendererl the sellers. (AItilOugh the courtf; held the '; except for el"l'iccs rPllrlereu" clause inuIJ!JliCflbIe, some doubt may 11l\'C been cast upon the valid1ity of this interpretation IJJ' the oeh supra. See Rowe, S!I1Jra, p. 335.

It is interesting to note that, after 1ile court' s decision in the Qu.ality Bal:fcl"s Cflse, the respODflent soid its assets to a cooperath-e which apparently now operates in essentially the same maimer as CH.(IG , receiving price concessions described as ql1f1lltity discounts (rom some suppliers and passing them on to its members as pfltronage dividends. See Ec1wa'. (ls, supra, p. 120.

, Dissenting Opinion CO F.

Commission fmds that it has received. what arc in substance brokerage payments under the masquerade of price eoncessions. The Conunission seen1S to reason as follows: The function of a buyer s broker is "to find llim sources of supply." CHOG, when securing source,s of supply for its members acts in the mLpacity of a buyer s broker." Ergo, price concessions granted CROG on goods which it purchases for its members are illegal payments "in lieu of " 3brokerage.

But the conc.lusion thus reached is in accord neither with the facts of this ease nor with the legislative purpose of the statute. It is clear that the price concessions received by CHOG were not "brokerage within the meaning of the statute. Although CROG may have performed for its members some of the functions which in other situations are performed by brokers, CROG is not a broker and there is no evidence that the price concessions w"which it received were ever cleseribed or understood as "brokerage': payments. On the contrary, they were openly admitted to be discolUlts or a,llowa.nccs from the sellers regular prices. There is here no problem of "dmnmy brokerage" \which must be forced into the open and exposed as price discriminations. As the court stated jn Robinson v. Sta:nley H 01116 Pro(z"cts 272 F. 2d 601, 604 (1st Cir. 1059) :

'l' he matter covered by section 2(c) is unearned brokerage pC/ 8C not discrimination. " "- '" There is no necessity for callng something brokerage that is not. If, after ceasing to employ brokers, a manufacturer improperly discriminates between customers, section 2 (a) will accomplish the purposes of the ad.

3 Tlle Commission also points to the fact that CRaG's sele('tion of the suppliers from whom it purclmsec1 its prinlte label goods constituted an inducement for its members to buy the goods of these suppliers. Since inducing a buyer to purchase the goods of a particular sllpplier is "e(l\,j' lleIlt to the functions of brokers " the COllmis ioll reasons that "compensation for such scr,ice is in lieu of hrol.:erage. " TIut surely this proposition has uo application to the present case. Carpel F1'08te(l Foods, Inc. et al., 48 F. C. 581 (1951), upon whi('h the Commission relies, invol,es the entirely different it1Jation of Ii buyers' cooperative which . the Commission founll, accerned payments from a supplier for inducing its members to purchase that SllPplier s products. ::0 suggestion of such an unetbical, as well as ilegal, practice on tbe part of Crag is nggested by the present ncord. CROG's only inducement to its members to buy the good,; of it,; suppliers was the imple rOlct thOlt these were the only goorls which CROG ba(l for sale. CROG could hardly change this state of affairs, and the COllIlis ioll Cfln hardly find a violation of ection 2 (c) by 'each bootstrap reasoning. The House Small Dusint'ss Committee has explained: "* '" !, (The l)1l')o e of attaching pel" se iJlcg-nlity to 111('section 2(e1. ((11 1111(1 (e) prohibitions was precisc1 ' to force unearned commissions out in the open. False brokerage q\HL hrol,f'rfge is absolutely forbidr1cn. False brokerage qua ' 11 nakecl quotation in price does not fan into the ' masquerade ' category; rather it falls into tlJe trap deliberately sd for it bJ' the law. Discrhuinntory concessions which cannot disguise tb(':.l1sel"ies fis brokerug-e or ' nJlowall('es ' are thus forced to sho"" their true character, and to be lleas- \1rer1 by the sections of the law (lealing with diserimiilation. " H.I:. Hept. o. 2DGG, 84th Cong. , 2(1 Sess., pp. 97-98 (1956).

NATIONAL RETAILER-01,V:\TED GROCERS , L'JC. , E'T AL. 1245 1208 Dissenting Opinion K or, so far as t.he record shows, ate the price concessions "discounts or a.allowances in lieu of brokerage" within the meaning attributed to this phrase by the Supreme Court in Bich (81&lra), for they are not shown to be direct price reductions "based on the theory that fewer brokerage services were needed in sa,les to these particular buyers, or that no brokerage services ,"ere necessary a tall. The examiner, although supporting his conclusion with little more specific than the assertion that it was to him "obvious " found that the price concessions received by CROG \\-C1'e "in lieu of brokerage:" presumably on t.he grounds that they paralleled the sellers' usual payments to their reg1l1ar brokers on sa.les to other customers, and could therefore be inferred to reflect the sellers sa.vings of brokerage on sales to CHOG. The examiner pointed out that the "except for services rendered" proviso of Section 2 (c) cannot be invoked to justify allowances reflecting such savings. But CROG s contention was not. that the price concessions received from its suppliers were in compensation for their savings in brokerage or for any "services rendered" but merely that they reflected the sellers' cost s Lvings brokerage aside, resulting from CROG's centralized buyingfrom the yarious factors ",'which may justify price, discriminations under the provltiions of Sectioll 2 (a), and which give the chain stores their buying advantage,s over competing independent wholesalers and retailers.

In cases of this type the Commission must determine from the evidence, including the manifest intent of the parties and any inferences which may be drawn from the identity of t.he amounts received and the sellers' usual brokerage payment.s, whether the challenged payments were in fad made ill lieu of brokerage. Although the examiner concluded that Crag "has received from its numerous suppliers large sums by " ay oJ discounts and allowances, which are parallel to similar brokerage payments made by these same supplie.rs for similar services performed for them by their regular, legitimate Great Atloutic Pacific Tea Co. v. Ferlero, Trade C01l1n!.8S!OJi, 106 F. 2d (167 (3nl Cir. 1930), ccrt. denied, 30S U. S. 625.

6 Crag' s .Articles of Incorporation, cited in both the initial decision and the Commission s opinion, state its purpose as being "to dTect . . . Sln'inr;s by bulk purchasing. 1 The S111'1'Cme Court in Fed, eml Tmde Commi.'sion v. Hei!1V Bruch r, 00., 3fi3 U. S. Hih, 175-176, stated:

This is nut to say that every reduction in price, conpled "itll a reduction in lJro:,erage automatically compc1s the conclusion that an allowance ' in lieu ' of brokerage has been granted. .As the Commission itself has made clear, whether such a reduction 1s tnntamount to a discriminatory payment of brokerage depends on the circumstances of each case. Main Fish Co., Inc. 53 FTC 88.

It also there noted tllat:

'I' he lJ\yet. s intent might be rele,aut were be charged WitJl reeeh. ing an allmyancc in violation of 2(c). " (p. 174) 1246 FEDERAL TRADE COMMISSION DECISIOKS Dissenting Opinion 60 F.

brokers * * * " he supported this conclusion by no particular findings and, with the exception of the payments made by one or two sellers it simply is not justified by the record.

Thus far I have discussed only what seem to be the obvious defects of the Commission s opinion. There remains the question of how the price concessions received by CROG arc realistically to be viewed. Counsel supporting the complaint and the examiner make much of the fact that neither Crag nor its suppliers ever mentioned the word brokerage ' although the suppliers obviously saved their u3ual brokerage expenses in selling directly to Crag. But surely the parties' failure to call these concessions "brokerage" is not evidence that they were brokerage. \Vhy is it not consistent with the facta to aSSUllle that CHOG was simply attempting to conduct its business in accordance with the requirements of Section 2(c) of the Robinson- Patman Act and that it therefore accepted price concessions fronl its suppliers only when they were not made in compensation for brokerage functions rendered to the sellers or for savings in sellers brokerage? This assumpt.ion-which, I submit, the C0l11nission must accept in the absence or substantial evidence to the cont.rary-would not, of course, exempt GROG's price concessions from scrutiny under the more general provisions of the statute. Instead, they might be re garded as price discriminations which, if anticompetitive in their effect, and if a cost justification or good faith meeting of competition defense were not established, would be illegal under Section g (a), and their inducement by Crag illegal under Section 2 (f) (or possibly Section 5 of the FTC Act). In the present case the price discriminations would undoubtedly be defended as being justified by the sellers' lower costs in selling to Crag. This possible justification, although concededly making the Commission s case-particularly under Section 2 (f) -11ore diffcult, has an important purpose which I believe is well ilustrated by the situation here. For Crag is not merely another big buyer but is instead a cooperatively-owned 8 Although the Commission s theory differs from that of the hearing e:examiner, it finds additional support" in "the facts of record showing 11 correlation between price differ. ences favoring CROG and a. supplier s usual rate of brokerage with respect to certain of respondents' suppliers. " But the Commission s only example of such correlation hardly provides the support which the Commission seeks. For although the supplier in question in an area where its usual brokerage was 50/, granted Crag a 30/ discount (tlescribed as 11 promotional allowance), and at the same time granted its broker unearned brokerage of 20/ on sales to Crag, the Commission admits that the sll1er had been granting Crag the 3% allowance "some time prior to taking on the broker in question. 9 Where the concessions were claimed to be promotional allowances they would, unless!' made to the sellers' other customers on proportionally equal terms. of course be in violation of. Section 2 (d).

NATIONAL RETAILER-OWNED GROCERS, ilw' ET AL. 1247 1208 Final Order enterprise througll \Yhicll its independent whole-saler members-who in turn supply independent retail grocers-seek to offset the buying power of the chains. The importance of such buying groups has been reco,6Yllized by the Commission. Chairman Dixon has recently stated:

(C)combination in one form or another oy small firms may be essential to their survival, particularly in those industries characterized oy massive aggregates of corporate power. The growth of the giant food chains, for example, revolutionized the behavior of the small independent grocery stores. 'l hey were quickly faced with the alternative of constructing cooperative l.mying arrangements or extermination. Certainly many indevendent food stores long ago would have wither'ed before the competitve threat of large chains had they not formed retailer-owned cooperative wholesalers; stores with combined retail sales of over $7 bilion are now affliated with such jointly-owned wholesalers. In contrast to this recognition of the value of cooperative buying groups in achieving the eompetit.iye strength \which the Robinson- Patman Act. \yas also intended to safeguard, the Commission s opinion \yould most certainly have the effect of driving these groups out of existence. For what it in effect holds is that any price concessions to a cooperative buying organization-which of necessity performs functions which a buyers' broker would perform wil be deemed in lieu of brokerage in pej' 8e violation of Section 2 (c) . To object to this interpretation does not imply that buying cooperatives or similar groups should be afforded special treatment under Section 2( c). But it is important that the various sections of the Robinson-Patman Act be interpreted and administered in harmonious relation to each other and to other antitrust acts, and not on the basis of which provision-if stretched to cover the practices in questionaffords the easiest route to an order to cea,se and desist. FINAL ORDER This matter having been heard by the Commission upon respondents' appeaJ from the hearing examiner s initial decision, and upon briefs and oral argllment in support thereof and in opposition thereto; and The Commission, for the reasons stated in the accompanying opinion, having granted in part and denied in part the appeal of respond- 10 Address before The Economic CJub of Detroit, March 12, 1962. n This result was at least franl(ly admitted by the hearing examiner who stated that he was unable to envison any type of buyer organization which could rightfully claim that by reason of Its different or unique character, it can receive special discounts and allowances from any seller in complete immunity and excmption from the clear mandate of the Btatute, 1248 FEDERAL 'TRADE CONUfISSIO T DECISIONS Pinal Order 60 F.

ents and having modified the initial decision to the extent necessary to confornl to the views expressed in the said opinion: It;8 m'dered That the initial decision be modified by striking therefrom that portion beginning on pa.ge 1229 with the words "Respondent ROG presents an additional and separate argument" and ending on page 1231 with the words "intent and purpose of the statute. It i8 l"rther ordered That the order contained in the initial decision be, and it hereby is, modified to rea.d as follmvs: It is o1'dered That respondent Central Retailer-Owned Grocers Inc., a corporation, its offcers, directors, representatives, agents and employees, directly or through any corporate or other device in connection with the purchase of food, grocery and related products, in commerce, as "commerce" is defil1ed in the Clayton Act, do forthwith cease and desist from:

Receiving or accepting, diroctly or indirectly, from any seller anything of value as a conunission, brokerage, or other cOlnpcl1sation or any allowance or disCOlllt in lieu thereof upon any purchase for its own account or on behalf of its members when it is acting as agent, representative or controlled intermediary of its members. It i8 (UTther ordered That respondents, A. G. Tick Stock Stores Inc. ; Allied Grocers of Indiana, Inc. ; Associated Grocers Co., Ine. Associated Grocers, Ine. (Wis. ); Associated Grocers, Inc. (Mo. Associated Grocers, Inc. (Kans. ); Associated Grocers of Alabama Inc. ; Associated Grocers of Colorado, Inc. ; Associated Grocers Coop. Inc. ; Associated Grocers of East Iichjgan, Inc. ; Associated Grocers of Oklahoma, Inc. ; Associated Grocers of Port Arthur, Inc. ; Associated Grocers 1Yholesale Co. ; Associated Wholesale Grocers Co., Inc. Associated Wholesale Grocers of Dallas, Inc. ; Bibb Grocery Co., Inc. Central Grocers Coop., Inc. ; Dixie Saving Stores, Inc. ; Spartan Stores, Inc. (formerly Grand Hapids vYholesale Grocery Co. ) ; Grocers \Vholesale Coop. , Inc. ; ICansas Service Grocers, Inc. ; Spartan Grocers, Inc. (formerly Lake Erie Coop. Grocers Company) ; Miami Retail Grocers, Inc. ; :Muskegon 'Vh01resale Company, Coop. ; Pan. handle Associated Grocers, Inc. ; Progressive Associated Grocers Inc. ; Redman Bros. of Lansing, Inc. ; South Plains Associated Grocers, Inc. (erroneously named in the complaint as South Plain Associated Grocers, Inc. ); Tho Sylvester Company; The Tusco Grocers Inc. ; United A-G Stores Coop., Inc. ; Gnited Grocers Coop. Assn. 1Veona Food Stores, Inc. ; 1Yhite Villa Grocers, Inc. ; Certified Grocers of Florida, Inc. (formerly Central Florida Cooperative, Inc. ), all corporations, and their offcers, agents, representatives and employees directly or through any corporate or other device, in connection with , ,, R. H. IACY & co., IXC. 1249 1208 Complaint the purchase of food, grocery and related products, in commerce, as commerce" is defulecl in the Clayton Act, do forthwith.h cease and desist from:

Recei ving or accepting, directly or indirectly, from any sener anything of value as a commission, brokerage, or any allowance or discount in lieu thereof upon a,ny purchase 'where they are represented by Central Hetailer- Ov, ned Grocers, Inc., or any other agent, representative, or intermediary controlled by them. It is lUJ'ther o7YleJ'ed That the complaint as to respondent National Retailer-Owned Grocers, Inc., be, and it hereby is, dismissed. J t is lUJ'ther ordel' That respondents ith the exception of National Retailer-Owned Grocers, Inc., shall, within sixty (60) days after service upon theul of this order, file with the Commission a report in writing, setting forth in detail the manner and form in 1which they ha vc complied "dth the above order. I t ,is frl-rther ordered That the hearing examiner s initial decision as modified and supplemented by the accompanying opinion, be, and it hereby is, adopted as the decision of the Commission. Commissioner Ehnan dissenting.

lx THE JL\TfER OF R H. "IACY & CO., INC.

ORDER, ETC. , IN REGARD TO TI-IE ALLEGED VlOLATIOX OF TI-IE FEDERAL TRADE COloDIISSlON AC' Doeleet 7869. Complaint, Apr. 1960-JJcclsion, JiaJj, 1962 Order requiring the world' s largest departllellt store, with principal place of business in T\ew York City and opemting throllgh six divisions in six areas in the Cnited States, to cease ,violating the Federal Trade Commission Act by soliciting or re('eiying donations from its yendors, such as requests it made to some 750 of its 20 000 suppliers to contribute $1 000 each toward the cost of the year-long lOath Anniversary celebration of :Macy New' York with the result that approximately 582 contributed $1 000 each to the cost of the celebration.

COMPLAINT Pursmmt to the provisions of the Federal Trade Commission Act and by virtue of the authority vested in it by said Act, the Federal Trade Commission, having reason to believe that R. H. ::facy & Co. Inc., hereinafter referred to as respondent, has violated the provisions of Section 5 of the Federal Trade COllmission Act (U. C. Title 15 , Complaint 60 F.

Sec. 45), and it appearing to the Commission that a proceeding by it in respect thereof would be in the public interest, hereby issues its compla.im:, stating its charges as follows: PARAGRAPH 1. Respondent, R. H. Macy & Co. , Inc. , hereinafter sometimes referred to as Thiaey, is a corporation organized, existing and doing business under the laws of the State of New York, with its principal offce and place of business located at 151 ,Vest 34th Street, New York, N.

PAR. 2. Macy is now and for many years last past has been engaged in the operation of retail department stores. It operates through six department store divisions in six areas throughout the United States. These divisions are J\Iacy s New York; Bamberger, New Jersey; Davison-Paxon Company, Georgia and South Carolina; La Salle & Koch Company, Ohio; Maey s California; and Iaey s Missouri- Kansas.

Respondent sells directly to the consuming public through the above enumerated divisions thousands of products of the type normally and usually sold by the department store trade. Respondent's sales are substantial totaling more than $450 000 000 for the year 1958. Sales of its New York division for the year 1958 totaled approximately $225 000 000.

PAR. 3. In the course and conduct of it.s business, respondent is no\v and for many years has been engaged in commerce, as "commerce is defined in tho Federal Trade Commission Act. Respondent purchases its products from many suppliers located throughout the various States of the United States and causes such products to be transported from various State,s in the United States to other States for distribution and sale by respondent through its retail dcpartmcnt stores.

PAIL 4. In the course and conduct of its business, as herein described, respondent has been for many years, and is now, in substant.ial competition in the sale and distribution of depart.ment store products, in commerce bet\Vcen and among the various States of the United States with other corpora.tions, persons, firms and partnerships.

PAR. 5. In the course and conduct of its business in commerce respondent, in commemoration of its one-hundredth year in business conducted during the year 1958 a year-long celcbration. Since :\1aey start.ed in New York City, the celcbration took ph1ce only in Macy New York division. The celebration consisted of a year-long series of special cnts special advertising and special promotions, all of _ _._ _ R. H. MACY & CO" TKC. 1251 1249 Complaint an institutional nature and an designed to enhance J\lacy s position in the community.

In connection with this celebration and in anticipation of it, 1'Iacy Ne\v York division, through its offcers and employees, asked approximlltely 750 of its llPproximlltely 20 000 vendors to contribute $1 000 each towuds the cost of this celebration. Approximlltely 582 vendors pledged to contribute $1 000 cllch. As of Jllnullry 30, 1959, l\hcy llld received from such vendors llPproximlltely $52'1 000. Contributions from vendors \were continuing to be received throughout 1959 PAR. 6. Purchases by :\lacy's ew York division froln the contributing vendors in the year 1958 varied from a low of $10 000 to II high of $300 000. Included among, but not limited to, and as examples of, the contributing suppliers to l\Iacy, each of whom contributed 000, the products which they mllnuflcture and sell, and their 1958 sales to l\lacy ew York division, are the following: H158 sales Supplier sname Product to I\Iacy ewYork Collegel1a11:Fasbiom, Illc---- I\len s Clothing_ $162 000- GenemlTextie Co_ Ironing Board Pads and Covers- 00() 284 913 Ivien s Trouscrs_ lnc--Phil Horowitz, 000 \Vearever" Pens and Pencils -------- _u " Inc-David Kahn, 201 748 s Trousers-- --- Boys' add ::Ien ational J-anb Co_ 036 Sportswear_ Ladies Inc--_Queen Knitting l\Hlls, 841 Phonograph Hceurds--Record Corporation of America_--_ ct and Plfl-stic Clo Inc-Seal Sae, s ShirtsKitchen -- Aeccssories-- 3.'; 436400 Bovs' and Men IIc--GeorgeSherwill 624 ief Cases and School Bags--Thomascs & Co_ 789 s PlljallH\S_--n_ Men ---u Ine-Varsity l'ajamas, 798 Cosmetics and Toiletrics_ , lne_Yardley of London PAR. 7. Respondent used the force of its purchasing power to induce contributions frOlTI its vendors who-because of their individual inequlliity of economic strength compllred to respondent; the highly competitive nature of their business; their lack of ability to combat such practices; the fact that their economic existence is enhanced and improved by continuing to sell to Macy; line! that supplying l\hcy enhances the prestige and selling ability of the supplier with other actual and potential customers-are relatively po erless to refuse to make such contributions. These circumstances are enhanced by the fact that :YIacy s New Yark store is one of the largest, if not the if any,largest, department stores in the United States. Very few, of these 750 vendors ca,n afford to make contributions of this type to all or any substantial number of their other customers. PAH. 8. The aforesaid acts and practices of respondent, a powerful buyer using the lcverage of its purchasing power and position, asking for and receiving contributions, gift or donations of whatever nature 19-603--64-- &, 1252 FEDERAL TRADE CO:v'VnSSIOK DECISIONS Initial Decision GO F. from its vendors for the lOOth Anniversary Celebration of J\Iacy New York, or for any other purpose, are all to the prejudice and injury of such vendors and their competitors, and to the competitors of respondent and the public, and constitute unfair methods of competiti.on and unfair acts and practices in commerce within the intent and meaning of, a,nd in violation of, Section 5 of the Federal Trade Commission Act.

Mr. Lars E. Jan8on supporting the complaint. , by Mr. Howrey, Simon, Balcer Murchison of vYashington, D. William Simon and llfr. Marvin Fenster of Ncw York, N. , for respondent.

INITI DECISION BY EDWARD CnEEL, llEARIXG EX.oDIIKER The Federal Trade Commission issued its complaint against the above-named respondent on April 19 1960, charging it with soliciting contributions from certain of its vendors to finance an Anniversary Celebration, and further charging that the asking for and receiving of these contributions constituted unfair methods of competition and unfair acts and practices in violation of Section 5 of the Federal Trade Commission Act.

This proceeding is before the hearing examiner for final consideration upon the complaint, answer, testimony and other evidence, and proposed findings of fact and conclusions filed by counsel for respondent and by counsel supporting the complaint. Consideration has been given to the proposed findings of fact and conclusions submitted by both parties, and all proposed findings of fact and conclusions not hereinafter specifically found or concluded are rejected, and the hearing exalnincr, having considered the entire record herein, makes the following findings as to the facts, conclusion drawn therefrom and order:

FINDINGS AS TO THE -\CTS 1. Respondent, R. II. lacy & Co., Inc., hereinafter sometimes referred to as ::lacy, is a corporation organized, exi.sting and doing business under the laws of the State of New York, with its principal OITiCe and place of business located at 151 vI' est 34th Street ew Yark, N. Y. 2. J\1:acy is now and for many years last past has been engaged ill the operation of retail department stores. It operates through six department store di.visions in six areas throughout the United States. These divisions are Iacy Ne'iv York; Bamberger, Kew .Jersey; Davi son-Paxon Company, Georgia and South Carolina; La SaJlc & I och R. H. MACY & CO. , IKC. 1253 1249 Initial Decisioll Conlpany, Ohio; 1Ilac is California; and Iacis I\1missouri-I(ansas. 3. Re.spondent sells directly to the consuming public through the above enumerated divisions thousands of products of the type normally and usually sold by the department store trade. Respondent's sales are substantial, totaling more than $450 000 000 for the year 1958. Sales of its ew York division for the year 1958 totaled approximately $225 000 000.

4. In the course and conduct of its business, respondent is nmv, and for many years has been, engaged in commerce, as "c01umerce" is defined in the Federal Trade Commission Act. Respondent purcha.scs its prollucts from many suppliers located throughout the various states of the united States ancl causes such products to be transported from various states in the United States to other states for distribution and sale by respondent through its retail department stores. , 1'8- 5. In the course and conduct of its business, as herein dt\scribed sponde.nt has been for many years, and is no,,', in substantial competition in the sale and distribution of department store products, in commerce, bet een and among the various states of the United States, "ith other c.orpol"nJ.ions, persons, finns and partnerships. 6. In the course and conduct of its business in commerce lacy, in commemoration or its one-lmndreclth year in business, conducted during the year 1958 a year-long celebration. Since lacy started in New York City, the celebration took place only in facy s New York division.

7. The celebration consisted of a. ye:1r- long series of special events special advertising and special promotions, all of an institutional nature and all designed to enhance lacy s position in the c01nmunity. 8. In c.connection with this celebration and in anticipation of it 1acts Xew York, through its offcers and employees, asked approximately 750 of its approximately 20 000 vendors (0 contribute $1 000 each toward the cost of this celebration.

9. Approximately 582 vendors tgreed to contribute $1 000 each. 10. As of January 3D, 1059 lacy had receiycd from such vendors flpproximately $524 000. Contributions from vendors were continuing to be received throughout 1a50 so that by "'larch 21 , 1060, "'hcy had received approximately $540 000.

11. Purehnses by J\.facy s New York in 1957 from the vendors who ere asked to contribute varied from a low of approximately 8800 to a high of approximately $2 600 000. Purchases by :\Jacy s J\:ew York in 1958 from the vendors who were asked to cont.ribute ntried from a low of $900 to a high of approximately 700 000. :. : : :,, _: : _: : _: 1254 FEDERAL TRADE CO VfSSION DECISIONS Initial Decision 60 F.

12. Included among the vendors, each of whom -contributed $1 000 the products -which they manufacture and sell, and their approximate 1958 sales to :Vlacy s New York, were the following: 196858.1e5 Supplier s name rroduct to Macy New York $162 000 : 1 80, 000 Z84 913 'rr 10, 000, 201, i48 45, 036 rd CorIJ rat f AmCfJL-- : Pho;;graph i'1. nll_ 841 Seal Sac. Inr-_ - lOlastic Closet Bud Kitchen Acccssories- i1, 400, 3543G 29:624 i. 78\1 Yardley of London. Inc_ - Cosmetics and Toilctncs_ 28, 798. 13. The selection of the number of vendors to be a,asked to contribute as well as the amount of money to be raised, was based in large pa.rt on the amount of money \which J\lacy needed to put on the extensive annl versary program.

H. Contemporaneously with the celebration, Macy continued its regular publicity program, engaging in displays, newspaper advertising, direct mail advertising, radio, TV, periodicals and programs. Macy s expenditures for publicity in 1958, exclusive of direct charges for the celebration, were approximately the same as they were in 1957 and 1959.

15. Competition at the vendor level at the time the vendors were being solicited by :Vlacy for the $1 000 contributions was intense and most of the vendors had a substantial nlil1ber of competitors. 16. Some of the vendors had been in business only a few years and some had been selling to Macy ew York for a short period of time while still others had been in business for many years and some of them had sold to Macy for many years.

17. Vendors to the department and specialty store trade have a substantial nun1ber of customers, some numbering into the thousands. 18. For many of the vendors, .Macy was considered to be a big customer and accounted for a large volume of sales. 19. o amount other than $1 000 was provided for in the vendor' participation program.

20. SOllIe vendors acceded to lacy s request in hope of improving their position with l\lacy; some gave because competitors were being asked to contribute; some gave because of their large volume of sales to Macy; and some gave because of the length of time they had beell sellng to Macy.

, R. H. MACY & CO, ) INC. 1255 1249 Initial Decision 21. The buyers for thc various departments made the solicitations from the vendors and the vendors were a wa.re that the buyers exercised their judgment and discretion and made the decision as to vdlOm to buy from and the volume to buy. Vendors are reluctant to refuse requests of these buyers.

22. lacy s Kew York is the largest department store in the world is in competition with fL la.rge number of stores in the greater New York area and all vendor witnesses testified that they sold to many 'customers in this trading area.

23. ;\iany of the vendor witnesses testified that they wore either unwilling or liable to give equal or proportionate contributions to their other customers who competed with Maey. 24. It cannot be concluded from this record that contributions have been favored because they made a contribution or that vendors who were solicited and refused to contribute suffered a loss of sales for that reason.

DISGGSSION It is de,ar that the Federal Trade Commission may determine whether an act or pract.ice is unfair within the meaning of Section 5 or the Federal Trade Commission Act \vhet.her or not such act or practice has lleretofore been considered or determined to be unlaTIful. Except for this expansion of concept in the I\:eppel case the guidelines expre.s::ecl in the Gratz 2 case have been followed in the decided cases. There the Court said:

The words "unfair methods of competition" are Dot defined by the statute and their exact meaning is in dispute. It is for the courts, not the commission. ultimately to determine as matter of law what they inclnrle. They are clearly inapplicable to practices never heretofore regarded as opposed to good morals because characterized deception, bad faith, fraud or oppression, 01' as against public policy lJecflllse of their dangerous tendency unduly to hinder competition or create mOllopoly. * Of these criteria mentioned, t.here ate two that could bc involved here. First, \\'as there ': oppression " involved in these so1ieita.tions \Were the vendors faced with a. choice of donating 01' risking the loss of sales to it valued account, or, if they were not faced \,it.h this choice, did respondent expect them to so believe There is no e"Fidence tlult this \vas the vendors' choice or that respondent' s solicitors expected them to believe that it was. The solicitors ,were instructcd to advise thc vendors that ,vhether they donated or not the decision would not. affect future dealings. Because of the nature of the buyer-seller rehltion- C. v. Keppel, R. F. Bro., Inc., 291 ES. 304 j see also A. L. . Schechter P01!ltj' CO/' , et al.v. 295 U. S. 495.

2 P. C. v. Gratz, et aZ. 253 U. S. 421. 1256 FEDERAL TRADE COMMISSION DECISIOKS Opinion GO F.

ships the vendors eont.inual1y sought to mainta.in the good \"ill of the. 1\facy buyers and the lacy buyers and executives \yho planned tile solicitations knew this, hut this is not suffcient to irnpute to them lmo\Yleclge that t.hey \,ere forcing a choice.e upon the vendors or kuO\vlmlge that the vendors so believed. The.re is evidence that some vendors feared that they were face.c with such a choice, but respondent's acts were not the kind or degree of oppre,ssion .which the law has condemned. The other element to be considered is the effe,ct or the solicitations on competit.ion. Gratz uses the phrase "tend1e,ncy unduly to hinder competition" which may be equated with "may be substantially to lessen competition . It js concluded t.hat the evidence docs not show a reasonable likelihood of a substantiallcsscllil1g of competition between vendors 01' bebveen Ia,cy and its competitors. The mo t that enn be said is that AJacy profited at the expense of some suppliers "ho may or may not Imve also profited through increased sales of 1\lacy. There is no direct evidence.e that competition nt the retail level was significantly affect.erl. These donations cannot be considered in ihe same light as price diffe-rcnces ,,'which rccur order after order. It may be, as counsel supporting the complaint contends, that acts such as a.re involved here circumvent Section 2(d) of the Clayton Act but it does not necessarily follow that they arc inherently unfair aml constitute pel' se violations of the Federal Trade Commi sion Act. It cannot be conc.uclecl that respondent's acts, as herein found, were inherently unfair, or tlmt the evidence shows the probability of a substantiallesse,ning of competition resulting from them, hmvever, since the solicitations could be repeated rmd have a cumulative effect, the orde.r of dismissal.which follo's's is without prejudice. C.O:NCLUSIOX The acts of respondent as herein found do not constitute unfair methods of competition or unfair acts and practices in violation of Section 5 of the Federal Trade Commission Act. ORDETI It is oi'd6led That the complaint herein be, and the same hereby is dismissed, -.vithout prejudice to the right. of the Commission to institute further proceedings should future circumstances so wa,rrant. OPINION OF THE C02\DIISSIQX By KERX Commissioner:

This matter is before us upon the appeal of counsel supporting the cOlnplaint from the hearing ex uniner s initial decision dismissing the H. H. MACY & CO. , IKC. 1257 1249 Opinioll complaint ''ithont prejudice. The complaint charges rc ,pondent, n. H. IvIaey &. Co" Inc. piney), with violating Section;) of the Federal Trade Commission \.ct in connection wit.h its tiolicitation of contributions of $1 000 ea,ch from approximfttely 750 of its suppliers or yeudol's for 1\Iacy's One- hundredth Anniversary Celebration. Counsel on the n,appeal does not. argue that the eXCllniller s findings a.re materially incorrect, bnt rtlthe-l' that his conclusions and his application of the b,y to the facts as found are eTl'oneons. There is no nppa,rent dispute about ally material fact. Hesponclent does not challenge the findings or conclusions of the initial c1ec:ision. :Macy, a X ew York corporation with its principal place of business at 151 ,Yest 34th Street, Xew York City, is engaged in the operation of retail department stores. It sells c ireetly to the consuming public. goods of the type mmally sold by department. stores through six divisions, as follows: J\facy, New York; Bamberger 'I . Jersey; Da,vison-Paxon Company, Georgia, and South Carolinn: Lasalle &. lCoch , :Missouri-I(ansas.Company, Ohio; ::Iacy s California; and jlac.y Hespondenfs total sales were marc than $,150 000 000 in 1D58. Sales of its Ke\\ York division for that Jenr totaled approximately $225 000 000.

In 1058, ),Iacy s Kew York, celebrated the one-hundl'ecHh anniversary of its founding by conducting various events and promotions during the entire year. Among other things, it sponsored cert!1in ceremonies attendecl by public offcials; created shop facndes around 1\lacy's street floor1' to duplicate the atmosphere, of :x ew York in 1858; conducted H, gl'ent fireworks display on the Mh of July: and engaged in certain institutional type arlvertising featuring J\fac:is 100th Anniversary. :TIacy s asked approximately 750 of its some 20 000 vendors suppliers, to contribute $1 000 each to\yard t.he cost of this celehl'a- 1 Paragraphs 7 and 8 of the complrlint charge as follows: PAR. 7. Respondent used the force of its purchasing power to induce contributions fr0211 its vendors who-because of their individual inefjlmlity of economic strength compared to respondent; the highly competitive nature of their business; their lack of ability to combat such practices; the fact that their economic existence Is enhanced and im- J)l'o'icd by continuing to sell to IIacy; and that l1ppJying )lacr cnhnlH'es the IJrestig-e and selling ability of the supplier with otller actual and poteutial custornel's are relati\' ely powerless to refuse to mai;:e such contributions. These circumstances are enhanced by tJ1e fact tlmt Macy s i'Tew York store is one of the largest, if not the largest, department !:stores in the United States. Very few, if any, of these 750 vendors can afford to malre contributions of this type to all or any 8ubstantinl number of tl;eir other customers. I'AR. 8. Tlle aforesaid acts anel practices of respondent, a powerful buyer using the leverage of its purchasing power and position, I1sl;ing for and receiving contributions, gifts or c1onatiC\!l" of whatever nature from its vendors fo)' the 100th Anniyersar,v Celebriltion of J'acy s Sew Yorl. , or for any other Inn.jJose. arc' flu to the pre iuc1ice 1\m1 injury of !mch vendors ancl their competitors, anll to tile cowpetitors of respondent Ilnd the public, anil constitute unfair methods of competition and unfair acts and practices in. commerce ,within the intent and meaning of, and in violation of, SecUon 5 of the Fer1eml Trade Commission A('t.

&, ..

1258 FEDERAL TRADE COMMISSION DECISIO Opinion 60 F. T.

tion. The $1 000 figure "as arrived at 11101'e or less arbitra,rily. The 730 vendors were chosen on the basis of past performrtnce and potential Approximately 582 vendors pledged or agreed to contribute 000 each. By March 21 , 1960, Macy received approximately $540 000 from these vendors in such payments. The pledges ,were for 000 each; no more, no less. It was not part of the program to offer the vendors L1Y particular displfy or advertising promoting their product. The purpose for ,..which the money was received was to help defray the costs of .Clacy's 100th Annivcrsary Celebmtion. The hearing examiner in his initial decision held that ,the guidelines of Federal Trade Oommission v. Gratz, et al. 253 U.S. 421 (1920), should be applied to the facts in this proceeding. There the Supreme Court held that the words "unfair methods of competition" are dearly inapplicable to prrLCtices never heretofore regarded as opposed to good morals because characterized by deception, bad faith, fraud or oppression, or as against public policy because of their dangerous tendency unduly to hinder competition or create monopoly. lie found or con- -euded that the evidence of record did not satisfy the pertinent Gratz tests, and so ordered that the complaint be dismissed, but without prejudice "since the solicitations could be repeated and have a cumulative effect.

The Supreme Court 1n1953 in Federal Trade 001n1nission v. lrlotion Picture Advertising Service 00., Inc. 344 U. S. 392, reviewed certain prior decisions in cases brought under Section 5 (omitting GTatz) and stated the law on defining "unfair 111Cthocls of competition, as follows: The " unfair methods of competition " \vhleb are condemned by 5(a) of the Act are not confined to those that ,,,ere ilegal at cummon law or that were condemned by the Sherilan Act. Federal Trade Commission Keppel ,f Bro.. 291 U. S. 304. Congress advisedly left the cOllcept flexible to be defined with particularity b\' the myriad of eases froll the field of business. Jd. pp. 31G- 312. It is also clear that the Federal Trade Commission Act \yas designed to supplement and bolster the Sherman Act and the Clayton Aet (see Federal T1' ade Commtssion Reee7/-Nut Co. 257 U. S. 441, 453)-to stov in their incipiency acts and practices which, when full blo\Vll, would violate those Acts (see Fashion Guad v. Federal Trade Comlnission 312 U. S. 457, 463, 466), as \veU as to condemn as " unfair methods of competition" existing violations of them. See Federal Trade Coll'/' ission v. Cement 111tiutc 333 'C. S. 683, 6U1. lei. 39. 395. It is for the courts to determine \yhat practices or methods are to be deemed unfair, but in passing on that question the determination of the Conm1ission is of gre-at weight. Fedentl Trade Commiss"ion Keppel Bro. 291 u.S. 304 , 314 (1934) ; Fedend tmde 00l1l1vi88ion v. Oement I,,stitute 333 u.S. 683 , 720 (1948). In Motion Picture Advertising Se1'uioe Co., Inc., supra the Court stated that the precise R. H. :MCY & CO, ) n,, 1259 124H Opinion impact of a pa.rticular practice on the trade is for the Commission, not the courts, to determine. The Court there further said that the point where a method of competition becomes " unfair" wit.hin the meaning of the Act will often tUTIl on the exigencies of a particular situation trade practices, or the practieal requirements of the business in question. 344 u. S. at 396.

\Ve will proceed to determine whether the acts a.nd practices of the respondent here charged arc "lUlfair" wit.hin the meaning of Section The examiner found and his findings are not challenged by the respondent in part as follows: :Macy s New York is the largest depftrtment store in the world. Far 1nany of the vendors, 1\'lacy was considered to be a big customer and Recount.ed for a laTgc volume of their sales. lacy s is in competition with a large number of stores in the New Yark area, and all vendor witnesses testified that they sold their products to many customers in the trading area.. l\lany af the vendor witnesses testified that they were either unwilling or unable to give equal or proportionate contributions to their other customers who' competed wit.h Iacy. The buyers for the various departments of l\Iacy s made the solicitations from the vendors, and the vendors were aware that the buyers exercised their judgment and discretion and made the decision as to whmll to' buy from and the volume to buy. Vendors are reluctant to refuse requests of the buyers. There is clearly shown here a for1l1 of coercio1l or oppression which we believe, is an lmfair trade practice and one "which lTIay be condemned as a violation of Section 5 even under the relatively strict tests of the Gratz case. vV:while the record does not show overt pressure upon vendors t.o give, such thre,ats of discontinuance of purchases or oflers of more business, vendors, as a practic.almntter, could not well afford to refuse J\facy s request. The impression that continued business with faey s might be involved was helped by the fact that ALley buyers made the contacts. The vendor could not know what the result might be if he refused, and this in itself was great pressure on him to give. It is clear from the record that the sums paid to Macy c.onstituted a considerablo fulancial burden to many vendors. Under the circumstances here shown, we hold that the practice of a large buyer using the leverage of its size and importance to exact from suppliers, who cannot refuse to give or who are reluctant to refuse to give, substantial gifts or sums of 1l10ney solely for the buyer s own advantage, is an "unfair" practice within the meaning of Section 5 of the Federal Trade Commission Act.

1260 FEDERAL TRADE COMMISSION DECISIOKS Opinion 60 F.

The Commission further holds that J\facy's practice was shown to be "unfair" "within the mea.ning of Section 5 because of its injurious effect upon iVlacis competitors. In considering this, it is important to keep in mind that "unfair n1cthods of competition" condemllcd by Section 5 are not confined simply to those illegal at common law or condemned by the Sherman Act or the Clayton Act. Since t.he present case falls so cle.,lrly within the fra,mcwork of competition; activity covered by the Hobinson-Patman Act, there is no doubt that in determining competitive jl1jury the less stringent requirements of that -,'-et as to injury may be app1iec1 , i. , a reasonahle likelihood of substantial injury to competition "ith vendors who granted the discriminatory concessions or \vlth 1\lacy, the recipient 110 need forof such concessions. It should be noted that there is the evidence to show specific losses to )Iacy's or actual divcrsions trade from competitors. IIard.ings Jllig. 00. v. Fedentl TTCtde OOlnmission 153 'F. 2d253, 257-2;"58 (1946). See also FedeTCtl T1'ade C01nmission v. Simplicity Paltern C/o., Inc. 360 17. S. 55, 63 (1050), where tho Court in a case involving discriminatory concessions inferred that losses occurred to the unfavorecl stores from the fact of competition and the discriminatory eon cessions. From the examiner s findings, it may reasonably be concluded that the practice gave ::1aey an unfair and substantial advantage over competing stores. Clearly, the amounts of $1 000 each from vendors totaling $5-:0 000 expendecl in promoting Iacy's as tll institution were substantial concessions to )Iacis over its competitors. In one instance set out in the initial decision, the payment was 10 per cent in 1858. ::facy'sof the sales of the vendor to 1\Iacy's New Yark benefited over cOlnpetitors in about the same \YflY as it Ivould have benefited had the payments been in the form of price concessions. The loss of business by competitors to =vfflCY may be inferred in either case. It is noted that ,,'while 1\1:acy received payments for a particular promotion, the money, in effect, was general reycnue and could have been used, for instance, to reduce prices. This is so because vendors' produc.s I\ere not specifically promoted and J\iacis ",vould have celebrated its 100th Anniversary (although perhaps not on the sarnc scale) whether or not it received eontribl1tions from vendors. The money taken in, therefore, might be considered as funds largely free and cleaT to be used for any purpose.

In this ease, )Iaey s in soliciting gifts of money, shifted to its vendors a substantial portion of its 0\1'11 advertising and promoiianal costs, i. , the costs of promoting J\laey s as all orgrmization. It ,yas able to do this because of its size and import.ance. Stores R. H. MACY & CO. , IXC. 1261 124H Opinion COlnpeting with J\lacy purchasing frolll the same vendors could not similarly shift promotional costs and so were to that extent at a substantial competitive disadvantage. \Ve believe, therefore, that there is sufficient evidence to find, and we do find, that respondent' practices were such as to result in a reasonable likelihood of substa,ntlal injury to competition with l\lacy's. \Ve are also of the view that the same general principle which governed the Orand Unl:onand American Neil's cases should apply here. The mete circumstance that in this case there is no showing that any service or facility was furnished by the respondent for the contributions soJicitecl and received is not a significant diil'el'ence. The inequity in the use of size to obtain special concessions is the same ill e,ither case. If it is contrary to public policy for a large buyer by reason of its size to secure disproportionate nch'crtising allowances, clearly public policy is contravened ill the exercise of economic might to obtain outright gifts or donations. If anything, the unfairness of the act is compounded by the failure to furnish a benefit to the contributor. Vhat a mockery of justice it would be to say that it is iJ1legal for a large retailer to solicit cash donations even when it gives some advertising benefits in return-yet it is perfectly legal for such a retailer to solicit CH. donations of substantial benefit to it, pocket the entire proceeds and give nothing in return. It "auld be an open invitation to widescalc solicitation of funds by hlrge buyers from suppliers. indeed it would create a new hunting ground from whicll it would be impossible for the game to escape. The resulting competitive benefits to large soliciting buyers "would be limited onl;.y by self-imposed restra.int on their mvn rapacity-and that restraint would no doubt be limited in turn only by weighing what the seller-supplier traffc \yould bear. \Ve conclude that payments here solicited and received constitute an "unfair" practice within the meaning of Section 5 of the Federal Trade COll1mission Act, and that respondent is in violation of Section 5 of that Act. Ve believe that any other conclusion would have the most deleterious consequences in this entire general area of commercial practices involving solicitation of funds from suppliers by large buyers.

Threaded throughout respondent's brief is an argument to the elIect that the lOath Anniversary \yas a unique and unusual event and that this ill some way justifies t.he request forcontribntiolls. The oln ious . The Gnnul, Union Company v. Fecleml Trade Commission, 300 F. 2d 92 (1962) ; Ameritun Nnp! Compu11.Y und The Union News Company v. Ferlera! Trade Commission, 300 :If. 211 104(1902).

, ,, TRADB COl\11fISSION DECISIO:\S 1262 FEDERAL Final Order 60 F.

answer to this is that \ve are not here concerned -wit.h J\:Iacis X ew Yark, lOOth Anniversary as such, which is clearly a unique occurrence, but with all events for which like contributions might be collected. Department stores characteristically find at least several events during a year to !'ID special promotions. If the practke is proper for a lOath Anniversary, there is no reason why it would not be justified for other occasions and become a continuing practice. We conclude that the hearing examiner erred in const.ruling and applying the law and in dismissing the complaint in this proceeding. The appeal of counsel supporting the complaint accordingly is granted. The initial decision will be modified to conform to the views herein expressed and, as so modified, will be adopted as the decision of the Commission. An appropriate order wil be entered. :FIX AL Order.

This matter having been heard by the Commission upon the appeal of counsel supporting the complaint from the hearing exmniner initial decision, and upon briefs and oral argument in support. thereof and in opposition thereto; and The Commission, for the reasons ilPpearing in the accompanying opinion, having granted the appeal, and having directed that the initial decision be modified to conform to its views expressed therein and that the initial decision, as so modified, be adopted as the decision or the Commission:

It is ordel' That the initial decision be, and it hereby is, modi fled by striking everything therein under and including the headings Discussion, Conclusion and Order and substituting the following: 25. Respondent lrnew or had reason to know that the contributions solicited from the vendors were not available on equal or proportional terms to other stores competing whh J\lacy -in the sale of the vendors products.

26. The acts or practices or respondent in knowingly inducing and receiving preferential contributions from vendors lmd the effect of probable substantial lessening of competition between Jacy s and its competitors.

27. l\Iacy, a large buyer, nseel the leverage of it:: size a.nd importance to exact from suppliers ho could not refuse to give or who were reluctant to refuse to give, substantial gifts or sums of money solely Tor its own advantage. 'Vhilc the record does not show overt pressure upon vendors to give, such as threats of disc.ontinuance of business or offers of more business, vendors, as a practical matter, c.ould not well afford to refuse )1 tcy s request. The impression that con- R. II. L-\CY & CO., INC. 1263 1249 Final Order tinued business with Macy s might be involved was helped by the fact that Macy s buyers made the contacts. The vendor could not !mow what the result might be if he refused, and this in itself was great pressure on hi1ll to give. The sums paid to :ila,cy constituted a con siderable financial burden to Macy s vendors. The solicitations and receipt of gifts of money by Macy in the manner here shown were oppressive and unfair acts.

CONCLUSIONS 1. This proceeding is in the public interest. 2. The acts or practices of respondent as herein found constitute unfair methods of competition and Wlfair acts and practices in violation of Section 5 of the Federal Trade Commission Act. ORDER It is ordered That the respondent, R. H. Macy & Co., Inc., a corporation, its offcers, employees, agents or representatives, directly or through any corporate or other device, in or in connection with the purchase of department store products in commerce, as "commerce is defined in the Federal Trade Commission Act, do forthwith cease and desist from:

Receiving or soliciting and receiving contributions, gifts, donations or anything of value of whatever nature, directly or indirectly, from its vendors to aid Or support, in whole or in part, any publicity, advertising, promotion or other program planned and carried out by respondent to further its department store business, except that this order shall not apply to compensation or consideration for services or facilities furnished by or through respondent in cOlmection with the sale or offering for sale of products sold to respondent by any of its vendors.

It is further ordered That the initial decision of the hearing examiner as so modified be, and it hereby is, adopted as the decision of the Commission.

It i, fu.rther ordered That respondent, R. H. Maey & Co., Inc., 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 in which it has complied with the order to cease and desist .contained in the initial decision as modified. 1264 FEDERAL TRADE C0M.V1ISSI0N DECISIONS Complaint 60 F.