North American Quilting Corp. et al.

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Ix THE IATTER OF ORTH AMERICA1\ QUILTIKG CORP. ET AI,.

CONSENT ORDER, ETC., IN REGARD TO THE ALLEGED VIOLATION OF THE FED- ERAL TRADE COMMISSION AND THE WOOL PRODUCTS LABELING ACTS Docket 0-140. Complaint, May 1962-Decision, May 1962 Consent order requiring Brooklyn, )"T , manufacturers to cease violating the Wool Products Labeling and Federal Trade Commission .Acts by labeling and invoicing as "80% reused wool 20% reused unknown fibers, quilted interlining materials which contained .substantially less reused wool than so represented; failng to label certain interlining materials with the generic name of the constituent fibers and the percentage thereof, and to comply in other respects with labeling requirements; and furnishing false guaranties that products were not misbranded.

CO::UPLAINT Pursuant to the provisions of the Federal Trade Commission Act and the Wool Products Labeling Act of 1939, and by virtue of the authority vested ill it by said Acts, the Federal Trade Commission having reason to believe that Korth American Quilting Corp., a corporation, a,nd I-Iarry Belsky, Leon Diamond, and :Mayer Of man, individually a.nd as offcers of said corporation, hereinrtfter referred to as respondents, have violated the provisions of said cts and the Rules and Regulations prol1ulgatedunder the 'Wool Products Labeling Act, and it appearing to the Commission that a proceeding by it in respect thereof would be in the public interest, hereby issues its campI ant stating its charges in that respect as follmvs: PAHAGRAPII 1. Hesponclent North American Quilting Corp. is a corporation organized, e.existing and doing business under and by vir. tue of the laws of the State of New York. Individual respondents I-Iarry Belsky, Leon Diamond, ancll\Iayer Of man are president, secretary, and treasurer, respectively, of the corporate respondent. Said individual respondents cooperate in formulating, directing and controllng the acts, policies and practices of the corporate respondent inc.uding the acts and practices hereinafter referred to. All respondents have their offce and principal place of business at 561 Grand Avenue, in Brooklyn, N.

PAR. 2. Subequent to the effective elate of the 'Wool Products Labeling Act of 1939 , and more especially since July, 1956, respondents havo manufactured for introduction into commerce, introduced into commerce, sold, transported, distributed, delivered for shipment, and 1270 FEDERAL TRADE COl\1J\HSSION DECISIONS Complaint 60 F.

offered for sale ill COl1i1Crce, ,\,001 products, as the terms "commerce and "wool product" are defu1ecl in said Act. PAR. 3. Certain of said wool products were misbranded by the respondents within the intent and meaning of Section 4 (a) (1) of the W 001 Products Labeling Act of 1939 and the Rules and Regulations promulgated thereunder, in that they were falsely and deceptively labeled or tagged ,with respect to the character and amollut of the constituent fibers contained therein.

Among such misbranded wool products, but not limited there.to were quilted interlining materials labeletl or tagged by respondents as 80%. reused \yool 201j reused unl\Jlo\ynfibers, wher('as ill truth and in fact, said products contain cd substantially less than the represent ed quantity of reused wool.

PAR. 4. Certain of said wool products were further misbranded by respondents in that they were not stamped, tagged or labeled as required under the provisions of Section 4(a) (2) of the ,Vool Products Labeling Act of 1939 and in the manner and form as prescribed by the Rules and Regulations promulgated under said Act. J1ong such misbranded wool products, but not limited thereto '\ere certain illterlining materials wit.h labels ,,' which failed: (1) to 11O\Y the true generic na,mes of the fibers; (2) to show the percentages of such fibers.

PAR. 5. Certain of said wool products ele misbranded in ,-iobtion of the "\V 001 Product.s Labeling \ct of ldi1D in that tlwy not labeled in accordance with the Rules :1lc1 .Regulations pl'oJl1l1g'atecl thereunder in the following respects:

(a) The required information descriptive of the fiber content contained on the labels attached to the '''001 pro(lucts '''as minimized and rendered obscurc and inconspicuous, so as likely to be l111l0tl('('(1 by purchasers and purchaser-consumers, by t.he nse 01 othet' written and printed matter intermingled wit,h the required informrttiol1 , in violation of Rule 11 of the aforesaid Rules and Hegulations. (b) The stamps, tags, labels, and other marks of identificatioll attached to certain wool products contained the names or c1desig11ations of fibers not present in said products, ill violation of R.ule 25 of the aforesaid Rules and R.egulations.

PAR. 6. R,espollc1ents have furnished false guaranties that certain of their wool products were not misbranded, whell they knew, or had reason to believe, that the said wool products so falsely gnarnnteed might be introduced, sold, transported, or distributed in commerce, in violation of Section 9 of the .Wool Products Labeling Act of 1939. NORTH AMERICAN QUILTING CORP. ET AL. 1271 1269 Decision and Order PAR. 7. The acts and practices of the respondents as set forth above were, and are, in violation of the Wool Products Labeling Act of 1939 and the Rules and Regulations promulgated thereunder, and constituted, and now constitute, unfair and deceptive acts and practices and unfair methods of competition in cOIrunerce., within the intent a, meaning of the Federal Trade Commission Act. PAR. 8. Responde.nts are now, and for some time past have been engaged in the offering for sale, selling and distributing of quilted interlining materials.

PAR. 9. In the course and eonduet of their business, respondents now cause, and for some time last past have caused, their said prod uets, when sold, to be shipped from their place of business in the State of New York to purehasers thereof IDeated in various other Stat.es of the United States, and maintain, and at all times mentioned herein, have maintained, a substantial course of trade in said products in commerce, as "COllUTIerCe" is defined in the Federal Trade Commission Act.

PAR. 10. Respondents in the course and conduct of their business as aforesaid, havo made statements on invoices and shipping memoranda t.o their customers misrepresenting the fiber content. of certain of their said products. Among such Inisl'cpresentations were statements representing quilted interlining materials to be "80% reused wool 20% unknown fibers, whereas in truth and in fact, the said products contained substantially less than the represented quantity of reused wool.

PAR. 11. The acts and practices set out in pa-ragraphs 9, and 10 have had and now have the tendency and capacity to mislead and deceive purchasers of said products as to the true content thereof and to cause them to misbra.nd products manufactured by them in -which said materials are used.

PAR. 12. The acts and practices of the respondent set out in paragraplls 8, 9 and 10 ,,-ere, and are, all to the prejudice and injury of the public and of respondents' competitors and constituted, and now constitute, lU1fair and deceptive acts and practices, in commerce within the intent and meaning of the Federal Trade Commission Act. DECISION .-)W ORDER The Commission having he.reLofore determined to isslle its complaint cha.rging the respondents named )n the caption hereof \\lth violation of the Federal Trade ConuTIission Act and the ",Vool Products Labeling Act of 1939, and the respondents having been served with Decision and Order 60 F.

notice of said dctermination and with a copy of the complaint the Commission intended to issue, together with a proposed form of order; and The respondents and counsel for the Connnission ha villg thereafter executed an agreement containing a consent order, and admission by respondents of all the jurisdictional facts set forth in the complaint to issue herein, a statement that the signing of said agreement is for settlement purposes only and does not constitute an admission by respondents that the law has been violated as set forth in such complaint and waivers and provisions as required by the Commission s rules; ::md The C0l111l1ission, having considered the agreement, hereby accepts same, issues its complaint ill the form contemplated by sa,id agreement Blakes tho follo-wing jurisdictional findings, and enters the following order:

1. Respondent, North American Quilting Corp., is a corporation organized, existing and doing business under and by virtue of the laws of the State of N ew York, with its office and princi pal place of business located at 561 Grand Annue, in the city of Brooklyn, State of New York.

Respondents Harry Belsky, Leon Diamond, ancll\fayer Of man are offcers of said corporation and their address is the same as that of said corporation.

2. The Federal Trade Commission has jurisdiction of the subject matter of this proceeding and of the respondents, and the proceeding is in the public interest.

ORDER It i8 ordered That respondent North American Quilting Corp. , a corporation, and its offcers, and respondents Harry Belsk-y, Leon Diamond and Mayer Of man, individually and as offcers of said corporation, and respondents' representatives, agents and employees, directly or through any corporate or other device, in connection with the manufacture for introduction into conllnerce, the introduction into commerce, or the offering for sale, sale, transportation, distribution or delivery for shipment, in commerce, of wool products, as "commerce and "wool product" are defined in the .W 001 Products Labeling Act of 1939, do forthwith cease and desist from misbranding wool products by:

1. Falsely and deceptively stamping, ta.gging, labeling or otherwise identifying such products as to the character or amount of the constituent fibers included therein.

2. Failing to securely affx to or place on each product, a stamp, KORTH AMERICA-'! QUILTING CORP. ET AL. 1273 1269 Order tag, label, or other means of identification showing in a clear and conspicuous manner, each element of information required to be disclosed by Section 4(a) (2) of the Wool Products Labeling Actof 1939. 3. ljnimizing or rendering' obscnre or inconspicuous the required information descriptive of thc fiber content contained on the labels attached to such wool products.

4. Setting forth the name or designation of fibers not present in wool products on the stamp, tag, label or other mark of identification affxed to such wool products.

5. Furnishing false guaranties that wool products are not misbranded under the provisions of the Wool Products Labeling Act when there is reason to believe that the wool products so guaranteed may be introduced, sold, transported or distributed in commerce. It is further ordered That respondent North American Quilting Corp., a corporation and its offcers, and respondents Harry Belsky, Leon Diamond, and IVfayer Of man individually and as offcers of said corporation, and respondents' representatives, agents and employees directly or through any corporate or other device, in connection with the offering for sale, sale, or distribution of interlining materials or other products in commerce, as "commerce" is defined in the Federal Trade Commission Act, do forth with cease and desist fronl misrepresenting the character or amount of constituent fibers contained in such products on invoices or shipping memoranda applicable thereto or in any other manner.

It is further ordered That the respondents herein shall, within sixty (60) days after service upon them of this order, fiJe with the Commission a report ill writing setting forth ill detc'til the manner and form in which they have complied with this order. :

Complaits Ix THE 11MATTERS OF CARNATION COMPANY ET AL., DOOKET 6172 THE BORDEN COMPANY ET AL., DOOKET 6173 BEATRICE FOODS COMPANY (DELAWARE) ET AL.

DOOKET 6174 NATIONAL DAIRY PRODUCTS CORPORATION ET AL.

DOOKET 6175 PET MILK COMPANY ET AL., DOCKET 6176 FAIRMONT FOODS CO:YIPANY ET AL., DOOKET 6177 ARDEN FARMS CO. ET AL., DOOKET 6178 FOREMOST DAIRIES, INC., ETC. , DOOKET 6179 H. P. HOOD & SONS, INC., DOOKET 6425 ORDERS, ETC., IN REGARD TO THE ALLEGED VIOLATIOK OF THE FEDERAL TRADE COMMISSro:s ACT 'hnended Complaint. , Sept. , 19ij5 IJeci8io'/8 , Ma'!2d, 1'962 Orders dismissing, for failure of proof, complaints charging major ice cream manufacturers with unlawfully leslOening competition by granting such inducements to retail customers as providing refrigeration cabinets and other equipment. and servieing the equipment; and giving discounts, rebates, and allowances; but including warning that the Commission would continue dose scrutiny of the granting of loans to retailers on the ('ondition tllat the recipient deal exclusively with the giver.

IENDED AND S'LTPLEMEXTAL COl\IPLAINTS Pursua.nt to the provisions of the Federa. 1 Trade Commission Act and by virtue of t.he authority vested in it by said Act, the Federal Trade Commission, having reason to believe that the corporations listed above in the cn ption hereof and more pnrticularly described and referred to hereinafter RS respondents have violated the provisions of Section 5 of the said Act ces. c. Title 15, Sec. J5), and it, lLppc"ring to the Commission t.hat proceedings by it ill respect t.hereof \"rollld be .Simllar tilnended and supplemental complaints are combined along with the original complaint in docket 6425, issued October 3, 1955, which was substantially identical with the amended complaints.

), ___ _ CARNATION CO:\IPANY ET AL. 1275 1274 Complaints in the public interest, hereby issues its amended and supplcrnentoJ COlllplaints, stating its chorges in that respect a.s follmys: PARAGRAPH 1. Each of the following named respondents is a corporation organize, , existing, and doing hu,siness under the la.wsof t.he St.at.e and with its principal offce and plac.e of business located as hereinafj or set forth:

CAR!\ ATIO co. ET AL., DOCKET ,,0 . 6172 aruc: State Ofincorpora- Principal offce and place of business tion Camation Company___ Dclaware_____ - 5045 "'-ilshire Boulevard, Los '\gclcs, California.

Carnation Co. of Wasbingtoll_ - WasllingtoIl--_ W. 411 Cataldo Avenue, Spokane, Washington. Carne.tion Co. of Texas-- ---- Texas--_-- 326 Ollio Street, Wichita Falls, Texas. Carnation 00. of OklahoIla_ ---- Oklaboma----_ 115 No. Cheyenne Street, Tulsa, Oklahoma. Damascus Milk Co -- Oregon 3342 S. E. Morrison St., Portland, Oregon. Camaco Equipment Co .u- Delaware_--__ 504.1 "'Viishire Boulevard, Los Angeles, Cali. fornla.

Respondent, Cal'naco Equipment Co. , is hereinafter referred to as the "Equipment Company." Hesponde,nt C unation Company is hereinafter referred to a.s "Carnation." The other above named respondents, when referred to collectively hereinafter, will be referred to as the "Carnation COlnpanies.

Carnation was founded by the late Elbridge A. Stuart at Kent Washington, on September 6, 1899. Its growth was rapid and after various organizational changes it was incorporated under the laws of the State of :Maine as Carnation :\Iilk Products Co., and, on July 1 1920, respondent Carml.tion was chartered under the la "\,"s of the State of Delaware to take over the business of the aforesaid Maine Corporation. During the history of its growth Carnation has acquired a number of independent frozen products manufacturers. On November 1, 1929, the corporate name was changed to Carnation Company, the style now used.

Carnation owns the preferred stock and the stockholders of Carnation own the common stock of the Equipment Company, which was organized by Ca.rnation in 1948 fls a corporate device for use in connection with the purchase, sale, lease and loan of ice cream cabinets and other refrigeration equipment. The Equipment Company is operated, controlled and managed as a unit of Carnation s business, and has been and is used by Carnation for the pUl'chat;c, sale, lease and Joan in int.erstate commcree of such equipment.

Carnation operates its frozen products business directly and through the Ca.rnation Companies, which it wholly o"\nls and controls. _____ Complaints 60 F.

THE BOHDEN 00. ET AL., DOCKET NO. 6173 Name State ofincorpora- Principal offce and place of business tiOD TbeBorden Company------------ NewJersey_--_--. 350 Madison Avenue, Yew York 17, New York.Fussen Ice Cream Company, Inc.- :Scw York_ 350 Madison Avenue, New York 17, Kew York. The Ricciardi Co., Inc___ _nnh- New York 651 Waverly Avenue, Brooklyn 38, New York. Respondent, The Borden Company, is hereinafter referred to RS Borden." The ot.her above named respondents, when referred to collectively hereinafter, will be referred to RS "Borden Companies. Borden WRS founded by Mr. GRil Borden, now deceased, in 1857 in Burrville, Connecticut. This business founded by "'fr. Borden in 1857 later becRme known RS New York Condensed Milk Co., which was in turn succeeded on April 24, 1899, by Borden s Condensed Milk Company, organized and incorporated on that date under the laws of the State of New Jersey. The present corporate title was adopted in October, 1919.

Respondent, Fussell Ice Cream Company, Inc., WRS recently merged with its parent corporation, respondent Borden. Borden operates its frozen products business directly and through the Borden Companies, and other wholly owned and controlled snbsidiaries. During the history of its growth, Borden has acquired a number of independent frozen products manufacturers. BEATRICE FOODS co. ET AL. , DOOKET O. 6174 Name State of incorpora- Principal oftce and pls.cc of business tion Bea.trlce Foods Company" d--- --------- Delaware_ _--.--_-- 120 S. Lasalle St., Chicago 6, Illinois. Beatrice Foods Company_m_------- ..---- Ohio_ -- 943 Carr Street, Cincinnati, Ohio. Meadow God Products Company__ _--_-- Delaware_ - 120 So. Lasalle St., Chicago, Ilinois. Meadow Gold Dairies of Califbrnja, Inc__- Dela"'I!Jrc_ un-- 442 So. Fair Oaks Ave., Pasadena California. Meadow Gold Products Corporation - Kew York--__---- 777 Kent Avenue, Brooklyn, New York. Wright & Wagner Dairy OOIIPalY-- WlsconsirL-- -- 525 Cross Street, Beloit, Wisconsin. Meadow Gold lce Cream Company------- Maryhmd-- ------ 1726 E. Pratt, Baltimore, Maryland. Respondent, Beatrice Foods Company (Delaware), is sometimes hereinafter referred to as "Beatrice. ' The other.r named respondents \vhen referred to collectively hereinafter \\,ill be referred to as Beatrice Companies." The Beatrice Companies are eac.h wholly owned subsidiaries of Beatrice. Tllis business originated in 1890 in Beatrice, Xebraska, as a partnership styled Haskelll' Bosworth. In 1897 Beatrice was incorpmated to succeed the partnership. In 1905 this corporation was succeeded by an Iowa corporation ullder the same name. Later, on November 20, 1924, Bea.triee \\' fls jneorpol'ated lmcler the laws of the St.ate of Dela\Vflre, retaining tb. Sflr11P mtn1P" Beatrice . _ _ _____ : ::. CARKATION COMPA,'I ET AL. 1277 1274 Complaints Creamery Company. The present name, Beatrice Foods Company, was adopted on June 1 , 1946.

The business of respondent Creanleries of America, Inc., a Delaware Corporation, 727 ,V. 7th Street, Los Angeles, 17, California, was recently merged into the business of Be,atrice. Likewise Beatrice has recently succeeded through nlerger and otherwise to a number of important frozen products businesses, among \\which are Louis Sherry, Inc., 30-30 Xorthern Blvd., Long Island City, New York, Russell Creamery, 1627 Broadway, Superior, Wisconsin, and Greenbrier Dairy Products Co., 704 Donnally St., Charleston, ,Vest Virginia. In addition, Beatrice since its incorporation, has acquired a number of independent frozen products manufacturers.

Beatrice conducts and operates its business directly and through the said wholly owned subsidiaries, the Beatrice Companies, which ilre opeTfLted a.s divisions. There are extensive int.er-company merchandise transactions between the parent, respondent Beatrice, and the Beatrice Companies, and among the Beatrice Companies themselves. Beatrice also makes loans and advances to the Bcat.rice Companies. NATIONAL DAIRY PRODUCTS CORP. ET AL., DOCKET NO. 5175 i Stateof1neorpora- Principal offce and place of business Kame tion Kational Dairy Products Corpomtion.___- Delaware_- 260 Madison Avenue, New York, N Ballard Ice Cream Co. , Inc-- I Delaware___------ 217 W . State Street, Huntington, Ind. Breyer Ice Cream Co-- I Delaware_ 43d St. and \\' oodland Ave. , Phil!).del- phia, Pa. Castles Ice Cream 00_ ------------------ Xew Jersey--_---- 444 Haymond Blvd., Newark, New Jersey.

Clover :Farm Dairy Co_------------------- Tennessee-- ------- 17. \"'a1nut Street, Memphis, Tennessee. Cloverland Dairy Products Corp- --_----- Delaware- - - ------ 3400 S.Canomon A ve. ew Orleans, I. Cloverleaf Creameries, Ine -- Delaware_ _---- Huntington, Indiana. Consolidated Dairy l' roduets Co., Ine- __- Delaware_____---- 11-5U 44th Road, T.ong Island City. Detroit Creamery Co_ ------------------- ::ichigan-- _-- 3333 Grand River Ave., Detroit, I\Iidl. Ewing-Von AHmen Dairy Co -- Delaware---- _--- 431 W. Oak Street, Louisville, Kentucky. Thel' rechthngFrankliD Ice CreamDaJryCo_--------------Co I DelawarcDelaware_----_--- 1217950 KenyonHarrisonASt.venue, Kansas, Cincinnati,City, .Mo.Ohio. ;1\ : := i Jdr Hydrox Corporation______----------------- elaware_ 415 E. 24th St., CJlicago, Ill. H:\'drox Ice Cream Company, Inc_ , Xew York- - - -- Van Dam St. and 47th A vc. , I.oug Island City. X.

Luick Ice Cream Co-- -.------------ Delawe.rc____----- 505 E. Capitol Drive, Milwaukec Wisconsin.

Ohio Clover Leaf Dairy Co-- u---- Dclaware--__----- 1820 Vermont Ave. , ToJeo.o, Ohio.Rieck Ice Cream Co-- -------------------- l'ennsylvania - 4634 IJrowlls Hil Road. Pittsburgh, Pa.J D Ro'zell I Dela\prc 73r, 80. "-ashing!oTl. Peoria, IJinois. 1 C 9J \;e B I :. X t t; 0 11 io.Southern Dairies,CoInc- -- Delaware_ -- 500 Dalton Avenue, Cllarlottc Supplcc-V.'ils- Jones .:lilk Co_ - PenTlsylvp_Ilia--n- 15 So. 31tll St., Phil ldcjphia, Pe.. , Ohio. ClevelandTellng Ice Cream Co ---------------- Tenn. ., .?Tashvillc,Union Ics Cream, CO---------- Delaware_____----__u-37.101l5li-f2C!JrDegieBroad StAvenue, I TenTlessee--Youngstown Samtary 1vlilk Co_------- ' DelawClrc_ _----- 7l.'J Erie Street, YOUllgstOWll, Ohio. Respondent National Dairy Products Corporation is sometimes hereinafter referred to a.s "Kational. The other named respondents when referred to collectively hereinafter, will be referred to as "C\ a- _ _ 1278 FEDERAL TRADE CO:VL\1ISSIOK DECISIOKS Complaints 60 F.

tiollal Companies. " The ational Companies are each wholly owned subsidiaries of National except ill the case of Soutllerll Dairies, Inc. of which K ational owns 98.05 per cent of the stock. The business of respondent, Ballard Iee Cremn Co., Inc. , lilts recently been transferred to respondent Cloverleaf Creameries, Inc. Kational was incorporatedlUlder the laws of the State of Delaware on December 8, 1923. Since then, it has acquired ownership of many clair:r companies, including respondent National Companies, most of which had their inception prior to the date of incorporation of respondent National Several of the X a.tional Companies ha.ve been ill operation for fifty years or nlore. One has been operating for nlore than a century.

ational conducts and operates its business through the said Xational Companies ,which are operated as divisions. NatiollnJ maintains general control oyer each of the :National Companies through approval or disapproval of budgets, the supplying of la.rge capital expenditures, the approval or disapproval of the acquisition of property sites, the approval or disapproval of loans of money to dealers and in various other ways and mea,ns. For this purpose regular 1llcetings of the board of directors and of an operating committee and executive comnlittee flre. held. PET nLK co. ET AL., DOCKET NO. 6176 Name State of incorpora- Prwcipal offce and place of business tiOD Pet Milk Company__ De1aware_ J 1401 Arcaei(' B\lading, fSt. Louis l'vlissouri.

Pct Dairy Products Company_ ---- Delaware_ -- 303 '.Y. '.Yawnt Street, Jobnson City, Tenn. Colvile Icf\ CreC'm Compa.y-- ' Utab_ n-- 159 W. First S., Salt Lake City, Utah. Respondent, Pet )lilk Company, is hereinafter referred to as "Pet." The other above-named respondents, when referred to collectively hereinafter, will be referred to as "Pet Companies. Pet was incorporated under the laws of the State of Delaware Jlhrch 31 1925, and acquired at that time all of the property, business and assets of an Illinois corporation of the sa-me name which had succeeded by change of name on September 6, 1828, another Illinois corporation named Ilelvetia l\filk Condensing Company, which was incorporated February 16 , 1885, with a 20 year life. Pet conducts and operates its busi.ness directly and through whollyowned and controlled subsidiaries, including the Pet Companies. Pet controls and directs the activities of the Pet Companies through the use of common offcers and through control of large capital ex- _ CARNATION CQ;fPA-'IY ET AL. 1279 1274 Complaints penditures, acquisition of new facilities, loans of money for expenses and working capital, approval or disapproval of budgets submitted and other general supervision.

Respondent, Pet .Dairy Products Company, a wholly owned subsidiary of respondent Pet, was incorporat.ed under the laws of the St.ate of D.elaware on ..1p1'11 16 , 1D32, succeeding to the bllsine.ss of various subsidiary corporations of respondent Pet as follows: feier Ice Creanl Company which \vas incorporated under the la\ys of the State of \Visconsin in Iarch 1927; Kellogg Ice Cream Company was incorporated llnder the la\\s of the State of ,Viscollsin in 1930 and ""fls merged into l\1eie1' Ice Cream Company on .Tll1e 15 1948, and the llame of AIe.icr Ice Cream Company, the snrviving corporation, was changed to Pet Iee Cream Company, st.,ill a ,Yisconsin corporation: the name of the Pet Ice Cremn Company was changml t.o Pet, Dairy Products Company 011 December 28 , 19;'.11; another corporfltion named Pet Dairy Prollucts Company -nns incorporated under t.he laws of the State of Te,nnessee on July 11 : 1820; on Iay 1 1952, the business of the Tennessee, corporation and the ,Visconsin corporation ,yas 1ransferrcd to tile Delaware corporation and the De.Jware corporntioll "\'ms the only snrvivlng corporation Ilnder the name Pet Dairy Products Company.

Hespondellt Colville lee Crenl1 Company, a ,yhony OIyuod subsidiary of respondent Pet, is a corporation organized and exist.ing under and by virtue of the la,ys 'Of the State of Utah, having its principal offcc and place of business at 159 ,V. First S., Salt Lake City, Utah.

During the history of its gTo,yth Pet has acquired a number of indepe.ndent frozen products manufacturers, FAIR::fQK'I' FOODS co. ET AI.1. , DOCKIW.r O. 0177 Name, State of ineorpora- ! Principltl offce and place of businesc; tion Falrmont Foo(ls COllprwy_ ------- Delaware__--- 320l Farnam Street, Omaha, Kebraska. Fairmont Foods Co., Inc-- - Xew York-- -- 197 Scott Street, Buffalo, New York. Fairmont Foods Company of "\Ylsconsm_ ~ "\VlsconsJn__ -- 165 N. Broadway, Green Bay, "\VJsconsin Respondent :Fa.irmont Foods Company is sometimes hereinafter reforred to as "Fairmont, Thc other named respondents when referred to colJectivcly hereinafter '\I"ill sometimes be referred to 'as "Fairmont Companies.

The corporate history of Fainnont Foods Company is as follows: This business was originally established in 1834 when a Xebraska corporation was chartered at Fairmont, Nebraska, under the style of ______ , . 1280 FEDERAL TRADE COMMISSION DEClSIONS Complaints 60 F.

Fairmont Creamery Company. On March 5, 1929, the business was incorporated under the laws of the State of Delaware as the Fairmont Creamery Co., with various wholly owned subsidiaries. In August 1945, Fairmont Creamery Co. acquired the assets of Imperial Ice Cream Co. of Parkersburg, ,Vest Virginia. On ;\1ay 3, 1947, the articles of incorporation were ame.nded to adopt the present name, Fairmont Foods Company.

Fairmont conducts and operates its business directly and through wholly owned and controlled subsidiaries, which are operated as divisions. The portion of Fairmones business which is hereinafter described, is conducted and operated directly and through the Fairmont Companies. Fairmont controls 'and operates the activities of the Fairmont Companies through the use of common offcers and through control of la.rge capital expenditures, a.acquisition of new facilities loans of money for expenses and working capital, approval or disapproval of budgets submitted and other general supervision. Respondent, Fairmont Foods Co. Inc., was originally incorporated as Fairmont Creamery of Kew York in June 1912, under the la\vs of the State of New York. On May 6, 1947 its present name was adopted. Respondent, l, ain110nt Foods Company of \Yi ;consin, was incorporated on 1\1:a1'ch 4 1915 under the llaln8 of Green Bay Cheese Company, Ltd., and was changed to Fairmont Creamery Compa.ny of \\Tisconsin on August 24, 1917, when the assets were acquired by the respondent. Later, on Iay 6, 1947, its present name was adopted. During the history of its growth respondent FaiIT0nt has acquired a number of independent frozen products Inanufacturing firms. ARDE FAR"1IS co. ET AL., DOCKE'l' NO. 617S Name State ofincorpora- Principal olike tind place of busin.' tio!! Arden Farms Co._ ----- Delaware__ l\lUO \Y. Slauson .\ve., Los Angeles !7 Calif.

Stokes Creilrnery Co_ asbjngton_ 1501- 4th Street, Seattle, IYashiugLOIl. Equipmer.t Enterprises, lnc_-- Ca)i!ornia_ 19110 IV. Slauson _-\ ye. , Los Angeles, Calif. :'1elvern- Fussell Ice Cream Co. (formerly California_ 400 Calvert A ,eIlle -\leXall(lria Viw;inia. known as Frusell- Young leg Cream Co.

Kansas City Diced Cream Co_ California_ 325 E. 31st Street, Kansas City, :.fish01Jri CameJla Diced Cream Co. (formerly California_ -- 2006 WestlJeimer St., Houston, Texas. known as Houston Diced Cream Co.

Respondent Arden Farms Company is sometimes hereinafter referrcd to as "Arden." The other named respondents, except Equipment Enterprises, Ine., when referred to collectively hereinafter, will be referred to as "Arden Companies." Equipment Enterprises, Inc. is hereinafter referred to as the "Equipment Company. _____ __ _ _____ ); __ CARNATlO COMPfu r AL. 1281 124 Complaints Arden was founded by the late Samuel H. Berch. Mr. Berch founded a company known as Velvet Ice Cream Company in Seattle, Washington, in 1919. This became the nucleus of respondent Arden of which Mr. Berch was president since its ineeption in 1925. Respondent Arden s business was incorporated under the laws of the State of Delaware on December 11, 1933, as Western Dairies, Inc. The present name, Arden Farms Company, was adopted through a merger of \Vestern Dairies, Inc. , a,nd throe companies known as Arden Farms Co. (formerly vVestem Products Company), Arden Farms Inc. (formerly Western Dairy Products, Inc. and California Dairies Inc. ), and Arden Protected Milk Company (formerly California Cooperative Creamery Company).

Arden conducts and opcrates its business directly and through wholly owned and controlled subsidiaries and ot.her subsidiaries ill which it has majority ownership of the capital stock, all of which are operated as divisions. Respondents Stokes Creamery Company, Equipment Enterprises, Inc., Melvem-Fussell Ice Cream Co. (formerly knO'iYll fls Fn5sell- Young Ice CrBlnn Co. ) and rransa.s City Diced Cream Co. are wholly owned. Respondent Camellia Diced Cream Co. (formerly known as Houston Diced Cream Co. ) is 55 per cent owned by Arden. Respondent Arden has recently acquired the stock and assets of its subsiditlry Tcspondents, Stokes Creamery Company and Kansas City Diced Cream Co. During the past few years Ankn has bought up and taken over the stock and assets of a number of important dairy products concerns. FORE::IOST DAIRIES, INC., ETC. , DOCKET KO. 6179 business i:rcorpora- Name State of 1 Principal offce and place of tion I 2093 College Street, Jacksonvile, rlll.Foremost Dairies, 1nc-- YorkPbemx Dairy, rnc.nn--_ 1 r-~e"" 1220 South S reet, Houston, Texas. Temlessec Dairy, Inc_ ---------- Te\as-- J6"!. Crowdus St., Dallas, Texas. TeIlessce J\ljJk Company, Inc_ --- Texas-- ---- Odessa, Texas Southern ).faid. Inc___ , Ylrgiwa- - Bnstol, Virgmia. Welch :"J:ilk Company, Ine_ West Virginia8._ Welcb, West Virginia. Bridgeman-Russel Co. . Inch_ -- z\1innesota__--_--- : no IV. Mlcbigan, Duluth, :Minesota. Respondent, Foremost Dairies, Inc. , is sometimes hereinafter referred to as "Foremost." The other named respondents, when referred to collectively hereinafter, will be referred to as "Foremost Com panies." Foremost conducts and operates its business directly and through wholly owned and controlled subsidiaries. Other wholly Dwne,d or controlled subsidiaries of Foremost engaged in the frozen products business, in commerce, a,s frozen products are hereinafter defined, are made respondents in this complaint. , , Complaints 60 F.

Foremost is the result of lnergers and acquisitions, including the following: merger betwe, l1 Foremost Dairies, Inc., a Delaware corporation, and Iaxson Food Systems, Inc. , a ew York corporation. Foremost Dairies, Inc., a Delawa.re corporation, was organized in 19 n and is the principal component of the present organization. :Maxson Food Systems, Inc., "as organized in 1945 to succeed the former yIaxson Food Systems, which was a division of 'V. L. Maxson Corporation. The aforesaid merger was effective February 8 1949. The name of the surviving corporation, :Maxson Food Systems Inc. was cha.ngecl to Forenlost Dairies, Inc., as of the date of the rnerger. A nlore recent merger was one ill which respondent Golden State Compccny, Ltd., !1 Delaware corporation, 425 Battery Street San Francisco, California, was merged into respondent Foremost, the agreement having been approved initially by the respective Boards of Directors on December 3, 1953 and ratified on February 25, 1954 by the respective stockholders \\'ith the corporate name rem lining as Foremost Dairies, Inc. The former business of Golden State Company, Ltd., has been continued by respondent Forenlost under a division known as Golden State Division.

During the history of its growth, Foremost has acquired a. number of independent frozell products manufacturers. IT. P. HOOD &; SONS , I:\TC., DOCKET 64 Respondent II. P. Hood &, Sons, Inc., sametiules he-reinafter referred to as Hood, is a corporation, organized, existing and doing business under tllc 1alfS of the State of )lassaehusetts, wit.h its principal office and place of business located at 500 Rutherford A venue ChRrlestown, "lass.

Thc pl'f'se,nt Hood corporation Vi"aS organized on February 2, 1020 at which time it acquired all of the assets and assumed all of the liabilities of H. P. Hood & Sons, a :Maine corporation. Prior to the incorporation under Massachusetts law, the firm had functioned as an individual.l proprietorship Rncl as a corporation in Massa('husetts since 1846.

In addition to its plant at Charlestown, J\fassachusetts, respondent Hood manufactures its frozen products at plants located at Bangor 1aine; Portland, 2\faine: Saint Johnsbury, Vermont: :Manchester Xew l-IaTnpshire; Boston, 1\Iass. ; Springfield fass. ; Providence Rhode Island; X ew Haven, Connecticut, and Ra vena, X ew York. Apart from the above named manufacturing plants respondent has fl, number of branch sales oHiees where no manufacturing a,activity takes place. These sales offces operate as satellites of the branch manufacturing facility.ies. Respondent has branch sales offces located CARNATION CO:yrPANY ET AL. 1283 1274 Complaints in the following municipalities: Troy, New York; I-Ioultoll, 1\faincj Lewist.on, i\Iaine; Rutland, Verrnont; Dover, New Flampshire; Concord, New Hampshire; Fall Hiver, J\Iass. ; Fitchburg, J\Iass. ; Hyannis , 1\fass. Mass. ; N Ol'tlullnptoll, j\iass. ; Quine)', i\Iass. ; N my Bedford Salem, 1\lass. ; Springfie.Jd Iass. ; Talmton, 1\iass. ; Lawrence, :NIass. 1Yorcester, 11ass. ; I-IartJord, Conn., and Xonyich, Conn. In addition to these sales offices respondent maintains t'lYO branch sales offces at the firm s headquarters in Charlestown, :\Jass. Apart from the absence.e of manufacturing activity.y in these branch sales offces, respondent operates them in thc salle m llner as those offces where manufacturing is conducted except t.hat rather than manufacturing some of their own needs, a.ll frozen products sold by them arc received from one or another of the manufacturing facilities. Respondent sells its frozen products prilleipa-lJy ell wholesale to retailers and other lw.ndlers of same" such as drug, grocery and confectionery stores, restaurants, hotels and jnstitutions. There are approximately 12 000 of these establishments purchasing ice cream from the various lIood facilities throughout N ely England. The number or customers served by the various sales offces v lries from 123 served by N orthampion to 1101 served by Boston \Vest, the great concentration of customers being located ,,-within the large municipal centers through ew England. Delivery to these retail customers by the Hooel facilities is, in virtually all eases, by route trucks operating from a manufacturing plant or sales offce, although in son1e instm1ces customers in outlying areas ate ser,\vecl by rn,il or independent contract earners.

PAR. 2. Hespondents are engaged in the business of producing, purchasing, processing, manufacturing, selling, and distributing dairy and related food products among which are ice cream, sherbets and other similar frozen dairy foods, hereinafter referred to as "frozen products . In carrying on their frozen products business respondents buy, sell, lease, and loan ice cream cabinets a.nd other refrigeration equipment he.reinafter referred to as "facilities Respondents sell their frozen products principally at wholesale to retailers and other handlers of same, such as drug, grocery and confectionery stores, restaurants, hotels, and institutions. Because of the nature of frozen products it is necessary for such retailers and ha.ndlers to have a facility or facilities of some sort designed and manufactured for use in connection with the storage display, and sale of them to the purchasing public. l Respondent Arden orgl1niz d the Equipment Com1Jln . ilr a corporate device for use in connection with the purchase, srtle, lease, and lOiln of facilities. The Equipment Company Is operateu, controlled, illJd managed as It unit in Arden s hl1sines:s and has been find is: used by Arden in tlle purchase. sfile, tense. find lortll in interstate commerce of facilties. i19- 603-64- Complaints 60 F.

Generally, retailers and other handlers of frozen products handle store, and sell only one manufacturer s line of such products in their stores and places of business. Most retailers have limited floor space for such facilities in their places of business. The placement by an ice cream manufacturer or facilities on the premises of a retailer or handler and the performance of any of the other acts and practices alleged in paragraph 6 hereof with or without an agreelnent condition or understanding that only the frozen products of said manufacturer shall be stored in or sold from such facilities, or that such dealer will purchase his full requirements of frozen products from such manufacturer, are in effect the same as exclusive requirements dealing arrangements or contracts.

Ice cream cabinet and refrigeration facility illits ",which a retailer must have in his place or business for selling and distri.buting frozen products vary in price according to size. The size of the facility unit that a retailer needs varies with his volrnne of business. The cost of these units to retailers ranges from $500. 00 or less, to $5 000.00 or more. PAR. 3. Respondents are engaged in interstate commerce in that they purchase and produce ingredients which are used in the manufacture or frozen products and cause some of these to be shipped across st.ate lines to the states or manufacture or such frozen products; in that they sell and distribute frozen products across state lines; in that in carrying on the acts, practjces and methods herein alleged respondents buy, sell, lease, loan, and supply facilities, buy, sell, and supply equipment other than facilities, make arrangements for loans of money, furnish services and facilities, and arrange for terms and conditions of sale, across state lines; in that in connection with the carrying on of their said business as aforesaid in frozen products over the area of the states of the United States in which they operate, respondents send and receive orders, information, signs, advertising material, advertising copy, and material and equipment relating to the said business and products thereof; and, in general, promote said business through the media of interstate transactions. PAR. 4. In the course and conduct of their said business said respondents are, and have been for a substantial time in the past in competition with firms, partnerships, corporations, and individuals engaged in the aforesaid business of frozen products and facilities in commerce between and among various of the States of the United States.

PAR. 5. lee cream was first manufactured for wholesale in this country in 1851 and was first offcially reported as manufactured in the United States in 1859. By 1869, ice cream was being produced CARNATION COMPA.'\ ET AL. 1285 :174 Complaints in tills country at the rate of 24 000 gallons a year. Since then, ice cream a.nd other frozen products have steadily increased in importance as foods in the economic life of the United States and many foreign countries. In 1951 , 642 639 000 gallons of frozen products were produced and sold in the United States. Carnation Company et aI., Docket 6172 In the year (1951J respondents produced and sold approximately 1.73% of the total or frozen products in the United Swtes representing a total of 11 150 487 gallons of frozen products. In 1951 the total net sales of all dairy products produced and sold by respondents amounted to $297 729 394. Of these approximately 5. were of their frozen products, amounting to $16 828 175.27. Respondents' sales of frozen products and their sales, loans tses and subleases or facilities were in areas 01 the United States west of the )tlississippi. Respondents ate a lnajor factor in this business in these tra ding areas.

The Borden Company et aI., Docket 6173 In the year (1951J respondents produced and sold approximately 10% of the tot:11 of frozen products produced and sold in the united States.

The net sales of dairy products by respondents in 1931 flmoulltecl to $792 056 671, of which.h 16% were of their frozen products amounting to approximately $117 000 000.

Borden has divided the United States into geographical trading areas. For example, Borden s Pioneer Ice Cream Division includes parts of the States of New York and New Jersey. Ilespondents operate 84 manufacturing plants and 228 distributing branches in 31 States of the United States in the conduct of their business in frozen prodnets and facilities.

Beatrice Foods Company et aI., Docket 6174 In the year (1951J respondents, collectively, but excluding Creameries of .America, Inc., which was acquired at a later date, produced and sold approximately 4 per cent of the total of frozen products in the United States, representing a total of 25 024 337 gallons. In the same year, 1951, the net sales of respondents, excluding Creameries of America, Inc., of all dairy products sold amounted to $228 661 163.24. Of this, approximltteJy 16 per cent, or $36 585 700 were of their frozen , ,, 1286 FEDERAL TRADE COMLvfISSION DECISIONS Complaints 60 F.

products. The sale of frozen products by respondents and the aforesaid sales, loans and leases of facilities by them were made in a substantial number of the States of the United States and in the District of Columbia.

National Dairy Products Corporation et aI., Docket 6175 In the year (1951J respondents produced and sold approximately 14 percent of the total of frozen products in the United States, representing a total of 86 129 249 gallons. In the same year, 1951, thc net sales of respondents of all dairy products sold amounted to $1 038 422 362. Of this, approximately 15 per cent, or $155 456 543 were of their frozen products. In 1952, respondents incrensed their totfl1 to 89 444 810 gallons ont of a total 588 750 000 gallons in the United States representing a sales dollar volume of $163 406 514 and approximately 15.19 per cent of the total of the national figure. In 1952 respondents total net sales of all dairy products sold was $1 141 295 700. The sale of frozen products -by respond:tellts and the. aforesaid sf1Jes loans and leases of facilities by thmll '"fere rnac1e in a subst.antial number of the States of the L united 3tnte.3 :mcl in the District of Columbifl. Pet Milk Company ct a!., Docket 6176 III the YCcll' CID31J respondents procll1 ecl i111cl sold approximately :2 percent of the aforesaid total of frozen products in tile Unitcll State representing a total of approxirnately 13 333 333 gallons. In the same yea, , 1051 , the net sale,s of respondents of all dairy products .'old amounted to S12, SOD 984, and increased in 10;'5:2 to SlG;\:2SG S5i. Of tho 1951 net sales, approximately 12%, or 000 000 ere of their frozen products.

The sa.)e of frozen prod nets by respondents and the ,dol'esaid sales. loans anc1leases of facilities were jn t.he States of Te111PSsec: Kentl1c.ky, North Carolina, South Carolina, Georgia, Virginia, ,Vest. Virginia ,Viscollsin, Illinois, Ctah and Idaho. Respondent Pet, through the Pet Companies, is fin impcrtnnt factor in this bnsl11e :s in the e. truly areas.

Fairmont Foods Company at a!., Docket 6177 In the year 119fj1J respondents produced and sold approximately 1.6 per cent of tlle total of frozen products in the Gllited States, repre.senting a total of 10 650 000 gallons, In the snme year 1051, the net sLLles of respondents of an dairy products sold amounted t.o 8111 531 415. Approximately 15 per cent of these were of their frozen ))roduets, amounting to $17 600 000. In 1032, net sa.les of a.ll dairy product.s increased to $121 000 839.

CARXATIOX COMPA ET AL. 1287 1274 Complaints The, sale of frozen products by respondents and the aforesaid sales loa.ns and leases of facilities ' were in the States of :Massachusett.s Connecticut, Pennsylva,nia, Ohio, J'\'Iichigan, I\:ansas, Texas, Oklahoma -\arkansas, Nebraska, North Dakota, ::1iunesota, Iowa, I\:entucky, ,Vest Virginia, )faryland, New York and vVisconsin. Respondents are an 1rnport.mt factor in t.his business in these trade fLreas. Arden FamlS Company et aI., Docket 6178 In the year l1051j respondents produced and sold approximately 2 per cent of the total of fro"cn products in the United States, representing a total of 12 D59 100 gallons. In the same year, 1D51, the net sa.les of respondents, except tllose of respondent )'Ielvern- Fussell Ice ) ofCream Co. (at that time known as Fussell-Young Ice Cremn Co. all dairy products sold arnounted to $130 328 50\),01. Of this, approxinHltely 14 per cent, or $18 372 884.54 'Hre of its frozen products. The sale of froze,n products by respondents and t.he aforesaid sales, loans and le lses of facilities by them were made principally in the Pacific coastal States, the States adjacent the.reto, ICansas, l\1:ssouri, Texas Virginia, l\Ia.rylancl, and the District of Colnm.bia. Foremost. DIliries, Inc., Etc., Docket 6170 In 1951 net. sales of all dairy products produced and sold by Fore- 842. In themost \Were $5:: 6:27 028. This increased in 1\)5 to $77 91:2 same Yf) n' respondents, Foremost and its then .wholly o,yned subsidiaries, produced find sold a total of 8 268 113 gallons of frozen products representing approximately 1.3 per cent of the national figure. This represented approximately 25 per cent of the total sales of all products sold by those respondents, amoullting to approximately $12 790. ,,,hose sales a.nd produc-The other respondents, Fore,most Companies, ,yeret.ion of frozen products in 1951 are not included in this total, acquired by :Forcmost nt a later elate. The sale of frozen products by re,sponclents and the aforesaid sales, loans ,tnd leases of facilities by them were in t,he, St,ates of Ahhama Florida, Virginia, Louisiana Ias3ilchuseHs, ::orth Carolina, Sonth Carolina, New York, Pennsyl- , :Minne.sotnvania, Tennessee, Texas, :Korth Dakot, , South Dakota I\:entucky, '\ rst. Virginia, ,Visc.onsin and Cf1lifornia. H. P. Hood & Sons, Inc., Docket 6425 For the uscal year ending February :28 , 1D5;) , the total nct sa)es of all dairy products produced and sold by re pondcllt amounted to :;110 808 128.00. Of this approximately 15% was oftheir frozen products UJllOnnt.jng to $17 361 648.00. Respondent's sales of frozen prod- 1288 FEDERAL TRADE CQ:lission DECISIONS Complaints 60 F.

uets together with its sales and loans of facilities were and are made in the six New England States and in that part of X ew York State surrounding the city of Troy. Respondent is a major factor in this business in this trading area.

In 1920, 148 298 000 gallons of frozen products were produced and sold in tho United States. This volume was increased to 618 532 000 in 1950. During the same period the number of establishments manufacturing frozen products gradually decreased from 2 427 in 1920 to 1 521 in 1941. The number of employees engaged in the frozen products industry increased from 15 443 in 1939 when there wero 2 734 manufacturing establishments to 35 974 in 1947 when the number of such establishments had decreased to 1 521. This decrease in the number of manufacturing establishments oecurring as it has during the period of the aforesaid increase in the production of frozen products and increase in the population of the United States from 105 710 760 in 1920 to 145 000 000 in 1947 and 150 000 000 in 1950 has been accompanied by a gradual increase in the degree of the concentration of ownership of the production facilities or such manufacturing establishments in terms of volume produced in t.he hands of a comparatively fe,l, corporations, including respondents. This increase in concentration has resulted ill part from the impact of the methods of competition and acts and practices described hereinafter in paragraph 6. Small business entities in this industry have been and are forced to attempt to meet and to n1eet such competitive method, acts and practices, but, because of lack of capital means to do so, many have had to sell out to the larger corporations, including respondents, while others have been forced into bankruptey. PAR. 6. For more than two years last past and continuing up to the present time, rCSIJonc1ents, in carrying on their business of manufacturing, selling, and attempting to sell, frozen products, have attempted to induce, and have induced, retail dealers and prospective retail dealers and other handlers of frozen products to handle, store and sell respondents' products exclusively, by doing, engaging in and carrying out various acts. methods and practices il1cluding the following:

1. Respondents have made facilities available to retail dealers and prospective retail dealers and other handlers of frozen products by sale, loan and lease, and through arrange111ents with others to supply such dealers and halldle s facilities, on the condition, agree,ment, or understanding, express or implied, that the lessee, purchaser, or borrower thereof shan not handle, store, or sell the frozen products of respondents' competitors.

, \\ CAR!\~ATIOX COMPA!\-Y ET AL. 1289 1274 Complaints 2. Respondents have made facilities available to retail dealers and prospective retail dealers and other handlers of frozen products by sale, loan, and lease on the condition, express or implied, that only the frozen products of repondents shall be stored therein or sold therefronl.

3. Because of their purchasing pmTer and the resources at their command, respondents are able t.o, and have, and do now purchase and lease "facilities': at prices no higher and 1n some cases less than the prices paid by regular licensed facility dealers and small ice cream manufacturers and have and do now sell, lease, loan and install such facilities at prices less, and on terms more favora.ble than retail dealers or prospective retail dealers or other handlers of frozen products have beell able to or can obtfl.in thenl elsewhere. 4. Respondents have sold, leased, loane, Uld rented facilities to frozen products dealers and prospective deale.rs or other handlers of frozen products without receiving or contemplating receiving any direct profit or compensnJion from such transactions. 5. R.respondents have made facilities aTaibble to retail dealers and prospective retail dealers and other handlers of frozen pl'ducts. 6. l respondents ha '-c made loans of money to retail dealers and prospective retailer dealers and other hnllcllel's of frozell produrt on the condition, agreement, or understanding, e.xlJl'ess or implied that such dealers and handlers shall not handle, store or sell the frozen products of respondents' competitors.

7. Respondents have made loans of money to retail de,alel's and prospective retail dealers and other handlers of frozen products for building, repairing, and rernodeli11g. stores and for the purchase of facilities and for the purpose of supplying the needs of such dealers ancl handlers for general operating expenses without receiving or contemplating receiving any direct interest 01' compensation from said loans.

8. Respondents ha\Te made loans of money and han al'l'allged with others by va.rious means and methods t,o make loans of money to retail dealers and prospcctiye retail dealers and other handlers of frozen prod ucts.

9. R.respondents have supplied retail dealers and prospective retail dealers and other handlers of frozen products with other equipment than facilities, and arranged with others to supply such dealers and handlers "'with equipment, for use in the conduct of their business, e.g. soda fOlUltains, and other store fixtures by sale, lease and loan and otherwise, on the condition, agreement, or understanding., express or implied, that the lessee, purchaser, or borrower thereof shall not handle, store, or sell the frozen products of respondents' competitors. Complaints 60 F.

10. Respondents have supplied retail dealers and prospective retail dealers and other handlers of frozen products with other equipment than facilities, and arranged with others to supply such dealers and handlers with equipment, for use in the conduct of the,ir business, e.g. soda fountains, and other store fixtures, by sale, lease, and loan without receiving or contemplating receiving any direct profit or compen sation from such transactions.

11. Said respondents have supplied reteil den lcrs and p,.ospectivc dealers and other handlers of frozen products with other equipment than facilities for use in the conduct of such dealers' and handlers business, e. , soda fountain equipment and store fixtures. 12. Respondents ha\e performed and furnished services of value for and to retail dealers and prospective ret.ail dealers and other handlers of frozell products, e.g., repainting of the interior of a dealer s or prospective rlca.let s or handler s establishment, servicing facilities or soda fountain equipment, and supplying signs and adve.rtisements, on the condition, agreement or understanding, express or implied, that the dealer or handler shan handJc, store or sen the frozen products of respondents only.

13. Respondents have performed and furnished services of value for and to retail dealers and prospective ret.ail dealers and other handlers of frozen products, c. , repainting of the interior of such dealers' stores, servicing facilities or soda fountain equipment without receiving or contemplating receiving any direct profit on or compensation for such services.

14. Said respondents have performed and furnished services of value for and to retail cleale.rs and prospective retail dealers, and other handlers of frozen products, e.g., repainting of the interior of a dealer s or prospective dealer s 01' other hancller s establishment or servicing facilities or soda fountain equipment. 15. Respondents have granted discounts and rebates on sales of frozell products to retail dealers and other handlers on the condition agreement, or understanding, express or implied: that the (leader or handler shaU handle, store or seu the frozen products of respondents exelusiveJy.

16. Respondents have granted volume c1isc01mts and rebates on the prices of frozen products sold to retail cle1tleTs a,ncl other handlers suffcientl)' large enough to constitute an inducement t.o such dealers and handlers to handle, store, or sell respondents' frozen products exclusively.

17. Respondents have made allovl"nces or payments in connection with sales of frozen products in the form of discounts or rebates to reta.il dealers and other handlers who own their own facilities on the CARXATlOX COMPANY ET AL. 1291 1274 Complaints condition, agreement, or understanding, express or implied, that said dealers and handlers shall handle, store, or sell the frozen products of respondents exclusively.

18. Said respondents have made allowances or payments in connection with sales of frozen products in the fOl'H of discounts or rebates to retail dealers and other handlers who own their own facilities while not making or offering to make such allowances or pa,yments on sales of frozen products to competing retail dealers and handlers who do not own their own facilities.

PAR. 7. The aforcsaid acts, practices and methods of respondents have :induced, and do now induce a substnntinl number of frozen product.s dealers andllsers of facility.ies to refrain from buying or leasing facilities from regular licensed fncilit.y deniers Hnd handling the frozen product.s of respondents' competitors nl1c1 to deal in respondent.s' frozen proc1nc.s exe111sinly: and such act.3 , practices and methods of a company6very few of the 1nrger corporations, including respondents, have call sed a. substantial nmnber of manufaetllrers with resources insuffcient to carryon saiel pradices to sell out to or merge with respondents or ot.hers, or to go out. of business entirely. The effect upon competition of the use of the nforesaid acts, practices, and methods by respondents is adverse to the public -interest and the capacity, tendency and effect of said acts, practices and methods are a.nd have beellj unreasonnbJy to hinder, hampe.r and rpstrain competing manufacturers of eompetitivp proc1llcts ill disposing of their pror1uct to frozen products df.alers. Said acts and practices and methods havp and do now nnreasonably hamper, restrain, Jessen and eliminate. C01Tpeti60n in the sale and distribution of :frozen products and have the capaeity to create in the hands of ft few, ineludin Q" respondents, ft tendency t.Q"yard monopoly in the sale and distribution of frozen products. The use by respondents and others of sneh unfflir methods of competition is advantageous to competitors \\ith the 11081. resources their cOITmand and prejudicinl to sllall business concerns with Jimited resources; and they tend to destroy the freedom of retailers to select frozen products pursuant. to c.customer demands or their own free "\viJ1. Said acts, practices, and l1wthoc1s a.re all to the prejudice and injury of the public, and in the circumstances constitute unfair methods of competi601l and unfair acts and practices "\within the intent. and nwaning of the Federal Trade Commission Act. 211,. Lynn O. Panlson, i11,. Ashby H. Owntm' and Ai",. Estelle L. Ag1/P supporting the complaint.

ilh. G01'don T. Jeffe1' and Iih-. Jewnes R. Bai,'d. Jr. of Los Angeles Calif., for Carnation respondents.

&) _ &) g, _ ____ _ &) &) Inital Decision 60 F.

Air. Cecil I. Cmltse and Dewey, Ballantine, Bltshby, Palmer Wood by 111'. John E. F. Wood, Air. Charles E. Stewart, Jr. and lJIr. E. Deane Tw' ncl' of Kew York, K. , for Borden respondents. 111'. Walter L. Dilger and Afr. John P. FOOl and Winston, Stra1vn Smith Patterson by Mr. Thomas A. Reynolds and illr. Ed,vard .1. Wendmw of Chicago, Ill., for Beatrice Foods respondents. 111'. Robel, t S. Gordon and Snyde1' , Chadwell, Fagerbltrg Keck by 11,' John T. Chadwell, Mr. Richard W. AfcLaTen, MI'. John W. Thomas and Air. Jean Engstrom of Chicago Ill. and Whiteford H((rt, Carmody Wilson by Mr. John J. Cannody, of vVashington , for National Dairy respondents.

Mr. Gene 11ayfield of St. Louis Mo. and Cann, Tay/m' , Lamb Long, by Ait. George P. Lamb, Mr. C. BTe1vster Chapman, J". and Illr. Carrington Shields of Washington, D. , for Pet respondents. Mr. Charles H, Flansbw' of Lincoln, Nebr., for Fairly10nt Foods respondents.

Ait. Af1:lton H. Ba,'ker and Gibson, Dltnn Crotcher by Mr. JIt/ian O. 'van Kalinowski and Mr. John J. Hanson of Los Angeles, Calif. for Arden respondents.

White Case by il". Edgar Barton and Mr. Thomas ill. Johnson of New York, N. , and Milam, Leillaistre, Ramsay Martin lir. George W. AJilam of Jacksonville, Fla., for Foremost respondents. Ropes, Gray, Best, Coolidge Rugg, by lir. Charles B. Rugg and il". Frank W. Crocker of Boston, Mass., for H. P. Hood & Sons, Inc. I:NITIAL DECISION BY JOHN LEWIS, I-lEARIKG EXAMI:,.mR INDEX StateInent of Proceedings- 1202 Findings of Fact- 1296 I. The Business of Respondents- ---- 1296 II. Interstate Commerce- ------ 1300 III. The Alleged Unlawful Prndices--_- --- 1301 A. Background and Issues_----_ ------ 1301 B. The Motions to Strike_____ ------------------- 1311 C. The Complaint Practices_ --------- 1316 D. Competitive Injury - --------- 1386 IV. Conclusions_____- -- ---- 1403 A. The Lavv_-------------- 1403 B. Summary ---- - 1412 STATE1\IEXT PROCEEDINGS These are nine separate proceedings instituted by the issuance of separate, but substantially identical, complaints against the abovenamed respondents charging them with having engaged in various unfair methods of competition a.nd unfair acts and practices in com- CARNATION COMPANY ET AL. 1293 1274 Initial Decision merce, in violation of Section 5 of the Federal Trade Commission Act. Complaints were originally issued against the respondents in the first eight or the above-captioned proceedings on February 15, 1954. Said proceedings were initia.lly assigned for hearing to another examiner of the Commission. After the filing of their respective answers by said respondents, a joint pre-hearing conference was held before said examiner on April 22, 1954. Thereafter, five of the proceedings were reassigned to the undersigned hearing exaJnincr, by order of the Commission issued September 2, 1954. A further joint pre-hearing conference was held on September 2, 1954. Two of the remaining three of the original eight proceedings were thereafter reassigned to the lmclersigned by order of the Commission issued October 11, 1954, and the third was reassigned on November 22, 1954. Sepa.rate hearings on the original c.omplnints were held before the undersigned in 1Vashing1:o11, D. , seriatim, on various relates between September 14, 1954 and May 13, 1955. Thereafter, motions were filed by c0U11sel supporting the complaint to amend and supplement the complaint in all eight proceedings. Following a hearing in washington, D. , on August 22 1955 , a,nd subject to certain conditions agreed to by aU counsel, the undersigned filed his orders, dated September 12 1955, in each of said proceedings, granting the motions and directing that the complaints be amended and Supplelnentecl in accordance therewith. Following service of said amended and supplemental complaints, the respondents filed their respe,ctive answers thereto. On October 3, 1055, the Commission issued and thereafter served on respondent Hood a complaint identical with the amended and supplemental complaints theretofore issued against the respondents in the original eight proceedings. Answer to said complaint was duly filed by respondent Hood.

:Further hearings for the purpose of receiving evidence in support of the complaints in these proceedings were held before the undersigned on various relates between October 24, 1955 and December 18 1956 in Portland, Oregon; Seattle 1Vashington; San :Francisco and Los Angeles, California; Washington, D. ; Richmond, Virginia; Easton, Maryland; Charlotte, North Carolina; Atlanta, Georgia; Jacksonville and Miami, Florida; I-Iouston, Texas; Phoenix, Arizona; Ne\v York, KClv York; Pittsburgh and Philadelphia, Pennsylvania; Knoxvillc, T'ennessee; Chicago, Illinois; Des l\1:ojne, Iowa; Omaha" N ebmska; Rapid City, South Dakota; Cincinnati, Ohio; Kansas City, ::lissouri; Portland, Maine; and Hartford, Connecticut. The evidence offered at the above hearings eonsisted mainly of testimony as to competitive conditions in the above areas. In order to avoid the necessity for having to recall witnesses where their testinlony related to more In:tial Dedsion 60 F.

than one respondent, joint hearings were held with respect to an respondents doing business in any hearing area, and the testimony of all witnesses called was transcribed in the record of each respondent doing business in such area, subject to the right of any respondent to move to strike such portions of the testimony of any witness as did not pertain to it.

At the close of the case-in-chief cou!)sel for respondents were granted approximately one month to determine whether to file motions to dismiss or strike, or to proceed with t.their defense. Counsel for an respondents, except Pet, thereafter notified the examiner that they would reserve all motions until the close of the case and would proceed with the presentation of defense evidence. A motion to dismiss was fied by respondent Pet which was denied by order of the undersigned dated :March 5, 1957.

Sepa.rte defense hearings were thereafter held in each of these proceedings on various dates between Apri129 , 1957 R,nd Xove.mbe,r 22 1957, except for consolidated hmtrings on September 16- , 1957 at which certain ccollOlnic and statistical evidence was offered on be.half of all respondents, except Fairmont, Hood and Pet. Portions of the testimony and evidence received at tile consolidated hearings were later stipulated into the Pet record. At the close of all the evidence respondents other than Hood, Fairmont and Pet mm-ed to consolidate various portions of the testimony and other evidence taken in their proceedings subsequent to the amendment of the complaints. Said motions were made and granted on the condition that the consolidation of such testimony would not. prejudice the separate identity of each proceeding and the rig-ht of each respondent to make a separate appeal from any adverse ruling in these proceedings. Counsel we.re granted leave to file pro nosed findings. conclusions. and briefs in support of their respective positions, and appToprinte motions to dismiss or strike. Thereafter six of the respondents fied joint findings and briefs, together with an appendix thereto, and separate motions to dismiss or strike. Respondents in the. lIood. Fairmont Pet proceedings fied sepf1 rate proposed finc1ings briefs and motions to dismiss 01' strike. Counsel sllppordng the chill1la.int fied a single set of propose.a findings and brief, to2'either with an appendix thereto. in a.n nine eases. In lien of oral argmnent counsel "- ere grrmtcc11leave'. to 1 This procedure was agreed to by all counsel except counsel for Pet and conn"el SUI)porting the complaint. Cot1Df'f'1 for Pfl requested that separate hearinp he held with respect to their client. Counsel supporting the complaint sought a complete consoJh1atlon of an records, with the testimony of a11 witnesses to be received in the record of each respondent. irrespective of whether said respondent did business in the particular portion 01 the country from which a witness was being caned or not. Both objection;; were overruled.

:,:

CAR TATION COr-:IPA:--Y ET AL. 1295 1274 Initial Decision file replies to the proposed findings and briefs of opposing counsel. Respondents Hood, Fairmont ancl Pet filed separate replies to the proposed findings and brief of counsel supporting the complaint. The rmnaiIling respondents filed a joint. reply to the proposals and brief of counsel support.ing the complaint and s8yeral of such respondents also filed sepa,rate supplemental rep1ie J' Counsel supporting the complaint eject.ed not to file any reply to t.he proposals or hrie.fs of respondents but. filed document ent.tled "Supplemental Brief" which is, in substance, n. response to the ancillary motions of certain respondent.s to disc. on grounds of lack of commerce ltnd to strike cert. 1in evidence. A t the hearings held herein all parties were representeel by counsel n1- iclpated in the. l1carings, find ,were afforded full opportunity t.o be heard, to offer edc1ence and to examine and cross-examine witnesses. he re.eon1s in l.h(,88 procee.dings ('onsi ;j; of appro:.,;mnteJy 14 000 pages of testimony; (not counting testimony which is duplicated in more han one, record) illc1 ::) 800 exhibits some of '\"\hieh exhibits consist of seve,ral Imndrec1 l)ag:es. The propo3ed findings, briefs and motions filed at. t.he. close of the evidence aggregate approximnJely aile t honsand page's.

Tlw l1Hlprs1gnec1 has concJnded j.hat in yie,,- of the snustantial ideuhty of llany of the basic is,sues of f;lct nncllaw\n t.these proceedings and t.he ff1ct that the records in six of them have been Jargely ('011soil(btect nncl in the interest of a rrl.ore expeditions disposition of these. protracted proceedings, that it i\"Ollld be appropriate.e to issue a sin!!le cleeisioll in nlJnine cases. The examiner has eoneJlHled that this mny be. done, 'iit.hout. prejudicing respondents ' right of dne process 1))' is_,;using a basic (leci.sion setting forth the facts nncllegRl principles ('OJJ1mon to ,111 ('ase. and pointing 1\p, ,,'herei er necessa.ry, significant f(lct, ll cllft'erences tn the individual rases, and by supplementing such (lecision ith fin appendix conta.ining more detai1ec1 facts concerning t.hn .;;p,p.'rate, market areas where each group of re-spo11dents does busi- Jle, . ns l'e.:fectec1 by the evidence.

lIaying- (':\n Jl1lJ: reYlewed the entire records in these proceedings and 1.he proposnJs nncl briefs of the parties/ nnd baserl on the entire record nncl his observation of the witne$ses, the hearing examiner makes the. following:

Coumel for aid respondents, In the replies filed by thero, have objected to the procedure of counsel supporting the complaint in joining- their chents in a single set of proposll1s and in treating the separate proceedings as If they were a single case. Said respondents request that the hearing examiner issue a separate decision in each of their proceedings.

3 Proposed finding's not herein adopted, either in the form proposed or in substance, .are rejected as not supported by the evidence or as involving immaterial matters. 1296 FEDERAL TRADE C01lLMISSION DECISIONS Initial Decision 60 F.

JnXDINGS OF FACT T. The Business of Respondents 1. Respondent National Dairy Products Corporation, sometimes referred to herf'inafter as "National " was incorporated under the laws of the Slate of Delaware on December 8, ID23. Its principal offce and place of business is at 260 .Hadison A venue, K ew York, N ew York. is engaged, either directly or through various subsidiaries or divisions in the manufacture, sale and distribution of a variety of dairy and related products, including ice cream and other frozen desserts. At the time of lhe issuance of the amended com plaint it had 26 subsidiaries engaged in the Inanufacture, sale or distribution of ice cream and other frozen desserts. Said subsidiaries have been named as respondents along with respondent Kational. Until May ID56 all of said subsidiaries were wholly owned by respondent Xational, except for respondent Southern Dairies, Inc., in which respondent National owned more than D8 percent of the stock. Beginning May 31, ID56 respondent :National began a program of merging its subsidiaries into the parent company. \Vhen completed, all of the subsidiaries ,will ber" Jme r1i\.isions of respondent National.

As of 1952, respondent Kational and its subsidiaries had llanufacturing plants and/or distribution branches in 28 states of the United States and the District of Cohunbia. The arefL of operation of the Na.tionuJ companies includes most of the eastern anclmic1wc.stcrn portion of the United States. They do not operate on the \ye t coast: in the Rocky ::JOlwtain States, or in Texas. Jost of the divisions of 1'esponclentSat1oral use the "Sealtcst" label on the lce cream products distributed by them, except. for the Breyer Division \ which ns( s th Dreyer " label.

2. Respondent The Borden Company, hereinafter sometimes 1'efen' eel to as "Borden " was incorporated under the laws of the State of KBW Jersey on April 24., 180D under the name Borden s Condensed Milk Company. Thc present corporate title was adopled in Gelobe" 1019. Its principal place of business is 350 Madison Avenue, New York, Nmv York. It is engaged in the manufacture, sale and distribution of a variety of dairy and related products, including ice cream and other frozen desserts. Respondent Fussell Ice Cream Conlpany was a wholly-owned subsidiary of respondent Borden but was dissolved on September 24 , 1953, after having disposed of ils assets to respondent Borden. Respondent Ricciardi is a wholly-owned subsidiary of respondent Bordcn and operates a frozen diary products business in the New York metropolitan area. Borden has manufac- CAR ATION COMPA_"ry ET AL. 1297 1274 Initial Decision turing plants and/or distribution branches in 41 states of the United States. It operates generally throughout the eastern and micl\vcstern portions of the country and in the western states of California, Ari zona and New :\lexieo. Its standard ice cream products arc distributed generally under the "Borden" label, except that in the New York metropolitan area it also uses the "R.icciardi 1-Iorton" and "Reid labels, and in the Baltimore area it also uses the "RencHer" label. 3. Respondent Foremost Dairies, Inc. , hereinafter sometimes referred to as "Foremost " is a corporation organized, existing and doing business under the laws of tile State of New York, with its principal offce located as 2093 College Street, Jacksonvile, Florida. It is the result of a merger, effective February 8 , 1949, between Foremost Dairies, Inc., a Delaware corporation organized in 1D31 , and :Maxson Food System, Inc., anew York corporation. It is engaged, either directly or through various subsidiaries, in the manufacture, sale and distribution of a. n l'ietJ of dairy and related products, including ice cream and other frozen dairy products. Its sales of ice cremn and other 1rozen desserts are made in 22 states of the United States. Prior to ID51 its operations were confulcd mainly to eight southern states. Thereafter, and largely by the acquisition of other companies, it ex tended its operations to the central states of J\1innesota, \Visconsin North and South Dakota, Kansas, Missouri and Arkansas, to the eastern states of New York, Pennsylvania, ::lassachusetts and Connecticut, and to the \'estern states of K e,v l\lexico and California. Its ice cream products are sold mainly under the "Foremost" label. 4. Beatrice Foods Company (Delaware), sometimes hereinafter referrcd to as "Deatrice is a corporation organized, existing and doing business under the laws of the State of Delaware, with its principal offce and place of business at 120 South Lasalle Street, Chicago Illinois. It originated in 1890 in Beatrice ebraska, as a partnership and was incorporated in 1897. The company became a Delaware corporation in 1924. It is engaged, directly or through various subl:'ic1jaries, in the manufacture, sale and djstribution of a variety of dairy and related products, including ice cream and other frozen dairy products. Beatrice and its subsidiaries are engaged in the manubcture, sale and distribution of icc cream and other frozen products in 36 states of the United States and the Territory of Hawaii, and operate manufacturing plants and distribution branches in 20 stat.es and Hav-mii. Originating in the 1icl,Yest, the company and its sub sidiaries have extended their operations to the east and west coasts aided substantially by the a.acquisition of a number of ot.her companies. , , , \ 1298 FEDERAL TRADE COMlV1ISSION DECISIOKS Initial Decision 60 F.

Their ice cream products are sold mainly under the ":Meadow Gold" label.

5. Respondent Arden Farms Co., sometimes hereinafter referred to as "Arden," is a corporation organized, existing and doing business under the laws of the State of Delaware, with its principal offce and place of business located at 1900 'West Slauson Avenue, Los Angeles California. Its predecessor company was founded in 1919 in Seattle \Vashington, under the name Velvet Ice Cream Company by Samuel H. Berch. Arden s business was originally incorporated under the laws of the State of Delaware on December 11 , 19:13 , as ",Vestern Dairies, Inc. The present na.me Tlas adopt.ed through a merger of \Vestern and three companies using t.he name Arden. It is engaged directly or through several1 subsidiaries, ill the 111unufacture, sale and distribution or a v!l.riety of clairv and related products, including ice erearn and other frozen dairy products. Its frozen products subsidiaries are: il1elvern-Fllssell Ice Cream Co., a California corporation whose principal offce and place of business is 400 Calvert Avenue Alexandria., Virginia, and Camcllia Diced Ice Croam COllpany California corporation, whose principal offce a.nd place of business is 2006 ,Vestheimer Street, Houston, Texas. A former subsidiary, I(ansas City Dieed Creanl COll1pany, cea.sed operating January 1, 1955 and was merged with respondent Arden. \nothcr Arden subsidiary is respondent Equipment Enterprises, Inc., which is a California. corporation having it.s principal oflice at 1290 1Vilshire Boulevard, Los Angeles. It is engaged in a general financing business, including the leasing and sale of equipment, and is not in the frozen products business.

R.respondent Arden for nlany years operated mainly on the west coast. I-Imvever .1n recent years it has expanded through its subsidiaries into :Missouri, Texas, Jlarylnnrl and Virginia. Its expansion into Texas occurred in 1950 when it acquired a controlling interest in the company '\vhic.h becmne Camellia Diced. It putered the eastern area around 1951 by acquisition of the company \which became 1\1e1vern-Fussell. Arden and its subsidiaries presently have nlanufacturing plants anel/or distribution branches -in California., Oregon ashington, Arizona, Texas, 1fissouri and Virgiaia. In addition to the above States, the Arden companies sell in Idaho, Montana, Kansas Maryland West Virginil1 and the District of Columbia. 6. Respondent Carnation Company, sometimes hereina.after referred to as "Carnation " is a Delaware corporation with its principal place of business at 5045 1Yilshire Boulevard, Los Angeles, California. It \vas founded on September 6 lS9D at Kent, 'Yashington, was l11cor- CARNATION COMPANY ET AL. 1299 1274 Initial Decision porated in l\Iaine as Carnation JIilk Products Company, and ,,,as subsequently chartered under the Ja,,"s of the State of Dehmare on l\Iay 21, 1920. It is engaged, directly or through various subsidiaries in the manufacture, sale and distribution of a. variety ofclairy and related products, including ice cream and other frozen products. It has three frozen dairy products subsidiaries operating, respectively, in the States of \Vashington, Texas and Oklahoma: each of whicll bears the Carnation name followed by the name of the state of incorporation. Another frozen products subsidiary is Damascus :Milk Company, incorporated in Oregon and operating ill that State and \Vashington. Respondent Carnaco Equipnlcnt Company is not ill the frozen products business, but leases equiplnent to the other Carnation companies. The controlling stock interest in that company is held by respondent Carnation. In a.addition to t.he States of California, Oregon, ,Yashington, Arizona, Texas and Oklah01Tll, in ,,-which the Carnat.ion conlpanies operate manufacturing plants and distribution branches, they have distribution branches and sell in Nevada and Idaho. 7. Pet J\iilk Company, hereinafter sometimes referred t.o as "Pet :.Iilk", is 11 Delaware corporation having its prineipa,l oflce at 1401 rcade Building, St. Louis, :.lissouri. It is engaged in the Inanufacture, sale and distribution of dairy and related products: but docs not directly manufacture and seIl ice cream or other.r frozen dairy products. Respondent Pet Dairy Products Company, sometimes hereilla.ft.er referred to as "Pet Dairi' , is a Dela\fare corporation having its principal offce and place of business at 303 ,Yest ,Yalnut Street Johnson City, Tennessee. It is a ,wholly~owlled subsidiary of Pet :.Iilk ancl is engaged in the nlanufactul'c, sale and dist.ribution of ice creaIn and other frozen dairy products in seven southern states. It formerly also operated in ,Yisconsin and Illinois but sold out. its interests in t.hat area in Kovmnber ID5-b, Respondent Colville Ice Creanl Company, sometimes hereinafter referred to as '; Colville, is (1, utah corporation having its principal of lice and place of business at 1.59 ,Vest First Street, Salt Lake City, Utah. It is also a ,,"hollymyned subsidiary of Pet J\iilk and operates in tah, Nevaela and ,Vyarning. In view of the disposition to be made of this proceeding the examiner finds it unnecessary to resolye the issue raised by respondent Pet :Milk as to W"hetller its control oyer its t"yo subsidiaries is such as to subject it to liability for their ac.ivities. 8. Hesponclent Fairmont Foods Company, hereinafter sometimes referred to as "Fairmont, is a Dela,vare corporation having its principal offce at 3201 Farnam Street, Omaha, X ebraska. It ,,' originally incorporated in X ebraska in 1884: under the name the Fair- 119-603--64-- Initial Decision 60 F.

mont Creamery Co. and became a Delaware corporation on !vfarch 5 1929. It is engaged, either directly or through its subsidiaries, in the manufacture and sale of a variety of dairy and related products, including ice cream and other frozen dairy products. It also prepares and distributes frozen foods other than frozen dairy products. Respondents Fairmont Foods Company, Inc., and Fairmont Foods Company of 'Visconsin are New Yark and "'Visconsin corporations, respectively, with their respective principal offces at 197 Scott Street Buffalo, New York, and 165 North Broadway, Green Bay, 'Visconsin. Both are wholly-owned subsidiaries of respondent Fairmont. The Fairmont companies sell and distribute ice cream and other.r frozeu dairy products in 19 states, all but seven of ,,-which are located in the central part of the United States. It has extended its operations ill recent years into portions of Virginia, ,Vest Virginia Kentucky, l\larylalld, Pennsylvania ew York, Connecticut ancll\Iassachl1set:ts. 9. Respondent H. P. Hood & Sons, Inc., sometimes hereinafter referred to as "Hood" , is a 1Ia,ssachusetts corporation having its principal place of business at. 500 Rutherford Avenue, Boston, :Massachllsetts. The company and its predecessor have engaged in the manufacture and saJe of dairy products, including iee cream and other frozen dairy products, since 1918. It has eight manufacturing plants located in five New England States and New York State. It distributes ice cream and frozen dairy products in all six e'v England States and a portion of eastern New York State. Its operations ' ere confined to the ew England States until it acquired two companies in eastern New York in 1953 and 1054. II. Interstate.e Commerce 1. Each of the respondents operates a number of manufacturing plants located in various states of the United States. To a considerable ext mt the frozen products business is local in nature, and sales and shipments or frozen dairy products arc made within a more limited radins of the producing plant than sales and shipments of less perishable products. For this reason sales and shipments from a number of plants of respondents are made entirely or almost entirely within the state of production. However, other plants of the same respondents do make sales and shipments across state lines. some instance such sales or shipments are quite substa.tial, while in others they represent a relatively small percentage of total production of the plant.

2. Each of the respondents purchases or receives a significant portion of the ingredients or other materials used in the manufacture CARNATION COMPANY ET AL. 1301 1274 Initial Decision of its frozen products from states other than the state of production. Signs, advertising materials, refrigeration equipment and other equipment relating to the sale, storage or distribution of frozen dairy products are also received by the various respondents from without the state of production and, in some instances, are transported to the establishments of retail customers located outside the state where such materials and equipment have been received. In some instances tho supplying of equipment or furnishing of assistance to retail customers, of the general type referred to in the complaints, is subject to the approval of a head offce or headquarters of a particular respondent located in a state other than that in which thc supplying plant or division is located.

3. Some of the respondents have questioned the jurisdiction of the Commission with respect to their subsidiaries, divisions or plants which sell entirely within a given state. For example, the Oklahoma subsidiary of respondent Carnation makes no sales outside the State of Oklahoma, and various other plants of the company make no sales or shipments across state lines. Similarly, respondent Arden s subsidiary in Texas, Camellia Diceel, makes no sales or shipments in commerce, nor does its plant in Arizona. In view of the disposit.ion hereinafter made of the complaints in these proceedings, the Bxaminer finds it unnecessary to make detailed conunerce findings with respect to ea,eh respondent and the various subsidiaries, divisions or operations of each respondent. Aside frolll other interstate aspects of their frozen products business, since each group of respondents regularly makes some sales or shipments of frozen products across state lines, in excess of de minimis quantities, with respect to some portion of their operations, there is a suffcient showing of commerce to warrant denial of motions to dismiss based on lack of jurisdiction, and to justify consideration of the substantive issues raised by the complaints.

III. The Alleged li nla wful Pmctices A. BackgTOwn and Issues 1. The complaints in these proceedings challenge various practices which are alleged to be used by respondents for the purpose of inducing retail dealers to handle or to continue handling the ice cream and other frozen products manufactured and sold by respondents. Before turnng to a consideration of the charges it is desirable to note briefly certain basic facts concerning the ice cream industry and its methods of distribution.

1302 FEDERAL TRADE COMMISSION DECISIOKS Initial Decision 60 F.'r.

2. Generally speaking, ice cream manufacturers distribute their products to the public through retail outlets which are not owned or affliated with the ice cream manufacturer. IIowever, a small, but increasing, percentage of ice cream is sold through retail outlets which have their own ice cream manufacturing facilities or are affliated with an ice cream manufacturer. An example of this is the Safeway grocery chain which at one time purchased its ice cream fronl nonaffliated ice cream manufacturers, but more recently has set up its own manufacturing facilities in various sections of the country. 1'8-manufacturer ".;10 distributes ice cream through retail outlets is ferI' ed to as a wholesaler of ice cream. "Where the manufacturer is owned by or affliated with the retail outlets distributing his ice cream he is referred to as a "captive" or "affliated" wholesaler. The latter terms refer to distribution through multiple outlets" "Where there is a single retail outlet involved which manufactures entirely for retail sale on the premises, it is regarded in the industry as a retail, rather than a wholesl11e operation.

3. )'Iost of the wholesaling of ice cream involves the direct sale or distribution by the manufacturer to the retail outlets. However, some manufacturers sell a portion of their products to middlemen, usual11y referred to as a "'distributor ': "ho in turn sell to Tetail stores. So far as appears from the record, the distribution of ice cream through distributors involves a relatively small percentage of the ice cream distributed in the United States, the usual channel of distribution being directly from the manufacturer to the retail outlet. Another exception to the direct manufacturer- dealer relationship is the sale by one manufacturer to another manufacturer. This usually involves specialty items which the purchasing manufacturer does not himself produce. It includes such items as popsicles, crea,msicles and similar items, which are referred to in the industry as "novelties. ' Still another exception to the usual manufacturer-retailer channel of distribution is the relating ly minor amount of distribution directly from the nutllufacturer to the consumer. This usuany involves small dairy companies in rural areas which deliver ice cream to the home along with mille 4. '\Within the category of ice cream manufacturers are some who manufacture and distribute only ice cream and related frozen products, while others produce or distribute a broad line of dairy products including milk, cream, butter and eggs. The record docs not contain any numerical breakdown between ice cream manufacturers who are exclusively in the ice cream manufacturing business and those which produce and distribute a broad line of dairy products. It does CARNATION COMPANY ET AL. 1303 1274 initial Decision appear, however, that in recent years a number of companies which were formerly only in the milk business have expanded into the ice cream business in order to have an outlet for their surplus milk pro duction and in order to take advantage of the preference existing on tho part of some retaij dealers for purchasing their entire line of dairy products from the same supplier.

5. The basic product manufactured by an ice cream manufacturer , of CDurse, ice cream, which is made out of a combination of cream milk, flavor extracts, fruits, nuts, stabilizers and other ingredients which are frozen in a freezer and maintained in hardening rooms prior to retail distribution. However, in recent years many of such manufacturers have supplemented their manufacture of ice cream with various other frozen desserts. Among these are ice milk which, as the name implies, contains milk but no cream and has a much lower butterfat content than regular ice cream. It is a product which appeals to caloric-conscious people. Another such product is kno"n as l\iel1orine, which has made rapid strides in the Southwest, particularly in Texas. It is made from fats and vegetablc oils other than milk fats, and bears the same relationship to ice cream as oleomargarine does to butter. Other products produecd by ice cream manufacturers include sherbets (with or without milk) and water ices. ;\Iost of the above products are considered hard-frozen products. However, there are also a number of plants and establishments which produce soft-frozen dairy products. These are frozen products which are sold directly from the freezer, without going through a hardening process, or are kept in a ha.rdening cabinet for less than t"elve hours. In recent ye lrs there have arisen a number of retail establishments along the highways and byways of the United States which have their own counter-freezers and which selJ soft+frozen dairy products from purchased ingredients. :\lany of such establishments are affliated with a chain or operate under a franchise arrangement, such as the Dairy Queen, Tastee-Freeze and Caryel stores. Such soft ice cream establishments, while still a relatively small factor in the industry as a whole, have been making rapid strides since the end of "\Vorld vear II and, in some areas, have managed to become a troublesome factor to traditional ice cream manufacturers by virtue of the.ir competition for the consumer s dollar.

6. Traditional ice cream and related hard-frozen dairy products are sold to the public in various forms and through various types of retail establishments. The two major forms ate bulk and package ice cream. Bulk ice cream is sold to the dealer in large bulk containers, from which it is l'e o)d to the public in smaller quantities, either for COll- Initial Decision 60 F.

sumption on the premises or in small packages for use at home. Ice cream is also sold by the manufacturer to the retailer in package form suitable for resale in the same form to the consumer. This is known in the industry as package ice cream. The usual quantities in which such packagcs are prepared are pints, quarts, half gallons and gallons. 7. The types of retail establishments through which ice cream is sold to the public include restaurants and other Gating establishments, where it is usually purchased for consumption on the premises; drug and confectionery st.ores, where it may be purchased either for consumption on the premises or away from the premises; and grocery and similar food cstablishments, where it is purchased primarily for consumption away from the premises. Restaurants and similar eating establishments usual11y purchase only bulk ico cream; confectionary establishments and drug stores usual11y carry both bulk and package ice cream; and grocery and food establishments usual11y only carry package ice cream.

8. Prior to W orld War II the great preponderance of ice cream sold in the United States reached the public through confectionery, drug and other cstablishments which handled icc cream in bulk form. Food stores handling package ice cream constituted a relatively small outlet for ice cream. It is estimated that during this period approximately two-thirds of the ice cream sold in the country was distributed in bulk form. However, during the postwar period there was a marked shift in the channels of distribution and, at the present time, approximately two-thirds of the ice cream consumed is sold through food stores which handle it in package form. There has also been a substantial increase in sales of ice cream novelties and of ice cream substitutes, such as Me110rine and soft ice cream. 9. In the par1ance of thc ice cream industry a retail establishment through which ice cream is sold to the public is known as a "stop One which handles bulk ice cream is known as a bulk or "wet" stop, while one handling package ice cream is known as a package or "dry" stop. Most establishments have traditionally handled the ice cream of only a single manufacturer, due mainly to limitations of floor space. However, there is a growing trend in some sections of the country for retail establishments to carry more than one brand of ice cream. This is particularly true in the larger food stores and supermarkets. An establishment which handles more than one manufacturer s brand is known as a " split" stop. Ice cream dealers are also diiIerentiated in industry parlance on the basis of whether the account was formerly served by another manufacturer, at the same location, or was initially acquired by CARNATION COMPA:-'Y ET AL. 1305 1274 Initial Decision the manufacturer serving it when the account entered business. An account which is acquired from another manufacturer is known as a "switch" account. One which is acquired by a particular manufacturer at the time the account entered business is referred to as a "pioneer" account.

10. The complaints in these proceedings attack as illegal certain forms of assistance given by respondents to their retail dealer accounts. It is charged that these forms of assistance are used as an inducement for the dealers to handle or continue handling the frozen dairy products of the respondent offering them. The forms of dealer assistance which the complaints challenge fall into four broad categories; (a) furnishing of refrigeration facilities and other types of equipment to dealers, (b) making loans to dealers, (c) performing various services of value for dealers, and (d) granting discounts to dealers.

11. The original and the amended complaints are basically the same insofar as the practices challenged arc concerned. However, there arc two noteworthy differences, one of which involves a broadening of the charges and the other a narrowing thereof. The original complaints challenged the practices in question only when they were used in connectjon with "switch" accounts, i. , \vhen a particular respondent used them to induce a dealer handling a competing ice cream manufacturer s products to switch to that respondent. The use of the practices in connection with new or "pioneer" accounts was thus not challenged, nor was their use challenged in connection with accounts which were already being served by the respondent in question. The amended and supplemental complaints have broadened the charges so that the practices in question are now attacked not merely when used in connection with inducing accounts to "switch" but also when they are used in obtaining "pioneer" accounts and in seeking to retain accounts which the respondent in question is already servlug.

12. .While broadening the charges in the respect that the challenge to the practices is no longer limited to "switch" accounts, the amended and supplemental complaints have made a significant retreat in their attack on the practices in question, in that the practices are now challenged only when they are used to induce the handling of a respondent' s products "exclusively." The original complaints contained no such limitation. Their attack on the practices was, in most instances, in the form of a trilogy, only one allegation of which involved the element of exclusivity. For example, the furnishing of refrigeration equipment was alleged to be illegal (a) when done with : : Initial Decision 60 F.

an agreement or understanding, express or implied, that the dealer would haudle respondent' s products exclusively, (b) when the equipment was made available at Jess than cost, and (c) when the equipment was simply made available to the dealer. Under the first subparagraph, the furnishing of equipment was challenged only when it involved an exclusive dealing arrangement, while under the second subparagraph it was chai1enged only when supplied at less than cost. The third subparagraph attacked the practice as such, irrespective of whether it occurred in an exclusive dealing context or aile which involved the element of below cost. The rationale of the original complaints appears to have been to advance alternative challenges to the practices in question, the strongest (albeit thc last stated) being an attack on the practice as such, and the second two being alternative positions to which counsel could retreat in the event the strongest attack proved to be untenable.

While the amended and supplemeutal complaints still contain the essential triad form of nttnc-king the practices in question, the basic allegation in Paragraph Six of the complaint which introduces the subparagraphs describing the specific practices has been amended so as to make exclusivity an essential element of the offense, by alleging that all of the practices in question were use,el to induce clcalp,rs " products exclll-ively. The wordhandle, store and sell respondents' exclusi.very, which was added to Paragraph Six of the amended complaints, also appears in Paragraph Seven of the complaints in which it is alleged that by use of the practices in question respondents have induced retail dealers "to deal in respondents' frozen products exclusively. It cannot be assumed that thc intTodudion of the word exclusiveli' in the amended and supplemental complaints "-as intended as a nullity. 'YhUe, as in the original cornplaints, certain of the subparagraphs contain no reference to an understanding as to ex- ' in the basic allegation ofe1usivity, the reference to "exclllsively Paragraph Six is a clear indication of an intention to challenge the practices only when they are used in a context of exclusiyc dealing, whether.r or not there is any specific agreement 'ith respect to this subject.

The introduction of the limit.ing factor of exc1usivit.y, not found in the original complaints, would appear to have been motivated by a decision to recede from the broad and possibly untenable attack on the practices as such, but "which as rcstricted to switch accounts in order to attack the practices without reganl to the type of account involved. During the course of the hearings and in his brief and proposed findings, counsel in support of the complaint hns chosen to ignore the CARNATION CO"fPANY ET AL. 1307 1274 Initial Decision allegation of exclusivity and to treat the complaints as an attack on the practices as such, without regard to whether they arc used TIith the purpose or effect of inducing exclusive dealing. In fact, the proposed order submitted by counsel seeks to have the practices outlawed without regard to whether they are used in a context of exclusive dealing or not. This approach, however, is not justified under the language of the complaint and, as wi1 be hereafter discussed, is of dubious legal merit.

13. As indicated above, the practices which the complaints attack revolve about four main items: (a) equipment, (b) loans, (c) senices and (d) discounts. Respondents are alleged to have used these to induce reta.ilers to handle their products exdllsively as follows: (a) Equipment. The subparagraphs dealing with equipment refer to two separate classes of equipment. The first involves ice cream cabinets and similar refrigeration equipment used for storing ice cream and related frozen products, which the complaints designate as "facilities." The second class of equipment is a broad catagory covering all types of equipment other thnn facilities, and includes such items as soda fountains and store fixtures. There are five subparagraphs dea.ling with facilities and three dealing with other equipment. In general, it is alleged that respondents have made facilities available to dealers (apparently without charge) or have sold or leased facilities or other equipment to dealers, either with an understanding as to exclusive dealing or at Jess than cost or TIithout profit. In the case of fac.litjes there is an alternative allegation that they have been supplied with an understanding as to e,xc.Jusive storage, i. , that only the respondents' products ,,-ill be stored therein. In both instances there is an alternative allegation, similar to the third alternative in the original complaints, which simply alleges that respondents have supplied facilities or other equipment.

(b) LOrbn8. There are tripartite allegations ,,'ith respect to the nmking of money loans to dealers as follmys: (1) That such loans ate made with an understanding as to cxclusi-ve dealing, (:2) that they arc made ,rithout interest, and (3) that they simply nte linde. (c) 8eTvlces. The same formula is repeated -with respect to services 'viz. (1) t,hnt they nre performed with an uude.rstnnd-ing as to exclusive dealing, (2) that they are perforl1cd without cost, and (3) that they simply are performed. The senices alleged to be rendered 4 Reference to counsel supporting the complaint is generally herein made in the singular since 'much of the presentation of evidence and argument appears to reflect the views of the senior attorney in support of the complaint, wbo Wlll substituted for earlier counsel fonowing the amendment of the cOUlplaints. 1308 FEDERAL TRADE COMMISSION DECISIOKS Initial Decision 60 F.

by respondents include such services as repainting the interior of dealer s store, servicing facilities or soda fOWltain equipment and supplying signs and advertisements.

(d) Discounts and Rebates. The subparagraph de"ling ,,-ith discounts and rebates fails into two main categories: (1) Volume discounts and (2) discounts based on dealers owning their own facilities. Under the first category it is a11cged, in the alternative, that discounts and rebates are granted with the understanding that the dealer will handle respondents' products exclusively, or that the discounts are so large as to constitute an inducement, in fact, for a dealer to handle respondents' products exclusively. 'Under the second category it is alleged, in the alternative, that respondents grant discounts and rebates to dealers who own their own refrigeration facilities with the understanding that they will handle respondents' products exclusively, and that respondents grant discounts and rebates to such dealers without making them available to dealers who do not own their own facilities.

14. Under Paragraph Seven of the complaint it is alleged that the practices in question have affected three different economic groups. The prin1ary group involved are competing manufacturers of frozen products who, it is alleged, have been unduly hindered in disposing of their products because respondents have used the practices in quest.ion to induce retailers to deal in respondents' products exclusively. It is alleged, in this connection, that a substantial number of competing icc cremn manufacturers have not had resources suffcient to use the pract.ices in question and have been forced to sell out or to mergc ,,,ith rcspondents or others or to go out of business enbrely. The second group involved are "regular licensed facility dealers" who, it is alleged have been affected because respondents have induced users of such facilities to refrain from buying or leasing facilities from the regular licensed facility dealers. The third group allegedly aiIected are the retail ice cream defLlers who, it is alleged, have been precluded from selecting frozen products "pursuant to customer demands or their own free will.

15. The basic factual issues arising under the complaints are: (a) To what extent do respondents assist dealers by supplying equipment or services, or by granting financial assistance or discounts in the manner indicated in the compbints; (b) arc such forms of dealer assistance offered as, or do they act as, an inducement to dealers in their choice of an ice crCll.m supplier or in their continuing to handle the products of fL particular supplier; (c) are such forms of assistance oiIered with the understanding th"t the recipient dealer will handle CARNATIO COMPA.l'Y ET AL. 1309 1274 Initial Decision exclusively the products of the manufacturer furnishing them, or do they in fact result in, or tend to result in, the exclusive handling of the products of the manufacturer supplying them; and (d) has the furnishing or assistance to dealers in the manner charged resulted in or is there a reasonable probability that it will result in, injury to com-petition.

16. In the brief and proposed findings filed by counsel supporting the complaint it is asscrted that respondents concede the use of the practices in question, that they have "introduced no evidence to counter the Commission s proof of injury" to competition and that they have raised no issue of fact but merely one of law as to whether the practices constitute unfair methods or competition within the meaning of the Federal Trade Commission Act. This does not fairly or accurately reflect the position of respondents or the real issues in these proceedings. Respondents do concede that they have assisted dealers and performed various services for them, some or which assistance or services fall within certain of the broad categories referred to in the complaints. However, respondents deny that such assistancc or services are utilized to the extent or with the purpose and effect claimed by counsel supporting the complaint. Respondents contend that the furnishing or such services and assistance constitutes a normal incident of doing business and is engaged in generally by ice cream manufacturers. They also contend that such assistance or services arc not offered as an induccment to dealers to handle or continue handling their products, and that because they are gencra11y available to dealers from most ice cream suppliers, they do not materially affect the dealers choice of a supplier. IVhile it is conceded that some of the respondents have used agreements in connection with some of the practices, which contain exclusive dealing provisions, it is contended that such clauses arc not enforced in practice and that the use of the practices in question has neither resulted in cxc1usive de,tling nor had any tendency in that direction. Finally, respondents deny that the practices have had or are likely to have any adverse competitive eifect. 17. The evidence presented by counsel supporting the complaint was offered in two phases. The first phase occUlTed prior to the amendment of the complaints and consisted of stipulations of facts and documentary evidence as to each respondent' s size and scope or operations, statistical informabon as to dollar amounts invested in the complaint practices, forms of leases and agreements used in cOIlnection thcrewith, copies of price lists and discount schedules, and detailed information as to assistance given specific dealer accounts or to dealers InWal Decision 60 F.

in specific geographic areas. The information as to the use or the complaint practices was confined mainly to "switch': accounts since it was offered prior to the amendment or the complaints. 110wever folJo"Ting the amendments further information was submitted which was not so limited.

The second and major phase of the presentation of the case-in-chief took place following the amendment or the complaints and consisted mainly or testimony by competing ice cream manufacturers and retail dealers in various market area,s. Such evidence was apparently offered to show the competitive impact of respondents' use of the complaint practices and the extent to which the practices influence the dealer s choice of a supplier.

The evidence offered by respondents in derense consisted largely or testimony and other evidence offered by each respondent, scparately, with respect to its methods of selling and distributing frozen products and the extent to which the complaint practices playa part therein. Certain of the respondents also cal1cd dealer and competitor witnesses. A number of the respondents also joined in presenting certain statistical nnd economic evidence. This evidence consisted of two parts. One involve,d the results of a statistical SU1TCY of ice cream dealers conducted by Xational Analysts, Inc. of Philadelphia 011 behalf of a number of respondents, purporting to show the extent to I\-which the complaint practices playa part in the choice of t supplier by dealers. The second part of the joint evidence consisted of testimony and other evidence offered through Professor M. A. Adelman of Massachusetts Institute of Technology, based on offcial data of the Department of Agriculture, purporting to show the market and production shares of certain of the respondents in various market areas and states. Counsel supporting the complaint calle(l in rebuttal an official of the Department of Agriculture Jor the purpose of explaining certain industry elata. compiled and published by the Department of Agriculture.

Before turning to a consideration of the evidence with l'e.spect to the complaint practices, it is desirable to consider at this time motions filed by a number of respondents to strike substantial portions of the testimony adduced by counsel supporting the complaint on the ground that such testimony is hearsay or consists of unsupported conclusions and opinions. Since a large portion of the argument of counsel sup porting the comploint is based on such testimony: it is important to dispose of the motions before discussing the evidence. CAH ATION COMPAL'n ET AL. 1311 1274 Initial Decision B. The 11 otions to St,ike During the presentation of the case-in-chief counsel supporting the complaint called a number of ice cream manufacturers who testified concerning competitive conditions in their respective market a.areas. Certain of such manufacturers claimed that their ice cream sales had declined in recent years or had failed to keep pace with population increases. In an effort to attribute these conditions to respondents counsel supporting the complaint sought to show through these C011petitor witnesses that they had lost or been unable to acquire a number of specifically named retail accounts because the accounts had been assisted by respondents in one of the ways challenged by the complaints.

The testimony of these witnesses as to why they had lost the accounts in question was based, in many insta,nces, on conversations allegedly had with the retail dealers in which the latter purported to state the reason they had s\yitched to a particular respondent or \"e1'e doing business with that respondent. In some instances the competitor \vitness had not himself spoken to the dealer but based his testimony on information received frolll a salesman or driver who had allegedly spoken with the dealer. In other instances the \vitness: testimony as to why the account had been lost or could not be acquired was based merely on his own opinion or surmise, it not appearing that either he or an employee had been informed as to the reason by the dealer. Respondents objected to such testimony as being hearsay or based on unsupported conclusions. The examiner ruled that the testimony of a conversation between a competitor witness and a dealer would be received as evidence of the dealer s state of mind, provided that independent evidence was later offered to show that the dealer had in fact been assistcd in the manner related by him, but that a. motion to strike would be entertained if such independent evidence was not offered. Objections were sustained as to testimony regarding the reasons for loss of accounts where such testimony \"as based on reports received from third persons or merely on the witness' own conclusions. I-Iowever, in a number of instances, such testimony came into the record before it was apparent that it was not based on personal conversation between the witness and the dealer involved. Despite numerous admonitions by the examiner that he would make no findings as to why competitor witnesses had lost specifically named accounts unless independent evidence was offered to establish the assistance of such accounts by respondents, cOlilsel supporting the complaint failed to offer such evidence with respect to the bulk of the 1312 FEDERAL TRADE COlv\iission DECISIONS Initial Decision 60 F.

accounts in question. Counsel for six of the respondents have, accordingly, filed motions to strike the testimony of competitor witnesses dealing with the loss of or inability to acquire such accounts. The testimony of competitor witnesses concerning the loss of, or inability to acquire, particular retail accounts has relevance in this proceeding only insofar as this condition is attributable to the complaint practices and to respondents' use thereof. The mere fact that respondents engage in some of the complaint practices and that competititors have lost aCcoWlts to respondents does not necessarily establish a causal connection between the two, since such losses may have been due to competitive factors having no connection with the complaints. Counsel supporting the complaint apparently recognized this by seeking to elicit from competitors the fact that it was respondents' use of the complaint practices which was the specific reason for the loss of, or inability to acquire, the accounts referred to. In order to demonstrate that an account was lost to a respondent because it had received assistance in one of the ways indicated in the complaints, two facts must be established: (1) That the account was in fact assisted in the manner alleged in the complaints, and (2) that this assista.nce ,vas, in fact, the reason for the account's choice of respondent as his supplier. For example, if it is sought to establish that Doe Ice Cream Company lost Jones' Grocery St.ore to respondent National Dairy because of a loan, it must appear (1) that ,Jones did in bct receivc a loan from respondent ational Dairy and (2) that this was his reason for switching from Doe Ice Cream Company to respondent ational. The testimony by Doc s president that Jones informed him that a loan from National was his reason for changing suppliers is acceptable evidence that he was induced to switch because of the loan, provided there is independent evidence in the record that Jones did, in fact, receive a Joan from respondent Kational IIowever, the testilnony of the conve.rsation between Doe and Jones cannot be llsed to establish both the fact of thc giving of the loan by National 5 During the course of the proceedings a number of the respondents offered to supply counsel supporting the complaint with information from their records as to whether dealers specifically named by competitors bad been assisted by them, if counsel wouid furnish them with a list of dealers as to which such information was desired. So far as appears from tlJe record, no such request WIlS made by counsel supporting the complaint. Subpoenas duces tecum requesting detailed information with respect to assistance to dealer accounts, beyond that which the examiner deemed necessary for purposes of these proceedings, were quashed or limited on motion of a numher of the respondents. The examiner s order of May 1, 1056, quashing certain of such subpoenas provided that an application for new subpoenas could be made in the event respondents failed to supply information with respect to specifically named accounts, in response to a request from counsel supporting the complaint. Ko application for 11 renewal of such subpoenas was ever made.

CARNATION COMPANY ET AL. 1313 1274 Initial Decision and Jones' motive or state of mind in switching. As evidence of Jones state of mind, the testimony is admissible as exception to the hearsay rule. As evidence of the fact of granting the loan the testimony is pure hearsay.

Respondents suggest that the bcst evidence of why a dealer ceased dealing with his former supplier and switched to a respondent would be the testimony of the dealer himself, rather than the testimony of his former supplier. Respondents cite, in this connection, thc decision of a Commission hearing examiner in Yale and TO'W1W Manufacturing Oompany, Docket No. 6232, holding such evidence to be unreliable hearsay. This holding was, however, later modified by the Commission in its opinion in the case, which held that such evidence "came within one of the recognized exceptions to the hearsay rule." The Commission s holding in this respect is in accord with the line of authority beginning with Lawlor v. Loewe 235 U.S. 52, which is cited in this exmniner s decision (as affrmed by the Commission) in Purex Oorpomtion, Ltd. 51 FTC, 100, 121 (fn. 12). However, while testimony of conversations between a competitor of respondent and a dealer is admissible to show the state of mind or motive of the dealer, it is pure hearsay insofar as establishing the fact of assistance to the dealer by respondent. Absent independcnt evidence of thc latter, there is nothing for thc appendage of the competitor s testimony as to motive to attach to, and such testimony standing alone can be given no probative weight. See, in this connection Harley-Davidson 1110tor 00. 50 FTC, 1047, a proceeding under Section 3 of the Clayton Act, where letters of dealers indicating their refusal to deal with fL competitor of respondent because of an exclusive dealing arrangement with respondent were held admissible as an exception to the hearsay rule, as showing reason or motive, but where the Commission stated that (p. 1068) :

Standing alone, these letters could not establish the ex-istence of an exclusive dealing agreement. But where the exclusive dealing arra1tgernent has been established and where certain of respondent' s dealers have stopped buying certain competitive products letters oj these dealers to the sellers cut off are competent to show the reason for this action given by the dealer at the time. Taken together with other evidence showing the existence of respondent' s activities to enforce its exclusive d(Jaling policy, and the actual stopping of purchases from the competitor, these letters are very persuasive, competent, and clearly material as part of the evidence showing the effect of respondent' practices on competition. (,gmphasis supplied. See also Purex Oorporation, Ltd., supra at 125 , 143 , 154-155 , 158 160, where the tesLilnony by competit.ors of respondent concerning conversations with cljstributor customers was held to have no pro- 1314 FEDERAL TRADE CO)JMISSIO DECISIONS Initial Decision 60 F.

bative value in establishing that a discriminatory price received from respondent was the reason for the change in suppliers, where there was no independent evidence of the discriminatory price in the market areas involved.

The second main eategory of evidence objected to involves testimony of competitors relating conversations purported to have been had with a dealer by one of the witness' employees, rather than by the witness himself. Such testimony is a. classic example of hearsay evidence. It is not admissible evidence of motive or reason for changing suppliers since the witness himself did not talk to the dealer, but is a lucre recitation of a conversation reported to the witness by a third person. Counsel supporting the complaint has urged that such testimony is admissible as being a report Blade in the regular course of business. Tlle exception to the hearsay rule involving reports made in the regular course of business, relates to \Tritten reports made substantially contemporaneously with the event recorded. Furthermore, such exception does not make admissible matters of hearsay and opinion contained in the, report. See Purex (j01' poration 8ttpl' at 130, holding to be unreliable hearsay, oral reports of conversations "ith a dealer reported to the 'Tit-ness by a third person. See a.lso lV oocly PaJjhiolls, lnc. 51 FTC 02 , 63 , GG holding that even a written report is inadmissible as hearsay "hen the person who prepared it 'Tas not ava,ilnble to testify. In any event, since the testimony of conversations between competing manufacturers and dmtlers is admissible only to show motive, and since there is no jndependent evidence of dealer assistance by respondents to most of the accounts involved, the evidence of such conversations can have no probative value absent such independent evidence. The final category of testimony objected to consists largely or testimony by competitors seeking to attribute the loss of certain accounts to respondents, where it does not appear 1'1'0111 their testimony that their conclusions regarding the loss of the accounts is based on anything n10re than their own opinion, conclusion or sunnise. It does not appear in most of such instances that the witness: opinion is based either on a personal conversation with the dealer or that it is even based on a report received from one of his cmployccs who talked to the dealer. In most of such instances the witness appeared to be simply giving his mnl opinion or that of a.n employee as to why the account had been lost or could not be a.acquired. Such conclusory testimony is clea,rly not reliable evidence upon which to base a finding. :1\moreover, as in the case of testimony involving con versatjons with dealers, there is no independent evidence in most of such CARNATION COMPA-'1Y ET AL. 1315 1274 Initial Decision instances that the dealer had a.ctually received assistance from one of the respondents in the manner claimed.

Counsel supporting the complaint makes a general argument in favor of receiving hearsay evidence in an administrative proceeding, citing the opinion of .Judge ",Vyzanski in S. v. United Shoe i.lfachinen) Oorp. 89 F. Supp. 349, which holds that it is not error to receive such evidence in civil antitrust cases tried without a jury. However, the opinion cited does not stand for the proposition that lwarsa,y is generally admissible, but only where it involves testinlony of the kind that uswllly affects fair-minded men in the conduct of their more important affairs. " The testimony rrhich counsel supporting the complaint is here urging as admissible does not fall \\within the exception cited in the United Shoe Jlachi' nery case since it is of a genentlly unreliable nature. A number of the competitor witnesses themselves recognized that credence could not. be given to such reports from dealers, concerning what another manufacturer had done for them or had offered to do for them, since dealers traditionally play off one manufacturer against another in an effort to make the best deal. As one of them testified: "I would say you hardly e'-er get the \whole truth by talking to one party in an affair." In a. nnmuer of instances the reports allegedly received by competitor witnesses from dealers, as to what assjstancc certain respondents had given them were demonstrated to be false by other etic1ence offered by counsel supporting the complaint, which disc.osec1 that the dealers in question had not received the reported assistance. IVhile hl'ars ty may he admissible under the JnOr8 lenient rules applicable in administrative proceedings it is not generally considered to be reliable and substantial evidence a,nd hence, unless corroborated, cannot be made t.he basis of a finding. Oonsolidated Edison 00. v. NLRB 305 U. S. 197 229-230; Willapoint Oysters, Inc. E"vinq, 174 F. 201 676, 690-691 (C.A. 9); Yia,nnopm,los v. Robinson 247 F. 2d fi55, 657-658 (C.A. 7); OOlnp"qnie de N"viqation Oyprien F"bn (Federal Maritime BOlcrd), August 18, 1955, 5 Pike & Fischer, Admin. Law (201) 44I. Accordingly, in each instance where the testimony concerning the loss of, or inability to acquire, specific accounts by competitor witnesses is not buttressed by independent evidence establishing that the dealer referred to did in fact receive assista.nce or an oiler of assistance in the manner indicated, the examjner will make no finding that the competitor lost or was unable to obtain the account in question for the reason indicated. Ordinarily the examiner would consider it appropriate to strike such hearsay evidence in vie\v of counsel's failure to offer evidence necessary to give it probative value. I-Iowever, the ex- 719-603--64-- 1316 FEDERAL TRADE COJ;L\IISSION DECISIOKS Initial Decision 60 F.

aminer does not consider it practical to do so in this instance. Respondents' specifications of the testimony they seek to have stricken cover 36 pages and involve hundreds of pages of testimony. In view of the ultimate disposition to be made of these proceedings the examiner deems it impractical to rule upon each and every one of the specifications set forth in the motions. It is suffcient at this point for the examiner to indicate his general intention not to rely on such hearsay testimony. Specific instances of the evidence failing within this general rule will hereafter be adverted to. C. The Complaint Practices 1. Cabinets (Facilities) 1. There are five allegations in Paragraph Six of the complaints dealing with the supplying of refrigerated cabinets for the storing of ice cream and other frozen products (such cabinets being referred to in the complaints as "facilities ). Basically, what the complaints charge is that respondents have supplied cabinets to dealers as an inducemcnt for the dealers to handlc respondents' products exclusively. Refinements of this basic practice are alleged to involve the sale, loan or lease of such facilities (a) with the understanding that the dealer wi1 not handle the products of respondents' competitors (b) with thc understanding that only respondents' products will be stored in the cabinets, (c) on terms more favorable than could be obtained from regular facility dealers or (d) without direct profit or compensation to respondents.

The basic issues which arise with respect to supplying of cabinets by respondents, the supplying of which is not gcnera11y in dispute are: (a) Do respondents use facilities as an "inducement" for dealers to handle or continue handling their products or, stated differently, does the supplying of facilities by respondents have the effect, whether intended or not, of inducing dealers to handle their products, and (b) has the supplying of such facilities involved any understanding as to exclusive dealing or has it had the tendency or effect, whether intended or not, of bringing about exclusive dealing. There is also presented an issue as to whether the supplying of c"binets under the circumstances alleged has had any effect on competition or is likely to have such an effect. Since most of the evidence in the record with respect to injury to competition cannot be segregated as between the various complaint practices, this question will be generally rcserved for later consideration in connection with a general analysis of the evidence of injury. However, to the extent that claims of injury spc- CARNATION COMPANY ET AL. 1317 1274 Initial Decision cifically attributable to cabinets were made, some reference to them will be made in this portion of the decision. 2. It is clear from the evidence that the mere fact of furnishing a cabinet to a dealer, Bither by sale, loan or lease, does not act as an inducement for the dealer to purchase his frozen products from respondents. This could be true only if respondents were the sole group of manufacturers or were part of a limited group of manufacturers who furnished cabinets to dealers. The contrary is, however, the case. The evidence discloses that from the very infancy of the industry it has been customary for the ice cream manufacturer to supply the container in which the product was stored. This has been necessary because of the highly perishable nature of the product, which must be maintained at around zero degree temperature, and because of the unwillingness or inability of the dealer to provide the storage container himself. It has been considered to be in the manufacturer interest to provide this facility since he has been held responsible both by the dealer and the consuming public, if his product becomes un saleable or unpalatable by virtue of melting and refreezing. Thus in the very earliest days of the industry the ice cream manufacturer supplied a wooden tub in which the ice cream was stored packed it with )salt and ice, and kept it supplied with salt and ice. Around 1920 a wooden cabinet came into use, in which the tub, packed in salt and ice, was placed. This too was supplied by the ice cream manufacturer. During the 1920's the first electrical cabinets were developed by equipment manufacturers and began to be supplied by ice cream manufacturers in lieu of the old tubs and wooden cabinets. By the 1930's electrical cabinets supplied by icc cream manufacturers were generally in use in the ice area,In retailing industry. L:p to the period of .World1Var II the electric cabincts were relatively 8in1ple and inexpensive. They served primarily a utilitarian pnrposo of storing and preserving the ice cream until sold. I-Iowever subsequent to VY 01'101 vear II manufacturers of refrigeration equipment began to develop newer and IDore attractive types of cabinets. The earliest types of such cabinets had a sliding top in place of the stationary cover over the openings in the cabinet. Later models had open tops and stiU later models had glass fronts and were self. defrosting. The latter types are generally referred to as display-types or merchandising cabinets, since they bring the ice cream into view of the purchasing public and are calculated to stimulate consumer rtppetite for ice cream. These more modern cabinets are larger and more expensive than the conventional pre-,var types. However, many ice cream manufacturers felt that t.he additional expense was justi- 1318 FEDERAL TRADE CO::vL\IISSION DECISIOKS Initial Decision 60 jo' fled since ice cream is essentially an impulse item, and storing it in an attractive cabinet, conveniently placed in the store, has tended to stimulate ice cream sales.

3. It has been the general practice for ice cream manufacturers in lllOst sections of the country to supply their customers ,with ice cream cabinets. These cabinets arc customarily loaned to dealers on a rent.free basis. In the minority of instances where dealers do mvn their own ice cream cabinets the ice crerlll1 manufacturers generally grant them a special discount (sametiDws referred to as a "refrigeration allowance" or an "iceless discount' ) in recognition of the fact that the manufacturer has been relieved of an expense Ivhich is customarily borne by him. The ice cream supplier loaning the cabinet usually undertakes to keep it in a proper state of repair by periodic inspection or service ealls. ,Vhere dealers have desired t.o o,,n their o,,n cabinet equipment, in order to take advantage of a refrige-ration allowance or for some other reason, it has been customary for ice creanl manufacturers to arrange to sen the111 a cabinet. Customarily such calJinets have been sold on a time-payment basis, under a conditional sales arrangement.

The practice of leasing cabinet.s to dealers under a rental arrangement has largely ceased. This practice, which was used in certain sections of the country, particularly in rural areas, had begun to dwindle even before ,Vorld ,Val' II. Some manufacturers have however, continued to charge a rental to dealers who have a very small volume ,which does not justify the furnishing of fl, cabinet on a rent-free basis. The only area of the count.ry where it is t.he general practice to lease cabinets on a formal rental basis is the State of California ,\'here, by statute enacted in 1030, lL manufacturer is prohibiteel from furnishing a cabinet without making a rental charge therefor.

4. The competitor witnesses called by counse.1 supporting the complaint differed among themselves with respect to the desirahility of t.he practice of ice cream 11lanufacturers in supplyjng cabinets to their dealers. Some indicated that they preferred not to have to supply cabinets because of the expense involved. :However, a nUDlber of others expressed approval of the practice for the reason that many dealers would not otherwise ha,ndle ice cream because they could not afford to purchase and maintain a cabinet, particular.rly small and medium-sized retail outlets. Some of the witnesses indicated that they had no objection to supplying cabinets if a rental charge could be made to defray the cost thereof. However, others indicated that the diiference between supplying a cabinet free-of-charge and supply- ,, CARNATION COMPANY ET AL. 1319 1274 Initial Decision iug one on a rental basis ,yas more apparent than real, since the dropping of the formal rent.al charge was usually acr.ompanied by a price adjust.ment to take care of the fact that the manufacturer \Vas no longer charging a rental to help defrny his cabinet costs. Some in the latter group indicated that the bookkeeping and other expenses involved in collecting the rental largely offset the amount of the rental.

5. ::108t of the criticism of competitor manufacturers having to do ,,,ith the practice of furnishing cabinets was directed not at the practice of furnishing cabinets as such, but revolved about the substantial increase in cabinet costs \"hieh occurred during the postwar period as t result of the fact that dealers began to de.nand the lfrger and more expensive display-type cabinets when they came into vogue. :Many of these witnesses conceded that the newer types of cabinets had been helpful to the industry by boosting ice cream sales, thereby largcJy offsetting the increased cost thereof. 110wevor, some of them claimed that some manufacturers ,were supplying more cabinets than were required or larger ones than were justified by a c1ealeT s volume. There as also criticism in some areas that manufacturers were supplying cabinets for use in storillg frozen foods other than ice CTeam or were permitting frozen foods to be stored in ice cream cabinets ,,-hieh were Loo large for the dealer s ice creanl needs. The gravamen of the testimony of competitor witnesses who referred to the subje,ct of cabinets was thus directed at the furnishing of ':excessi\- " equipment (excessive either in number or type), rather than at the practice of supplying cabinets as such. This also appears to be the position of counsel supporting the complaint ,yho interprets 1he complaints as alleging that respondents "supply bett.er cabinets thftn flte neerled and more cabinet space than is required. To this extent counsel appears to have receded from the broad attack of the complaints on the supplying of cabinets as such. 6. Insofar as the basic. practic.e of supplying c.abinets is concerned, the e.vide.nce fails to establish that respondents are responsible either for its origination or its continnanc.e. The practice originated before some of them went into the ice cream Imsiness nncl has been in vogue in some sections of the country where none of the, respondents operated. The deeply ingra.ined nature of the pract,ic.e and respondents' Jack of leadership in it is demonstrated by the failure of efforts on the part of some of them to tBlTninate or modify the practice. Thus, efforts by respondent Borden jn ew York City, in I)hoenix, Arizona, and in Iowa to get out of the cabinet business by selling out their cabinets to dealers hate met with no success. A serious e,Hort by respondent Ka- 1320 FEDERAL TRADE CO:\:\ISSIOK DECISIONS Initial Decision 60 F.

tional in the upstate Kew Yark area to induce its dealers to purchase the cabinets which it had loaned them resulted in less than 3.3 percent of their dealers agreeing to purchase cabinets and the cffort had to be abandoned. Similarly, efforts by respondent Arden to collect cabinet rentals in the Portland, Oregon, market, where it is a substantial factor, and by respondents Arden and Carnation to introduce the California practice of cha-rging rentals in the Phoenix, Arizona, market where they are leading factors, have been unsuccessful. 7. As already noted, the thrust of the testimony of competitor witnesses dealing with the subject of cabinets was not directed so much at the practice of supplying cabinets, but at the cxcesses which had ali. , thatlegedly arisen in connection with the furnishing of cabinets, some manufacturers used cabinets as a vehicle for acquiring or retaining dealer accounts by making offers beyond what the dealer s normal needs require. It was assertd, for example, that newer-type cabinets were being supplied to dealers before their present cabinets had become obsoletc, that dealers were supplied with more cabinets than required for their ice cream needs, that dealers were supplied with larger cabinets than their sales required, and that dealers were supplied with cabinets for use in storing products other than frozen dairy products. In connection with such claims, it should first be noted that there is a large element of subjectivity involved, and that the size and number s businessof cabinets will vary with the particular manufacturer judgment and method of operation. One manufacturer may feel that a small cabinet or a single cabinet of the non-display type is suitable for a particular dealer because of the dealer s small size and his location. Another 111manufacturer may feel that the dealer has a greater potential than his present sales indicate and that the supplying of a more modern type of cabinet win help realize his sales potential. One manufacturer may be extrmnely conservative in his cabinet policy and permit a cabinet to remain in a dealer s premises after it has become obsolete. Another may have a more progressive cabinet policy and feel that his sales will be aided by furnishing more modern cabinets as they are brought on the Jnarket, even though many of his cabinets are not yet obsolete. One manufacturer having a daily delivery schedule in a particular area. may feel that a single cabinet or one of a smaller size is suitable for a particular dealer. ..\.another manufa,cturer, in an effort to cut down on his delivery costs, which are a significant factor in the industry, may feel that it win ultimately bc cheaper to furnish a dealer with an additional cabinet for storage or with a cabinet of larger size in order to accommodate the manufacturer s less frequent delivery schedule.

CARNATION COMPANY ET AL. 1321 1274 Initial Decision The evidence fails to establish in definitive terms that there are any recognized and universal 1101'1118 of cabinet size and type against which the practices of respondents or of ice cream manufacturers generally can be measured. For this reason it is diffcult to evaluate the opinions and conclusions of some competitor witnesses that certain of the respondents had furnished dealers with more or better equipment than these particular witnesses thought was justified. Such gcncralized opinion testimony is of lilnitecl value, except as it is related to specific accounts ,vhere the VOlUll18 of the account is known and the deli very pattern of the manufacturer is disclosed, and where the size and type of cabinet alleged to have been improperly furnished are clearly established. It may also be noted, in evaluating such generalized claims that it is not in the economic interest of an ice crcanllnanufacturer to supply a dealer with more equipment than his volume will justify since equipment must pay for itself out of the dealer s purchases. There may be instances where a manufacturer will misjudge a dealer volume and supply him with a cabinet which is too large and expensive for his needs. 110w8ve1', the simple economics of the situation will soon dictate to the lnanufacturer that he mllst rectify the situation. Where this happens the manufacturer win usual11y move the cabinet to a nlore suitable location and replace it with one more appropriate for the volume and type of establishment of the particular dealer. It should also be noted that the mere fact that a manufacturer furnishes a cabinet to a dealet "which is larger or of a more modern type than that of the dealer s former supplier does not necessarily mean that the dealer changed suppliers because of the cabinet. The evidence discloses that there are a great many reasons which cause dealers to switch having no connection with the complaint practices such as greater consumer acceptance of the ncw suppber s products, a better merchandising program, better prices, better service, dissatisfaction with a salesman or driver, or better salesmanship. Very often where dealers change suppliers because of circumstances un conneeted with the complaint practices, there is no discussion as to what type of cabinet thc dealer wih receive, it being implicitly undcrstood that he win be furnished ".ith an appropriate cabinet to replace that of his former supplier.

8. The evidenec with respect to cabinets upon which counsel supporting the complaint relies falls into three nmin categories, (a) statistical evidence as to the amounts vhieh respondents have invested in cabinets, (b) testimony by competitor witnesses concerning respondents' use of cabinets in acquiring accounts, and (c) testimony . . :::::::::::::: . ___ __ _ ______ 1322 FEDERAL TRADE COMMISSION DECISIO Initial Decision 60 P.

of dealer "witnesses who "Were supplied with ca biuets. Each is hereinafter discussed.

(0) Cabinet Investment. Counsel supporting the complaint cites the large amounts spent by each respondent for cabinets and suggests that such amounts are abnormal and beyond the reach of other manufflcturers. The figures cited include each respondent's tota.l investment in cabinets, as of December 31, 1955, and the amounts spent for cabinets in 1955 as follows:

Tobl cabinet Amount spent investment as for cabinet of Dec. 31, 1955 inl\155 National- - ___n_----__------- $17 751 545: 4(;8, 475 Bordcn-- --n__-- ----_u_ _n_____n 816 017 332. 244 Forcmo L-- - - - - _u - --- - --- - 407 873 neatricL----_u- _u_--- J :: 884, 407 Arden_ 081 586 221 602 Carnation1_ u_n 401, 122; 175, ';8 airmonL--_ 532 13851 443 451 PcLn_ _n___ ---u_ ----_u_ 953 6132 212 ';1 Hood-- ----u-- _u_------ 628, 128, 775 899 1 This figure includes S5,252 601 invested by companies having no affliation with Beatrice, from which the latter Jea c'; t.he cabinets.

2 1'11io f.gure includes 5;, 785 932 in cabinets leaoed from others. The 11bon figures, while indicating that each of the respondents has iuyestec1 substantial amounts in cabinets supplied to dealers establish nothing in themseh-es. Cabinet investment is a relative thing. It involves a relationship to the number or accounts served by it company and the gallonage of such accounts. There is no showing in the record that relntiye to the number of nccounts which they sense and the gnllonagc thereof any of the respondents has an inordinate 11l"'if'stment in cabinet.s. Counsel supporting the complaint argues that by reason or their financial ability, respondents ate able to spend more for cabinets thfln their smaller competit.ors. The record does not, ho,vever, demonstrate that, the respondents have in fact in ve.!:ted sums in cabinets beyond that normally expended by competitors generally. In fact there is no 1"e.liable and substantial evidence in the record ns to the cabinet expenditures of other manufacturers in relationship to the gallonage figures or such compa,nies. It will be obse.rvec1 that there are ,vide differences in cabinet expe,nditures among the respondents themselves, with Pers investment being nncler $1 000 000, as compared to NationnXs investment of over S17 OOO 000. \Vhen it is noted that Kationa.Fs ice cream gallonage in 1955 was rl1most 86 000 000 gallons, while Pet's was approximately 4 000 000 , the lack of significance of total figures or cabinet expenditures becomes apparent. There is no evidence that. CARNATION COMPA."\ ET AL. 1323 1274 Initial Decision relative to its rrozen products business any respondent has an abnormal investment in cabinets.

Counsel supporting the complaint cites figures purporting to re flect the per gallon investment in cabinets by each respondent and suggests that the per gallon cabinet investment or respondents is unusually high. The figures cited by counsel have been computed by dividing ea"h respondent's total cabinet investment by its total ice cream gallonage in 1955. This Inethoc1 involves two basic errors. First, in dividing by the gallonage for only one year, it is asswned that the cabinets involved have a useful Efe or only one year, which is contrary to the evidence. Secondly, except ror Beatrice, counsel uses each respondent' s ha.rd ice cream sales as the divisor rather than its total rrozen products sales, a.1hough the cabinets are used to store all rrozen dairy products. This tends to exaggerate e,ach company s per gallon expenditures. The extent thereof becomes apparent when it is noted that Carnation s hard ice cream gallonage figure (used by counsel as it diy-isor) is approximately 10 2115 000 ganons, while its total frozen products sales are approxilnately 000 000 ganons.

Even accepting the figures used by counsel supporting the complaint, they vary so widely from company to company as t.o reflect no common pattel l and to have no meaningful significance. Thus the per gallonage cabinet investment figures of Arden and Borden are 7. cents and 8.5 cents, respectively, while those of National and rIood are 20.7 cents and 31.1 cents, respectively. Such differences mry readily be accounted for by the fact that one company mry have a large quantity of older, depreciated cabinets in use which ma,y shortly be replaced, while another may recently have replaced a number of its older cabinets. The figures cited by counsel supporting the complaint both with respect to total cabinet expenditures and per gallon invest ment, rail to support any inference adverse to respondents. (b) Oompetito?' Testimony. There is relatively little testimony by competitor witnesses critical of the basic practice or supplying cabinets to dealers. For the most part competitor witnesses referred to it as a normal and tra.ditional industry practice. To the extent that there was any criticism or the practice, it, centered about certain ex cesses which had allegedly arisen. These: as already noted, illvohr the supplying or more or bever cabinets than dealers required: or the furnishing or cabinets for use in storing non- dairy frozen foods. In his brief, counsel supporting the complaint cites the testimony of several competitor witnesses purporting to be crit.ical of the basic practice or supplying cflbinets. One is a Seattle manufacturer who 1324 FEDERAL TRADE CO:\VIISSION DECISIONS Initial Decision 60 F.

testified in the affrmative in response to the leading question of counsel as to whether his investment in cabinets was a "drain on your capital structure. " Another is an Atlanta manufacturer who expressed the opinion that the supplying of cabinets is no longer a necessary element in the development of ice cream sales. Still another is a Beaumont, Texas, dealer who testified that he would prefer to sell cabinets to dealers or to lease them rather than supply them without charge.

However, there were many witnesses called by counsel supporting the complaint whose testimony was favorable to the practice of supplying cabinets to dealers. These ice cream manufacturers indicated that many small and medium-sized dealers could not afford to purchase their own cabinets and would not carry ice cream if they were not supplied with a cabinet. 'While some of these expressed concern over the increased cost of cabinets, particularly the modern displaytype cabinets, a number of them indicated that the increased sales resulting from the use of such cabinets justified the increased expense thereof. The Atlanta witness whose testimony is cited by counsel supporting the complaint agreed that the open display-type cabinets had been a factor in his company s substantial increase in sales. Likewise, the Se,attlc manufacturer whose testimony counsel cites conceded that the newer type cabinets helped increase sales in the modern stores where there is considerable customer traffc. Insofar as the preference on the part of some manufacturers for leasing cabinets to dealers rather than supplying them on a rent-free basis, a number of the manufacturers indicated that the difference was one of form rather than of substance, since the price of the ice cream inevitably included the cost of the cabinet. Vhere a formal rental is charged, the price is somewhat lower than if the cabinet is supplied on a so-called rent-free basis. Some manufacturers indicated that the cost of co11acting rentals largely offset the value of the formal rental charge.

Similarly, in the case of selling cabinets to dealers, there is little difference in the basic cost to the manufacturer. Since most dealers canuot afford to pay cash, the cabinet is paid for on an installment basis, with the ice cream manufacturer still bearing the same basic cost of the cabinet until it is paid for. The special refrigeration allowance generally granted to dealers who own their own cabinet results in a price reduction, which largely pays for the cabinet and is the substantial equivalent of a cabinet rental charge. In any event, it is not the function of the Commission to act as an arbiter an10ng the conflicting preferences of ice cream manufacturers. CARNATION COMPANY ET AL. 1325 1274 Initial Decisioll The basic question is not whether some manufacturers like or dislike certain practices or prefer somewhat different or better ways of selling ice cream, but (a) whether certain practices are basically unfair and inimical to competition, and (b) whether respondents are responsible for either initiating the practices or have used them unfairly to injure competition.

As has already been noted, the practice of supplying cabinets by ice cream manufacturers is an ancient practice in the industry and is one for which respondents are not responsible. The decline in the practice of charging rentals, which was formerly in vogue in some sections of the country, cannot be attributed to respondents. As already noted, efforts by some of the respondents to introduce or continue the practice of charging rentals have been unsuccessful. Likewise, eil'orts by some respondents to sell cabinets to dealers, rather than furnish them on a so-called free basis, have been unsuccessful. Ironica1ly, while counsel supporting the complaint cites with apparent approval the testimony of the Beaumont manufacturer that he would prefer to sell cabinets than loan them, counsel called a manufacturer in J(noxville, Tennessee who criticized respondent Pet for doing precisely that, viz., selling cabiuets to dealers who wished to purchase them.

The failure of the efforts on the part of some of the respondents to change or modify basic cabinet practices, in markets where such respondents are an important factor, attests to the deep-rooted nature of the practices and respondents' lack of control over them. This was confirmed by the testimony of competitors who conceded that even if respondents ceased supplying cabinets, many of their competitors would continue to do so. Such witnesses also agreed that any company which was prohibited from supplying its customers with cabinets would be put in a precarious competitive position. As previously noted, the bulk of the testimony critical of the practice of supplying cabinets was directed at so-called excesses, rather than at the basic practice itself. Typical of such testimony is that of the Beaumont manufacturer cited by counsel supporting the complaint, who testified in the affrmative in response to the leading and suggestive question of counsel supporting the complaint as to whether: Competition forced you to exceed what you thought was adequate and put in a still better cabinet!" Counsel supporting the complaint apparently equates the witness' reference to " competition" with "1'espondents as he does in numerous other references to the testimony. However, not only did the ,vitness make no claim that any of the responde,nts was responsible for the prevailing cabinet practices in 1326 FEDERAL TRADE COMMISSIOK DECISIO Initial Decision 60 F.

his area, but his principal complaint related to price competition and ma.inly involved a nonrespondent company.

To a large extent the claims of diffculties arising in connection with the supplying of cabinets were attributed to the increased cost thereof (as cabinets have become larger and more elaborate) and to the demands of dealers, rather than to the activities of particular competitors. Typical is the testimony of the Seattle manufacturer cited by counsel supporting the complaint, who stated that as the stores -beca.me larger and more modern they dClnanded more and better cquip1nent. He did not, however, attribute this to any of the respondcnts but stateel that all companies in the area Clc "in the same boat insofar asbcing subject to the demands of dealers for better equipment. 'V11ile there were some witnesses who sought to attribute to respondents the use of cabinet excesses in the acquiring of accounts, their tesblllony was generally of a conclusory nature and, insofar as they sought to refer to specific accounts which they had allegedly Jost or Vlere tilable to acquire because of such practices, their testimony consisted mainly of unreliable hearsay, conjecture and surmise. Typical is that of a "witness from San Antonio, Texas, cited by counsel supporting the complaint, who claimed that respondent Carnation had supplied an account wit.h a cabinet for use in storing frozen foods. Other than the ,,-itness' hearsay and conclusory testimony there is no reliable evidence in t,he record as to the supplying of a 'cabinet to the aCColUlt in question, for use in storing frozen foods, by Carnation. The witness conceded that it was not uncommon to find frozen foods in his own company\; cabinets, despite its efforts to discollrage such use by dealer's. The testimony of other witnesses indicates that this is a problem shared by most ice cream manufacturers, inc.uding respondents.

VVith respect to the testimony of those \witnesses '\yho claimed that respondents had supplied larger or better cn:binets than they considered proper, it has already been noted that the record contains 110 substantial evidence as to objective cabinet standards against which such subjective 'claims can be weighed. Ioreovel' , in nlost instances there is no reliable evidence as to \yhat cabinets ,\were furnished by respondents to the accounts in question, nor as to the gaJlonagc of such accounts. There is therefore no basis for determining ,\whether the supplying of cabinets in such instances, if it oc:Currcd, cxtended be,yond tho exercise of sound busine,ss judgment '\with respect to appropriate cabinet size and type. The record is 111so lacking in reliabJc evidence that the furnishing of cabinets acterl as all inducement. for dealing with respondents in any substantial number of jnstllllces. CARXATION CQMP,u-y ET AL. 1327 1274 Initial Decision "Thile some of the competitor witnesses claimed tlutt certain dealers had adviscc1 them that the receipt of a cabinet by a respondent had been a factor in the,ir choice of a supplier, the record is lacking in reliable evidence as to ,,'lmt type of cabinet, if any, such dealers had received. No weight can therefore be given to such testimony for the reasons heretofore indicat.ed in the section entitled "The 1rlotions to Strike. "

'Vhile it may be that some of the competitor witne.sses called by counsel supporting the complaint have a predilection against the supplying of cabinets, there is no substantial evidence that the practice has had an anti-competitive effect. Of the ten competitors whose testimony counsel cites in his main brief and proposed findings, only two luwe sustained a decline in sales in recent years and in neithel' instance does the evidence establish that such decline can be attributed in any significant degree to the use of ca,binets as a. 'competitive weapon by respondents. 1\ioreover, the evidence fails to establish any injury to competition in any market are, , aside from the alleged diffculties of a few individual competitors.

(c) Dealer Testimony. As has been previously indicated, the mere fact that a clealel' receives a cabinet does not establish that this was his motive for dealing with a particular supplier, since cabinets are generally available from ice cream suppliers. Even the fact that he has rece.ived a larger or better cabinet than that furnished by a previous suppEer does not by itself establish that this was his reason for switching. The evidence discloses that dealers will frequently switch for reasons having nothing to do with a cabinet, and that incidental thereto they llay receive a better cabinet. In apparent recog11ition of this, counsel supporting the compla,int called a, number of dealer witnesses for the ostensible purpose of establishing their reason for dealing with a pa.rticular supplier. all, he called 73 dealer witnesses. ,Vhile in almost every instance these dealers had received a cabinet from one of the respondents there were only a handful of cases where there was any reference to a cabinet as having played a part in the dealer s 'choice of a supplier. Three of the dealers in the latter category ",ere from Bellingham Washington. Onc had s",itched to Arden after" local competitor had failed to replace a IG-year-olcl cabinet, despite repeated promises to do so. Another also s",itched to Arden after the same local supplier failed to replace an olel, leaking combination cabinet and fountain. A third switched to Arden after another local supplier failed to replace what the dealer described as an "outmoclecF cabinet, which wa, Lao small. These instances hardly establish that respondent Arden Initial Decision 60 F.

undertok to obtain accounts by offering excessive cabinets. So far as appears, it simply undertook to meet the normal needs of these dealers which were being neglected by their former suppliers. In at least two of the above instances the installation of appropriate cabinets resulted in an increase in the dealer s sales. Another instance where the supplying of a cabinet was stated to lmve played a part in the dealer s choice of a supplier involved a dealer in Houston, Texas. The dealer stated he had switched to respondent Arden mainly because it supplied him with a display-type cabinet in place of a conventional cabinet furnished by his former supplier, who had advised him he did not think the more modern type was suitable ror his drive-in establishment. Subsequent events confirmed Arden s judgment since there was a substantial increase in the dealer s sales.

The final instance involved a dealer in Knoxvile, Tennessee who switched from respondent Kational to respondent Pet when the latter sold him a cabinet, which he wished to purchase in order to take advantage of the special five per cent refrigeration allowance. The significance or this witness' testimony is somewhat diffcult to comprehend. Apparently it is the position of counsel supporting the cOlllplaint t.hat National was acting improperly in loaning cabinets to its customers rather than selling them, but that Pet was wrong in selling cabinets rather than loaning them. The record contains evidence or some other instances where dealers had received better cabinets from a respondent than they had had from it rormer supplier. However, in these instances it does not appear that the cabinet was a reason for the change, or the dealer speeificaJJy negatived it as his motive ror switching. For example, a dealer in Houston had received two open-type cabinets from Carnation in place of two closed cabinets from another supplier. The dealer s primary reason for changing was Carnation s better discount schedule, rather than the cabinets. The dealer was shown pictures by Carnation salesman of the type of cabinet which was thought to be appropriate for his establishment and was to1c it would soil more ice cream. The latter prediction was borne out by a substantial increase in the dealer sales of ice cream. Another dealer in Knoxvile had received a better cabinet from Pet than from a local supplier, but testified this had nothing to do with his switching. The dealer had not asked the local supplier for a better cabinet and had not discussed with the Pet salesman the type of cabinet he would receive. By the time of the hearing he had already switched to another local supplier because of his dis- CARNATION COMPAr.,ry, ET AL. 1329 1274 Initial Decision satisfaction with Pet service, and had received an equivalent cabinet from the new supplier. The testimony of the latter witness is typical of most dealer witnesses, who take it for granted that they will receive an appropriate eabinet and whose choice of a supplier is usual1ly based on other considerations.

9. In the above discussion consideration has been given mainly to the evidence adduced by counsel supporting the complaint, without the benefit of countervailing evidence offered by respondents. The evidence offered by respondents establishes that their primary effort in the sale of ice cream is centered on improving their product, in building up consumer acceptance through widespread advertising, merchandising and promotional programs, and in aiding their dealers through educational programs and advice as to the best ways for displaying and merchandising ice cream, rather than on "buying or "captivating" accounts as contended by counsel supporting the com plaint.

Insofar as cabinets are concerned, they are supplied in accordance with established industry practice on the ba,sis of respondents' business judgment as to the size and type of cabinet snitable to the particular dealer and with due regard to their delivery schedule in the area. Only a smaD percentage of the cabinets supplied by respondents are of the modern display type. They are mainly placed in acconnts where it is felt sales will be stimulated and increased thereby. J\Iost of such cabinets are placed in existing accounts, rather than in accounts obtained from competitors. For the most part cabinets are supplied to small and medium-sized dealers, since the larger supermarkets and chains usually prefer to own their own refrigeration equipment. Dealers are encouraged to OWll their own equipment by being offered a special discount therefor but, except for the larger outlets, they have beeen reluctant or unable to undertake the expense. 10. The survey of ice cream dealers conducted by K ational Analysts Inc., which respondents offered in evidence, tends largely to support the claims of respondents that the supplying of cabinets plays a relatively minor role in the dealer s choice of his supplier. The survey covered 1 331 dealer outlets handling 1 784 brands of frozen products sold by 1 514 different ice cream manufacturers. The dealer outlets included 620 which handle the brand or brands of the respondents (except respondent Hood) and 894 served by nonrespondent companies.' So far as appears from the record, the survey was conducted Totals to more than 1,331 outlets because some carry multiple brands of nwre than one manufacturer.

1330 FEDERAL TRADE COMMISSIOI\T DECISIO:\S Ini tial Decision 60 in an objective, impartial manner and is statistically reliable. The dealers were asked, (1) why they were handling their present brand or brands of ice cream, (2) what other reason they had for handling the brand, in addition to the reason or reasons first given and (3) \which one of the reasons given was the most impOltant reason for handling their present brand and which the second most important. The reasons given by the dealers atc expressed in terms of percentages of the total number of dealer-brand combinations involved (referred to as "brand mentions ), rather than as a percentage of the number of dealers because of the multiple brands handled by some dealers. In most instances the totals of the responses exceed 100 percent because of the multiple reasons given by S011e dealers. On this basis it wi1 bc noted that in answer to the general question in which dealers were asked why they \were handling their present brand, only 6.4 per cont of the brand mentions involving respondents elealers (out of a total of 167.2%) gave the furnishing of a cabinet or the servicing thereof as a reason for choosing one of the respondent.s as a supplier. vVhcn the dealers were asked what other reason they had for choosing their present supplier, an additional 4.4 percent (out of a total of 128.8 per cent) referred to cabinets as a reason. when the dealers were asked "which of the reasons given -was the most important reason and which \Vas the second nlost important, the responses referring to cabinets -were only 3.2 percent and 1.3 percent respectively. It is significant that the responses from dealers purchasing the brands of other c0111panies -were almost identical, percentage wise, with those of respondents' dealers, indicating that the offering of cabinets as an inducement by respondents does not differ significantly irom that of other companies and that in neither instance is it a major factor in the, choice of suppliers. The results of the survey also include a select group of dealers who ha,d changed suppliers since T anuary 1 , 1955, -which was ,,'within two years prior to the conducting of the survey. Although it might be expected that the results of this select group of dealers, who had recently s-witched, might show a larger proportion switching because of cabinets, the results were substantially idcntical as those of the larger group of dealers surveyed.

11. As has been heretofore noted, an esse,ntial element of the charges in these proceedings is the allegation of exclusive dealing. Insofar as cabinets are concerned, it js alleged that they are supplied pursuant 1Tbe report of the survey, which was received in eyic1ence without objection by counsel supporting the complaint, is part of the record of all of the above proceedings except those involying respondents Pet, Fairmant and IIood. CARNATION Compll.'I ET AL. 1331 1274 Initial Decision to agreements which provide for the exclusive handling of the supplier s products or that the supplying thereof leads to exclusive dealing because of limitations of floor space. These allegations are considered below.

(a) Ea:clu.shoe Dealing AgJ'eemBnts. It is customary for most manufacturers in supplying refrigeration equipment to a dealer to have him sign some type of form acknowledging receipt of the cabinet compressor and related equipment. The nature and wording of such forms vary widely among the respondents and even difier among the various branches, divisions or subsidiaries of particular respondents. The forms bear such varying titles as "Refrigeration Equipment Agreement Loan of Equipment/ "Bailment Le,ase Equipment Receipt Loan Receipt Delivery Receipt Installation Receipt and "Lease Agreement." Some of the documents purpOli to be in the nature of formaJ agreements with undertakings by both parties. Others are more in the nature of simple receipts, some of which contain certain commitments on the part of the dealer. Some of the forms contain clauses which are in the nature of an exclusive dealing undertaking on the part of the dealer; others contain a more limited commitment, in the nature of an undertaking to store only t.he supplying manufacturer s products in the cabinet, but not prohibiting the dealer from purchasing the frozen products of another manufacturer; and stiD other forms contain no commitment whatsoever limiting the dealer s right to purchase competing frozen products or to store them in the cabinet of the supplying manufacturer. Set forth below is a brief analysis of some of the forms llsed by the various respondents, with particular reference to whether they contain a, Jimit1ng clauses with respect to the dealer s right purchase or store competing ice cream products.

(1) Cm'1w.tion. Respondent Carnation uses ft form in California entitled "Refrigeration Equipment .Agrcemenf' under which the dea.1er agrees that as long as he llses the equipment. furnished him he will buy from Cm11ation exclusively a1J of his requirements of ice, cream and other frozen products. This agreement is not for any fixed duration, and the obligation to purchase Cnrllation products lasts only as long as he, uses said equipmcnL" A variation of this form, which is used in the I-Ionston, Texas market, merely provides that the cabinet only will be llsed for the storage of Carnation products, but docs not prevent the dealer from purchasing the frozen products of ot.her manufadurers provided he docs not store them in the Carnation cabinet. Another form which is llsed ill Oklahoma contains no comrnitme,nt by the dealer to Guy his ice cream requirements exclusively from Carna- 719-603--04---- Initial Decision 60 F.

tion or restricting his use of the cabinet to the storing of Carnation products.

(2) Borden. Respondent Borden uses a form of agreement entitled "Loan of Equipment " which provides that in consideration of the furnishing of mechanically refrigerated equipment for preserving ice cream and the furnishing of signs and advertising material the dealer agrees, during the term of the agreement, to buy his ice cream and other frozen commodities from respondent Borden "exclusively and to the extent of his requirements." An agreement of this type, having a term of five years, has been used by respondent Borden in the Philadelphia market. A similar form of agreement, having a more limited term of three years, has been used in the New York, New Jersey and Connecticut markets. A similar agreement, having a term of only one year, has been used in the Pittsburgh market. Respondent Borden also uses a number of forms in connection with the loaning of cabinets which contain no requirement for exclusive dealing. Thus, an alternate form of document used in Connecticut entitled "Equipment Receipt" contains no agreement either with respect to exclusive purchase or exclusive storage of Borden products. A document entit.led "Equipment Installment," used in California, and another entitled "R.eceipt", used in Iowa, likewise contain no exclusive provision, either ,with respect to the purchase or storage of Borden products. A "Lease Agreement" used in \Visconsin requires that the cabinet be used exclusively for storing Borden products, but contains no undertaking not to purchase competitive products. A form used in Florida likewiso provides for the exclusive storage of Borden products In the cabinet, but contains no limitation on the purchase of the products of other manufacturers so long as they are not stored in the Borden cabinet.

(3) Beatnoe. Respondent Beatrice and its subsidiaries have had in general use a form entitled "Equipment Receipt " which contains no provlsion that the dealer will buy his ice cream requirements exclusively from that supplier, although the form does provide that the equipment supplied to the dealer will only be used for the storing of products purchased from Beatrice. Counsel supporting the complaint cites in his brief a document entitled "Bailment", which contains a provision that the lessee of the equipment win, during the term of the lease, buy his ice cream and other dairy products from Beatrice " the extent of his requirements for products of such nature." So far as appears from the record this form was used only in the Pittsburgh market and was abandoned in August 1953, prior to the issuance of the original complaints.: Accordingly, it would appear that for over CARNATION COMPAl"' ET AL. 1333 1274 Initial Decision five years respondent Beatrice has not used any form of agreement or receipt in connection with the supplying of facilities which requires that the dealer purchase his ice cream requirements exclusively from that respondent.

(4) National. Respondent National and a nmnber of its subsidiaries have used a form of agreement in connection with the furnishing of cabinets and compressors which provides that for a term of one year the dealer wiJ sen National products "exclusively to the fun extent of Dealer s requirements . Other forms used by a number of the subsidiaries or divisions of respondent National, while containing a provision that the dealer win purchase his ice cream products exclusively from the company supplying the cabinet, do not obligate the dealer to do so for any specific term and give him the right to cancel the relationship at any time or after giving a brief notice. A nmnber of the forms used by subsidiaries or division of respondent National contain no provision whatsoever for the exclusive purchase of K ational products, although in some instances the forms do limit the use of the equipment furnished to the storage of the company s products. Among the subsidiaries or divisions faning in this category is Southern Dairies, which operates throughout a wide area in the southeastern United States. The subsidiaries or divisions of respondent National which do not use any agreement or receipt containing a requirements or exclusive dealing clause serve 33.4 per cent of respondent National's dealers and sell 31 per cent of its volume. (5) Arden. Respondent Arden has used a form entitled "Installation Receipt and Lease Agreement" in its Oregon and ,Vashington State territories, which provides that during the term of the lease the lessee agrees to purchase aU his ice cream and other frozen products from respondent Arden. This agreement is, however, terminable at will by either party. Another form, used in California and in Kansas, contains no provision with respect 10 exclusive dealing, but does require the dealer to use the cabinet only for the storage of respondent Arden s products. A form of receipt used by Arden s subsidiary, Melvern-Fussell, in Washington contains no provision either with respect to exclusive dealing or exclusive storage. (6) Foremost. A form in general use by respondent Foremost in many markets, including N ew York, South Carolina, Texas and Min- I.oall Receipt" used in Indiana., Ohio, Illinois, Kansas Ilnd Missouri, obligates the dealer to use Seal test products only as long as the cabinet remains in his possession. A similar document used in Louisvile, Kentucky, and another used in upstate New Y.ork and the Xew England States, are subject to cancellation on 30 days' notice. An agree- Inent used inWfsconsin and parts of Illinois Is terminable on five days' notice. Another agreement use in parts of Pennsylvania and West Virginia is terminable at will. Initial Decision 60 F.

nesota contains a provision that equipment will be llsed only for storing products of respondent Foremost, but does not prohibit the dealer from hnying a competitor s products nor require that he buy his exclusive requirements from respondent Foremost. A form lease agrcement. which was used in Tennessee by Foremosfs subsidiary Southern Maid (,,'which has since been dissolvcd), did require the dealer to purchase his ice cream supplies from Southern )Iaic1. HOTIever, the agreement was cancellable at any time. (7) Pet. Respondent Pet does not use any form of ngrcC'llent 10Rse or receipt, in connection \Ylth the furnishing of facilities, which requires the dealer to purchase exclusi\Ccly froln that respondent. It did at one time use a form of "Ecluipment Lease:' in its \Visconsin territory which required the dealer to buy his requirements exclusiyely from respondent Pet during the term of the lease. IIowever it has been stipulated that this form of agreement was superseded in 1952 by one which contains no such provision. Ioreover, respondent Pet. has disposed of its ,Yiseonsin operation since the inception of this proceeding and the forms there used have not been adopted in it.s other operations. The form ,,'which is generally in use throughout Pet:s primary market, in the southeastern part of the Vnitcd States, contains no provision requiring the dealer to purchase his frozen products exclusively from respondent Pet nor prohibiting the dealer from storing other products in the Pet cabinet. A form of receipt used by respondent Pet' s subsidiary Coh-i1e Dairy in the L.tah territory, "bile not requiring the dealer to purchase his requirements exclusively from that company, does prohibit the dealer from using the cabinet for the storage of frozen products sold by any other company.

(8) Fai'nnont. Respondent Fairmont uses ynriOllS forms of receipts and leases in c.connection with the supplying of facilities, none of which prohibit the dealer from purchasing or using the products of it Coltpeting manufacturer. Iost. of the forms do, however, provide that the cabinet supplied by Fairmont will be llsed only for the storing of its products.

(9) flood. So far as appears from the record, respondent Hood uses no forms of agreement, lease or receipt in connection with the supplying of refrigeration equipment which prohibit the dealer from using another manufa.cturer s products or which require that the equipmeJlt. be used only for the storing of Hooel products. (b) Pl'ctical Opemtion. As indicated by the foregoing, there is considerable variance al1long the forms used by respondents, insofar as the requirement for exc1usi'Te purchase of the suppliers\ products. CARNATIOK COMPANY ET AL. 1335 1274 Initial Decision The forms used by respondents Beatrice, ForCHlOst, Pet, Fail'llont and IIooc1 contain no such provision. Some of the agreements used by respondents Arden and CilTlUltion do contain the provision, but it is effective only as long as the dealer chooses to use the cabinet. Smile of the agreements used by responde,nt National containing such a provision ha.ve a fixed duration of one year, 'Thile others arc terminable at will or on short notice, ancl approximately one-thinl of its gallonage is not. covered by such agreements. ,Yhile respondent Borden llses some agreements of Jonger duration containing the questioned clause, in other areas the clause is not used. It is the position of the respondents who use agreements contflining the contested c1cause that, Iy)wtever meaning sllch agreements may have had in years past, during recent years they have not been enforced and serve mainly as c,llJinet receipts. The examiner finds it unnecessary to decid( Iyhat legal significance such agl'eClnents have either as binding cabinet agreelnents or as mere receipts. The evidence discloses that such agreements hayc no substantial practical iUipact on dealer-supplier relationships. In actual practice it appears to make little difl'erence Iyhethel' t.he dealer has or has not signed a cabinet agreement, receipt or lease, or whether the document contains an exclusive dealing clause, or whether it is for any fixed duration. The evidence indicates a. high degree of volati1it.y in dealer-supplier relationships and that leases, agreements 01' receipts have no practical Bfleet in limiting the mobility of dealers. The continuflnce of particular dealer-supplier relationships depends essentially on the dealer s satisfaction with the supplier s product price and service. "'hen a dealer becomes dissatisfied 'with his supplier) Jar vdmtever reason, he ,will Slyitch to another supplier. So far as appears from the record, the existence of an exclusive dealing agreement is not an inhibiting factor in such switches, In fact many of tho dealers IYho testified IYCTe not evell aware that they had entered into any formal agreement with their supplier or that they were obligated to denl ,with him for any c1eJinite period or were prohibitedfrmll handling another mallufacturer s products. The. record does not. contain a single instance of 11 respondent seeking to hold a dealer to an exclusive dealing agrecmcnt. Counsel supporting t.he complaint argues that. limitations of floor space hflve the practical effect of rcsu1t.ing in cxclusin dealing, even without any formal agreeme.nt. In t.he opinion of the examiner the existence of a tradit.ion of single dettling in the industry tends to defeat the argument of counsel supporting the complaint. It demonstrates that exclusive dealing agreements have little practical preclusi,-e effect 1336 FEDERAL TRADE CQ1L\IISSION DECISIONS Initial Decision 60 F.

since 1nost dealers will deal with a single supplier anyway, irrespective of whether a formal agreenlent requires them to do so or not. I-Iowever, it does not follow, as counsel contends, that because of the single-dealing tradition the mere furnishing of a cabinet has a significant preclusive effect. It is preclusive only in the sense that a dealer who customarily handles a single brand will only purchase the products of the supplier furnishing the cabinet, for as long as he uses the cabinet. flowever, since there are numerous other suppliers ready, willing and able to supply another cabinet, such preclusion, continues only as long as the dealer wishes it to, i. , as long as he finds his relations with his present supplier satisfactory. In practical effect this results in considerable mobility among dealers, with the supplying of a cabinet having no essential tying effect.

It should also be observed that there have been considerable inroads into the tradition of single dealing in recent years. In many sections of the country it is becoming quite commonplace to find two, three and even four different suppliers' products in the same establishment particularly in the medium- and larger-size food stores and supermarkets. Even some of the smaller retail stores have begun to split their ice cream business. The record contains instances where this splitting has occurred among rebilers dealing with respondents despite the existence of exclusive dealing agreements. There are also instances in the record of dealers placing another supplier s products in the cabinet of a respondent, despite a clause requiring the cabinet to be used only for the storage of the respondent' s products. Despite the fact that most retailers do deal with only one supplier it is within their power to change suppliers almost at will. There is no evidence that any form of agree.ment, 1case or receipt used in connec tion with the supplying of a cabinet has any significant effect in tying a dealer to a particular supplier. Kor is there any evidence that the supplying of a cabinet as such has any substantial preclusive effect. 12. Based on the foregoing, and the evidence as a whole, it is concluded and found that:

(a) TI,e record fails to establish by a preponderance of the reliable probative and substantial evidence that any of the respondents has attempted to induce or has induced retail dealers, to any significant ext.ent, to handle, store, and sell such respondent' s products, exclusively or otherwise, by selling, leasing, loaning or otherwise making available to them facilities for the storage and sale of frozen prod ucts. (b) 'Vhile facilities are made available to retail dealers by respondents, the furnishing of such facilities is not a substantial inducing factor in the dealer s choice of a frozen products supplier since such CARKATION COMPANY ET AL. 1337 1274 Initial Decision facilities are generally available to dealers from most frozen products suppliers. Respondents did not originate such practice and there is no reliable, probative and substantial evidence that they have used it to any substantial extent, as a competitive device in the acquisition or retention of retail dealer accounts.

(c) vYhile some of the respondents, as more specifically above found, have used agreements purporting to require dealers to whom they supply facili6es to use their frozen products exclusively, such agreements, with few exceptions, are of limited duration or are terminable at will or on short notice. :NIoreover, such agreenlents are not enforced in practice and dealers shift from supplier to supplier without regard to such agreements.

(d) The record fails to establish that respondents' practices in supplying facilities to dealers have resulted in injury to competition in any relevant market area or that there is any reasonable probability of such injury.

2. Financing 1. Thc complaints contain two main groups of allegations pertaining to practices which counsel supporting the complaint lumps under the heading of "Financing." The first group relates to the making of money loans to dealers and the other to the supplying of equiplnent. In connection with money loa,ns it is alleged that such loans (a) are made with the understanding that the dealer will not handle the products of respondents' competitors, (b) are made without interest or other compensation and (c) are simply made to dealers. In connection with the supplying of equipment (which is generally sold on a time-payment basis) it is alleged that such equipment (a) is supplied with an understanding as to exclusive dealing, (b) is supplied without any profit to the respondent and (c) is simply supplied. The equipment referred to in this group of allegations consists of such items as soda fountains, store fixtures, and other items of equipment other than facilities. The issues which arise under these allegations are similar to those discussed in connection with the furnishing of facilities, viz., whether respondents use financial assistance as an "inducement" for dealers, whether the practice l'PBults in exclusive dealing, and whether there has been or is likely to be injury to competition.

2. The rendering of fllancial assistance to dealers by ice cream manufacturers takes two basic forms, (a) the loaning of money and 9 Such equipment is apparently;.' referred to separately from facilities for the reason that It is usually sold to the dealer, whUe facilities are usuulIy loaned and sometimes leased.

1338 FEDERAL TRADE COM:\IISSION DECISIONS Initial Decision GO F. (b) the sale of equiplnent all a time payment basis. Dealers gCllcraHy borrow money to enable them to remodel or modernize their stores or to purc.hase needed equipment. ,Vhere t.he ice cream l1mlllfacturel' arranges for the dealer (,0 purchase equipment or se.11s it to him, the latter usually makes fI small dmYJl payment and pays the balance in monthly installments, "which are sometimes collected by a surcharge on ice cream purchases. The equipment sold typically involves a soda fountain or store fixtures. In the case of Inone)' loans the dealer usually signs a prornissory note and gives the icecl'eam supplier a chatie.l mortgage on his store fixtures. In the case of larger amount.s other security for the laan may be given, such as insurance policies or it 1110rtgage on realty. ,Vhere the manufacturer sells t.he equipment to a dealer on a, time-paYlnent basis, this is uSlwJly accomplished by the signing af fl, conditianaJ sales contract, pursuant to \\which t.title remains in the ice cream manufacturer until payment is completed. ,Vhile some of the respondents have. in the past, nat charged interest. in eonnect.ian \with SOHlO financing transactions, in recent years it has been the l1sunl practice to add an interest charge of four t.o six per cent. 8. As in the case of the supplying of ice cream cabinet.s, the rendering of finnncial assistfmce to dealers is not a recent innovation in the indl1stry. An ice cream manufacturer fram Danbury, Canne.cicut. indicated that. manufacturers in his area had been rendering iinancial assistance to dealers since the 1920's. Another gavernment. \witness n. mannfaeturer frolll ,Yashington, D. , testified that manufacturers in t.hat area, had been making laans to deniers since thb middle 1920' Tho.re was also testimony by a, \witness representing a. large eastern ice cream manufacturer, \with headquarters in the Philadelphia metropolitan area, to the effect it had been the. practice in his are,a for a great rnany years to assist dealers financially. The record fails to establish that respondents are responsible far initiating the practice of assisting dealers financially 0.1' that their activity.ies in this regard differ materinlly fram those af the,i1' callpetit,ors generally. All af the respondents re.nder financial assistance to customers, either by way of money loans 0.1' financing the purchase of equipme.nt. The same is true of most of their campetitars, including It nUlnber \\"ho were called to testify against respondent.s. Hesponde.nts: lack of leadership in the practice \yas attested to by campetitor \yitne,sses in Portland, Oregan, and in Chicago. The testi- HlOny of one af the Part land manufacturers, that even if respondents Arden and Carnatian (the two. large,st manufacturers in the area) ceased giving financial assistanee, to. (leaders, the practice IYould nevertheless cantinue" is indicative of the \yidespreac1 chal'aeter of the prac- CARNATION CO:\IP AKY ET AL. 1339 1274 Inital Decision tice and the bek of leadership of the t"\yO respondents in question. A Chic.ago manufacturer indicated that although National's Hydrox Division had c.eased giving advance rebates in the form of loans several years previously, the practice had nevertheless continued in the market. The SlIlle witness identified hro large local companies as the tollghest': competitors in the are, 4. The rendering of financial assistance by ice CTeam manufacturers to dealers performs a, two-fold function, (a) it enables de,fllers to remodel, 1l0der lize or expand their operations, thus putting them in a better competitive position and (b) it helps increase the sales of the ice cream manufacturer through more modern fl1d expanded retail outlets. Counsel supporting the complaint suggests in his brief that it is not necessary for ice cream 111anufacturers to perform this function. \Vhile a small proportion of dealers might be ab1c to obtain credit at banks and regn1ar financial institutiolls for modernizing and similar purposes, a great many of the dealers do not have the financial standing or t.he necessary security required for bflnk loans. The only secnrity most of them have is the equipment in their stores \which banks \vould have diffcult.y in disposing of in case of default on the loans. The ice cream manufacturer, on the other hand, Cfln eit.her H:lnove the equipment to another location "\which he is supplying or can find a buyer for the establishment through his many contacts in the, industry.

The record demonstrates that the vast maj ority of the loans and other financial assistance is rendered to small and medium-sized dealers, and not to the large chains and supennarkets. The latter very infrequently ask for any financial assistance. They usually make their own arrangements "\with respect to financing or the purchase of equipment. Their primar, interest is in e(,Llring a fayorable price from the ice cream mHnufflCturer. lany o:f the outlets which receive financial assistance are so-called "rllamma and pnpa grocery stores, \yhieh desire to modernize their establishment in order to remain competitive "\ith the chain ancl supermarkets. Others are individually operated drug stores, which seck to modernize or expand in order to compete with the drug chains or other brge outlets. One small dealer characterized the ice crearn manufacturer as the dealer ace in the hole': when he gets into financial diffculty and needs help in a hurry. This attitude \yas eehoed by a llumber of other dealer "\witnesses.

The record contains numerous instances where as a result moc1ernizntion and expansion, dealers have increased their sflles ycry sllbstantia.lly, benefiting not only themselves but their suppliers. For 1340 FEDERAL TRADE COM:ISSIOX DECISIONS Initial Decision 60 F.

example, a loan to a dealer in Seattle by respondent Camation for remodeling purposes enabled the dealer to increase his gallonage by 150 per cent. A dealer operating a small confectionery establishment. in the District of Columbia was enabled, through a loan from respondent National, to open a new ice cream specialty shop in suburban Maryland which developed into a very large and succcssful operation. The latter dealer could not borrow the money required for this new enterprise from the bank and would not have opened his second establishment, but for the assistance received from his supplier. 5. As in the case or cabinets, the evidence upon which cOlilsel supporting the complaint relies fails into three categories, (a) statistical evidence as to amounts involved in financing, (b) testimony of competitor witnesses regarding the alleged competitive effects or financing and (c) testimony of dealers who allegedly received financial assistance. These are discussed below.

(a) Amounts Involved. Counsel supporting the complaint cites the large amounts spent by respondents in various forms of financial assistance, as indicative or the fact that small manufacturers are placed at a competitive disadvantage because or their more limited resources.

Berore indicating the extent of each respondent's commitments in financing, reference should be made to several questions which have been presented concerning the correctness of the computations used by counsel supporting the complaint. The first of these involves the inclusion, under the heading of financing, of loans made to dealers by banks or other financial institutions where a respondent has endorsed the note or otherwise guaranteed the credit of the borrower. This practice is not utilized to any significant extent by any of the respondents except respondents Arden Rnc1 CRrnation, whose financial assistance to customers by way of endorsement of credit exceeds the amount of direct money loans. It is contended by these respondents that since this does not involve any actual outlay of capital, as does the ll1aking of cash loans and the sale of equipment on a time-payment basis, the figures of a,mounts of loans guaranteed are not properly included under the categoT)' of financing. This argument finds support in the testimony of some competitor -witnesses whose objection to the making of loans or financing of equipment was based on the claim that they did not have suffcient capital available for such outlays. This objection does not exist to the same extent in the case of the endorsement of loans, unless there is any substantial amount of Joans on , CARNATIO T COMPA. ET AL. 1341 1274 Initial Decision which the borrower has defaulted. The record discloses, however that the losses on loans are almost infinitesimal. For purposes of convenience the examiner has concluded that the amounts of loans guaranteed may be included under the general category of financing. However, the amounts thereof will be specifically indicated where applicable.

The second category of assistance as to which some question has been raised as being properly included in the category of financing is what is designated in various areas as "Trade Agreements Performance Contracts" or "Advance Rebates." In substance, the manufacturer advances to the dealer a certain amount which is usually designated as a is agreed that if the dealer purchases a "loan." It given anlOunt of ice cream from the manufacturer or remains his customer for a given period of time the loan will liquidate itself. This practice is engaged in to a limited extent in certain large metropolitan areas and generally involves ne'\\, accounts. The manufacturer, in effect, estimates what the dealer s volume win be over a given period and gives him his volume rebate in advance. In some instances, however, the dealer may also receive his regular volume rebate in addition to the cash advance. In either instance, the smn advanced is really in the nature of a price cut given to t.he dealer in return for his purchasing a given amount of ice cream or remaining a customer for a given period of time, rather than a true loan. There is no evidence in the record that this practice has been used at a11 by respondents Foremost, Arden, Carnation, Pet or Fairmont. It has been used to a very limited extent by respondents ational, Borden Beatrice and Hood. vV11ile it is dubious whether the amounts involved in such advances should be included under the category of financing, the examiner has so included them for purposes of the computations hereinafter made, but the extent thereof will be specifically designated.

The final item which is the subject of dispute among counsel involves the amount of each respondent' s financially assisted gallonage. The figure which counsel supporting the complaint has used is a computed figure based on actual gallonage figures supplied by each respondent. Counsel supporting the complaint assumes that the period for repayment of the loans made by each respondent averages about three years and argues that the annual gallonage of each account should be multiplied by three in order to show the total gal10nagc which has been "induced" to deal with a respondent. In the case of 1342 FEDERAL TRADE COMl\fISSIOX DECISIOXS Inital Decision 60 F.

respondents Xntional, Borden and Foremost, sillce the gnJlonage figures supplied by these respondents only include sales made after the date of financial assistance (this being the only portion ,which can be said to have been "induced" in any sellse), counsel supporting the complaint. argues that the gallonage figures should be multiplied by six, on the assmnption that the a.venlge loan was made in mid-year. one of the assnmptions made by counsel supporting the complaint is correct. 'Yhi1c t.he terms for the repayment of loans and equipment purchased sometimes extends beyond a year, there are ycry few i11strllces in the record where the period extends as long as three years. 'Iost of sneh transactions invoh-e a period of eighteen months or less. This period of time is fnrthe.r reduced by the fact that in a number of instances t.he balances on loans or amounts clue on equipment are prepaid for one reason or another, including circumstances where the dealer switches to another supplier. There is no accurate basis in the record for estimating the precise average period for the repayment of JmlJS in the case of each respondent or for the respondents generally. Such evidence as there is would indicate that the period is doser to a year than to three years. In the case of respondents K ational, Borden and Foremost there is no basis for assuming t.hat the average loan is made in mid-year, since loans arc made at different times during the year and the gallonage of each assisted ncconnt may vary considerably. In any event, for purposes of demonstrating the order of magnitude of each respondent s financing operations on an allllual basis, which is counsel's apparent purpose, its actual financing commitments for a. particnJar year and thc annual gallonage of the financially assisted accounts (based on actual figures in the record) constitute f'c reasonably accurate measure thereof. These arc the figures which are herenfter used.

Set forth below is a table shm\'ing the amount commitJ.ed by each respondent. during the year 1955 for the financial assistanc.e of retail dealers in the manner preyiollsly desc.ribed, the number of accounts so assisted and the gallonage sold to such accounts. As previously inclicated, the gallonage fibrures of ational, Borden and Foremost include. the gallonage actually sold to the assisted accounts in 1955 after the elate of financial assistance, \yhereas in the case of the other respondents they also include 1955 sales rnac1e prior to the elate of financial assistance, __ CARNATION COYIPA:\ ET AL. 1343 1274 Initial Decision FINAKCI.:G- Dollar l\umher of I GaEOJ1Hge of among1t accounts accounts KationuL 1:33 510, 43(; 803 417 204 Boru('_ _'_H 2, 741 , 721 ' 3e7 435 174 Foremost 1848. 390 ()07 l08 Beatrice_- !745. 353 614 073 Only Arclen ;841 664 262, , 546 Carnatioll 1'194 31;2 323 947 Fairmont--_.- 4:JH, 043 ;410 :;15 025 Pel-- 116 58, 5tj 'IGO 230 Hood i 306 952 238 823 794 ! AIJove figures include lidvlllces or loans pnrsuunt to performance contracts, trade agrecment" alll simi:ar armngements amounting to :321 317 and illvolving 53 ae,counts with a gallonage of 39541. 2 Above figures include advances or lOiiis pursuant to trade agreements, etc. , nmounti.!lg to $02 199 alld involving 17: acco':nts with a gllllonagc of 119 21;5. 3 Above figllres include guarantees and endorsements of loans made by others, uUJOunting to 310 000 and involving a gallonage of 2 502.

j Beatrice figures are computed by projecting the actual figures for a fiye-market area, which it was stipulalell were typical. The computations are baser! on an average expenditure of $,()21 per g .llon for financing in the five-near ;:et area (which represents 18 per cent ortbe company s total gallonage and 17 per cent of its accounts). The figures include iidvances or loans pursllant to performance contracts and advanee rebates amoullting to Bpproximately $22 000 aud involving au estimated 22 iccounts with an approximate gallonage of40,Olin.

; A!Jove figures include gnilnmtees and endorsement of loans made by others amounting to S614 088 and in volvillg Ii g,,;loi igC of 276 , 7U4.

(Above figures include guarantees find endorsements of loans made by others amounting to S203, OOO and involving a gallonage of 16 6()5.

) These figures are coi:puted in part by a projection of actuiil figures representing equipment sales in II five-market area, aconnting for 11 per cent of the company s total gallonage. The record coutains "dual figures on a natioflf'1 basis for 101111accounts but not for accounts to wbom equipment ,vas sold. o The record contains information with respect to dolhr amount of sales to financially assisted accounts \.ut not the gallonage thereof. The gallonage figure bas !JeelJcomputed b)' dividing tbe amount of rloUar sales by tbc average cost per gallon of:31.60. i Above tgllres inclllle loans made to peddlers and vendjng machine operators amOIJIting to $100 242 and involving a gaiJonage of 36123S. Sblce sllc;b aec;ounts are more in the nature of wbolesale customers than traditional retail deal\' accounts, this irclusion tends to cxaggerate tbe figures. Also included are ioms made pursuant to trade agreements, aUioulltiIlg to :i;0, 'i5i1 and involving 126 aeounts with a gallonage of 211 954. Exeluclt'd from tbe totals are overdue amounts from retail accounts of $7 145, involving 19 257 gallons since these merely involve credit balances owL'lg from delinquent accounts which, for bookkeeping purposes, have been acklowledged by a note. The total amounts involved in the furnishing of financial assistance to reta-il dca-leis are obviously not insubstantial. Hmvever, like cabinet expenditures, such total figures establish nothing by themselves but are significant only in relation to the size of each company s operations. 'Vhether, as contended by counsel supporting the complaint they involve ml10nnts beyond the capabilities of the a,vcrag ice cream manufacturer can only be determined by relating each respondent's investment in financing to its total business. Using a figure of 8.3 per cent as being the percentage of dealers financially assisted by respondents (based on a misinterpretation of the K ational Analysts' survey ligures) and an assumed average- sized Joan of $2 000, counsel argues that a small manufacturer '\with 300 accounts "'vould have to furnish financial assistance to 25 accounts and expend $50 000 a year in order to be competitive with respondents. Aside from the question (which ,,,in hereafter be discussed) of ___ ________ _ ____ . Initial Decision 60 F.

whether the proper standard for measuring fair competition is what the small manufacturer can afford to spend, the actual figures in the record do not support counsel's argument. While the average amount invested in financing by some of the respondents is approximately 000, the percentage of financially assisted accounts in most instances is under 2 per cent, rather than 8.3 per cent, as the table below indicates:

Average Percentage amount of ofacl:ounts financial receiving assistance per financial account in assistance in 1955 1955:

Percent National___n__n nn_--_--------- ,--_--_--_un- 945 Borden_ 005 1.89 :ForenlOst.__---------- ------_----_n-- 030 1.20 Beatrice 105 '3, 210Arden 175 1.71CarrJation -______n______ 12, Fairmont...--.----------- --n----_---- --_n--_n------__ 065 Pet- 080 Hood______-------- ZIO J Computed by dividing total amount of financing by total number of accounts. I Computed by dividing total number of amounts served by number receiving financial assistance. ! Beatrice figures have been computed from the actual figures for the fivc-market area stipulated to be representative, rather than from the projected figures. j This computation is based on the Inclusion of the amount of loans guaranteed by others, where no capital outlay by Arden was involved. If the amount of such guarantees were excluded, the average amount figure would be reduced to $1 360.

5 'rhis computation is likewise based on the inclusion of the amount of loan guarantees. If tho amount thereof were excluded, the average amount figure would be reduced to $1 325. This figure is based on a comparison of accounts receiving financial assistance in 1955 with total number of accounts in 1952, that being the latest year for which the latter information appears In the record. Since the record indicates !. gallonage increase of over 2 million gallons between 1954 and 195., it may be assumed thc number of Fairmont accounts has increased substantially since 1952. On this basis the above percentage Is undoubtedly much higher than the actual percentage ,'..uld be if available. As is apparent from the above figures, the accounts which receive financial assistance from respondents represent a very minute fraction of the total number of accounts served by them" and the average amount involved in such assistance is relatively small. As will also be observed from the figures, the fact that some companies have a larger proportion of financially assisted accounts does not necessarily mean that they have a larger investment in financing. For example while Hood and Fairmont appear to have a larger proportion of assisted accounts, the average amount invested by them per account is smaller than almost all the other respondents. Although the above computations involve a comparison in terms of number of accounts rather than in terms of gallonage served, it seems clear that a comparison on the latter basis would also reveal the relative insignificance of respondents' financing operations. A precise computation on a gallonage basis is not possible for any of the respondents, other than CARNATION COMP "' ET AL. 1345 1274 Initial Decision Carnation and Beatrice, since the gallonage figures of financially assisted accounts which are in the record include all frozen products whereas the total gallonage figures are restricted to hard ice cream only (except for the two respondents mentioned). However, a comparison of figures of these two respondents, as well as a somewhat exaggerated comparison with total hard ice cream sales for the other respondents, indicates that in almost every instance the gallonage of financially assisted accounts represents well below 5 percent of each company s total gallonage.

(b) Oompetitor Testimony. More of the competitor witnesses were critical of the practice of assisting dealers financially than was the case with respect to the supplying of cabinets, although in a number of sections of the country there was almost no reference to financing. Much of the testimony was of a general conclusory nature, consisting of expressions of opinion and preference, with little reliable evidence that any of the respondents were leaders in the practice, had used it aggressively to acquire accounts, or had caused competitive injury by reason theroof. Typical is the testimony of a large Toledo manufacturer cited by counsel supporting the complaint, who expressed the opinion that the rendering of fu1ancial assistance to retail dealers does not help develop ice cream business and indicated that he opposed the practice. In contradistinction to this is the testimony of a Danbury, Connecticut, manufacturer who, after first expressing a preference ror not having to make loans, conceded that the smaller independent stores had to have financial assistance in order to obtain needed equipment. This manufacturer and others stated that the practice had been followed by ice cream manufacturers generally for a great many years. Not only is there no evidence that respondents originated the practice, but the evidence shows it was utilized in some areas before any of the respondents had entered them. In addition to such general expressions of opinion, some of the competitor witnesses claimed that they had lost business because of the practice and, in some instances, sought to attribute such losses to various of the respondents. For the most part such testimony was or an unreliable nature, consisting of hearsay and unsupported conclusions. In the relatively few instances where there was any reliable evidence that some of the respondents had given financial assistance to specific retail accounts referred to by competitors, the record generally fails to establish that the rendering of such assistance was a lO In the case of respondent Beatrice the percentage is 3. 52 per cent, while in the case of Carnation it is 3.10 per cent including the gallonage of loan guarantee accounts. The exaggeration in percentages which could appear if the comparison were with hard ice cream gallonage only is demonstrated by the fret that a comparison on the latter basis reveals the Carnation percentage to be 4. 84 per cent, as compared to 3.10 per cent. :: , :

1346 FEDERAL TRADE C011MISSION DECISIONS Initial Decision GO F.

atcl'ial factor in the respondents acquisition or retention of the account 01' that it l'csu1ted in c01npetitiv8 injury. Indicative of nature of the evidence upon which counsel supporting the cOlnplaint relies is that of the Toledo manufacturer referred to above. This witness at first testified that his company had been losing about 35 to 50 accounts per year because of, "\yell, competitive practices in which we do not engage-lnaking loans of money\ of course enabling a dealer to finance soda fountains and C0U11ters " J-lmvever, after this sweeping broadside, when the ,vitness proceeded to particularize ,,,it,h respect to sixteen accounts alleged to have been lost by his company, financing was claimed to have been involved in eonnection with only one account, and the vdtne.ss' testimony as to whether a respondent had assisted this account was pure hearsay. Furthermore, it developed on cross-examination that the "35 to fio accounts ,,,hieh the witness claimed he had lost every year was not fl, net loss but \yas normal turnover in a company having 1 600 accounts and that the company had actually gained more accounts than it lost each year. The record also discloses that the company in question has enjoyed a very substantial increase in the number of its accounts and in its gallonage during the post-war period.

Cut from the same cloth atc the broad-brush claims of the \Ya,shington, D. , manufacturer, \yhose testimony is quoted by counsel supporting the complaint to the effect that he had lost "ot.her customers': to ot.her companjes ' because of loans of money. Not only did the witness not identify the "other companies, but he c01l1d recall only it single account where a loan was a factor in the alleged loss, and there is not. a scintilla of reliable evidence in the record that any respondent had loaned the account in question anything. The company has gained more accounts than it Jost. 'Yhile its gallonage has not increased significantly during the post-war period this is also true of the respondents operating in the \Vashington area. The testimony of the other competitor ,witnesses referred to by counsel supporting the compla.int is similar to that discussed above. :Much of it is long in accusation (couched in broad general terms), but short in reliable proof when related to individual competitive situa tions cited in support of the geneml charges. In only a handful insta,Tlces is there any reliable evidence of financial assistance by respondents to any of the accounts referred to and in only a negligible fraction of these is there any reliable evidence to show 01(1t the financial assistance was a. material inducing factor in the choice of a respondent as a supplier. The testimony of these witnesses fa,jls to establish that respondents have used finane-ing on a substantial scale as an aggressive CARNATION CO llAA-Y ET AL. 1347 1274 Initial Decision competitive device 01' that respondents' use of the practice has resulted in competitive injury.

(c) Deedo'Testimony. A number of the dealer witnesses caUed by COlUlsel supporting the complaint had received fiuaJ1cial assistance from some of t.he respondents in the form of loans, sale 01 equipment or advance rebates. The respondents in\'olvecl in these transactions were ational, Borden, Beatrice, FOl'mnost or Pet. one of the dea.Jers called to testify had recci vecl fllancial assist.ance from respondent... Arden, Carnation, Fairmont or Hood. ' While thc fact that the dealers in question had receiyecl financial assistance from ce-rtain of the. respondents is not in dispute, in only a 1m\' instances does it. appear that the rendering of such assistance was an inducing factor in the dealer choice or a supplier. .For. example, or fite dealers call1 d in ,Ya,shington, D. , who had received loans from respondent ationnJ, four \were already dealing \with respondent K ational at the time of receiving the loan. One of these wa.s about to open an additional establishment and had received oirel's of loans froni a. 111111ber of other I1flllUfacturers but preferred to deal with National beca use of his long association with that company and its products at his existing location. The single pioneer account inyolvecl had chosen respondent National as his supplier after having had a conSUlller survey conduct eel (at his own expense), which indicated that National's brand ,vas the most popular one in the neighborhood, The dealer lwd reeeiyed simllar offers of loans from other suppliers, indllding one from a lnanufactul'er \vho was called as a witness by c011nsel supporting t.he complaint. Out of fourteen dealers "ho had receLveclloans in the New York City area, approximately four \were dealers who \fere. already purchflsing from the particular respondent. at the time of receiving the. loan from it. Three of the loans made to sn'itch accounts merely invoh' ecl the assumption of the balance of a. loan dne to tlw former supplier here the evidence discloses that. the account had decided to switch for reasons having nothing to do \with the loan, Of the five remaining ;\yitch accounts, only t\\o indicat.ed that the Joan had been a fact.or in their decision to s\fitch. J-Iowever, one of the latter two aec.ounts later became dissatisfied with respondent National (from whom it. hild rceeived a loan) and switc.hed back to his original local supplier, who assumed the balance of the loan due to respondent :I'rationnl and e,ven increased the amount thereof In the case of one dealer in t.he Philadelphia area who hacl received a loan from respondent National in connection with the opening of fl nenv est.ablishment, other evidence offered by could1se.1 supporting the complaint discloses that respondent 719-603--64-- Initial Decision 60 F:r.

National's offer was made to meet a competitive offer by a local supplier which had been brought to the respondent's attention. The foregoing demonstrates that a mere showing that a dealer has received financial assistance does not necessarily establish that this was the reason why he chose to deal with the company assisting him. In the case of existing accounts, there is almost no evidence in the record that the rendering of financial assistance acted as an inducement for such accounts to deal with respondents. In the case of switch accounts, while the evidence discloses that the furnishing of financial assistance did influence some dealers, others switched because they had become dissatisfied with their former supplier and had decided to switch to one of the respondents for reasons unrelated to tinancial assistance. Some instances involved merely the assumption of a balance due the former supplier on financing by him. Even in the case of pioneer accounts the furnishing of financial assistance is not necessarily the reason for the dealer s choice of suppliers. Several of the dealers had received offers of assistance from a number of suppliers but chose one of the respondents for reasons unconnected with financing. In some instances the dealers had sought out the respondent because of some basic reason for dealing with it and had not even been approached by other suppliers. The record establishes that some of the offers of assistance by respondents were made after it had been learned that similar offers had been made by competitors. 6. The statistical evidence in the record tends to place in proper perspective the sometimes exaggerated claims of certain competitor witnesses and the testimony of that segment of dealer witnesses whose choice of supplier appears to have been influenced by the receipt of financial assistance. These figures disclose the relatively small extent to which respondents engage in the financial assistance of dealers and the hct that the bulk of such assistance goes to their own existing accounts, where there is the least probability that it is being used as an aggressive competitive weapon.

The total financing figures of each respondent have already been discussed above. From these it is fairly evident that respondents are not engaged on any mass scale in the furnishing of financial assistance to c1calers. The fact that less than two per cent of the accounts of most of the respondents receive financial assistance in any year, representing a ganonage of a comparable order of magnitude, hardly suggests that respondents are engaged in any all-out effort to obtain business through the use of financial aid to dealers.

The fecord also contains other statistical evidence, ",hieh tends to confinn the conclusions suggested by the overall figures, concerning the Emited scope of respondents) use of financial assistance of dealer , CARXATION CO:\1PAc'n' ET AL. 1349 1274 Initial Decision accounts and the generally nonaggressive clm.racter thereof. These include a breakdown of the figures of financial assistance for some of the respondents as between existing, switch and pioneer accounts and also indicate the extent to which accounts obtained from competitors receive financial assistance. Set forth below are some of the figures appearing in the record. As will be noted therefrom, the information in the record concerning National is somewhat more extensive than that for some of the other respondents. However since that respondent does business over a wider area than the other respondents, and figured more extensively in the testimony of Government witnesses, it may be assumed that the trend indicated thereby is generally applicable to most of the respondents. (a) National. A study of the loans and of the sales of equipment pursuant to conditional sales contract by seven of the plants of respondent National's subsidiaries or divisions (serving such representative cities as Newark, New Jersey; l\Lemphis, Tennessee; Cincinnati Ohio; Pcoria, Illinois; Cleveland, Ohio; New Haven, Connecticut; and Providence, Rhode Island) reveals that out of 290 customers receiving such assistanco in 1954 and 1955 , 186 (or 64.3%) were old accounts and the balance were almost evenly divided between pioneer and switch accounts (18.3% being pioneer and 17.6% being switch)." The pattern above indicated is confirmed by a breakdown of the figures covering loans and financing of equipment by respondent National's Breyer Division, which does business over a wide area of the easte.rn United States, including such cities as New York, Philadelphia Washington, D. , and Richmond. Out of 542 accounts receiving financial assistance in 1954 and 1955, 360 (or 66.4%) were old accounts, 21 pcr cent were pioneer accounts and only 12.1 pel' cent were switch accounts. A similar pattern appears with respect to 42 accounts financcd by respondent National's Southern Dairies Division, during 1954 and 1955 , in acksonvil1e, IV est Palm Beach find :.fiami, Florida, as to which evidence.e was offered by counsel supporting the complaint. Of the 42 accounts involved, 32 (or 76.270) were old accounts, 8 (or 19%) were pioneer and only 2 (or 4.8%) were switch.

As is apparent from the above figures, the great preponderance of accounts receiving financial assistance are National's own existing fic- II It should be noted that the above computations differ from those proposed by re spondents, In that there is excluded from the category of old or existing accounts 35 accounts which received financial assistance during a period of from 30 days to one year after the account was acquired. It seems evident that some indeterminate portion of these accounts may be regarded as old accounts, although the exact proportion thereof cannot be determined from tlJe record, If all of them were Included in this category the perccntag-e of old accounts receiving financial assistance would be increased to 76 per cent, and the other percentages would be reduced proportionately. 1350 FEDERAL TRADE CO L\nSSION DECISIONS Initial Decision 60 F.

count, which ",YQuld indicate that the great majority of loans are made defensively or are nonaggressive in character. This does not necessarily mean that the remainder are aggressive in chal'llcter, since the eTiclence indicates that many pioneer and switch ncconnts who receive Iinancial assistance choose their supplier for reasons l1lllllnecied ,,,ith financing.

The above figures must, also be viewed in the light of the fact that the order of magnitude of all accounts l'cceiying financial assistance is only about two per cent pel' year of the entire l1mnber of accounts served. 'Vhile the record contains no informat.ion as to ,,,hat proportion of the entire number of accounts added each year receive financial assistance, such infonnation is available \"ith respect to switch accounts. Evidence offered by counsel supporting tite complaint indicates that respondent National made D5 loans to switch accounts in 195:2 and financed the sale of equiplnent for 27 accounts in the same year, The accounts receiving such loans represented only 1. 8 per cent of the total nunlber of accounts acquire,d by ational from competitors in D5:2, and those receiving financial assistance on tho purchase of equipment represented only 0.5 per cent of the total number acquired from competitors in the same year. (b) B oTden. 'Vhile the information in the record with respect to Borden is not as e,xtensive as that pertaining to X ational, it appears to follow a similar pattern. Thus of 18 transactions involving loans or conditional sales of equipment to customers in Jacksonville and :!\ia.mi, Florida, as to which evidence was offered by counsel supporting the complaint, a1l but two were to existing accounts of Borden. The two exceptions involved s\vi.ich accounts where Borden merely refinanced the balance of it loan received from a competitor. Likewise, it a.appears that the 85 loans shown by counsel supporting the complaint to have been made to switch a,accounts in ID52, and tbe 102 loans ma.de in 1953, represent only 1.5 per cent anell.7 per cent respectively, of the total number of accounts acquired froln competitors by Borden in each of these years.

(c) Beatrice. The record discloses that in a five market area, stipulat.ed to be typical and including the cities of Chicago Des j\1oines Omaha, Cincinnati and Ka.nsas City, existing accounts accounted for 88.5 per cent of the gallonage of itll accounts receiving financial assistance in 1955 (not including financial assistance in the purchase of cabinets) .

12 Since tile gallonage of accounts purchasing cabinets is only 17,694 out of a total ussisted gallonage of 314, 252, it seems evident that this exclusion would. not materially affect the above.indicated percentage.

CARNATION CO:MPA::I" ET AL. 1351 1274 Initial Decision (d) F OTenwst. In the case of respondent Foremost, evidence offered by counsel supporting the complaint discloses that it made only four loans per year to switch accounts in 1952 and 1953. Since the record contains no information as to the total Humber of loans made 1n t.hose years, it is not possible to compute the exact percentage which these represent of all loans made. IIowever, on the basis of a, comparison with the number of loans lTmc1e in 1954, this would represent only about 15 per cent of the totnJ number of loans. (e) Pet. Out of a total of 9610Hns made by respondent Pet in 1954 and 1955, 61 (or 63.5%) were made to old accounts, ;:7 (or ;:S.l %) were made to pioneer accounts and only 8 (or 8.3%) "-'cre made t.o switch accounts.

(f) Fair1n,ont. Evidence with respe.ct to a. five-city area in which Fairmol1t does business discloses that out of 31 loans made during the fiscal year ending February 28 , 1956, all but two were made to existing accounts. One of the latter \fas made to an account. which switched to Fairmont because of a. preference for its advertising and merchandising program, and the second 'was made to the new owner of an existing store which had previously been served by respondent Borden.

Similar st.atistical information does not appear in the record with respect to the remaining respondents. Ho,,' evet, there is no reason to beheve that the financial assistance rendered by them is not also furnished primarily to existing accounts. Offcinls of several of them testified that it was their policy to assist mainly their own accounts a.nd not to seek to obtain competitors' accounts by offering financial assistance.

Counsel supporting the complaint has suggested that loans to existing accounts may also be a.ggressive ineharacter, by seeking to hold accounts which may he interested in switching to a competitor. There is, however, no substantial and reJiablc e"idence in the record to support this thesis. The overwhelming portion of the complaints of competitors dealt with accounts ,which they hacllost, rather than with those ,,,hieh they sought to obtain from a respondent. \Vhile there were it few accounts falling in the latter category, there is no reliable evidence that the receipt of financial nssistance from a respondent was responsible for such accounts not s,,' itching to a non respondent competitor. On the contrary, the record contains a number of instances of dealers switching to a. competitor despite the receipt of financial flssistrmce from a respondent.

Initial Decision 60 ,' 7. Additional evidence of the limited role played by financial assistance, in the choice of suppliers, appears in the report of National Analysts, Inc. (previously referred to at page 1329, par. 10). The report which is in evidence covers not only the general survey of 1 331 dealers discussed in connection with cabinets, but a separate survey of 405 dealers all of whom had received financial assistance in 1954 or 1955. The results of both surveys indicate that the rendering of financial assistance plays a minor role in the dealer s choice of supplier. In the general survey, which covers dealers without regard to whether they had or had not received financial assistance, the furnishing of financial assistance by a respondent was referred to as a factor in the choice of supplier in a total of 6.8 per cent of the brand mentions." This result was produced by responses to three questions. The first question was a general "open end" question of why the dealer was handling his present ice cream brand or brands. In response to this question financial assistance from a respondent was given as a reason in 0.2 per cent of the situations involved. The second question also of the open-end type, as to whether there were any other reasons involved, produced the result of 0.5 per cent in which financing was referred to as a reason. The third question utilized the "aided recall" technique and involved showing the dealer a printed card containing a list of possible reasons for choosing their present brand, including that of financial assistance, and asking the dealer which of these were of importance in handling their ice cream. This question produced the result of 6.1 per cent, in which financial assistance from a respondent was referred to.

The above results are of interest not merely bec tise they indicate the limited role which fmancing plays in the choice of a supplier, but because of the fact that the results with respect to dealers handling the brands of nonrespondents were not significantly different from those applicable to respondents' dealers. The totals with respect to nonrespondent dealers who referred to financing as a reason were 8.0 per cent, as compared to 6.8 per cent for respondents' dealers. The total for all dealers, respondent and nonrespondent, who referred to financing was 7.5 per cent.

It is apparently on the basis of this result that counsel supporting the complaint makes the argument, previously referred to, that 8.3 per cent of al1 dealers are financed and that a manufacturer in order to be As previously noted, the results of the SlirYey are g-cnerally expressed in terms of' brand mentions, Le., brand- dealer combinations, mtller than In terms of the number of dealers, because of ' the fact that some dr;alers handle the products of more than ODe supplier and more than one brand of ice cream. CARNATION COMPA."\ ET AL. 1353 1274 Initial Decision competitive must have capital suffcient to finance that number of accounts. Aside from a question as to the accuracy of the percentage used by counsel, the above figures do not establish that at any given time a manufacturer must be prepared to finance the percentage of his accounts indicated thereby. Some of the dealers interrogated had been financed as far back as 1947 and had paid off their obligation. 'Vhile they may have referred to financing as a reason, there was no financial obligation outstanding as of the tinlC of their interrogation. The results of the survey do not indicate what proportion of this group of dealers actually had a financial obligation outstanding at any given time, but merely that at some undisclosed period they had received financial assistance from a supplier. The 6.8 per cent figure for respondents' dealers, it should be noted is an optimum figure which includes any reference to financing as a reason by a dealer, even though it may have played a very minor role in the dealer s choice of supplier. To establish the relative importance of the reasons assigned, the deniers ",ycre asked to review the reasons given by them and to indicate which was the most important and which the second most important, reason for handling their present brand. The results were 2.1 per cent in which financing was given as the most important reason and 1.3 per cent in which it was the second most important reason. These results indicate that for most of the dealers who referred to financing it was not a reason of the first magnitude.

The second survey involved 405 dealers who had received finaucial assistance from respondents Arden, Beatrice, Borden, Carnation and National during 1954 and 1955. These were selected on a random sampling basis from a list of dealers who had received financial assistance froln the five respondents during these two years. By the time they were interviewed 33 of the dealers were no longer handling the brands of thc respondent which had assisted them. An additiOJud 28 of the dealers were ha-ndling the brands of other manufacturers, as wen as those of the respondents assisting them. Because of the multiple brands handlcd by some dcaJers thcrc were 517 brand-deaJcr combinations among the 405 dcalcrs intcrvicwed. The dealers were interrogated in a manner similar to that used in the general survey. In response to the question of ",yhy they were handling their present brand or brands, 6.0 pcr cent of the dealerbrand combinations involved referred to fina.ncing as a reason; in response to the follmy-up question of ",Yhet11er there were any other reasons, an additional 1.0 per cent referred to financing; and in response to the "aided reea.1I" question in which the dealers were shown , .

1354 FEDERAL TRADE COMJ.1JSSIO DECISIQ),TS Initial Decision 60 F.

a card cont, ining a list of possible reasons, including fimllcing, 9. per cent mentioned financing.

"'VhiIe the aggregate of the responses, 16.6 per cent, is somewhat higher tha.n t.hat in the general survey, this is not surprising considering that all of the dealers had been finaneia11y assisted. The results do not sustain the position of counsel supporting the complaint that all or snbstantiaJly a11 financially assisted dealers choose their supplier on the basis of sllch assistance. It must also be observed that the above figure is an optimum figure since it includes all references to financing even though it was a. faetor of the low-est order of magnitnde in importance. In this connection it should be noted that "hen the above group of dealers was asked \\which of the reasons given was the most important and which the second most important, rcfrTenres to financing were, respect.ively, 5. 4, per cent and 4-.0 pel' cent. Finally, in order to keep the above re.suits in proper perspective, it must be recalled that the entire body of financially assisted dealers themselves constitute only a very minor fraction of each respondent's total number of nceounts.

8. As in the case of the supplying of cabinets, an essentirl1 element. of the complaints, \\ith respect to the furnishing of financial assistance, is that it OCCllrs in a context of exclusive dealing, i. , that it is done pursuant to agreements which call for the exclusive. handling of a respondent's pro(lucts or that because of the nature of the industry the furnishing of financial assistance by a respondent necessa.rily results in the exclusive handling of its products. These allegations are considered below.

(a) Exclu.si"ue Dealing AgreeTltents. The record discloses that it is customary for nlost mannfncturers to enter into a. \written ngrccment with a. dealer to ' whom they furnish financial assistance. The forms of agreement used by respondent \yhieh are in evidence indiente that there is consi(lerable variance furlong them nnd even among diH'cTent plants of n particular respondent, insofar as a requirement that the (len1er handle only the products of the respondent giving him fllancial nssistancc is roncerned. Set forth below" is 11 brief analysis of the forms of agreement used by the \' arious respondents, \\ith particular reference to "whether they contain a requirement for exclusive dealing.

(1) Oanw, tion. The record contains two executed conclitional sales contracts covering the sale of equipment to dealers in Phoenix Axizona and Seattle, \Vashington, both of which require the dealer to purchase Carnation products until the equipment is paid for. There, is not.hing in e,ithel' agreement. to prevent prepayment of the monthly installments CARNATION COMPA.1\ ET AL. 1355 1274 Inital Decision provided for. In fact the Arizona agreement spec.ifica.11y provides that it may be terminated at any time by payment of the balance due. In addition to these executed agreements, there are also in evidence unexecuted forms of eonclitional sales agreements used in Texas, Oklahoma, ,Vasbington and Oregon ,which require the dea-Icr to purchase his frozen products exclusively from Carnation until the equipment is paid for. There is noth.ing in any of the agreements to prevent the termination thereof by prepayment of the balance due" ,Yhile the 1\.1'izon8- and ,Vashington agreements referred to above contain exclusive dealing provisions, there is also in evidence it form of conditional sales agreement used in both st.ates which does not contain such provision, although it does provide that only Carnation products ,vill be stored in the equipment sold. A form of agreement used in California, lik81",jse contains no exclusive dealing provision but does provide that during the term thereof the equipment sold may only be used to store Carnation products.

The above agreements all pertain to the sale of equipment on an installment basis. ,Vhile Carnation also renders financial assistance in t.he form of money loans or gnrLrant.eeing bank loans) there are no agreements covering such transactions in evidence. It cannot therefore be determined whether they provide for either exc.11sive dealing or e,xcJusive storage.

(2) Borden. There are several unexecuted for11s of loan agreelllent in e,"ic1enee used in the, K ew Yark and N 8\V Jersey markets, which conblin a provision that during t.he term thereof the dealer will buy his frozen products requirements exc1usi very from Borden. These agreements purport to be for a fixed term, but the range of the duration of the term thereof does not appear from the record. Some of the agreements provide for repayment of the loan by a surcharge. on ice cream purchases and others provide for fixed monthly installme, payments. It does not appear from the record ,whether agreements similar t.o these lire used by Borden in connection 'lith the making of loans in any of rhe otl181' numerous marke,ts in which it does business ot,her than :Ke') .York and XC\\ Jersey, or whether1' the agreements in evidence are typical of those used elsewhere. There are also in eyidence fanns of conditional sales contracts used by Borden in eonncctioll with the sale of equipnwllt in K ew Y ark Jersey, 'Yisconsin, Imnl nnd Indiana. These provide that the dealer ,will purchase frozen products exclusindy from Borden during the t.erm of the Rgreemellt. The range of the duration of the term of such agreements clocs not apl)ear in the rec,ord. 1,Yhile requiring the exclusive h:mc11ing of Borden products during the term 01' the agreement Initial Decision 60 F.

some of the forms (including those used in New York, )few Jersey, and Indiana) permit termination of the arrangemcnt by prepayment of the balance due.

In addition to the agreements used in connection with the sale equip1nent in the states above mentioned, there are also in evidence agreements used in Florida and California, which contain no provision for the exclusive purchase or storage of Borden products. There is no evidence in the record with respect to whether agreements used in connection with the sale of equipment in the many other states in which Borden does business, other than those referred to above contain exclusive dealing provisions.

(3) Beatnee. The record contains evidence of two forms of loan agreement used in New Yark City and two executed agreements used in Evanston, Illinois, all of which contain exclusive dealing clauses. One of the K ew York forms provides that the dealer wi1 purchase his ice cream requirements exclusively from Beatrice for a specified period whiJe the other provides for exclusive purchase during the period of repayment of the loan. However, there is also in evidence a third form of agreement used in :New York which contains no exclusive dealing cJanse, but merely provides that the dealer win purchase ice cream manufactured by Beatrice (the amount required to be purchased being unspecified), until the loan is rcpaid.14 Of the two Evanston agreements, one is for a definite two-year term, while the other requires exclusive purcha,se of Beatrice s ice cream for two years or until the loan is repaid. There is no indication in the record as to whether loan agreements used by 'Beatrice in other parts of the country contain exclusive dealing provisions.

","while some of the loan agreements discussed above contain exclusive dealing provisions, there is no evidence that any of the agreements used by Beatrice in connection with the sale of equipment contains such a requirement. There are three forms of conditional sales agreement in evidence which are used in )luncie, Indiana; Galesburg, Ininois; and Great Falls Iontana, none of which contains any exclusive provisions. .While an earlier form of agreement used in Montana did contain such a provision, it has not been used since 1947. (4) NatiOnll. The record discloses that some of respondent National's divisions use agreements in connection with the making of Of 24 loan tran actions In the Xew York area, five Involved the use of the third form, which does not require the exclusive purchase of Beatrice products. It may also be noted that the perlod provided for repayment of the loans was one year in the case of 11 of the loans, 18 months in five instances, two years in 7 instances and three years In only a single transaction. It is also of interest that the majority of the transactions Involved thfJ aClJuisition of accounts from a respondent competitor, mainly from respondent National.

, CARNATION COMPANY ET AL. 1357 1274 Initial Decision loans which contain exclusive dealing provisions. Evidence of such agreements involves the Breyer Division in New York City and Philadelphia " Consolidated Dairy Products Division also in the New York area, General Ice Cream Division in Upstate New York and New England, Clover Farm Dairy Division in Mississippi and Tennessee and Detroit Creamery Division in Michigan. Some of these agreements require the dealer to purchase his exclusive requirements of frozen products only until the loan is repaid and some provide for purchase for a specific period. The terms of the agreements vary from a period of months to as long as five years. Outside of the agreements used in the above-mentioned areas, there is no evidence as to what types of loan agreement are used in the rest of respondent National's far- flung operations.

There is also in evidence a series of forms of conditional sales contract used by various divisions of respondent National in connection with the sale of equipment in New York, the New England States Iowa, Nebraska, Wisconsin, Illinois, Tennessee, Arkansas, Michigan Missouri and I(ausas. These agreements all contain a provision requiring the exclusive purchase by the dealer of the products of respondent National or its divisions. The duration of such requirement varies. In some instances the requirement is to remain in effect until the equipment purchased has been paid for. In others the duration of the agreement is for a specific period of time or until the payment of the purchase price has been completed, whichever event occurs later. Others provide for a fixed term or until a specified amount of ice cream has been purchased whichever period is longer. The fixed term referred to in these forms varies from one year to five years. It does not appear whether agreements containing similar provisions are used in any of the other states where National does business.

(5) Arden. The only documentary evidence reflecting the type of agreement used by this respondent in the making of loans is three actual agreements with dealers in Portland, Oregon, and one with a dealer in Battleground, Vit ashington. A11 four agreements provide that the dealer will purchase his entire requirements of ice cream from Arden during the term of the agreement, which term is specified to be until the loan is fully repaid but not in excess of a specified period of time. There is no evidence as to the provisions of loan agreements used by respondent Arden in any other area in which it does business including those where evidence was offered against it such as Seattle 15 The record also contains such an agreement involving the Breyer Division In Washington C. However, the use of this agreement was abandoned:ln 1953. 1358 FEDERAL TRADE COJ'vIMISSlO DECISIO Initial Decision 60 F.

'Vashingtonj Houston, Texas; Phoenix, Arizona.; and 'Vashington ne.

There are two forms of agreement in evidence used by respondent Arden in connection -with the sale of equipment under' conditional sales eon tract. One is a blank form of n.gree.ment used in .Arizona and the other is an executed conditional sales agreement entered into with a dealer in Bellinghrun, 'Vashington. Keither agreement contains any provision requiring the exclusive purchase of Arden products or the exclusive storage of such products in the equipment purchased. (6) F01'emost. The record contains documentary evidence "ith respect to only 1:,,0 loan transactions involving respondent Foremost. The first of these is an agreement entered into in connection with the making of a, loan to a dealer in N my York City in K Q\Tcmbcr 1 D52 and provides that during the term thereof t.he dealer will purchase from Foremost all the ice cream products sold by him. There nothing in the, record to indicate whether Oils executed agreement is typical.1 of other agreements used by re pondent Foremost in the New York area or elsewhere, in connection ,,'it.h the nlfking of loans. The other documentary evidence involves a loan transaction with dealer in Te.xas and consists of a promissory note ancl chaUelmortgage, neither of -which contain any provision that the dealer will purchase his ice cream requirements exclusively from Foremost, or any ot.her provision of an exclusive nature. There. is no evidence in the. record concerning the type of agreement used elsey\here in the United States by respondent Foremost, in connection with the making of money loans to c.l1stomers.

The rec.orci does contain several conditional sales agreements llsed by respondent Foremost in connection ,with the scalp of facilities or other equipment on n. time-payment basis. Those llsed in the. Florida area do include a provision that the dealer wi1J purchase a1l of his rC'luirements 01 frozen products from Foremost until such time a.s the conditional sales contract. is c.ompleted by payment of the purchase price 01 the equipment. However, several other agreements which nre in evidence., involving tbe sale of equipment in the I10uston and Dallas areas, contain no provision "ith respect to exclusive purcha.se or exclusive storage of Foremost products.

(7) Pet. YVhile there are seve.ral agreements in evidence involving the making of loans by respondent Pet, none of them contains any requirement. that the dealer will purchase exclusively from that company. There are also several forms of agreement in evidence 111vo1\' ing the sale of equipment 011 11 time-payment basis but, ,,,ith one exception, none of these contains any requirement as to the exelllsive , , ,, CAR:0 ATIO:: COMPA. Y ET AL. 1359 1274 Initial Decision purchase or storage of Pet products. The one exception involves a form whicll was discontinued in 1952 and was used only in Pefs "Tisconsin operation which was sold in 1854. (8) Fairllwnt. There are no agreements in eviclenee involving the making of money loans by respondent Fairmont, and there is no basis for any finding that this respondent requires the dealers to ,v11om it makes loans to purchase their ice cream requirements exclusively from that company. The record does contain several forms of conditional sales agreement in evidence which are used in connection with the sale of equipment by Fairmont on a time-payment basis. One is a form used in Nebraska, Illinois, l\Iiehigan, and \Visconsin, and the other is a form used in Ohio and Texas. Neither form contains any provision obligating the dealer to purchase his ice cream requirements exclusively from Fairmont. However, both forms require that the equipment sold be used solely for the storage of Fairmont products purchased from that company. "Thile the agreements are for a term OT three years, it has been stipulated that the above provision with respect to storage of Fairmont products in the equipment was never enforced after the purchase price had been paid in fu U. (8) 1100d. The only agreement inyolving respondent Hood in evidence is a so-ca.llecl "Trade Agreement" which provides that respondent Hood will loan the dealer $2 500 'ith the understanding that if t.he dealer is purchasing its entire requirements of dairy products from the company on the due date of any of the annual payments required t.hereunder, he will be excused from such payment and the principal sum wi1 be reduced proportionately. 'While the record establishes that this agreement is typical of other "Trade Agreements" entered into by the company, it does not appear, hat forms of agreement, are used in connection ,,-ith ordina.ry money loans or in the sale of equipment on a time-payment basisY Accordingly no finding can be made as to whether the latter forms of agreement contain any exclusive provisions.

(b) Pro,cticol Operation. The foregoing indicates that there is considerable variance in the forms of agreement used by respondents insofar as exclusive dealing provisions ate concerned. In the case of some of the respondents the evidence fails to disclose that they use such provisions at all. SOllIe of the respondents use such provjsions in connection with loans of money, but. not in connection with the sale reve1'se is the case.of equipment. In the case of some respondents the '\Vhile some respondents maIm use of agreements containing such la Tbe record discloses that financial assistance through the use of trade agreements constitutes only 13. 2 pcr cent of the entire ll!lOunt of financial assistance hy Hood in 1D55. Inital Decision 66 F.

clauses in some areas, there is no evidence that they use them in many other areas where they do business. There are also wide differences in the terms of such agreements, both among respondents and among the different plants or divisions of particular respondents. In some instances such arrangements can be tcrminated forthwith by repayment of any balance due, while in others the agreement continues for a theoretically fixed period despite repayment. In actual practice, however, the inclusion or non-inclusion or such clauses appears to have little practical effect on dealer-supplier relationships. The relationship between dealers and those respondents ,,,ho have entered into exclusive arrangements does not appeal' to differ significantly from that existing between dealers and other, or the same respondents where such agree-ments have not been used. Likewise the relationship between respondents and their financially-assisted dealers does not appear to differ from that existing between dealers and nonrespondent ice cream manufacturers generally, a number of whom also make use or exclusive dealing agreements. Thc record discloses that dealers win split their frozen products business, despite the receipt of financial assistance from one of their suppliers and despite a contract requiring the exclusive purchase of the products of that supplier. It also appears that dealers ".in switch from a supplier despite the rendering of financial assistance by that supplier, even though there may be fU1 unexpired contract requiring them to purchase the supplier s products for a given period of time. ,Yhile it is the usual practice for dealers to pay oil the balance of any outstanding financial commitment to a supplier before s"\vit('hing, tills does not appear to raise any significant barrier to the switching of dealers. In most cases there are a number of other suppliers in the market ready, willing and eager to assume the balance of any outstanding amount due the former suppEer and to arrange for the dealer to make payments to the new supplier or, in some instances the dealers themselves will payoff the outstanding balance at tbe time of switching to a new supplier. The record discloses that losses from the furnishing of financial assistance to dealers are negligible. In fact since interest at current rates is now generally charged, the furnishing of such assistance has its profitable aspects. Although the complaints challenge the practice primarily because of the exclusive dealing aspect thereof, there was almost no reference to the latter feature in the testimony of competitor witnesses. To the extent that competitors were critical of the practice, their criticism was directed at the practice as such, particularly at the expense attendant thereon, rather than at the fact that it involved exclusive CARNATION eomp A1"Y ET AL. 1361 1274 Initial Decision dealing. This likewise appears to be the position of counsel supporting the complaint, whose criticism of the complaint practices is based on the fact that they result in "very expensive competition ' to the smaller companies.

The position of counsel supporting the complaint with respect to the exclusive dealing issue is that irrespective of any formal understanding as to exclusive dealing, the very act of financing a dealer results in "captivating" the account. This argument is apparently based on the single-dealing tradition which prevails in the industry and the sense of obligation which financial assistance allegedly instills in the dealer. In the opinion of the examiner any argument based on the single-dealing tradition in the industry is largely selfdefeating. To the extent that a dealer, because of space limitations or custom, normally handles the prod1Jcts of only a single manufacturer any agreement which requires him to do what he is already doing is so much surplusage. This self-evident fact was taken note of in the testimony of a Portland manufacturer who indicated that he didn t usually require dealers to whom he sold equipment to handle his products exclusively since most dealers in the area normally handled only a single supplier s products. l\:foreover, he expressed the opinion that such agreement.s had little value anyway since " time they want to pay us up in full they can pay us in fun and kick us out.

The argument based on the dealer sellse of "moral obligation toward the Inanufacturer likewise has little merit, insofar as establishing that the furnishing of financial assistance to a. dealer necessarily tends to tie up the account on an exclusive basis. Counsel supporting the cOlllplaint cites in his brief the testimony of a Knoxville dealer (which appears only in thc Pet record), to the eiIect he felt a sense of "obligation" toward Pet because of a loan which it gave him. However, the testimony of the same witness, as well as that of other dealers called by counsel supporting the complaint indicates that any sense of obligation which stems from financial assistance received by the dealer is a slender reed upon which to rest a dealer-supplier relationship. Continuance of such relationships as has been heretofore indicated in the discussion of cabinets, rests on the dealer s total satisfaction with the supplier s product, price and service. Should dissatisfaction arise for any reason, the fact that the dealer lias received financial assistance has little effect, so far as appears from the record, in holding him. It is noteworthy, in this connection, that despite the loan from Pet, the deale!, to, whom Initial Decision 60 F.

coullsel makes reference Inter took all respondent. ationaFs ice cream in response t.o consumer demand.

The ephemeral and mercurial nature of dealer-supplier relationships is amply demonstrated by the following examples of dealers who switched away from respondent or split. their business, despite the receipt of financial assist.ance and, in some inshmces, despite unexpired exclusive agreements:

(1) The operator of a drug store ill Charlotte, North Carolina switched to L local N Drth Carol inn COIU pany from respondent N tianal when he uecmne disappointed at the. rebates he hful received from the 1ntter, despite the fact that there was all unexpired exelusin'l dealing agreement in effect at the time. The a.agreement provide,d that the dealer \"ould buy all of his dairy requirements from ational until payment of the pl1rc1wse price of a. soda fountain sold to him by National or "until the specified due date of the last installment of said purchase price, whichever is later." The denier himself paid off the balance due and s\"itchecl despite the fact that some time remained before the "clue date of the last installment." It is noteworthy that the dealer in question, like a l111mber of other dealers who testified, was not even aware that the agreement ho had signed cal1eel for the exclusive handling of National' s products for n specified period, nnd completely ignored this prov1slo11.

(2) The operator of a grin and soda shop in \Vinston-Salem, North Carolina, switched from respondent Kational to the samo local North Carolina, company mentioned above, despite an llnexpireclloan agree ment with N at-ional. The ne\v supplier enabled the dealer to pay off the balance of the National loan and even loaned Lhe dealer an additional amount.

(3) Of 1.1: dealer witnesses ca.lled by counsel supporting the complaint in New York City who had receiveclloans from a respondent at least five later switched to another supplier despite an outstanding lmlance on the loan. In four instances the l1my snppJier enabled the dealer to pay all the ba.lanee (even increasing it in OIle case) and in the fifth, the dealer himself paid off the balance. Since the respondents involved in these transactions " ere a.tional and Borden and since the record discloses that both use exclusive dealing agreements in connection ",with the making of loans in the New York area it seems probable that. the switches above dis( nssed occurred despite the fact t.hat. such agreements had been e,entered into by the dealers. (4) The O\\ller of II drug store 111 Pittsb1lrgh ",'Iho had switched to respondent Kational after receiving a loan from it, switched back CARNATION COMPAJ ET AL. 1363 1274 Initial Decision to his former local supplier within six months thereafter, despite the fact that it substantial balance relnained on the loan, because customers in the area favored the other brand. The local supplier enabled the dealer to payoff the balance of the National loan and even loaned the dealer an additional amount. (5) A dealer in Evanston, Illinois, who had switched to respondent Beatrice from a local supplier because the latter refused to 1l1anufacture ice cream for him under a private label and who had obtained a loan from Beatrice (most of which was used to payoff the balance of a loan from the local supplier), switched back to the local supplier within a year, despite an outstanding exclusive dealing agreement requiring t.he purchase of Beatrice products for two years. The switch occurred because of dissatisfaction with Beatrice s ice cream and the dealer had no diffculty in obtaining a loan from the local supplier to enable him to payoff the balance due to Dmttrice, the other supplier even increasing the amolUlt thereof.

(6) The above aU involve instances of dealers, who had been iinancially assisted by a respondent, switching to another supplier dcspjte the fact that there was still a b:l1ance owing and, in many instances despite an unexpired contract. There are likewise a number of instances of dealers splitting, despite the receipt of financial assistance from a respondent. One has already been referred to above, involving a dealer in I\:noxvil1e who added :N ationaFs ice creanl in response to customer demand, despite l loan from Pet. The largest loan lllade by Arden in Seattle was to an account which was split among three suppliers. Tho largest loan (a guaranteed loan) made by Arden subsidiary in Houston like\yise was made to a split account. Respondent Beatrice made a loan to a dealer in Evanston who was splitting his business between Kational and another supplier. Beatrice replaced ationnJ as a supplier in this instance, but the dealer continued to cleal with his second supplier despite an exclusive dealing provision in the loan agreement with Beatrice. In the Florida area a dealer for whom National had financed a soda fountain continued to buy a portion of his requirements frolll another supplier.

The record does not contain a single instance where a respondent has sought to hold a dealer to an a.agreement, made in connection with the rendering of financial assistance, which required the dealer to handle the respondent's products exclusively or otherwise for any particular period of time. So far as appears from the record respondents have permitted such dealers to terminate the relationship with them or to split their business with another supplier without bringing any legal pressure to bear. The sole incident in the record of anyone seek- 03--64-87 1364 FEDERAL TRADE COMMISSIQX DECISIONS Initial Deci::ion 60 F.

iug to hold a dealer to such an agrecmcnt involves a nOlll'csponclent competitor witness in Philadelphia, who threatenecl to bring suit in order to prevent a dealer to "ham he hacllnacle a loan from switching to a respondent.

The Jack of captivation resulting from financing, "which the abovecited examples of individual accounts suggest, is confirmed by statistical information of a somewhat more extensive llnture ,which appears in the record. Thus, the National Analysts' survey of dmdcrs who had rccei\Ved fia,ncial assistance frolll respondents during 1D54 and 1D55 discloses that 38.1 per cent of thc dealers involved had been lost or split by 1955, and 55 per cent were still operating and handling the same brand, while 6.9 per cent could not be interviewed. This accords with a separate analysis of the dealers of respondent N at.ionars Breyer Division, which discloses that of 223 dealers ,,110 had received financial assistance in 1954, 37.2 pel' cent had been lost by April 1957 , and out of 319 dealers similarly assisted in 1955 25 per cent had bccn lost by April 1957. A similar pattern appears with respect to a group of 42 dealers of ational's Southern Dairies Division in Florida who had received financial assistance in 1955. By early 1957, 30.95 per cent of these accounts had been lost. These figures indicate L substantial lossrate among financially assisted accounts. ,Vhat is even more significant, however, is the fact that according to the uncontradicted and credited testimony of offcials of Beatrice, Borden and National, the loss-rate among financially assisted accounts is no lower than that which exists among non-assisted accounts.

It seems evident from the foregoing that the furnishing of financial assistanco to dealers, with or without any understanding as to exclusive dealing, does not result in the tying up, holding or "ca.pt.ivating of accounts to any significant degree.

9. Based on the foregoing, and the evidence as a ,whole, it is concluded and f01md that:

(a) The record fails to establish by a preponderance of the reliable probative and substantial evidence tlmt any of the respondent.s has attempted to induce or has induced reta.il dealers, to any significant extent, to handle, store and sell such respondenes products, exclusively or otherwise, by making loans of money, guaranteeing loans by others or supplying or selling equipment on a time-payment basis or other- WIse.

(b) \Vhile respondents do loan money to customers or guara.ntee loans, and do supply or sell them equipment, on a. time-payment basis and otherwise, their practices in this regard are in accordance with long-established industry practices. Such assistance is rcnde.rec1 pri- , CARNATION CO:MPA.1\ ET AL. 1365 1274 Initial Decision marily as a service to dealers to enable them to increase and expand their sales of frozen products. The evidence fails to establish that any of the respondents has used the furnishing of such assistance, to any substantial ext.ent, as a competitive weapon in order to induce retailers to deal or continue dealing with them or that the offering thereof operates, to any significant extent, as a substantial inducing factor in the dealer s choice of a supplier.

(c) "While some of the respondents have to some extent, as hereinabove more specifically set forth, utilized agreements containing provisions which purport to require the exclusive use of the particular respondent' s products until repayment of a fi 1ancial obligation or for a definite period, such agreements in practice have no significant effect in the retention of dealer accounts on an exclusive basis or otherwise and do not prevent the switching or splitting of accounts. So far as appears from the record, such agreements ar8 not enforced by respondents and there is no practical difference between the mobility of such accounts and that of aCCOUl1ts which have not entered into such agreements. The record also fails to establish that, aside from such agreements, the furnishing of financial assistance, as such, to dealers results in or is likely to result in the exclusive handling or storing of respondents' products. So far as appears from the record the furnishing of such assistance has no significant effect in preventing the switching or splitting of dealer accounts.

(d) The evidence fails to establish that respondents' practices in rendering fulancial assistance to dealers, in the form of loans, equipment or otherwise, have resulted in injury to competition in any relevant market area or that there is any reasonable probability of such injury.

3. "Services of Value 1. The complaints allege that respondents have performed or furnished "services of value for and to retail dealers, citing as examples of such services repainting of the interior of a dealer s * * * est.ablishment, servicing facilities or soda fOlmtain equipment, and supplying signs and advertisements." Such practices are alleged to be i11egaJ , (a) when done with the understanding that the dealer will handle only the frozen products of respondent involved, (b) when done without receiving any direct profit and (c) when simply done. Counsel supporting thc complaint characterizes the practices included under these allegations of the complaint as "Miscellaneous inducements" and cites, in addition to those services specifically alleged in the complaint, the following: Supplying "unwarranted" cabinets and compressors for refrigeration equipment, supplying cabinets for the Initial Decision 60 F.

storage of frozen foods other than dairy products, black-topping driveways, supplying napkins and menus, granting advertising allowances and purchasing obsolcte equipment from dealers at abnormally high prices.

2. Under the rule of ejusdem generis most of the additional items referred to by counsel supporting the complaint can hardly be characterized as the performing or furnishing of "services of value for and to dealers :' within the meaning of the complaints. For example the supplying of "unwarranted" cabinets, compressors, or cabinets for frozen foods would appear to be properJy cha11engeable, if at a11, under the allegations having to do with the leasing, loa,ning or sale of facilities or other equipment. These matters have already been largely discussed above. However, brief consideration will be given to them at this point.

In connection with the challenge to the supplying of "unwarranted cabinets, it is not clear from counsel's argmnent whether he intends to concede that the supplying of "warranted" cabinets, i. , cabinets which are genuinely needed for the storage and sale of frozen products of the manufacturer is a proper function for an ice cream manufacturer. If so, those allegations of the complaint having to do with the supplying of facilities would fall, unless they can be interpreted as being limited to supplying excessive equip1nent. Aside from whether counsel intends to make such a concession or not, it is not clear fronl his argument at what point he contends that the supplying of cabinets becomes "unwarranted" or excessive. As previously noted in connection with the discussion of the subject of supplying cabinets, there is a complete failure of proof with respect to dcfiitive and recognized standards in the industry, against which it can be determined whether the supplying of any given nwnber or size of cabinets is unwarranted or excessive. There is not a scintilla of evidence in the record to support counsel's ipse dixit that "10% of the cabinets placed with dealers by respondents Cise unwarranted." In fact, there is no reliable evidence in the record that any of the respondents has supplied any cabinets to dealers which, in terms of the size and potential of the account and the delivery pattern of the manufacturer, can be considered to be "unwarranted.

It may be that the reference to "unwarranted" cabinets is intended to be to the aJ1eged practice of supplying cabinets which are used for storing non-dairy frozen products. This practice was referred to by some of the competitor witnesses in a few areas. In most instances it did not involve the actual supplying of cabinets for frozen foods but rather the practice of permitting dealers to place some frozen CARNATIOK CO:YPA. ET AL. 1367 1274 Initial Decision foods in the ice cream cabinets. Some of the complaints involved old ice cream cabinets which are sometimes used for the storage of excess quantities of ice cream. Such cabinets arc supplied primarily for the convenience of the ice cream manufacturer in order to obviate the need for extra deliveries on -week-ends or during other periods peak demand. From time to time dealers may use a portion of sneh storage cabinets, and sometimes even the reguJ lr display cabinets, to store froze.n vegetables, juices, meats or other non-dairy foods, even though they may not have the permission of their supplier. Ice cream manufacturers generally, inc1ucling respondents, seek to discourage dealers from doing this since the storage of other foods may give the ice cream an unpleasant odor. I-Iowever, it js a situation which is diffcult to police, as t number of the competitor witnesses conceded, and requires the UEe of the utmost tact on the pont of the manufacturer lest he lose the account. ",Vhile it is a somewhat anno ying practice, it does not appear to constitute a major problem in the industry. The record fails to establish that any of the !'cspondents has, to any substantial extent and as an aggressive competitive practice, permitted dealers to store other frozen foods in the ice cream cabinet supplied by them or supplied a separate cabinet for frozen foods. J\10st of the. testimony of competitor witnesses who referred to the subject was of a general complaining nature, like that above discussed in connection with cabinets, and -was not directed specifically at tho practices of respondents. To the extent that there was any reference to the responde,nts the testimony -was, for the most part based on hearsayar on conclusion or surmise, and failed to establish that any of the respondents ha.d supplied a cabinet with the lmderstanc1ing, express or implied, that it could be used for the storage of other frozen proc1acts.

The testimony of dealer witnesses docs disclose three instances of the supplying of cabinets for the storage of frozen foods, involving two of the respondents, but these were obviously defensive, in nature or appe lr to be atypica.l. Two of the instances involved respondent, Arde, s subsidiary in IIollston, which supplied an additional aiel storage cabinet to two dealers for use in storing frozen foods, but in both instances the cabinets merely replaced similar cabinets which had previously been supplied to the dealers by hyo local manufacturers, from whom the dealers had switched for other reasons. The third instance involves an existing account of Foremost in l\1iami to -whom that respondent supplied an old storage box during an emergency to prevent the spoilage of some frozen foods, but the box was also used to store other Foremost dairy products.

1368 FEDERAL 'IHADE COM:'viission DECISIONS Initial Decisioll 60 F.

To the extent that the supplying of cabinets for the storage of frozen foods other than frozen dairy products may constitute a problem in the ice cream industry, the record fails to establish that any of the respondents has either initiated the practice or has used it, to any substantial extent, in the acquisition or retention of dealer accounts. It may be noted, in this COIllcction, that in the National Analyst.s' survey only 0.2 per cent of aU the dealer-brand combinations involved and only 0.3 per cent of respondent-dealer brands referred to the supplying of cabinets which could be used for the storage of other products, as a reason for dealing with their supplier. The evidence also fails to establish that the use of such practice by respondents has involved any understanding as to exclusive dealing or that it has resulted in competitive injury.

Counsel' s reference to the supplying of compressors to dealers apparently is to the practice of ice cream manufacturers of supplying a compressor to operate a soda fountain or other refrigeration equipment, used primarily for tho storage of dairy products. There was almost no reference to this practice in the testimony of competitor \vitnesses as constituting a significant competitive problem. It was referred to by only a single dealer witness in cw York, who testified that respondent K ational had loaned h1111 several compressors to operate some soda fountains, but that they merely replaced similar equipment which had previously been supplied by a local ice cream manufacturer and that the supplying thereof was in accordance with the prevailing practice of manufacturers in the New York area" The record fails to establish that the supplying of compressors represents a significant competitive problem, that it is used by respondents to induce deniers to handle their products, exclusively or otherwise, or that it has had or is likely to have any substantial adve.rse competitive effect.

The reference to "black-topping drive"\yays" and to the supplying of napkins and menus, by counsel supporting the complaint, is apparently based on the casual reference to the former practice by a single witness from Louisvi11c and to the latter practice by a witness from the Philadelphia, suburban area. In each instance the ,vitness mentioncd the practice as being among a number of practices utilized in the are,a but made no effort to attribute either of the practices to Hny of the respondents, either generally or in connection with any specific competitive situation. There is not n, seintilla of evic1enee that any respondents has utilized the pmcticcs or that the practices COJls1itute a serious competitive problem.

, :: , CAHXA'tion CO PA)''Y ET AL. 1369 1274 Initial Decisioll Counsel's reference to the granting or advertising allowances is based on the alleged granting of such an allowance by respondent Beatrice to a dealer in \Vashington, D. with no supervision over how the advertising allowances were spent." The testimony of the dcaler in question indicates that he received the allowance in lieu or the benefit he had been receiving from the radio and television advertising program oT his Tormer supplier, since Beatrice did not have such aprogranl in the area. There is no evidence in the record to indicate that this practice is engaged in by respondents on any substantial scale or to indicate any adverse effect on competition. The competitor who lost the aCColUlt in question is a very substantial operator in the \Vashington area and, although present during the hearings, was not called to testify by counsel supporting the complaint. The final so-called "miscellaneous inducemene: referred to by counsel, which does not fall within the scope of the complaints, involves the alleged purchasing of obsolete equipment. The incident cited by counsel is based on the hearsa,y testimony of a compe6tor w-itness as to the alleged purchase of such equipment from a dealer by respondent Carnation. There is a complete failure of proof that (a) Carnation did purchase the equipment, (b) that the price it paid ". disproportionate to the value of the equipment or (c) that the purchase thereat acted as an inducement for the dealer to handle Carnation s products. foreover, if the incident did occur, there is nothing to indicate that it is anything but an isolated transaction having no competitive impact.

3. The only practices fading within the scope of the alleg.ations of the complaint dealing with the performing or furnishing oT "senrices of value, as to which there was any significant reference by competitor witnesses, are the supplying of signs a,nd the servicing of facilities and other equipment. Turning first to the practice of supplying signs, the record discloses that a number of the respondents do supply signs to the dealers handling their products, as do ice cream manufacturers genera-lly. Such signs vary from small "rooden, metal or plastic signs, to more elaborat.e neon or other illuminated signs. In most instances two-thirds of the sign is devoted to the name and brand of the ice cream manufacturer, and a panel about onc- third of t.he size of the sign ("which is referred to in the industry as a "privilege pfl1el" ) conta,ins the dealer s name or the nature of his business (e. Grocery, Drugs':: etc. ). The signs are generally hung outside the dealer s premises, but sometimes are displayed in his windm\". Iost of these signs are stock sig11s running in cost from about $30. to S100,QO. I-IO\yever, some of the larger neon signs range to 8200 and 1370 FBDERAI-- TRADE CO).lISSIO:: DECISIONS Initial Decision 60 F.

$300. In some instances, special signs are supplied to meet the needs of specific dca.lers. However, in many of such instances the dealer is required to pay for a portion of the cost of such special signs. In almost all cases the c1caler is rcquircd to pay for the cost of electricity used in the lighted signs. )lost manufacturers also supply a variety of indoor display materials which primarily advertise their products. There is no substantial evidence -in the record that respondents have used signs as an inducement to dealers to purchase their products or that the furnishing thereof by respondents constitutes a sig11ificant competitive problem. So far as appears frolll the record, respondents' practices in supplying signs to dealers do not differ materially from those of their competitors generally. Respondents advertise their products extensively through various media, of mass communications, such as newspapers, radio and television. The supplying of si.6-'S to dea.lers is merely an extension of this advertising program. Having created a demand for the.ir products by mass advert.ising, the respondents seek to inform the public as to the specific locations 1Vhere their products may be purchased. This they arc able to do by placing a sign outside of the dealer s establishment or in his window. Occasionally the sign may be painted on one of the exterior walls of the dealer s pre111ises.

Counsel supporting the complaint appears to recognize the advertising value of placing signs, -which advertise a manufacturer product, in front of or near the dealer s premises. \Vhile the complaint appears to attack the furnishing of signs and advertising material broadly, the attack of counsel supporting the complaint in his proposed findings is limited to the supplying of signs "in e:xcess of those recognized as justifiable for advertising purposes. Counsel singles out particularly the supplying of privilege panels on signs and contributing to the cost of more expensive signs. The record fails, hO\\evel', to establish that any of the respondents has supplied signs "in excess of those recognized as justifiable for advertising purposes. "

The supplying or a privilege panel containing the c1dealer s n81ne is a practice which can be amply justified. It is the c1ca1cr s quid pro quo for allo-wing the ice cream manufacturer to place a sign on the dealer s premises, the greater part of which is devoted io advertising the name and brand of the manufacturer. \Were the lllll1.1Tactnrer to place an equivalent sign on the public high\fry or to aclyertise on billboards the monthly advertising rates therefor would be substantial. The dealer charges the manufacturer nothing for the space used to advertise the ma,nufacturer s product. The dealer also pays CARNATION CO::PANY ET AL. 1371 1274 Initial Decision for the electricity consmned in the lighted signs. Giving the dealer a small privilege panel on the sign, containing his name or type of establishment, is a small price for the manufacturer to pay in return for the advertising value he receives frolll the sign. The few inst.ances in the record of the supplying of special signs inv olved dealers situated on a national highway or in anotlwT strategic location where the increased advertising benefit to the manufacturer more than offset any additional expense that might have been involved. There is relatively little evidence in the record critical of the practice of supplying signs to dealers. :Most of the witnesses who referred to the practice of supplying signs did so in terms of approval, including the practice of furnishing privilege panels. In the few instances where competitors were critical of the practice, it was moro on the ba.sis of the alleged supplying of an excessive number of signs or of larger signs than they considered necessary being supplied. 1-Iowever, there is no reliable evidence that any of the respondents has engaged in or been responsible for the supplying of excessive signs. Of the witnesses whose testimony eOLUlsel supporting the complaint cites, not a single one ascribed to 11 respondent any competitive diffculty clue to the furnishing of signs. The manufactui'er from Sac City, Im\a, whose testimony is cited, spoke of the practice as being of value to both the manufacturer and the dealer from an advertising standpoint, and indicated that it "vas unobjectionable so long as dealer demands were not excessive. The witness made no claim that any of the respondents was furnishing signs which he considered excessive or that he had lost or been unable to acquire any accounts because of the furnishing of such signs by any respondent. The testimony of the manu.facturer fronl the Easte.rn Shore of 1aTyland, cited by coun sel, while more critical,l of the practice of supplying signs, was directeel mainly at a large nonrespondent company and the witness made no chlim to having lost any accounts to any of the respondents because of it. The manufacturer from western Korth Carolina whose testimony is cited, while also crit.icaJ of the practice, could not name a single account. where it hacl been involved in compet.ition with any respondent. A witness from I-figh Point, which is located in the same area, had no criticism of the basic practice, but indicated that the supplying of the more expensive neon signs recently was a trouhlesome innovation. JIO\vever, he ascribed the initiation of this trend to a large N orth Carolin l company and made no claim. that any of the respondents had used it as an aggressive competitive ,,-eflpon. The record is wholly deficient, insofar fts establishing that respondents have either initiated the practice of supplying signs or have used ( \ \ Initial Decision 60 F.

it to any substantial extent. fls an inducement in the acquisition or retention of cleale,r accounts. The limiteel role played by signs in the choice of a supplier is indicated by the results of the N atianal Analysts survey in which 0.7 percent of the brand mentions referred to the furnishing of signs and displays as a reason for dealing with a respondent. This compares with a response of 0.9 percent of dealers handling the products of other manufacturers. Since these results are based on the supplying of relatively inexpcnsi, e display materials as 'veil as signs, it seems probable that the above percentages would be even lmyer if based solely on signs.

4. Another "service of value" n.about -nhich some reference -nas made is the servicing or equipment. It is the general practice for most ice cream manufacturers to service the ice creflm cabinets and other refrigeration equipment furnished to dealers for the storage and sale, or the manufacture.r s products. There -nrs very little complaint about this practice, except by those fe"\\' rnnnllfac( 111'er5 "\yho complained about the basic. practice or supplying c.abinets and any expense attendant thereon. l\Iost or the "\witnesses -nha referred to the subject -nere in agreeIllent that if the manufacturer supplied a cabinet it "\"\as al::o desirable rar him to maintain the cabinet in good running order. fact, if he railed to do so, the basic purpose or supplying a cabinet iz., to assure the produc.t reaching the public in the same palatable form in -nhich it WflS cleJiverecl to the dcrder) would be frustrated. Counsel supporting the complaint has apparently aba.ndoned any attack on the sen icing or nuu1ufacturer-Qlyned ice cream equipment nnd luts limited himself to the alleged practice or servicing c1dealerowned equipment, including soda fountains, ice cream cabinets, meat cases and other refrigeration equipment owned by the dealer himself. Such testimony as there is on this subject in"\- es a fey,' "\yit.nesses in the Virginia.-Carolina, area who claimed that 80nle manufacturers, in addition to servicing their own equipment, a 1so serviced dealer-owned equipment -nithout mfLking any charge therefor. The testimony of these witnesses "\vas of a general nature and there is no reliable e"\-idence that t.he practice has been involved in any competitive diffculties with the respondents. manufacturer from Dan dlle, Virginia, testified that the practice was engaged in generally in that area and, while claiming that Pet was more trouble.some in this re.spcct than other manufacturers he could not name a single lecount where this had been involved as a competitive problem. A manufacturer from Fredericksburg, Virginia, who also referred to the practice, conceded that. it invohecl a m ttter of :'slight expense" and "\vas "just an incon,. enience rather than a se.rious competitive problem. The only reliaule evidence CARNATION CO:'IPfu'I ET AL. 1373 1274 Initial Decisioll in the record with respect to the servicing of dealer-owned equipment by a respondent involves Pet, and the testimony of the dealer in question (the operator of a restaurant in Charlotte, North Carolina) disc10scs that he had to pay for any parts which wcrc involved and also for htbor if the repairs were extensive. The dealer had been fl customer of Pet Tor 22 years and there is no indication that he was induced to purchase from it because of this incidental service. To the extent that Pet or any other respondent doing business in the area has performed any service on dealer-owned equipment it has involved an occasional situation where the manufacture,y s service man was already on the dealer s prcmises making a regular call to service company-owned equipnlent and, as an accommodation to the dealer might ha vo made some minor a.djustment on the dealer s own refrigeration equipment if the dealer requested it. I-Iowever, where any substantial rcpa.irs or clenJer-owned equipment l1ave been involved, the manufacturer has usually charged for parts which were supplied and for the labor of the service m ln. The evidence fails to establish that any of the respondents, as a matter of regllJar routine, has serviced dealer-owned equipment free of charge where substantial repairs were in vol ved, or that such servicing as has been performed constitutes a significant competitive problem.

5. Unlike the statistical evidence pertaining t.o respondents' expenditures for cabinets and financial assistance to dealers, that offered with respect to the various " services of va,lue" falling "within the allegations of the complaint discussed above is meager, both in tornlS of the total and relative amounts involved and with respect to the respondents for which such evidence is offered. Such evidence was offered only wjth respect to respondents Beatrice, Pet, Fairmont and Hood and indicates t.hat the only expenditures of any consequence for miscellaneous services of value nre for signs contnl11lng privilege panels. Counsel supporting the compln.int has chosen to ignore the actual figures offered by him with respect to these. respondents and has proposed in lieu thereof certain computed figures for an Hine respondents. Compounded of a phantasmagorial combination of unfounded assumptions, est.imates and sheer guesswork, the. figures proposed do not have the remotest resemblance to anything in the record.

)7 Counsel' s figures include estimates Oil "unwarranted" cabinets, compressors and frozen food cabinets. .Aside from the propriety of including' these items under the category of " services of value, the figures are based on the unfounded assumption that 10 per cent of cabinets supplied are "unwarranted. " Furthermore, figures on these types of equipment are to a Jarge extent already included under the figures for facilities and other e!Julpment. Counsel' s figures are based, in addition, on a series of estimates and 1374 FEDERAL TRADE CO:\ nSSION DECISIONS Initial Decision 60 F.

The absurdity of the figures suggested by counsel supporting the complaint may be observed by a comparison with some of the actual figures which appear in tlle record. The evidence discloses that in a fi," market area stipulated to be typical, respondent Beatrice in 1055 supplied signs with privilege panels to 23 LCcounts and some used cabinets for frozen foods to three accounts, out of a total of 8 579 customers in the area. These accounts had a gallonage of 31 300 ga1Jons out of a total gallonage of 5 060 000 gallons sold in the area. Translating this to a wttional basis it ,,"Quid llean that in ID55 Beatrice had rendered miscellaneous services of value to 1,:1:3 cust.omers (compared to 4 693 suggested in the computations of counsel supporting the complaint), with the value of the services amounting to $41 720 (as compared with COlUlSC!" proposed figure of $1 674 650) a.nd in\ oh'ing a gallonage of 185 984 (not 3 549 300 as proposed by counsel). On the basis of the actual figures it appears that 0.3 per cent of Beatrice s accounts in 1955 received assistance by the furnishing of Iniscellaneous services of value and that these accounts represented 0.5 per cent of that respondent's total gallonage. The figures for respondent Pet disclose that in 1955 it furni,shecl signs with privilege panels 10 138 accounts at a total cost of $23 560. The accounts so assisted represented a.approximately one per cent of the accounts served by that: respondent. The figures for respondent Fairmont indicate that its total investment in signs of all types in a. representative five-market area during H);");') a.mmmtecl to $10 185, such signs being supplied to 53 accounts. The accounts receiving such assistance had a total of 76 82;'5 gallons, which represented approximately 5 per cent of the totnJ gallonage of a11 Fairmont accounts in the area. For respondent :Hooc1, the record contains the limited in.formation tha,t during t11e fiscal year ending February 1 19;")4, it supplied signs and display material for use 011 ice cream cabinets having it vn,ll1e of $21 097. Its total salps during this period -were S17 620 654. There are no meaningful figures in the record disclosing the amounts expended by responclcnts X ational, Borden Foremost, Arden or Carnation for signs or other 10rms of miscellaneous service.

guesses COI1cerning- costs of servicing equipment and supplying- signs for which there is no record bfl is ano are coutrary to nctual fig-tires in tile record. In the case of a number or the respondents there is no evidence that they S1JiJply any equipment or services fallin.g in some of the categories referred to.

1/; It is not possible to CGmpute the percentage which the number of accounts receiving signs represents of the total number of accounts, since the record contains DO information as to the number of accouuts served in 1955 , either in the five-market area or natioIlally. CARXATIO=' COMPANY ET AL. 1375 1274 Initial Decision 6. The record contains almost no evidence that any of the respondents, in supplying signs or performing other miscellaneous services of value, docs so on the understanding that the dealer will purchase the respondent's products exclusively, nor does the evidence establish that the supplying or performing thereof results in exclusive dealing. The only evidence indicative of a,ny agreement or an exclusive nature involves respondent Borden, and consists of the form of agreement entitled "T..oan of Equipmenf' which has been pre\Tiously referred to as being used in connection with the supplying of cabinets in tho Philadelphia area. The form contains an incidental reference to the supplying or "signs and advertising material" and provides that the dealer will purchase his ice crean"! from Borden "exclusively and to the extent or his requirements, during the term of the agreement." However, as indicated in connection with the discussion of such agreenlents under the heading "Cabinets, such provisions have very little practical effect. Whatever is there stated with respect to the splitting and switching of accounts which have received cabinets applies equally to those which have received signs. Another agreement in the record, which involves respondent Foremost, provides that it will supply a sign to a particular dealer "for the duration of (thej business association" between them and that if the dealer decides to change to another dairy company he will pay Foremost for the cost of the sign and thc installation charge. The agreement does not, however, contain any provision for the exclusive purchase of Foremost products during the period of thc dealer s association with Foremost. Since the sign was apparently one that was especially made up for the dealer and was not useable by Foremost if thc dealer switched, the provision requiring the dealer to pay for t.he sign in that case appears not to be 1mreasonable. This is, moreover, the only such incident in the record. There is no evidence in the record that any of the other respondents has used any exclusive dealing agreements, even on a pro forma basis, in connection with the supplying of signs to dealers or the performance of other misce11aneous "services or value.

7. Based on the foregoing, and the evidence as a whole, it is concluded and found that:

(a) The record fails to establish by a preponderance of the reliable probative and substantial evidence that any of the respondents has attempted to induce or has induced retail dealers, to any significant 1376 FEDERAL 1'TRADE COMMISSION DECISIONS Initial Decision 60 F.

extent, to handle, store and sell such respondent's products, exclusively or otherwise, by perfornling and furnishing services of value for and to retail dealers, including such services as rcpa.inting the interior' of a dealer s establishment, servicing facilities or soda fountain equipment, supplying signs and advertisements, or any other services of value.

(b) 'While some of the respondents do perform or furnish some services of value for and to retail dealers, such as the supplying of signs or the servicing of facilities or equipment furnished to dca,lets by such respondents, such services of value are performed and furnished in accordance with long-established industry practice. The evidence fails to establish that any of the respondents originated such practice or has used it as a competitive weapon to obtain or retain dealer accounts, or that the furnishing thereof operates, to any significa.nt extent, a.s an inducing fflctor in the dealer s choice of a supplier, (c) The evidence fails to establish that any of the respondents has to any substa116al extent, entered into agreements or understandings with retail dealers in connection with the performing or furnishing of any of the services of value above discussed, which require such dealers to handle respondents' products exclusively or which, by their operat.ion, tend to require the exclusive handling of respondents' products. ( d) The evidence fails to establish that the performing or furnishing of services of value by any of the respondents for retail dealers has resulted in competitive injury in any relevant market area or that there is any likelihood of such injury.

4. Discounts and Rebates.

1. The complaints cont.ain two sets of allegations dealing with the subject of discounts and rebates. The first revolves about quantity discounts and the element of exclusive dealing. It is alleged, in this connection, (a) that respondents have grrmtecl discounts and rebates on the condition, agreement or understanding that the dealer will handle respondents' products "exclusively " and (b) that respondents have granted discounts or rebates which are suffciently large to constitute an inducement to dealers to handle respondents' products exclusively (apparently without regard to whether there is any actual agreement as to exclusive dealing or not). The second series of allegations have to do wjth the granting of discounts and rebates to CARNATION COIvlP A1-y ET AL. 1377 1274 Initial Decision dealers who own their own ice cream storage facilities. It is alleged in this connection, that respondents grant rebates and discounts to such dealers on condition that they handle respondents' products exclusively and, in the alternative, that rebates and discounts are made to dealers owning their own facilities which are not paid or offered to competing dealers not owning their own facilities. 2. Turning bricfty to the second of the above group of allegations dealing with the granting of discounts to dealers who own their own facilities, it would appear that the attack on this practice has been ab,mdoncd by counsel supporting the complaint. There was almost no complaint concerning this practice in the test1110ny of witnesses and it is not referred to in the proposed findings and brief filed by counsel supporting the complaint. The record discloses that most ice cream. manufacturers throughout the country grant a special refrigcration allo\vance" or "iceless discount" to dealers ,vho own their own equipment. This is in recognition of the fact that myning their own cabinets they have relievcd the manufacturer of a cost which he ordinarily bears, viz., supplying a cabinet to the dealer and scrvicing such cabinet. Such allowances or discounts are made as an incentive for dealers to own their own cabinets. It is diffcult to understand how the complaints can, on the one hand, attack the supplying of cabinets by ice cream manufacturers as an undesirable practice, and at the same time also attack as undesirable a practice which seeks to encourage dealers to own their own equipment. In any event, there is no evidence in the record that the granting of discounts to dealers for owning their own equipment constitutes a significant competitive problem in the industry. If anything, it constitutes a boon to the smaller manufacturers who prefer not to have to supply their dealers with cabinets. As indicated above, it is a practice which is almost universally followed by ice cream manufacturers. There is likewise no evidence that the granting of such discounts is conditioned in any way on the dealer s handling the granting manufacturer s products exclusively, nor does it appear that the limiting of such discOlmts to dealers who own their own equipment places the dealers I\'ho do not receiyc such discounts nt a competitive disadvantage. The I\'hole purpose of the discount is to equate dealers ,1110 hftY8 the added expense of paying for and servicing their own cabinets with dealers who have been relieved of such expense by their ice cream supplier.

Initial Decision 60 F.

3. Turning next to the subject of discounts and rebates which are either granted with an understanding as to exclusive dealing or which because of the size thereof, allegedly result in exclusive dealing, it would appear that the attack based on these allegations of the complaint has been substantia.lly modified by counsel snpporting the complaint. Whereas the Janguage of the complaints appears to be directed generally at quantity or volume discounts, or at what is referred to in the industry as "sliding scale" discounts, the attack made in counsel's brief and proposed findings is limitcd mainly to what counsel designates as "Off List Pricing." Very little reference is made to discounts and rebates which are given pursuant to respondents' published price lists and discount schedules. .While copies of these were offered in evidence early in the proceedings, they were not utilized to any significant extent by counsel supporting the complaint. Instead counsel requested respondents to submit further information concerning their off-list prices, and placed considerable emphasis on this subject in the examination or witnesses and in argmnent. It is not clear whether counsel now concedes that discounts and rebates given in accordance ,with published schedules are not an unla,ir competitive practice. It is clear, however, that the gravamen of his attack is directed at the off-list feature thereof.

4. The argument of counsel supporting the complaint revolves in large measure about statistical data obtained from respondents indicating the number of accounts which received the benefit of off-list prices and the gallonage of such accounts, with illustrations of the size of the discounts granted to particular types of accounts. Counsel contends that these figures establish that " respondents sell from 20 40% of their gallonage off list. Counsel further contends that the ilustrative price data supplied demonstrates that amounts of the offlist discounts are unusually large, with that of respondent National averaging 20 cents per gallonage and those of the other respondents being equally large. The record does not support counsel's conclusions with respect to the proportion of respondents' accounts which are granted off-list discounts nor with respect to the size of such discounts. 5. Set forth below is a table indicating the proportiou of each respondent' s total number of accounts which received the benefit of offlist prices in 1955, and the proportion of each respondent's total gallonage which was sold off list in that year. ____ _ : : CARKATION COMPANY ET AL. 1379 1274 Initial Decision OFF LIST ACCOU.:TS AND OALLONAGE-l!J55 NO. ofo1I Percentage Offlistga1- I Percentage list accounts oftatal loll age oitatal accounts gallonage 1 Percent 12, 253,!\Tatjonal_- 469 5. 577 2580001 1 percent4.22.BordcIl__ 300 7. 415 450'Foremost. - -- --- un ---- . 6CJ4 4. 12. 643 3. 436,625363 059 24. !J66 u, 512 879 15. 912 , 6. - _m :rode - \ 9580/8-:olle ,-- 7. m--mmmm 518 1 025. 927 0110 1 32. 1 The percentages in this COlllI= ate somewhat overstated, except for Beatrice, Carnation and FainDont, since they arc based Oil a cOIDparison of oii-list sales of aU frozen products, with total gallonage figures wbicb are limited to bard ice cream only. Except for the three respondents mentioned, the only total gallonage figures in the record ate lor hanl ice cream. The extent by which the above percentages may be overstated is ildieated b)' the fact that in the ease of respondent Carnation (for which the record includes total figures of both bard ice cream and aU frozen products), a comparison of oii-list sales oi aU frozen products with total figures of bard ice cream would result in i.ncreasilg the percentage figure oi that respolldent from 15.2 per cent to alrnost 25 per cent.

2 '1'be percentage figures for this respondent are based Oil actual figures for a representative five- market area. 'the total figures of accounts and gallonage are based on a projection of these actual figmes. a The percentage figure for this respondent is based on the actual figures for a representative five-market area. Th, total gallonage figure is based on a projection of the actual figures. While it does appear that 55 accounts were granted off-list (liscounts in the five-market area, it is not possible to compute the total nurober or percentage ofacCouIltsin.olved since therecord containsno total figures ofthenumber of accounts served il either tbe five-roarkct area or nationally. I Tbe exact nUI:ber 01 accounts served by respondent Hood does not appear in tlle record. Tile only information in thereeorrl is Omt it serves lippro:dmatcly 10,000 accounts. The above percentage is compu ted on tbe basis ofa comparison with this approximate number of aCGouuts. 6. The above ligures do not bear out the contention of counsel supporting the complaint that respondents sell "20% to 40% of their gallonage off list." Only one of the respondents even remotely approaches the 40% figure and the next two in order of magnitude are figure cited by counsel.only slightly in excess of the 20 % minimum while the balance (except for Pet which makes no off-list sales) are considerably below the 20 minimum figure, it must be recognized that in terms of the percentage of total gallonage sold off list, the amounts involved are not insubstantial. This, however, is a matter of limited significance since a true insight into the competitive impact of off-list selling cannot be gained from these single-dimensional figures. Such figures by themselves mean little U111ess there is taken into consideramore importantly, tion the extent to which the prices are off list and, unless the base or list prices, from which such deductions arc made are compared. For example, deviations from list averaging two or three cents pcr gallon and involving as many as 50 per cent of a manufacturer s accounts may have less of a competitive impact than deviations averaging 20 or 30 cents per gallon and involving only 15 per cent of a manufacturer s accounts. Similarly, a price deviation of 20 cents from a base price of $1.85 a gallon may have little or no competitive 719-603--64-- 1380 FEDERAL TRADE COlVvIISSIO:\T DECISIO Initial Decision 60 F.

effect on another manufacturer '\hose base price is $1.G5 , but who has a smaller percentage of discounts or none at all. 7. The record likewise fails to support the asscrtion of counsel supporting the complaint that the off-list prices range as high as 40 cents off list, in the case of National, or that the average of the off -list prices of that respondent is 20 cents a gallon. In fact, there is no record basis for computing the average of the off-list discounts granted by fU1Y of tll(, respondents. ,Vhflt the record does contain are illu::;trations or eXflmples of the amount of the oii-hst discounts granted to certain unnamed customers falling into each of the following three categories of customers, (a) "Voluntary Group, (b) "Chain" and (c) "Inclividual Account. " There is nothing to indicate that the figures in the record are typical of each group or that they represent an average of t.he amount of t.he off-list discounts granted to customers in each of the three categories. There is no information in the record as to the range of t.he distribution of the discounts in each category or as to the number of customers "within each category receiving discounts in a. pruticulal' a. mount, or any other information v, which would sen-e as fl basis for computing a meaningful alTcrage figure. The record does disclose that respondent "National did grant a 40cent a ga.llon discount from a $1.85 list price on bulk ice cream to a single lilnamed account. I-Iowever, this account was entitled to a 19cent a gallon rebate under the published schedule, based on the volume used by the account, so that the amount which was off list in this instance was 21 cents rather than 40 cents. 1moreover, the 21-cent discount. only applied to its bulk ice cream purchases, the amount of the off-list discount oii package ice cream varying from two cents to 15 cents a gallon. The account in question falls in the "Indivichml Account" category. The record also discloses that respondent National granted a. special discount to an nnnamed "Voluntary Group of thirteen stores. All of the stores received the benefit of respondent N ationars maximum discount in the are1t of 5 per cent. During 1955, nine of the thirteen stores actually earned the maximum discount based on the volume of their purchases, while some of the balance earned 4 per cent and a. few ea.rned only 2 or 3 per cent. On the basis of the list price of approximately $1.70 a gallon they all received f'cpproximate1y 8. 5 cents f1 gallon rebate, ,,,herens some would hate been ent.itled to a discount of only 3.4 cents a gallon under the published schedule. In this instance, the maximum amount, off list was approximately 5 cents a gallon, rather than 8.5 cents a gaHon. The third example in the record involves a chain of stores served by several c1iffe.rent branches of respondent National, which received dis- ___ _____._ . ._._ CARNATION COMPAc"' ET AL. 1381 12i4 Initial Decision counts on package ice cream ranging, by area, as follows: 13-15 cents 5 cents, 13 cents, and 11-25 cents. In this instance the so-ca1Jed off-list prices actual1Jy involved giving these stores thc benefit, on package ice cream, of the regular schedule discount applicable to bulk ice crea.m. The record discloses that this price arrangement wa,s due, in part, to an offer made to the chain by a competitor. For the other respondents, the record contains examples or the off-list discounts or rebates granted by them to certain unnamed accounts falling within the categories mentioned above, as follows: Volt1ntflry: Corporate Individual gro\;p, chain account Cellt. Cents Cenis Borl1cll_ ----"u.- 15%- 18- 11- Foremost_ BcntriC6____ &-6 Ardcn i)-Ii. 5-12 5-14 Carnatioll Fairmont- IIoou It should be noted that in a number of thc above instances the disc01llt was granted on a limited portioll of the dealer s purchases, such as on a secondary brand, and in a number of instances the concessions were granted wholly, or in part, to meet competitive offers of other ice cremes manufacturers. In any event, the figures in the record have very limited significance since, as above noted, there is no indication of whether they arc typical or represent an avcrage of the off-list discounts granted by respondents. Moreover, the probable competitive impact cannot be determined without a defmitive comparison of respondents' base prices with those of competitors, which is not possible to any considerable extent on the basis of the evidence in the record.

8. In addition to the statistical information discussed above, counsel supporting the complaint also relies on the testimony of a number of competitor witnesses who referred to competitive diffculties allegedJy arising from the matter of price. As in the case of much of the testimony of such witnesses relating to other aspects of the complaint, that pertaining to the matter of price was of a rather general nature, involving broad references to pricing practices applicable in the market and1ittle of it pertained spccifical1y to the practices of any of the respondents. In many instances the complaints made were with rega.rd to low prices in general, it not appearing whether the complaints related to off-list prices, volume discounts or simply low base prices. In most instances where references were made to any of the respondents as being responsible for the loss of, or inability to acquire , , Initial Decision 60 F.

specific accounts on a price basis, no reliable evidence was offered as to tho price being charged by the respondent in the specific instances complained about. It cannot therefore be determined in most of such instances whether the complaint involved off-list prices, quantity discounts or lower base prices.

Indicativc of the testimony upon which colu1sel supporting the complaint relies is that of a manufacturer in San Francisco, whose testimony counsel cites in his proposed findings and brief. The witness testified in broad-brush terms that "ice cream campa,nics in order to acquire certain accounts have deviated from procedure, or are not charging the price out of the published price list." Ko reference ap. pears in the testimony of this ,vitness as to what ice cream companies he was rcferring nor was any reference made to specific accounts which this manufacturer lost or could not acquire clue to such price practices. Thc fact of the matter is that under California statute deviations fr01TI publjshed price lists are prohibited, except to meet competition, and then only if the deviating company files a notice with the state indicating the extent of such deviation and the reason therefor. It cannot be assllmed, in the absence of specific and reliable evidence, that any of the respondents lmd deliberately engaged in a violation of the California law. No suggestion was made by the witness that he had filed any complaint with the California authorities charging respondents with price deviations in violation of law. Another of the witnesses cited by counsel supporting the complaint a m.manufacturer in :Miami, Florida, referred vaguely to "high rebates as a competitive practice. Yet the witness did not name a single account where this was involved in competition with the three respondents operating in the area" National, Foremost and Borden. In fact he conceded that he had had no competitive problems with respondents Foremost and Borden for several years at least and that his only difficulty with respondent National was the alleged giving of an extra cabinet to a single account. The witness' testimony further indicates that his main competitive diffculties involve a non-respondent manufacturer.

There are a number of other references in the testimony of competitor witnesses to "price arrangements price low prices excessive discounts " and "chain store discounts, but very little of it pertains to off-list prices, very little of it specifically involvcs respondents a.nd in very few instances is there any reliable evidence as to the prices of respondents which were involved in any competitive situation. One of the few specific instances as to which there was any reliable evidence offered is that cited by counsel supporting thc complaint in his pro- CARNATION COMPA.'-Y ET AL. 1383 1274 Initial Decision posed findings where a dealer in southern Florida was granted a 47M cent discount from base price by respondent Foremost. The testi- HlOny of a Forcmost representative who was called as a witness by counsel supporting the comphint, indicates that the discount was computed on the basis of a projection of the dealer s anticipated gallonage and, in large measure, involved simply the application of Foremost' regular volwnc discount. It likewise appears that Foremost' base price is considerably higher than that of the supplier which formerly served the account, the actual difference in the net price of the two in this case being only 10 cents. In any event, the dealer himself testified that thiswas not his reason for switching to respondent Foremost, and that the former supplier had even ouered to meet the Foremost price, but that it was his intention to switch to Foremost because of his former association with that company at another location and his preference for selling its brand. The only other evidence in the record of oll-list prices being inyolved in connection with any specific competitive situations involves two accounts of respondent Arden in the Houston market. In one instance the price, which 'vas 15 cents off list, ,vas granted by the respondent in response to an invitation t.o bid from a large food chain :tl1cl was offered to meet the competition of a non-respondent company. In the other instance the price "as the result of a bookkeeping error and was rectified as soon as it ,yas discovered. In both instances, the chain stores ,were split ,,,ith other suppliers by respondent Arden. D. Basic to the a1Jegations with respect to quantity discounts and relmtes is the charge that they involve exclusive dealing, i. , they are granted wit.h an understanding that the recipient will det11 only in the products of the. manufacturer grant.ing them, or that the discounts al' so large as to induce such a. course of dealing, irrespective of any specific understanding. This charge is not, however, borne out by the evidence.

The only evidence in the record of any specific agreement to use a pa1'6cular manufacturer s ice. cream exclusively in order to be ent.itled to a discount, involves respondent Borden. Several volume discount schedules used by t.he eornpany and several subsidiaries in the Xew York and New Jersey area in 1952 contain the st.atement that the discounts will be paid only to dealers who use Borden s products xclusi,cely. This statement does not a.appear on any of the other Borden discount schedules in evidence. The record does not indicat.e that the statement appeared on other discount schedules used in the Xew York area and Xew Jersey area after 1952. It does not appear hat any dealer in that area failed to receive a discount because he Initial Decision 60 F.

had split his business with another manufacturer. No reference was made to the subject by any of the considerable number of dealers from the Kew York area who were called to testify by counsel supporting the complaint. The testimony of such dealers indicates that it is traditional in the area for dealers to handle the products of it single ice cream manufacturer. On this basis: the reference of exclusive dealing on the volume discount schedules in 1952 would appear to have had no practical effect. o evidence \fas offered, through competing ice cream manufacturers within the ow York a.rea, to indicate that the clause in question haclhacl any compet.itive impact on the market. 10. There being no evidence of any underst.anding as to exclusive' dealing involving any of the other respondents (or in the case of respondent Borden, no evidence of any such understanding' in any other section of the country) this next question is \\whether, irrespective of any aetna,l unc1erst ulcling, the granting of off- list discollnts or even the granting of regular volume discounts, results in exclusive dealing. In this respect the record is almost completely deficient. fost of the testimony, even though lacking in specificity as to the nature of the price deviations or the identity of the companies invohrcd, indicated that the problem of price competition existed mainly \vital respect to chain stores, supermarkets and other volume accounts. Yet the record indicates that a large proportion of such accounts are split bet\\een t\VO or more ice cream manufacturers. The most frequent reference in the record to price as ft competitive factor was in the Texas area and in the l\Iidwest area, including particuhtr1y !(ansas and 1\1missouri. Yet these very areas are the scene of some of the widest splitting of accounts of any section of the country, and the record indicates that local manufacturers are -,yell represented in such split accounts. In flreas -"here the tendency to splH is not as pronounced, there is no evidence that the granting of discounts has been a factor in this situation. Even in these areas \fhich are mostly in the eastern section of the country, there appears to be a discernible trend to\ford splitting in the larger account.s which are usually the ones receiving the discounts. There is no reliable evidence in the record that the granting of off-list prices or volume discounts has resulted in the exclusive handling of a particular n1manufacturer s products or may reasonably be expected to so result. 11. The record fails to establish that respondents have iniliatec1 the practice of granting off-list prices or qurmtity discounts or have used it as an aggressive competitive weapon for inducing dealers to handle their products. Their practices in connection with the granting of quantity discounts and deviating, to some extent, from their CARNATION COMPANY ET AL. 1385 1274 Initial Decision published prices do not appcar to differ materially from those of many of their competitors. .While some of their competitors ,10 maintain a single price system, without quantity discounts, the prices of such manufacturers in many instances ate basically lower than those of respondents before application of respondents' discounts, and the granting of such discounts in many instances simply results in putting the respondents' prices in line with those of competitors. The evidence discloses a l1U111ber of instances where the allegecllowering of respondents' prices, generally or in specific situations, was admittedly done in response to price cutting initiated by nonresponc1ent companies. This is particularly true in the I(ansas and :Missouri areas where there was more emphasis on the problem of price competition tha,n in most other areas.

Much of the testimony with respect to the matter of price did not but. rather 10w81'involve either quantity discounts or all-list prices, prices on secondary brands or on ice cream manufactured under private label. Such pricing practices are outside the scope of the comphtints. The fact that some competitors prefer not to make a second brand or to manufacture private label ice cream, in accordance is not an issue \\'hichwith the specifications of a particular outlet, is involved in these proceedings. There is no sho\ving that such se,conc1ary brands or private Jabel brands are compantblc in quality to that of respondents' regular brands or that respondents have llsed such brands merely as a device for cutting price. Another complaint was based on the economic philosophy of certain competitors that the individual stores associated with a vohmtary buying group should not be given the Tegular chain store quantity discount. This again does not involve off-list prices and has dubious relevance under' the complaints.

12. Based on the foregoing, and the evidence as a whole, it is concluded and found that:

(,,) The record fails to establish by a preponderance of the reliable probati.ve and substantial evidence that any of the respondents has to any Sllbstantial extent:

(1) Granted discounts and rebates on salcs of frozen products to retail dealers 011 the condition that such dealers will handle, store or sell such respondent' s products exclusively; (2) Granted yolumc discounts and rebates on thc prices of frozen products sold to retail dealers sufficiently large to constitute an inclueement to such dealers to JUl1c1le, store, or sell such respondent's products exclusively; or Initial Decision 60 F.

(3) 31ade allowances or payments in the form of discounts or rebates to retail dealers who own their facilities on the condition that such dealers will handle, store, or sell the frozen products of such respondent exclusively.

(b) While respondents do grant discounts and rebates in the sale of frozen products, the record fails to establish that they originated such practice or have used it as an aggressive competitive weapon to destroy compet.ition, or that their practices in the granting of such discounts and rebates differ materially from those of their competitors generally.

(c) The evidence fails t.o establish t.hat the granting of discounts and rebates in t.he sale of frozen products by any of the respondents has resulted in competitive injury in any relevant market area or t.hat there is any likelihood of such injury. D. Competitive lnj,,"y 1. The question of injury to competition resulting from the complnint practices has already been consic1e,red inciclentnJ to the clisc115s10n of each of the individual practices. At this point the question is considered in its broacler aspect to determine "\,"whether there is any basis for a finding of competitive injury resulting from the combined eifect. of the practices. In order to justify such a finding it must appear (a) that competition in a relevant market or markets is an unhealthy st, and (b) that t.here is a dcfinitc c usual connection between this condition and the use of the complaint practices by one or more of the respondents.

The evidence of economic unheaJth rests largely on the claims by some competitors of loss of accounts or decline in gallonage, sales or profits, and to some extent on the departure from business or some companies. Counsel supporting the complaint also relies on an alleged increase in the market share of respondents, accompanied by a decline in that of smaller competitors. To est blish a causal connection bet.ween these conditions and the complaint practices counsel relies on the fact, (a) t,hut respondents have used the complaint practices, (b) that some competitors claimed the complaint practices were a factor in their losses, and (c) that some competitors claimed that they had been informed by dealers that the loss of or inability to acqulre specific acc01Ults was due to the complaint practices.

2. Turning first. to the question of causal connection, the mere fact t.hat respondents have utilized the complaint practices in any market CARNATION COMPANY ET AL. 1387 1274 Initial Decision does not mean that a competitor s claims of declines in business or losses of apconnts can automadcally be attributed to the respondents who do business in the area. As has already been observed, to the extent that respondents do enga.ge in any of the complaint practices their activities are similar to those of their competitors generally. In most market areas they have active and substantial competitors and it cannot be inferred that all or even a substantial part of thecompetitive diilculties of individual competitors are due to respondents and, more particularly, to their USe of the c0111plaint practices. Ol' do self-senring general accusations or opinions of competitors unsupported by reliable evidence with respect to specific' co:npetitivc' situatious, justify" finding that thc competitive diffculties of individual competitors are attributable to respondents. A considerable portion of the testimony of competitors, as has already been noted, was devoted to general "gripes" about market prac6ces. To the extent that these witnesses sought to attribute such conditions to any of the respondents, it was frequently based on unreliable hearsay, sUTInise and opinion. 1Vhere there "was evidence in specific situations that dealers had advised competitor witnesses that some form of assistance was a reason for switching to or dealing with a respondent, no independent evidence was iutroc1need in Inost cases by counsel supporting the complaint to establish the fact of assista,nce. \17hero there was evidence of assistance there was frequently no evidence that it had played any role in the dealer s choice of 811 pplier. In addition to the weakness in the testimony of competitors, there is other evidel1ce in the record which suggests a num bel' of legitimate reasons for the adverse exl)eriences of some competitors, or at least reasons having no connection with the compla,int practices. For example, the evidence discloses the advent of additional competitors in some areas thereby cutting int.o the business of the older companies. The evidence also discloses that the growth of soft ice crc8.m and counter-freezer establishments has made serious inroads in the business of hard ice cream manufacturers in some areas. Another factor has been the trend among some chain stores to establish their own ice cream manufacturing facilities, thereby depriving exist.ing manufacturers of an outlet and adding to competition for the consumer dollax. The.re is also considerable evidence that oJd fashionec1 price competition, having no connection with the complaint practices, has played a part in the declines of some companies. The weakness of the evidence in support of the complaint, combined with the existence of other market factors which also furnish a reasonable explanation of why certain competitors have declined 01' have- 1388 FEDERAL TRADE C01\L\iission DECISIONS Initial Decision 60 F.

not made ally progress, l'ecluire the conclusion that, to the extent competitors htlve been experiencing competitive diffculties, the re.core1 clocs not support a finding that there is any substantial connection between such diffculties and the complaint practices. The nature of the evidence which is the basis of this conclusion has already been discussed to .some extent and will be he.reaftel' discHsserl in greater detail in the Appendix to this decisioll.

3, Turning to the question of whether t.he evidence establishes the existence of an unhealthy economic state in any relevant market (aside from the question of 'what cllUsec1 it), the record is likewise deficient. As a.lreac1y indicated, the claim of injury rests in large measure on the testimony of competitor witnesses concerning declines in the number of their accounts and in their total gallonage sales or profits. Iost of these claims rest on a comparison of re ent sales figures with those of the peak early postwar :years, 1946 or 1947. They are for the most part based on rough estimates and approximations of sales figures, unsupported by books and record. 11'respecti ve of the dubious nature of some of the figures, tho alleged declines in the sales of some competitors fitil to establish an overall unhealthy competitive state in any market area. Genera,lly the declines of some competitors are counterbalanced by the 8.(1 vances of other non respondent competitors in the same market. In a number of instances the complaining competitors appear to represent small, marginal companies which arc not truly representative of the market. :Many of the claims of injury arc based on the inability of t.he competitor to increase his sales conunensurate \with population increa::es, rather than on a,ny actunJ decline. Y ot the evidence discloses t,hat despite population increa.ses there h8,ve been no gcncrnJ increasps in ice cream sales in a number of markets. In many of the instances \"he1'e competitors claimed t.their sales had declined or had not increr.sec1 proportionately, the record discloses that the respondents 01' some. of them doing business in the same a.rea have had a similar experienc.e in their sales.

,Vhile individual companies have gone out of business in particular markets, the record fails to establish that there is any significant mortality among ice cream manufacturers. F1'pqllently such companies have been re,pbced by ne\\ compa.nies in thc same market and sometimes by milk companies expanding into the ice crenn1 business. ,Yhill' some, of the departing compa.nies have sold out to various of the respondents: many hfln sold out to other loca.l cOlnpctitors or to new entrants into the market. In a number of instances successor COIT- , CARNATION COMPANY ET AL, 1389 1274 Inital Decision pa,nies have been successful in the same market where their predecessor failed.

Despite the problems of individual companies, the record fails to establish any significant mortality among so-cfLlled independent ice crcnm companies, or any such decline in their position in the various marlmt aTens where hearings were held as to support a finding that competition in these areas is in an unhealthy state. Equally important, the record fails to establish that such problems as do exist arc due insubstantial part to the use of the complaint pnwtices by respondents. Further analysis of conditions in the various market areas involved, which are the basis for the above general findings, will he found in the Appendix to this decision.

4. Basic to the injury argument of counsel supporting the complaint is the assmnption that any decJilH in sales since the early postwar years, or a lack of growth since then, bespeaks the existence of abnormal or unusua.l competitive factors in the market (his explanation therefor presumably being the complaint practices). However, there is considerable evidence in the record to indicate that the early postwar years Ivere not typical or normal years. According to the testimony of a number of the competitor witnesses themsehc, there was an unusual upsurge in demand during the first year or two after the end of 1Y orJd 1Var II which as never again equalled by most companies in many areas. This fact is attested to by the offcial production figures of ice cre,am manufacturers compiled by the United States Department of Argiculture (hereinafter referred to as USDA), ,,-which are in the record. The production of hard ice cream at wholesale declined from a peak of approximately 650 000 000 gallons in 1946 to slightly ln excess of 500 000 000 gallons between 1949 to 1951. .While it began to increase thereafter, it never again reached the 1946 peak the maXil1lU11 production in 1955 being approximately 575 000 000 ganons.

These figures are for the 'iyholesale production of ha.rd ice cream only. During the eflrJy posbnlT years the production of other frozen dairy products, such as milk sherbet and ice milk, I\as relatively small, accounting for Jess than;) percent of an frozen dairy products produced. However, in the later period the production of these less expensive diet appealing frozen desserts began to increase, until they reached 20 percent of the procluc tion 01 frozen products in ID;55. If the production of these other frozen dairy products is included, the 19.16 production figure of 7 46,710 OOO gallons for all frozen dairy products was again surpflssec1 in 1955 when total production reached approximately 791 OOO OOO gallons. In substantially all of the interyening years the total 1390 FEDERAL TRADE CO:MISSION DECISIO::S Initial Decision 60 F.

production of frozen dairy products remauled below the 1946 figure. Such other desserts have been lllore popular in some markets than in others, thus accounting for overall increases in production in some markets after 1946, while other Inarkets were experiencing a decline. 5. The usda figures likewise tend to disprove the argument of counsel supporting the complaint that there ha,s been a substantial decline in the number of manufacturers producing hard ice cremn at \vholcsale. According to these figures the number of wholesale producing plants has remained substantially the same during the post\rar period. vVhilo the number of plants is not coextensive with thc number of companies producing ice crea,m for wholesale distribution because of the fact that some of the larger conlpanies operate l1ultip1e plants, it is nevertheless some gange of the nmnber of companies in t.he business. It is particularly significant that there has been no substantial change in the number of plants which produce less than 100 000 gallons annually, these being the plants which are generally owned by small independent companies operating only a single plant. Set forth below is a table containing a cOlnpal'ison of the total number of wholesale ice cremn phnts and f1 breakdown of the number of plants in the three smn11est size categories, for the years 1947 and 195:1, the latter being the latest year for "which figures giving a complete breakc1mvn of pbnts by size groups is available in the record: CO;\rPARISON O:F ':T"C='.In:ER OF WIIOLES..LE ICE CREA).l PLAKTS 19,; 19,5- Total ,\'umbcr of Plants '31-- 10. Plants Less Them 25 000 G tl-- 1: O 027 Pbnts Bct\\ een 25 1O 'l(1 4\J,G99-- ;'1 539 Plants Betn-em GGO and 99 999__ 4Sn 506 1 Iultaking a simihu comparison counsel supporting t11e complaint tas used tlJ8 figure 3 763 as tlJe t.otfl! number of plants in 1947. B01\-ever, tllis b a tcr"!ative figure, which WflS later correctccl))y tbe rSD" and a release coutai:ling SUCl c!langc and prepared at thc reque3t of counsel supporting t1Je complai!Jt, givcs tllc above Eg-llr8 as the corr2ct nUEJbcr of pl:lnts . Thc flrgllnent Qf counsel sU!JT)orting1.11e complaint as to why this uncorrected 5gure should cont.hue to be used is entirely without merit. It is bl'secl upon the bet that there is no revised figure for 19jj with 'i tich to compere the revised 19H figure. There is, l1however, a revisecllG54 figure wbic!; is the JJgure above user! 8S tile basis for comparison. As is apparent from the above table, there has been no significant change, either in the total number of wholesale plants or in the number of small plants, i. , those producing less than 100 000 gallons annually. The slight decn ase in the total number of plants may be necounted for largely by the fact that there ha.s been a tendency among the larger companies to consolidate their operations into larger-sized producing units. This tendency has continued during 1955 and 1956. 6. Counsel supporting the complaint takes the position that the USDA figures do not correctly reflect the situation with respect to CAR"ATION COMPM'Y ET AL. 1391 1274 Initial Decision the changes in the number of plants in recent yea.rs, in that there have been erroneously included in the category of vdlolesale plants two groups of producers which he contends should not be classified as wholesalers but as retailers. These are (a) "captive" plants, i. plants which prod ucc only for retail sale in their own affliated retail stores, and (b) small producers of under &0 000 gallons, llost of which counsel supporting the complaint contends produce for retail sale 011 the premises rather than for resale to independcnt outlets. Counsel contends that if the l1l1mber of "captive" plants and those which he cia,1m8 are essentially retail producers were deducted from the total llumber of plants, this would reveal a substantial decline in the number of wholesale plants between 1947 anc11955. The argument pertaining to the so-ca1l2d ;'captive': plants presents no problem. The record (1is closes that there were estimated to be 481 such plants in 1947 and 471 in 1954. IIenccj pven if it "\ore conceded that such plants do not belong in the "\hole.sale column, n deduction of 481 plants froln the 1947 total ligl1e of wholes,tle producing plants and 471 plants from the 1954 total "\vould result in no significant net difference between the total number of wholesale plants in the two years. In fact, there would be ten more '\'lOlesale plants in the latter year than there wonJcl be under the above table.

Counsels ai'gument with respect to the second category of plants , those producing under 50 000 gallons, has an unrea.l, metaphysical quality about it which is strangely reminiscent of "Alice In "\Vonderland." By a breat.h-taking series of factual assumptions, based on such nonrecord sources as "our information" and "our view " counsel reaches the conclusion that all plants producing less than 25 000 gallons, which USDA classified as wholesale, are actually retaij plants, and that an appreciable number of plants between 25 000 and 50 000 gallons are likewise retail, nIthough the number of the latter is not specified. 19 Counsel's argument appears to be based in part on a distortion of a statement contained in the USDA release to the effect that where a plant produces 50 per cent or more of its products for sale at wholesale, its entire production is classed as wholesale, whereas if less than 50 per cent is produced for wholesale distribution, it is classed as retail. Counsel' s confusion regarding this statement is compounded b;r misunderstanding of another statement that where USDA has no information on plants over 15 000 gallons, it classifies them as wholesale. Counsel suggests thn.t the computations made by the Department of Agriculture are basien.lly erroneous since all plants under 25,000 actually produce over 50 per cent of their products for sale at retail, as do a large part of those under 50 000 gallons. The representative of the Department of Agriculture testified that the Department had reasonably reliable information on all but about one hundred small plants, and that the likelihood of misclassification. on the basis of a plant which it classified aB wholesale actually producing 50 per cent or more of its products for retail consnmptiOll, was very slight, since there are very few plants whose production falls that close to the dividing line. There is not a scintilla of evidence to warrant accepting the ipse dixit of counsel supporting the complaint, rather than the offcial figures of the L'SDA and the testimony of its offcial, who was called as a witness by counsel supporting the complaint.

1392 FEDERAL TRADE CO:\fMISSIO DECISIOl\T Inital Decision GO F.

Counsel supporting the complaint arbitrarily suggests that there are 000 such plants which should be considered as retail and should therefore bc deducted from the number of plants classified as ,,-wholesale by the USDA. He fmther suggests that the number of such plants pill the multiple plants operated by respondents should be deducted from the total number of plants producing for wholesale in 1955, leaving a net of 1 767 plants for that year. Counsel concludes that comparing 1,767 plants in 1955 with 3 127 in 1947 indicates that 1 360 wholesale proc111cing plants have "disappeared" from the scene since 19'17. Aside from the lack of any record basis for counsel's claim that the USDA improperly classified 1 000 plants as wholes,de and his further dcduetion of multiple plants operated by respondents (the reason for the latter deduction not being apparent from counsels argument), counsel overlooks the fact that an equivalent number of plants should also be deducted from the 1947 total in order to 111ilke both figures comparable. The record indicates that there were substantially the same number of plants producing under 25 000 gallons in both years. Assuming arguendo that they were an retail in 1955 there is not the slightest reason to believe that they were not also retail in 1947. Hence a deduction of substantially the same number of plants from 1941 and 1955 would leave the net number of plants in both years substantially the same.

7. By a process of reasoning similar to that discussed above, counsel supporting the complaint also seeks to establish that there has been a substantial decrease in the number of wholesale ice cream manufacturers between 1947 and 1955, as wen as in the nwnber of plants. Recognizing that the Department of Agriculture figures arc in terms of the number of plants rather than companies, counsel seeks to reduce plants to companies. He does this by deducting from the 1955 offcial usda figure of 3 008 plants, the following: 1000 plants which he claims are retail rather than wholesale (for the reasons indicated abm'c), 241 multiple plants of respondents, and 95 multiple plants of non respondents (the figures on which counsel has obtained from industry publication which is not in evidence). By this mathematical sleight of hand1, counsel arrives at a net figure of 1 672, which he claims represents the number of wholesale ice cream producers in 1955. Then with an almost breath-taking disregard of elementary logic, counsel apparently compares 1 672 companies in 1955 with 3 127 plants 1947 , and claims that the number of companies in the united States has been cut nearly in hah" since 1947. Aside from the impropriety of comparing companies with plants, it is obvious that counsel has neglected to deduct from the 1947 figure an cquivalent number of so- CARNATION CO:1P "Y ET AL. 1393 1274 Initial Decision called ret"il plants in the under 25 000- 000 gallon category, and the multiple plants of respondents, as well as those of other campa,nies operating multiple plants. \1' ere this to be done there would be no significant difference between the two years. Based on the actual evidence in the record there is no wa,y by which the number of companies in 1054 or 1055 may he precisely comp"red with those in 10'1. However, frolll such evidence as does exist there is no reason to believe that the number of com panics has declined significantly. Thc usda figures with respect to the number of small plants give every indication that there has been no significant change in the number of small COmpallles.

8. A considerable portion of the argument of counsel supporting the complaint is devoted to the proposition that the complaint practices have resulted in a trend toward concentration of the ice cream business in the hands of respondents. This is another way of saying that competition has been injured by a shift of business to respondents and away from competitors. Basic to this argument is the aSslll1ption that such shift has been due in substantial part to the complaint practices. The fact that a shift has taken place would not be legally significant in these proceeclings unless a causal connection with the complaint pmctices is established. As has already been indicated, the record fails to establish any substantial causal connection between the complaint practices and the diffculties of competitors in any market area. Consequently there is no basis for a finding that the complaint practices have been a significant factor in any alleged trend towarcl concentration in the hanels of respondents. Equal1ly important, however, the record fails to establish any trend toward concentration, as suggested by counsel supporting the complaint. o. The contention of counsel supporting the complaint that there has been a trend toward concentration among the respondents, rests on a comparison of the combined production shares of respondents in 1947 and 1955, with total Uniteel States production in those years. Aside from the basic impropriety of seeking to aggregate the production shares of an respondents as if they were one affliated group of companies or as if this were a single conspiracy case, the mathematical inaccuracies and gratuitous assumptions on 'which much of counsers argument is based result in production shares for both periods which are totally distorted. Contrary to the argument. made by counsel supporting the complaint, there has been no sig11iIicant increase in the, aggregate production shares of the respondents. According t.o counsel supporting the compla.int, respondents: collective share of the national production of ice crea.m at '\yholesnle in Initial Dccision 60 F.

1947 was 38 per cent and increased to 44 per cent in 1955, an increase vf six per cent. Counsel then seeks to demonstrate t.hat the increase is even greater tlum six per cent by eliminating from the total USDA production figure (which is the universe figure with which respondents' production is compared), production which counsel contends is non-wholesale. Counsel first eliminates the production of "captive plants, thereby increasing respondents' 1047 production share to 40 per cent and their 1955 share to 47 per cent, or an increase of seven per cent () Counsel then flrgues that the production of the 1 000 plants discussed above, which ,were allegedly misclassified by the Deparbnent of Agriculture as wholesalers, should also be deducted from the natiouaT figures of hard ice c.remn produced at wholesale. Counsel estimates the production of these 1 000 plants to be 37 530 000, based on a proje,ction of the figures contained in a stipulation which was introc1ucBd in evidence solely in the IIood proceeding and which covers only the ew Englancl area. By thus distorting the 1955 figure of national wholesale production, counsel arrives at respondents share of production in 1955 as 50.6 per cent, which he compares to a 1947 figure of 40. 8 per cent in 1947, ftnd claims that there has been aJ1 incre.ase in respondents' production share of 10 per cent. Aside from the basic impropriety of making a computation base.d on datR which is only in the Hood record, counsels argument sellers from two fatal weaknesscs. First, as has already been indicated fLbove, there is no record basis for any assertion that USDA improperly classified 1 000 plants. Secondly, if they " ere misclassified, the same "\vould be true basically of the 1947 fig"ures, and if the production of these p1nnts were deducted from both years, instead of only from 19;')5 as counsel has done, the result would indicate no signifiea,nt change in production shares.

In addition to the above errors, the basic computations of counsel supportil1g the cornpl lint: on which the above refinements are based contain a number of errors which affect cOlinseFs basic argument wit.h regard to increase in concent.ration. The figure used by counsel supporting the complaint as the 1047 total of respondents' production of ice cream is in error by 14 089 901 gallons. By using an e.rroneous figure for respondent NationaFs 1947 gallonage (which \VilS contained in an exhibit later revised), tha.t companies 1947 gallonage is underestimated by 7 107 858. A further understatement of 6 892 043 results 20 The production figures of "captive" plants are not included in the Pet, Fairmont or Hood records.

21 The actual figure in 1054 for 1,027 plants whose production was less than 25,000 gallons (these being the nearest thing to the group of plants counsel Is referring to) shows II total figure of 12,345,609 gallons in that J'ear compared with 11,278 031 gallons In 1947.

_ CARNATION COMPAJ'Y ET AL. 1395 1274 Initial Decision from a misstatement of the total 1947 gallonage of all respondents. This understatement of 14 089 901 gallons for 1947 is aggravated by an ovcrstatement of respondents' gallonage for 1955 by 7 192 279 gallons. Thus, instead of respondents' share of the U. S. wholesale production in 1947 being 38 per cent and their share of production in 1955 being 44 pet cent, as counsel suggests, the figures are as follows: 1947 1955 000 574 376 ODD ---- 577 026,Total Production afIce CrcflIIl at V,'bolcsalc-- 721 543, 901 246, 763 -- 237, Totall'production of Ice Cream_Respondents' 42, 41.2% Fercentage of Total____Hespondents' As indicated by the above table, the net increase in respondents production is 8 779 820, not 30 062 000, and the percentage increase is 1.7 per cent, not 6.0 per cent. This increase is more than accounted for by the fact that respondent Foremost's production figures, for 1955, include the gallonage of Golden State which it acquired in 1054 with a gallonage in excess of 10 million. If the production figures of companies acquired by oiheT respondents aHer 1947 were also eliminated, it seems clear that respondents basically would be below their 1947 production figures for the equivalent number of plants in operation. In view of the inaccuracies in the basic figures used by counsel supporting the eomplaillt, the further refinement of such figures by the deduction of captive plants and so-called retail plants are also obviouslyerroneous. The deductioll of the gallonage of captive plants would not change the above percentages appreciably. There is likewise no basis for R,ny deduction of the so-called 1 000 retail plants. As above indicated, thcrc is no reliable evidence in the record that there is any such number of plants erroneously classified by the Department of Agriculture and there is, moreover, no reliable evidence as to the gallonage of such plants. Furthermore, if an equivalent deduction were made from the 1947 universe. figure, there would be no significant increase in respondents' share between 1947 and 195G. 10. The above discussion of whether there has been all increase in respondents' share of national production has been considered in the context in which it has been presented by counsel supporting the complaint. Ilis basic approach, however, is erroneous. Each group of respondents in each of these nine proce,edings is a separate entity and the figures of each glad p must be separately consider.rec1 and compared in order to determine whether their respective market positlons SflY that respon(1 lltshave improved. It is manifestly improper to as a group have increased their market position when a nwnber The correct fig-ure is elsewhere set forth in Table III, page 19 of COUDSel' S brief. 71\J-G03-H4-- 1396 FEDERAL TRADE CO:MISSION DECISIONS Initial Decision 60 F.

of them have actually declined in some markets a.nd on 11 national basis. It is not proper to balance these declines by the increases of some respondents, either in local markets or nationally, and argue that respondents as a group have improved their position, particularly since some of the increases represent the gallonage of acquired companies rather than true production increases. On the basis of the data in the record it is possible to measure the scparate fortunes of the respo111ents in three different ways: (a) terms of \vhether their respective market shares have increased or decreased in key areas where evidence 'was oiIered aga,inst them; (b) in terms of whether their respective shares of state production in the states "where they malntain manufacturing plants have increased or decreased; and (e) in terms of whether their respective shares of wholesale production of hard ice eremn in t.he United States as a whole have increased or decreased. To a consideration of the data in the record in each of these categories the examiner now turns. (a) 31w'l:et Shapes In Ifey A'Ieas. There- is in evidence stat.istical information showing each re.spondents share of the market between 1950 and 1D55 in a number of the areas \yhere counsel supporting the complaint sought to show injury to competition. This information was prepared by Professor M. A. Adelman of I.I.T. from dabL supplied by respondents indicating their respective sales in these areas and from computations made under his supervision indicating the total estimated sales in each of these markets. The market areas consist of the Standard ilIctropoJitan Areas (SMA's) established by the United Sbites Goyernment, which arc used by the Government and by industry for statist.lcal purposes and market surveys. So far as appears from the record the ma.rkct share information is suffciently accurate frolll a statistical point of view as to furnish a reasonably reliable basis for measurillg market share trends. The primary objection to such data by counsel supporting the complaint "as that the uniyerse figures used were based on total product.on or sales, rat.her than on wholesale production or sales.24 This objection, howe-vel', is not well taken for several reasons. In the first place there is some question as to the proportion of total production figures which is represented by retail production, and for purposes of measuring a trend it is more reliable to use total production figures than wholesale figures abm In the second place reta.il productlon represents only" minor fraction of total production (Jess than 10 per cent) and while the deduction of such figures from the total figures for each year might indicate each respondent's share to be slightly See National Dairy record, p. 7073.

25 Id. pp. 7056-7058.

: _ ::: . !:: :::: ;; ::_ _ :::____ _ :::_: : ::. CARNATION C01\IPANY ET AL. 1397 1274 Inital Decision larger, it. \\onlc1 not. aired the trcmd revealed by the figures in evidence. If U1:ything, the deduction thereof would tend to fayol' respondents because the ,vholesale component has tended to increase faster than retftil prodllction.

Set forth below is a table shov;ing the percentage changes in market shares of six of the respondents in certain markets between 1930 and 19,155, as revealed by the market share information in evidence.2 The actual percentage which each respondent's share represents of such markets appears in the Appendix to this decision, in connection witll the discussion of each such market. As noted above, the market areas arc those concerning which counsel supporting the complaint offered evidence against the responc1e11ts. ,Yhere iigures do not appear Tor a particular city with respect to a, prlTt1clllar respondel1t, it is beca.use that respol1( cnt docs not do business in the nre:1, unless othendse indicated.

:\IARKET SHARE CIIANGES , 195G-1955 ational Boruen Beatrice Foremost C,motion I Acden I I\T Perce1lt Percent Percent Xew Yor 1. 2 +1.1 - Phil:vlelpbj:L___ 9.3 47 7 -- - Ba!timorc_ ------ +0. +1.0 _ 8 - +1.0 1.6 - mm-- -- J- +1.3 ;If D. I :VJj 10. icr,go_mj--nu-u_-- -_u-- -n - CmcmnatL_ 1-0 6 ' m I 1!1 ;:6 :b;

ian Fm.Jlcisco-- :+i: 1:11: ! 11 1 Tbe above rJcrccnt ge change is ilcas\,rccl from 1951 , date-not lJeing aV:iiinlJlc fur 19i,U. 2 The above pcrcenta e change is :11i),1SlJred from JD5. , when Bor(len entered the m:u.ket. 'Foremost entcTe(l t.bis :lren in 1954 iJr aC(juistioI1 of Gol(len St:1te Dairy. Xo fig'cn's are nvailab!e as to Golden St:'lr. s market s:-are in 195U.

4 TJ1e above pen' ent-age is I:icasurni Itorn J953, when Arden entcreu market by acquisit.iDn of a local company.

8 "\\"in he obsC'l'vcll horn the above ftgul'es, the respondents have for the most part., lost. rat.her than g lined mflrket position. 1\espondent :K utional has gained in four areas but cleclilwd in six; respondent Borden has gained in four but Jost. in seven; respondent Beatric.e has gainer1 in three but lost. in four; respondent Foremost. has gained in two but: lost in two; respondent Carnation has gained jn one but lost in three; respondent Arden has gained in three but lost in t.three. For the 1TIOSt part, the gains arc small ;:llcl arb oilset oy the losses in other areas. It will also be observed that while some of the :n Id.Kop.similar7060. Information appears with respect to respondents Pet, :balrmont and Hood. However, information on a state basis wblch is hereafter discussed, gives SOlle idea of their market trends.

_______ _ ._ Initial Decision (;0 F. respondents have gained in particular market areas, others have 10st jn the same "rea although they have aU used substantially the same c01upctitive practices. The figures not only reveal no trend toward concentration in favor of any of the respondents, but the variety of the experiences of particular respondents in different markets and among respondents in the same market suggests that the complaint practices do not playa significant role in affectingrnarkettrends. (b) T7'l1d of Prod1lction Shares In States of Prod1lction. The trend in each respondent' s position may also be measured by comparing their production in the states where they have plants, with the total production of frozen dairy products manufactured in such states. This is not a precise measurement of their market shares since the frozen products produced in one state may be sold in an adjoining state or states. Nevertheless, it is a helpflllmcthod of analyzing the trend in respondents' positions in the general areas where their business is mainly concentrated. Set forth below is a comparison of the changes in the share of production of from:en dairy products of each respondent except Fairmont (for whom such data is not available), between 1947 and 1955 in a,n states in ,..which they have plants. The production share figures of each of the respondents in a number of the individual states involved are set forth in the Appendix, in connection with a discussion of these areas.

PRODUCTIOX SHARE:; oJ." RESPOXDENTS (IN STATES I WHICH THEY PRODUCED) IN RELATIO); ' 1'0 TOTAL FROZEN PROD"CCTS PRODUCED (IN THOSE STATES), 1947-1955 HI47 1955 h,rccnt change Percent Percent National 1 225 175 Borden 10. -1. Beatrice 3 +1. 17. 147 on- 10. -1. Foremost' (1950i-- +1, Pet 1 - 9 I +0, Hood' 2fJ. 19. 1 Production percentage of24 states. In the 27 states in which Nationaj produced in 1932, its percentage of state production was 30.1 per cent. These states were sulJstantially the same as those in HJ47 and 1955. ! Production percentage of23 states.

S Production percentage of 17 state 4 Production percentage of four states.

I Production percentage of fivc states.

6 'lhe Foremost ftgures are based Oil a comparison of its production share in thc II states which It served in 19.';0, with, its sbare in t1Je same st ltes in 1\155. o equivalent data is avai alJlc for 1947, except for hard iee cream. In HIM aDfl1955 it begau serving seven additional states, largely through the !\acquisition of other companies. Its share of plOduction in these states illcreased by 0.3 per cent between 1954 and 1955. 1 Production percentage of three states.

i The Hboye (gures are uased on a comparisou other production of bard ice cream atw110lesale in tbe New England States. The recon1 does not contain any information on the production of frozen products by this responctent other than hard iee crel1n. The uboye fgures do not include the Ncw York State area, which was entered by this respondent in September 1953 whcll it acquired a small company in the eastern part of the state. AnotlJer acquisition of a somewlJat larger company was made in September 1\)54. Hood' share of tbe wholesale production ofJ,ard ice cream in "'ew York State as of 1055 was 1. 07 per cent. ___________________ CAHKATI01\ COMPA:\"Y ET AI,. 1399 1274 Initial Decision As is apparent from the above figures, there has been no significant increase in respondents' respective production shares in the states in which they produce. Counsel supporting the complaint would, presumably, quarrel with the figures because they arc based on a comparison with total production in these states, including that of retail and captive" plants. However, all that the exclusion of the production of such plants would accomplish would be to slightly increase respondents' respective shares of production in each of the two years used for comparison, but the figures of percentage change would remain substantially the same. The above figures have significance as a helpful indicator of the trend in respondents' production sha.res between 1947 and 1955.

(c) Shares of Wholesale Production of Ha1'd lee Crea"" in U. The trend in respondents' shares of production may also be measured by comparing them with the total wholesale production of hard ice cream in the United States. This is essentially the basis of comparison used by counsel supporting the complaint, except that his method involved lumpiug the production of a11 of the respondents together instead of comparing each one s production, separately, with total national production. Set forth below is a table indicating each respondent' s total production of hard ice cream in 1947 and 1955, and comparing it with the total wholesale production of hard ice cream, as appearing in offcial USDA figures.

POSITION OF RESPONDENTS IX RELATION TO TOTAL U.S. \VHOLESALE PRODUCTIOX OF HARD ICE CREAM , 1947-1955.

(Thousands of Gallons) 19'J7 1955 Production Percent production P,,,,nt I Percent Change Total______------ 572 605 loo%i--_ 100% NatiollaL- 101 209' 10. I 85, 871 15, Borden_ 63, 653 5S- 1.2 ForClllost- 855 11.11.2 27,,'j1i 192 +3. 61\2 +1.3 138 20, Beatrioo_ 35 27 +0. \1031 397 ArdcD_ 2 13 +0. )28 10, 751 FairmollL-- 9 i 12 Carnatioll_ 033 +0, Hood_ 199 :6 I 1.7 Pel___ 529 061 3, 910 07' +0, The record contains nO data on the production of retail ami captive plants, except for . hard Ice cream. The production by retail plants accounted for less thnn 10 per cent of the total production of hard Ice cream in 1947 and 1954. 'Dlc prodnctioD by captive plants accounted for approximately (j pel' cellt of the hard ice cream produced in 1947 and 6 per cent of that produccd In 1954. Assnming similar proportions for other frozen dairy products, otller than banI lee cream, It scems clear that the deduction of substalltial1 identical amounts from the 1947 and 1954 production figures ,,,auld produce substantially similar results, Insofar as percentage change between the two years Is concerned. WhUe the latest jo'ear for which figures on both retail and captive plants appear In the record 1s 1954, there is no reason to believe that the 1955 figures would vary significantly. . . .. . ,. ) 1400 FEDERAL 'TRADE CO:v::1!SSION DECISIONS Inital Decision 60 F.

As is apparent from the above figures, except for respondents Foremost and Beatrice, none of the respondent's shares of the wholesale production of hard ice cream in the lJnited States has increased by as much as one per cent between 1947 and 1955. A large portion of the increase by respondents Foremost and Beatrice is due to their aequisitions of other companies, rather than by true increases in production. The same is true of some of the other companies repreSclltecl above. Thus, for example, respondent Fairmont's gallonage in 1955 would have been below its gallonage in 1947, bnt for the acquisition of several other companies between 1950 and 1955 which had a combined gallonage of approximately two million gallons. The two largest companies, National and Borden, have actually sustained a decline both in absolute production figures and in relative production shares between 1947 and 1951, as has the respondent Hood. The figures fail to establish that there is any significant trend toward the concentration of the ice cream business in the hands of respondents. Presumably, counsel supporting the complaint would quarrel with the above results because the total gallonage figures, comprising the universe with which respondents' gal10nagc is compared, include the production of "captive" or, as respondents call them aJIilinted" plants. Counsel supporting the complaint regards these plants as essentially retail, while respondents contend that they should be regarded as wholesale, which is the way the USDA classifies them. Assuming arguendo, the correctness of the position 01 counsel supporting the complaint and making the deduction which he suggests, the results do not differ signjficantly from the resu1Ls and trend above indimted. Set forth below is a table in which there has been deducted from the total USDA figures of wholesale ice cre nn production, the production of affliated plants. Such plants produced 28 000 000 gallons in 19"1 and 35 992 000 gallons in 1955. llESPO?\DEXTS' pO'Hno:\' 1:\T RELATION 1'0 TOT_-\L 'iYIIOLESALl'; L' S. PIWD1:7CTIO:\ 01" HARD ICR ORE_"-..!f, EXCLFSIVE OF l-' RODUCTIO OF " C;\PTIVE" OR AFFILIATED" PL_-\NT 1947-19,j5 I'P ge I p('('t' nec T'ercpnt ailge I1rollu tion ;Y:n point National- 1"6 O I BonJrn_ 11.7 1.2 Foremo t - -i3.Beatrice_ :::1 . +1.4Anlcn_ 7.3 i -70. Fairilont_ 9 I +0. CamalioD- 1.5 ' +0.Hoocl 1 ' Pol-- 06, 7 I +0. 21 Tho iigure for the latter year is actually that for 1954, but it Is the latest figures In the record on such plants, ami is the figure used by counsel supporting the complaint in making' his computations.

::::_ ;:_.._._.:::::: ::::::_ _ CARNATION COMPANY ET AL. 1401 1274 Initial Decision Since the above results do not take into account the production of the approximately 1 000 plants which counsel supporting thc complaint also claims are retail (based on alleged miselassification by the USDA), he would presumably also question the corrcctness of the above figures. As previously noted, there is no record basis for counsel' s contention that there has been any significant misclassificatioll of plants by the USDA, nor is there any basis for his computation of the production of such phl1ts. flow-ever, asslUl1ing, arguendo, that there has been a misclassification of plants in the category suggested by counsel, the record affords a basis for determining the gallonage of such plants. A recomputation which excludes the gallonage of such plants results in no significant change in the basic trend rcflected by the above figures.

The computation made below is based on the assumption that all plants producing under 50 000 gallons flre retail. Counsel has argued that aU plants under 25 000 gallons are retail and that some indeterminate number between 25 000 and 50 000 are retail. The USDA figures reveal that there were 1 589 such plants in 1947 with a gallonage of 32 711 914 and 1 563 such plants in 1954 with a gallonage of 007 000. Deducting the production of aJl such plants from thc figures used in the previous table, rather than the niggardly 1 000 plants suggested by counsel, the results are as foUows: HESPOND:E),'TS' T'OSITIO:: I"' RELATJOX TO TOTAL WIIOLESALE r. B PRODL:CTIO)J OF hard ICE CREAM EXCLUSI\' E OF PRODUCTION OF "AFFILIATED" PLANTS A::D PLA:\fS u::DEH 50, 000 GALLO:"TB, 1947-19ijD i Pel'entagcof1917 ercent1'gecf1955 Percentpoint change I prouuclion prouuction I--- iI: 1.3 YoremosL--_--_-- +4.Eefltricc_ +1.6 +0. +0, +0, ::::::I III +0, For convenience in comparing the results achieved under each of the methods of computing respondents' production shares discussed above, there is set forth below a recapitulation of the percentage of change between 1947 and 1955 in each respondent' s share under each such method. The first column disc10scs the change between 1047 and 1955 in each respondent's share of production as compared to the production of the states in which their frozen products are produced. In the second column the comparison used for reflecting the percentage of change is that bebveen respondent's production of hard ice cream ___________ ____ ( ) 1402 FEDERAL TRADE COiYIMISSION DECISIONS Initial Decision 60 F.

and the total national production of hard ice cream by plants listed as wholesale by USDA. In the third column the comparison is with the total national wholesale production, less "captive" or "affliated" plants, and in the last column the production of "captive" plants and those under 50 000 gallons have both been eliminated from the universe 'with which respondents' production is compa.red. COMPARISON OF PERCE:\TAGE POINT CHAKOES IX RESPOKDEKTS' PROD1JCTIO:\ 1947-11155 TotaJfrozen Less products Total L, captive production bard ice Less plants and States cream captive tboseunder where wholesale plants 50,000 respondents production gallons produce National______------ -.n____--_-______ BordcD_un___---- ---______n______---- 1.7 -1. -1. 1.3 Forcmost___- ------------______n- 1+1. +3. +3. +4.neatrice ----nn__ +1. +1.3 +1. +1.6 Arden_ _u_nu--__- +0, +0. +0. TainnonL - hn_un_--nn__ __n__nnn +0. +0. +0. Uarnation __n______-- +1. +0, +0. +0. Hood- n_nn n_nn_ ___nnnnnPet-- _nnn__n--n_--_ --_----_nn +0. +0. +0. I The above percentage is based on a comparison between 1950 and 1955 production figures, since there are no figures in tbe record for this respondent's total frozen products production in 1947. No figmes.

As is apparent from the above table, with the exception of Foremost and Beatrice, none of the respondents has improved its production share by as much as 1 percent., irrespective of whether the production of respondents is compared with that of the states in which they produce or with the nationa,l produc60n of hard ice cream at wholesale. Likewise, in the case of a comparison on the latter basis, the figures disclose that there is no significant difference between one based on t.total wholesale production as reported in official USDA figures, a.nd one based on such wholesale product,ion less t.he production of affliated plants or less the production of both affliated plants and plants under 000 gallons. The figures fad to disclose any trend toward concentration of the frozen products business in the hrmds of respondents either individually or as a, group.

In the case of Foremost a,ud Beatrice, as already indicated above the increase in their shares of production between 1947 and 1955 is accounted for Ja-rgely by the production of companies which were acquired, rather than by any expansion in production or sales through their own plants. Several of the other respondents have also gained production by virtue of the acquisition of other compa-nies, except for which some of their shares would be lower than above indicated. \Vhile some of these acquisitions may be subject to question under CARNATION CONfPA.-v ET AL. 1403 1274 Initial Decision Section 7 of the Clayton Act, they arc not directly involved in the instant proceedings, in which the question is whether respondents) production shares have been increased significantly by the use of the complaint practices.

11. In addition to the primary charge of injury, involving competing ice cream manufacturers, the complaints make oblique reference to t.wo other groups as being adversely affected, viz., retail ice cream dealers and "regular licensed iaciEt.y dealers. " There is not a BcintilIa of evidence of any injury to either of the latter groups. 12. Based on the foregoing, and the record as a whole, it is concluded and found that:

(a) The record fails to establish by a preponderance of the reliable probative a.nd substantial evidence that there has been any substantial injury to, or lessening of, competition in any relevant market, or that there is any re,asonable probability thereof, as a result of the use of the complaint practices by any of the respondents. (b) \Vhile individual competitors in certain markets may have experienced adverse business conditions or competitive diffe-ulties, tho record fails to establish, (1) that there is any substantial causal relationship bebYN n such diffculties or conditions, and respondents' use of the complaint practices or (2) that competition in the relevant markets involved (as distinguished from the position of individual competitors) has been or is likely to be substantially injured. (c) The record fails to establish any trend tmyarc1 concentration of the frozen products business in the hand of resporulents, during the period covered by the evidence, as a result of respondents' use of the complaint practices or otherwise.

IV. Conclusions A. The Lmv of Unfa!:r Llethods of C01npetit.ion 1. The discussion up to this point has bccn with respect to the fa, tual issues raised by the complaints. These are basically, (a) whether respondents have engaged in the complaint practices and, if so, to what extent, and (b) whether there has been any adverse competitive impact resulting therefrom. The consideration of these issues has assumed that the practices involved are unfair methods of competition Such acquisitlons might have indirect relevance if it were to appear that the compJliint practices were responsible for any competitors sellng out to respondents. However, as heretofore indicated, there is no evidence in the record to support an affrmative finding on this score.

m In the case of "regular licensed facilty dealers, there Is no evidence as to wh.o they are or that it bas ever been customary to purchase or lease faeilties from them. , 1404 FEDERAL TRADE CO:VIMISSION DECISIONS Initial Decision GO F.

within the meaning of the Federal Trade Comnlission Act. This, however, is tl fundamental issue in these proceedings, and to a consideration thereof the cxmniner now turns.

2. As already indicated, the complaints challenge various forms of dca-lei' assistance including (n.) the furnishing of facilitios and other equipment, (b) the rendering of financial assistance, (0) the performing or furnishing of other services of vR,lue, and (d) the gran6ng of various disCOUl1l:S, rebates ancl allowances. These various forms of a.ssistance have heretofore been referred to loosely as the "complaint practices." However, the compbints do not attack these practices in and of themselves. Basic to t.he challenge to such practices is the a.l1egation that they occur in a context of exclusive dealing, i. , that they are expressly conditioned on exclusive dealing or that they necessa.rily result in exclusive dealing.

3. The compbintsin th(' e proceedings are path'rned essentially after thc complaint in the Hastings J!1manufacturing 00. case, 39 FTC , which also involved the oflering of various inducements to customers in order to obtain their business all an exclusive 01' prefercntial basis. The practices there involved included the making of loans to distributors the guaranteeing of increased profits: and the purchasing of the c1istrilJltors invc'itol'ies of COE1petitors' products at cost (regardless of age) and then clumping them. The Commission s finding that these practices constituted un1';1i1' methods of competition was not predicated merely upon respondcnes llse oJ the practices, but rather upon the fact th:1t respondent used the practices to induce distributors to hanclle its products "upon an exclusive basis or upon a basis highly prefer'entinr' 1:0 respondent. The Commission also fmmel that respondent had initiated the practices in question as part of "an aggressive campaign to flcql1ire ne,\\ and: so far as possible, exclusive chnnnels of clistriblltioll.

The court of appeals: in affrming the Commission s decision and order, specifically recognized that exclusivity was an essential clement of the offe.nse which the Commission had found, stat.ing that the Commission had found the practices to be unfair- '" * '" when done as an inducemcnt to tbe distributor to discontinue handling" competitve products and to handle the petitioner s products exclusi,ely or Vl'efcrentially. Hastinqs Jla'!1utacturillf/ Co. Y. FTC (C. A. G, 19-16), 153 F. 2d 253, 254, The court left no doubt as to its O\fn position, that the element of exclusive or pre.ferential dealing \fas fl, key clement of the offense, in stating (at page 257) :

It is not ileg-al for a manufacturer tn finance his retail outlets or to guarantee them profits, but unduuLtedly the utilzation of these expedients p.

CARNATION COMPM"Y ET AL. 1405 1274 Initial Decision singularly or in combination, as an inducement to jobbers to throw out competing lines and to handle, exclusively or preferentially, the products of a manufacturer "from whom such blessings flow " may well be within the statutory concept of unfair methOlls of competition. Suell inducements as constituent el ments in a method of competition, are the "exclusive-dealing requirements which Mr. Justice Brandeis so vigorously condemned * * * 4. 'While the complaints are brought under Section 5 of the Federal Trade Commission Ad, the essential element of the offense ap pears to parallel that under Section 3 of the Clayton Act, which proscribes the sale or lease of goods or equipment on the condition, agreement or understanding that the lessee or purchaser will not use or Llcal in the goods of a competitor of the lessor or seller ('where the effect, of such arra.ngement may be to substantially lessen competition or tend to monopoly). Presumably t.he present complaints "were not brought under Section 3 of the Clayton Act because some of the practices do not technic ..l1y involve the 3010 or lease of equipment, e. furnishing of facilities on a rent-free basis, rendering of miscellaneous services of value, and the granting of discounts. See Ourti8 Publishing 00. v. 1'1'0 270 Fed. 881, aft'll. 260 U. S. 568. However, it seems clear that the complaints are phrased in terms of a Section 3 Clayton Act type of violation, in order to come within the line of cUJthority which holds that practices of the type that run counter to the public policy disclosed in the Clayton Act (or in the Sherman Act) may also be deeme.d to constitute unfair methods of competition under the Federal Trade Commission Act. See Fashion 01'iginaton' Guild of America, Inc. v. FTO 312 U. S. 457; FTO v. Jiotion Pictme Advertisv. FTO 112ing Service, Inc. 344 L. S. 302; Oarter Oarbvyetor Corp. F. 2d 722 (C.A. 8 , 1940).

5. That arrangements or practices iyhich involve the element of exclusive dealing or other preelusive features fall within the category of practices which may be deemed to const.itute unfair methods of competition under the Federal TnHle Commission -,'Let appears to be beyond cavil. See FTO v. illot'on PictliTe Advertising Service 00. v. FTOInc. , supra; Fashion OTiginators ' G'ldld of A1nerica" Inc. supra; Hastings llJanufactu1'ing 00. v. FTO, supra; Cnl'c'/o Carb'l(et01' 001' v. FTC, supra. Imme8ycr, while such arrangements are of the type which may be considered to constitute unfair methods of competition, they are not per se illegal. S. v. AmB?'ican Oan Co. 87 F. SLlpp. 18: ;-n; see also Commission s deeision in 11otio.n Picture LldverNsi.ng Service Co. , Inc. 47 FTC ;W8, 303. lnespeclive of whether a proceeding is brought under the Cla.ytoll Act or Federal Trade Commission Act, a shmying must be made wjth respect to the probable adycrse competiti \'8 impact of such arrangements. An ul- 1406 FEDERAL TRADE COMMISSIO)l DECISIONS Initial Decision 60 F.

timate finding of illegality depends on a number of factors, such as the length of the contracts (U.S. v. AmeJ'ican Can Co. , s"pm; FTC lIfotion PichlTe Advertising Service Co., Inc. , supra) and the proportion of the market tieclllP thereby (Standard Oil Company of California v. 337 U.S. 293).

It has been suggested that in proceedings which are not specifically brought under Section 3 of the Clayton Act (in which it has been said that the courts have applied a somewhat automatic standard in determining probable competitive effect), a broader inquiry must be made into competitive conditions in order to determine the probabilities of competitive injury or tendency to monopoly.32 IIowever, for purposes of the present proceedings it is llu1eeessary to determine whether there is any valid distinction between the injury test applied under Section 3 of the Clayton Act and that applicable to proceedings under the Federal Trade COl11111ission Act. Counsel support.ing the complaint has not presented the ca.se in the na.rrow frame of reference of the "quantitative substantiality" test of 11 Section 3 Clayton Act proceeding, but hns sought to demonstrate broadly the antieompetitive effects and tendencies of the practices involved. Furthermore, as Ifill hereafter appear, there is no record basis for a determination of the question of injury in terms of the sommvhat mecha.nical quantitative substantiality test. 6. The examiner entertflins no doubt thflt in te.rms of the issues drawn by the pleadings the comp1paints state a cause of action Hnder Section 5 of the Federal Trade Commission Act. In reaching this conclusion it must be l'ccogn-ize.cl that in one respect the complrdnts, as amended, go beyond the theory on which the llast'inqrr case was tried. The complaint and order jn that case were restricted to challenging the practices when they were used as an inducement for distributors "to discontinue handling" the products of competitors and to handle respondent's products exclusively. In effect, the practices were challenged only when used in a context of pirating away the custoDlers of competitors by offering them illicit inducements. In the instant proceedings, under the amendment to the complaints the practices arc challenged not merely when used to take a,vay the customers of competitors, but also when used to assist respondents own accounts and when used in obtaining new accounts never previously served by anyone.. In this respect, the amended and supple- See, e. Report of A ttorn.ey General' s Committee to St1/dy Antitrust Laws, . 141- 142; Times-Picayune PnbU8hing Co. v. S., 345 U. S. 594; Tampa Ji' lectric Co. v. "Nashville Coal Co., 168 F. Bupp. 456 (M.D. 'Tenn. , 1958) ; Dictograph Products lnc. l"1C 217 F. 2d 821 (C.A. 2, 1954).

T COMPA:\'Y ET AI- 1407 CARNATIO 1274 Initial Decisioll mental complaints extend beyond the original complaints in these proceedings \,which, like the complaint in l-Iastin,qs were limited to challenging the practices \vhen u ed to induce dealers to switch. :However, in another respect, the amended complaints are narrower t.han tho original complaints in these proceedings. The original complaints, while patterned after Hastings in the sense that the various forms of assistance were challenged only when used in connection with " switch" accounts, appear to go beyond IIastings in the respect that they did not limit the attack on the practices merely to situations where exclusi.ve dealing was involved. Apparently in amending the complaints it was decided to recede from the broad challenge to the practices as such, and to question them only when used to induce exclusive dealing, in order to be able to broaden the challenge with respect to the type of account involved. It is not entirely clear what motivated t.his change of approach, except that it did become apparent very early in the hearings that an attack limited to switch accounts was not a very practical one since only a small fraction of respondents' expenditures in the complaint practices involved switch accounts. It mflY be that r011nse1 decided to recede from a theory which was of dubious merit under Hast-ings order to ma.ke ft. more re,aJistic attack wit,h respect to the type of account involved even though the latter change involved an extension of Hastr.ngs. In any event, whatever may l1ave been the motive in amending t.he complaints, the examiner is satisfied that as amended (with exclusive dealing an essential element of the charge), they are legally suffcient even though they are no longer limited to switch accounts but include existing and pioneer accounts as well. 7. low ever, the above conclusion that the amende(l complaints are legally suffcient does not resolve the issue. ,Vhile the amended complaints are framed in terms of exclusive dealing, counsel supporting the complaint during the course of the proceedings has gradually sought to minimize and ignore "exe1nsiviti' as an essential element of the offense." In the brief filed by him he has come full circle to the position that the complaint practices constitute unfair methods of competition, as such, \vithout regard to ",,,whether they are used in a context of exclusive dealing or not. The order which he proposes would seek to require respondents to rerrnin from using thp practices irrespective of ",whether they are used as an inducement for exclusive Hastings in whiehdealing. In this respect the order differs from t.he respondent was orderpel to cease using the pra,ctices only ",hen 83 It may be noted that tills change of approach largely coincides with a. change of counsel In support of the complaint. Pres€Ilt seniorcounsel was substituted for earHer counsel Immediately followlng the amendment of the complaints. Initial Decision GO F.

used to induce distributors "to discontinue handling all products competitive with responclenfs.

It is not clear why counsel has abandoned the original themy of t.he complaints, patterned as it was after the .flastings case and the line of authority holding that Bxcll1sive arrangements of the type proscribed by the Clayton Act ilr8 also unfair methods of competition under the Federal Trn,de Commission Act. The statement in counsel' brief (page 70) that respondents have used exclusive dealing agreements "until recently L1ggests a reccgnitiorl on his part of the fact that suell agreements have for ihe most part faJlell into disuse. In fact, it is undisputed that. a llumber of the respondents have never used such agreements. In any event, counsel recognizes that the theory ,which he now esponses, unlike the established exclusive dealing theory of the cOlnplainl:s, inyo1ve8 a foray into virgin territory. This seems apparent from his statement that (page 110) ; "'1J18 practices with ,,-which we are here concerned have never before been clearly labeled.

8. Tn seeking to classify as unfair methods of competition, practices which have "never before been clearly labeled", counsel supporting tho complaint undertakes to develop a theory concerning the la\v of unfair methods of competition which hns ': ver before been clear-r1i' l'e,eognized. Counsel apparently concedes that the practices do not fa.n within either of the two broad categories of practices which the Supreme Court held to be encompassed by the ,words "unfair methods of eompetit1011 FTC Y. Gratz 258 U.S. 421 , 425 viz_ , (a) practices ,yhic11 arc "opposed to good mora-is beca-uso char acterized by dece.ption, bad faith, fnn1Cl or oppression, and (b) practices which are "against public policy because of their dangerous tendency unduly to hinder cOlnpetition or create monopoly." \Vhile Jater decisions hate questioned ,whether the Supreme (' ollrt, did not go too far in substituting its own judgment. for that or the Commission as to whether the particular methol1s of competition there involved were unfair (see, e.g. Hastings ilJa' ufactll/'i: ng OOlnpany FTO , S'l.pit at 258), and some de.cisions 11a\'e expressed the basic concept of what constitutes unfa.ir methods of competition somewhat differently than the language used in Gmtz (see, e. FTO v. Keppel & BTO., Inc. 2Dl U.S. 304 ), the broad el'itel'ia laid do\yn in the Gratz case are still goocllaw.

IH In the Kepl!ei case the Court expressed essentlaJ1y the same thought as that appearing in the pllrl1gravh (u) above of the Gratz case when It stated (at page 311): A method of competition which casts upon one s competitors the burden of the loss of business unless they wil descend to a practice which they are under a powerfnl n oral ompulsion not to adopt - even though it Is not criminal, was thought to involve the kind of unfairness at \vhieh the statute was aimed. CARNATION COMPA r ET AL. 1409 1274 Inital Decision Counsel supporting tJ1e complaint JMS suggested a new, additional and somewhat esoteric sta,ndard for determining whether specific pnlctices may be cha.racterizecl as "unfair." III addition to the tvi' broad yardsticks suggested in the Gratz decision, counsel suggests a ne,v crucible for testing whether practic.es arc unfair, viz., whether they const.itute "beneficial competition" or conversely, " Ti' orthless competition. " This shiney new standard has suggested itself to counsel from a variety of words and phrases found in several cases and in other non-legal authorities cited by counsel. Aside from the questionable nature of tile alchemy by which counsel distills his new concept., it is not entirely clear what is accomplislled thereby. It is diffcult to understand how the terms "beneficial competition" and worthless competition" shed any further Hght on the. problem of what is meant by the phrase llsed in the statute" "unfair methods of competit.ion. " Presumably "beneficial" compet.ition is equivalent to "fair ' competition, and "worthless competition to "unfair" competition, but having sta,tecl this, one has the feeHug that he is back at the point where he started.

9. V\Thile the terms themselves shed very little en1ightBlllnent as to their application, counsel supporting the complaint has endeavored to supply an explanation thereof. Cow1sel suggests that "beneficial" competition should center around "quality and price, and that other practices, such as supplying dealers with cabinets and signs, and making loans or performing other miscellaneous services, involve worthless" competition, 1Tl1ich results in the public "paying higher prices for second-rate merchandise. Counsel's argument overlooks the fact that there are numerous other factors which legitimately enter into the competitive picture. Among the factors which have long been recognized as falling within the category of accepted COlTImercial competitive practices, in addit.ion to price and quality, are- (! These inclt1de the Gratz ('nse Itself, from whjch c0\1nse1 takes the phmse "public policy" (which is used to in(l"ollnce the (b) category referred to abole, jm' olving monopolistic practices), and interprets the phrase as being S Vr:ODJ'ilOUS with "Pl1blic interest" the HU8ti11Ufl case in which there nppenrs n reference to practices "lilly:r to result in public injury; the Oement Institute ('false (333 U, S. (83), in which the concerted mnintrnllnceof il basing point system ,,,as held to be unfair llnd in which reference is made to the trarlitlonal concept that Congress intended to outlaw finy practice ' which "c1estroys compdition fIDd establlslJes monopoly " (clearly f111Jing- within tbe (b) category of unfair practices defined b y the tz (If'cision) ; a work by A. A. Eerie entitled '" Tbe Twentieth Century Cflpitfllist Revolntlon" in which it is suggested1 that the mi hty sbollld be held to a bidH'r standard of con(11lcl than the lowiy; rind a treatise on tllp FerleraJ Trade CommissloD b;v 1'lwmas C. BI 1isdeJJ , Jr. (Columbia University' Press), in '\\'which rcfercnrr is IIU()o to 11 similar notion ,' , that certain practices might be l'legal'rler1 as unfail' (:llly when committed by large companies (g-ivlng as examples tying contracts and price discrimination), , 1410 FEDERAL TRADE CO IMISSION DECISIONS Initial Decision 60 F.

(MJore extensive advertising, '" '" * better terms as to time of delivery, place of delivery, time of credit, interest or no interest, freights, methods of packing'" '" * , more attractive aull more convenient packages, superior service, and many others (Sinclair Refining Company v. F1' 276 Fed. 686, 688.

It may be that counsel would also classify some of thc above factors as involving "worthless" competition or, as he has sometimes designated such practices expensive:' competition. Actually some of the competitor witnesses did complain because they could not advertise as extensively as respondents, thus putting them at a competitive disadvantage. Some complained about,the expense of packaging, one even complaining about the expense of printing his company s name on the package. However, the examiner does not understand that the level of "fair" competition is determined by what the sman manufacturer or any category of producer can afford. The mere fact that a practice is expensive or makes it more diflieult to do business does not necessarily make it unfair. While it was the intention of the law to insure "fair opportunity for the play of the contending forces ordinarily engendered by an honest desire for gain, it was not intended to compel all competitors to a common levcl." FTC v. Sinclair Refininq Co. 261 U.S. 463 475--76.

fuch of counsel's argument with regard to "beneficial competition suggests that it is the function OT the Commission to select from among the broad spectrum of competitive practices, having varying degrees of desirability, those which it deems most wise and beneficient. This however, misconceives the function of the Commission. It does not presume to run the economic railroad. " 37 Its function is to prohibit practices demonstrated to be "unfair, not to prescribe "fair" ones. Counsel's suggestion that the public has a stake in having competition limited to price and quality, and that it is paying' more for "secondrate merchandise" is entirely without merit. '\V'while it is true that the cost of furnishing services to dealers, such as the supplying of cabinets and signs, must ultimately be reflected in the prices charged the dealer it does not follow that the public is disadvantaged. If the dealer had to supply his own cabinets and service them, and pay for signs and other equipment, those costs would obviously have to be reflected in his price to the public. As far as the public is concerned it appears 8G See Sinclair Refining Co. v. PTC, 276 Fed. 686, 689 (C.A. 7, 1920), wbere the court held that there was nothing in the law making it "Ilegal for one competitor to do that which is beyond the financial abilty of another: see also FTO v. Pa.ramount 57 F. 2d 152, 157 (C. A. 2, 1932), wilere the court held that the "mere fact a given methofl of competition makes It more diffcult for competitors to do business s1Jccessful1y Is not of itself suffcient to brand the method cf competitlcn as unfair. 51 Annual Heport of Commission, 1956, p. 6. CARNATION COMPANY ET AL. 1411 1274 Initial Decision to make litte difference whether respondents furnish equipment and services to the dealer or the latter supplies them himself. In fact the indication is that if the dealer had to do these things for himself many would be unable to do so as cheaply and effciently as the ice cream suppliers and that there would be fewer outlets carrying ice cream, with the result that the public might well have to pay more for a scarcer product.

Counsel supporting the complaint has suggested during the course of these proceedings that possibly the assistance of dealers by icc cream manufacturers has resulted in an oversupply of retail establishments sellng ice cream, and that it would be better if there were fe\ver establishments carrying the product, so that each one could sell more. The examiner cannot subscribe to this concept based on a theory of economic scarcity ,which is reminiscent of the proposals of a former Secretary of Agriculture who suggested that every third pig be put to death in order to increase the price of pork. The headng examiner is confident that the natural operation of the econnmic laws governing our iree competitive system will, over any given period, establish a proper bahl1ce between the supply of retail outlets handling ice cream and the public demand for such products, without the imposition of the artificial restraints suggested by counsel.

Counsel's suggestion that the public is paying a higher price for second-rate merchandise" is like,vise not supported by the evidence. If anything, the standards of ice cream today are higher than they were in former years for an equivalently priced product. It is true that most companies sell a second grade of ice cream with a lower butterfat content and higher overrun. I-Iowever, this product sells at a price substantially below the standard brand merchandise. Conversely, some companies today are producing a premium brand which sells at a higher price. The public is given a wide choice in grade and price, and ice cream is made available at convenient retail outlets of all types.

10. Despite considerable argument in which it is suggested that the complaint practices do not involve "beneticiaP' competition and are therefore unfair, counsel finally conccdes that an ultimate finding of ilegality depends upon a showing of t.he adverse competitive impact of the practices. This being so, it is diffcult to understand the purpose of the extended discussion with respect to the new standard of GB Counsel states in this connection (p. 110 of brief) : It follows that methods or practices . . . which do not have the capacity to benefit the public * . .. arennfair if, oj CDU1"C, the Tequisite (lcgl"ee of injw' jonll1l to exi t (/8 a matter oj ja,ct. (Emphasis supplied.

19-G03--64-- Initial Decision 60 F.

beneficial competition, since a showing of competitive injury would establish the illegality of the practices ",' en under what counsel regards as the old- fashioned concepts of the G1'atz, decision, in which practices against public policy because of their dangerous tendency unduly to hinder competition or create monopoly" are helel to constitute unfair methods of competition. It ' would appear, therefore, that counsel has come full circle to a recognition of the fact that the complaint practices are not i1Jegal in themselves, and that a finding of illegality depends on the context in which they were used. 11. It seems clear, therefore, that in order to Ilnc1 that the complaint practices constitute unfair methods of eompetitioll in violation of the Federal Trade Cummission Act, it must either be found that they are basically opposed to good morals or that: in the context of their llse, they have. dangerous anti competitive tendencies. T\Thile the gove.rnil1g principles arc self-cvidcllt, their application to iuclLvidl1a1 cases is diffcult. As stated by the Supreme Court in F1'O Jlotion Pict'UT6 Adv6rtl:shLg Service 00., Inc., supra at 396: 'The point where a Inethod of competition becomes " unfair" wil often turn on the exigencies of a 'Particular situation, trade practices, or tlle practical require- J!:ellts of the business in question.

The fact that a practice has been "openly adopted hy many competing conc.crns (FTC v. Sinclail' Refining 00. , 8't/jti' at 475; Jlotion- Pictw' e .iclv. Servo Co. 47 FTC 378, 389), and not merely by :1 single competitor as part of "an aggressive campaign (IJastings JIly. 00. v. FTO, supra at 255), is a factor to be considered. Where a practice is not inherently anti competitive, there must be a showing of a ': purpose or power to acquire unla'lyful monopoly " or convincing evidence that the "probable effect of the pn.ctice will be unduly to lessen competition (FTC v. Sincla' , sUJJTa at 475; see also Hastings 111/g. 00. v. FTO, supra \yhere respondent s "aggressive purpose was noted by both the Commission and the court). \V11e1'e the legality of a practice depends on its eHect and it is of a type not clearly recognized as anticompetitive (such as combinations and conspiracies), a finding that it has a dangerolls tendency unduly to hinder competition or create a monopoly, should take into account "its effect as demonstrated upon the experience of competitors. FTO v. Panwwunt Famous-Lasley 001'1'" 57 F. 2d 152, 158 (C.A. 2, 1932). B. Summary 1. Illegality Based on Exclusive Dealing.

a. The evidence discloses the use by some respondents of exclusive , CARNATION CO:Mk-. ET AL. 1413 1274 Initial Decision dealing agreements in connetcion with some of the complaint practices. The evidence with respect to such agreements pertains mainly to the supplying of ke cream cabinets and the loaning of money or rendering of other nnaneial assistance. To the extent that such agreements require a dealer to purchase "all" of his frozen products, or his requirements:' thereof, or to purchase such products "exclusively from rt particular supplier, they involve exclu ive dealing arrangements of thc type \which has been held to const.it.ute an unfair method of competition.

This does not, however, apply to agreements which merely provide that a dealer will use a cabinet or similar equipment supplied by his frozen products supplier only for the storage of that supplier s products. Such agreements are not considered to constitute exclusive dealing arrangements; nor arc they illegal as "tying" contracts, since rcspondents do not have any patents or monopoly or enjoy any dominant position in the cabinet field, and the restriction is confined to the use of the cabinet and does not limit dealers, expressly or in practical effect, in the sale of competing products. FTO v. Sinclair Refining,q Co. , supra at 474; dson L. Thomson Mfg. Co. v. FTC 150 F. 2d 952 (C.A. 1 , 1945); d. United Shoe Machine,,! Corp. v. , 258 S. 451; International Business illcwhine COTp. v. 298 L. S. 131. Agreements of this type are sanctioned by the la,yS of a number of states, which prohibit or restrict the storing- of one manufacturer frozen products in the cabinet supplied by another. b. '\\l11i10 excll1siv,, clcrtling :lITnng"ements fall within thc c tcgory of practices which have been held to be unfair: they are not illegal pel' se. As alrmtdy noted, where such agreements are of limited duration meet the peculiar problems of an industry, and do not unreasonably restrain trade, they have been held not to be illegal. S. v. .I merican Oan Co., supra at 31; Motion Picture Ad"uertising Service Co. Inc. \"1'1'0 at 392, and at 395 of 3H U. S. For the most part, the agreements here involved are of limited duration. :Many of those used in connection with the supplying of cabinets are terminable at win or on short notice or are of a maximum fixed duration of one year. ::fany of those used in connection with the rendering of financial assistance are terminable at any time by repayment of the balance due, and even when they have a fixed duration arc in practice termi- 9 An example of Emch Iltws Is the Penmylvania statute which provides: It shall be unlawful for any person " .. .. knowingly to supply or place or deposit ice cream " .. * of one ice cream manufacturer or c1istributor In ally equipment, cabinet, c:.n, or other container belongirig to another ice cream manufacturer or distributor. (Act No, 512 approved llay 8 , 1956, entitled "An act amending the Act of May 21, 1949, Pamphlet Laws 1594.

Inital Decision 60 F.

nable by repayment of the balance. The requirement that the dealer purchase thc supplier s products exclusively during the period the financial ob1ign"tion is outstanding meets a practica.l need of the industry since the repayment schedule is frequcntly keyed to the dealer ice cream purchases by a surcharge on such purcha.ses or some similar arrangement.

c. The examiner finds it unnecessary to determine which, if any, of the exclusive agreements used by respondents should be classified as falling within the "unfair" category, or whether some may be excluded from this category under the above authorities by reason of the limited duration of such agreements or the economic just.ification thereof in industry conditions. As has already been noted, even ",.here such arrangements are of the type \\which may be classified as unfair, it is nevertheless necessflry to establish the probable adverse competitive impact of such arrangements before it can be concluded that they are i1ega!. Under the line of authority established by the Supreme Court in the Standard Station-s' case (Standard 0/1 of Oalifornia v. S37 U.S. 2D3), in order to justify an inference or findjng that the use of such agreements may adversely affect competition it must appear that a substantial proportion of the market is tied up thereby. The record in these proceedings fails t.o establish that a substantial portion of any market has been tied up by respondents use of such agreements.

As has already been noted, there is no evidence that respondents Beatrice, Foremost, Pet, Fairmont or Hood use such agreements in connection with the supplying of cabinets or that Pet, Fairmont or I-Iood use them in connection with the making of loftns or financing the sale of equipment. The evidence with respect to the other respondents is fragmentary, it appearing that some of them have used such agreements in some areas but not in others, and that some h Lve used them in connection with some types of financial assistance but not others. It also appears that such agreements have litte practical effect on the great bulk of small retail establishments, which customarily handle a single brand irrespective of the requirement of auy agreement. It further appears that there is a growing trend toward tho splitting of accounts, despite exclusive agreements, and that such agreements do not substantially affect the mobility of dealer accounts. In any event, it is not possible to make any finding with respect to the probable impact of the use of sllch agreements, based on the quantitative substantiality test of the Standard Stations ease, since the record1 fails to disclose what proportion of any respondent' s gallonage in any particular market is affected by such agreements nor as CARNATION COMPANY ET AI.. 1415 1274 Initial Decision to the proportion which such affected gallonage represents of the entire ga.llonage sold in the market. Furthermore it may be doubted whether such test would be appropriate in these cases in view of the fact that counsel supporting the complaint has not sought to rely on any inference of injury, but has sought to show actual injury in specific markets. The evidence introduced with respect to actual competitive conditions in these ma.rkets would tend to negate any possible inference of injury which might otherwise a.rise. PUTex Corp. Ltd. 51 FTC 100, 167.

2. Illegality Apart from Exclusive Dealing. a. In apparent recognition of the fact that exclusive dealing arrangements playa minor role in the operation of the complaint practices, counsel supporting the complaint has largely abaudoned this aspect of the CRse, and contends that the practices are illegal without regard to whether they involve exclusive dealing. To sustain a finding of illegnJity, it must appear that the practices arc inherently illegal or that they are ilega! because of the context in which they are llsed.

b. Aside from the fact that counsel's theory extends beyond the allegations of the complaints, the examiner finds nothing inherently illegal about the complaint practices as such. There is nothing about the practices "\which justifies characterizing them as "opposed to good morals. iost of the practices have been traditiomt. in the ice cream industry. The record fails to establish that respondents are the origil1atOI'S of the practices or the only ones to use them. The court in the II astings case specifically recognized that, apart from its use as an inducement for exclusive dealing, it is "not jl1legal for a manufacturer to finance his retail outlets." It is clear, therefore, that if the practices arc il1legal, it must be because of the context in which they are used. It must be because respondents have, as stated in the n to de-Sinclair Refining case supra exhibited a "purpose or power stroy competition, or because they have used the practices "aggressively" to substantially improve their position, to the detriment of competitors (llastings Mfg. Co. v. FTC, supra). This, in substance is the gravamen of much of the criticism of competitors, whose fire was directed more at the excessive and aggressive use of the practices to the detriment. of competitors, than at the basic practices themselves. Counsel supporting thc complaint has also conceded that a finding of 40 In the Hastings case it was found that as a result of " an aggressive cawpaign, in which the complaint practices were Involved, r(O1pondent in the space of four years had g-rown from one of the smallest manufacturers in the uela to the second largest. Appendix 60 F.

illegality rests ultimatcly on establishing that the "rcquisite degrce of injury: * * exist(sJ as a matter of fact.

The rccords in these proceedings fail to esablish the aggressive or excessive use of the complaint practices by respondents or that there has been any substantial injury to competition by reason of respondents' use thereof. V\Thile there is some evicl8n.ce of competitive diffculties by individual competitors in SOHIC Inarkets, the record fails to establish a substantial causal rehtionship bet"een such diffails to estab1ishficulties and the complaint pnlctices and, moreover, any substantial injnr;y to competition in any of the markets involved. The record also fails to disclose any significant improvement in the competitive position of any of t.he respondents, on an overall basis or in any market area, during the period covered by the evidence (1947-1956), or any trend tmnlrd concentration of the frozen products business in favor of respondents eluring this period. CQ)icl "CSION OF LAW It is concluded that counsel supporting the complaint has failed to establish by a prcponderance of the reliable, probative and substantial evidence that any of the respondents in the above-entitled proceedings has engngec1 in any unlawful conduct in violation of Section 5 01 the Federal Trade Commission Act, as alleged in t.he comp1paints, and that the complaints should, accordingly, be dismissed. DER It is ordered That the complaints in the above-entitled proceedings , and the same hereby are, dismissed.

APPL' NDIX TO INITIAL DECISION This appendix contain an analysis of competitive conditions in each of the ma,rket areas concerning which evidence was offered, with particular reference to whether the evidence discloses that the use of the complaint practices by respondents has resulted in competitive injury in any such market area. Counsel supporting the complaint called approximately 90 competitor witnesses and 73 dealers in 25 cities. In a number of instances these witnesses testiiied with respect to competitive conditions in areas other than the city in "which they testified. Consequently this analysis of competitive conditions involves a number of other areas, in addition to the 25 hearing cities. CARNATION COMPA."-Y ET AL. 1417 1274 Appendix Before turning to a consideration of the evidence, certain preliluinary observations should be made which are generally applicable to the evidence offered by counsel supporting the complaint. The first has to do with the representative character of the witnesses called in support of the complaint, particularly the 90 competitor witnesses upon whose testimony counsel supporting the complaint concedes these cases rest largely" and who, he claims, are representative of independent ice cream manufacturers generally. V\''h:ile the sheer number of these witnesses and their geographic distribution give a surface impression of representativeness, closer analysis all a market area basis. in terms of the nUJnber of companies in the market and the position of some of the witnesses in the market, gives a considerably different picture. 'Vhile in a few markets, such as Portland, Oregon the competitor witnesses represented a good cross-section of companies in the market, in most a.areas the coverage was spotty and the \witnesses left the impression of not being truly representative of manufacturers in the market. A number of the witnesses call eel were from small marginal and lmprogressivc companies, which did no advert.ising and engaged in very litte selling eiIort, but sought to attribute their cliilcui ties to the sins of the larger company, rather than to their own inadequacies. In a. number of instances representatives of companies which the testimony of other witnesses re,-ealed to be substantial and prospering, were excused from testifying after having been subpoened. In some areas, such as New York, not a. single competitor witness was called.

Another serious deficiency :from the staIJclpoint "Of the distribution of witnesses was the lack of propel' balance between COIn petit or and dealer witnesses. In some areas all or substantially aU the ,..tnesses were competitors, with no dealers to corroborate hearsay testimony concerning relations behveeu respondents and specifically named dealers. In other areas, such as J\ ew - ( ork, there \Vas a plethora of dealer '\vitnesses, but not n single compet.itor was called to indicate wha.t competitive impact, if any, respondents' relations with the dealers in question had ha.d in that armL 'Vlleu both compet.itors and dealers were called in an area, the dealers were frequently dealers who had not been involved in the competitive situations testified about by the competitor witnesses, or had been customers of manufa,cturers other than those who testified and sometimes of uHlnuf lcturers ,,,ho had been excused from testifying.

A final C01nment which should be made involves the general reliability of the competitor testimony. As has been indicated in the Appendix 60 F.

main decision, much of the testimony of slich witnesses consisted of uncorroborated hearsay with respect to ",vhat assistance various respondents had allegedly given accounts which they had lost or been unable to acquire. In addition, there was considerable testimony by some of these witnesses concerning alleged declines in their overall sales or profits. Frequently this involved a comparison of their sales figures in a recent year with those in 1946 or 1947 , and some"' times reference was made to sales figures in intervening years. There was also reference to sales figures involving individual customers. Yet the witnesses were not requested to produce their books and records but, for t.he most part, testified frolll memory, giving estimates and rough approximations of sales figures going back as much as eight years when all but persons with unusually retentive memories would have little likelihood of being reasonably accurate. In apparent awareness of the questionable reliability of some of the figures upon which claims of losses were based, counsel supporting the complaint argues in his brief that "books D.nd accounts tell only part of the story" and that the "health of competition involves more than profit and loss statements, but rests on a number of factors "including the state of mind of participants." The subtlety of this argument escapes the prosaic lInderstanding of this examhmr. Either a man s sales or profits have declined or they have not. they have, this will be best reflected in his books and records rather than in his state of mind. If they have not, his disturbed state of mind, unsupportecl by the realities of his profit and loss situation, is a matter of small l10lllcnt in these legal.l proceedings, albeit it may be of considerable i.nterest to those engaged in the iields of psychology, psychiatry or mental divination.

"With these general observations concerning the nature of some of the evidence in the record, the examiner turns to a consil1eration of competitive conditions jn the various market areas where counsel supporting the complaint sought to show the competitive impact of the complaint practices. The evidence in each area will be discussed in the same chronological order as the evidence was offered. 1. Portland, Ore,qon The only respondents doing business jn the Portland area are Arden and Carnation, the latter doing business under the name of its subsidiary, Damascus Afik Company. Each of the respondents has a manufacturing plant in Portland and sells in the Portland metropolitan area as well as in other sections of the state. In addition to CARNATIOK COYIPA:'Y ET AL. 1419 1274 Appendix tho two respondents there were approximate.Jy eight other manufacturers of ice cream selling at wholesale in the Portland market, as of October 1955, when hearings ,were held. These are Rogers Ice Cream Company (formerly known ,lS Dail'yswect Ice Cre nn Company), Dairy Cooperative Association (whose ice cremn business is operated under the name l\fayflmver Ice Crea.m Company), Farmers Dairy Association, Jewel Ice Cream Company, M eac1mvJand Dairy Company, Peter Pan Ice Cream Products Company, Polar Pie Ice Cream Company (an affliate of Sunnybrook Farms D.tiry Company), and Frostkist Ice Cream Company. A former substantial supplier in the market, Swift &; Company, left the market in 1951. In addition to t.he above manufacturers selling at wholesale, there are hvo large retail chains in the Portland area which manufacture their own ice cream, Safeway Stores and the Fred j\r(eycrs drug chain. Likewise, since the end of 'Worlel 'War II there has been a substantial increase in the growth of roadside stands and other retail outlets which sen so-called soft ice cream made from vegetable fats and other ice cream substitutes, and retail establishments whicll manufacture their own ice cream in counter freezers from mixes purchased fronl Counsel supporting the complaint called as witnesses seven of theothers. eight ice cream manufacturers in the Portland area 41 and also one manufacturer from the state capital of Salem, which is outside the Portland trade area. No retail dealer witnesses were caned from either area.

The testimony of a number of the Portland manufacturers was to the effect that it ,yas becoming more diffcult to obtain new accounts and to retain existing accounts because of the expense involved in meeting the requests of dealers particularly for the newer type ice cream refrige.ration cabinets and for financial assistance. Some of the manufacturers claimed that hecause of their financial inability to meet these dema,nds their volume had eieher declined or had failed to keep pace with the increase in population, and that their profits were likewise declining. J\Iost aT the testimony was of a general nature, not directed at any particular competitor. However, in some instances the witnesses sought to attribute their problems in part at least to respondents Arden and Carnation (Damascus) . oi The only manufacturer not represented at the hearings was Frostkist. Counsel supporting the complaint called a representative of the Oregon Independent Retail Dealers Association. However, his testimony was based larger;;" OIl opinion ano. hearsay, and portions thereof were stricken. '.ro the extent that his testimony has any relevance, it was duplicated in the testimony of other witnesses. 1420 FEDERAL TRADE CONLvHSSION DECISIONS Appendix 60 F.

Insofar as the competitors' complaints involved the furnishing or ice cream cabinets to dealers by ice cream manuracturers, it should be noted that they were not directed at the furnishing or ice cream cabinets, as such, or at any agreements used in connection therewith requiring the exclusive use of the products or the manufacturer suppaying the cabinet or that the cabinet be devoted exclusively to the storage of the supplier s frozen procll1ctsY They were directed rather at the expense of furnishing the more up-to-date cabinets and to the alleged practice of furnishing a dealer more equipment than he required for his ice cream nceds.

In order to place the matter of supplying cabinets in its proper perspective, it should be not-ed that all manufacturers in the Portland area for a. great many years have eustomariJy supplied iee cream cabinets to their dealers, except for a small pore-entage of dealers who preferred to purchase their OY;-n refrigeration equipment. Prior to ,Vodd Val' II it was the practice of many manufacturers to make a rental charge to the dealer for the use of the ice cream cabinet supplied by them. However, this practice began to dwindle during the depression years, and by 1948 most manu:bctnrers had crased ('('Prcting rentals in tho Portland market. , except from the smaller cnleTs .whose volume did not justify a free cabinet. There is nothing in the record to establish that respondents Arden or Carnation wero responsible for the discontinuance of the collec- 60n of rentals. In fact, when the first manifestations of the practice appea.red during the depression years, Carmdicn (Damascus) hfLc1 not yet gone into the ice crr-am business in Portbud, its operations being confined to the milk end of the dairy business. The testimony of the repre.sentative of Peter Pan Ice Cre m Company indicates that all companies played a part in t.he abandonment of the lctice of charging renta.l for cabinets, and that no particular company was responsible for it.

Aside from the question of ,whether the tllO rc:sponclents "ere re sponsihle for or took a leading- role in t.he abandonment of the practice of charging a. rent.al on cabinets, the record does not establish any necessary relationship bebveen such aba.ndonment and the diffculties which any competitor may have experienced. 'While the Peter Pan representative did testify that his profits during the period when it was customary to collect rentals "ere "higher than they are now this does not establish a cause and effect relationship between the bvo 48 One of the few witnesses to refer to the subject, the representative of Polar Pje Ice Cream Compflny, expressed his opposition to permitting the pI acing of another manufacturer s ice cream in the cabinet supplied by his company. CARXATIO:\ COMPA: ET AL. 1421 1274 Appendix facts. The cost of doing business, whether it involves the fumishing of cabinets free of charge or any other service, must eventually be in eJudcd in the price of ice cream. This fact was attested to by witnesses in a number of areas who indicated that the abandonment of rental charges was generally accompanied by an upward price adjustment in order to take care of the increase in costs. As stated by the representative of Polar Pie Ice Cream Company:

money. It hasLWJhen we give free cabinet rentals it costs my company some to be tacked on somcwhere in the price of ice cream. This same economic principle is recognized by the practice of most ice cream manufacturers who grant to dealers owning their own refrigeration equipment a special discount or refrigeration allowance in recognition of the fact that the manufacturer is relieved of the cost of having to supply such equipment.

As indicated above, the c01nplaints of competitor \vitnesses with regard to cabinets were centered about the incrensec1 cost thereof during the postwar period, when the more expensive display and merchandising cabinets came into vogue to replace the less expensive storage type cabinets previously in use. This, of course, is due primarily to the improvements in cabinets rather than to any action of respondents. The evidence discloses that the impetus for the use OT such cabinets came primarily from the demands or dealers, who ,were frequently educated by salesmen representing cabinet manufacturers concerning the advantages of the newer cabinets. The record fails to establish that respondents initiated ihe practice of supplying the newer cabinets in the postwar period or that they used such cabinets as an aggressive competitive ,ycapon in acquiring dealer accounts. The only suggestion of any leadership in this pract.ice was in the testimony of the representative of Hogers Ice Cream Company who testified, in response to the question "whether there was a leader in this offensive, that "there was a leader in the respect that the larger manufacturer was in a position to supply the more expensive equipment." He identified this so-called leader as Damascus. The examiner does not construe this to mean that Damascus was the leader in the sense of instituting the practice or of using it aggressively. In any event, the Rogers' witness was unable to back up his broad assertion of Damascus' leadership in the supplying of cabinets, by naming a single account he had lost or been unable to acquire due to this practice. The only specific instance that he could cite was an account which he endeavored to acquire from Swift & Company, which allegedly was able to retain t.he account by offering it a bigger cabinet. 1422 FEDERAL TRADE COM.\1ISSIQ:V DECISIQ:VS Appendix 60 F.

While other competitors complained about the increase in the expense of furnishing cabinets, part.icularly to the larger accounts, they did not suggest that either of the respondents was responsible for this con dition. A representative of Farmers Dairy Association specifically testified that he could not say "anyone would be more aggressive than anyone else.

A number of the witnesses recognized that the newer cabinets were of a definite advantage to the industry since they tended to increase Eales by appealing to the buying impulses of the public and also cut down on delivery costs by providing larger storage space. Some of the witnesses took note of the fact that the cabinet manufacturers had played a part in educating dealers as to the desirability of t.he newer type cabinets, and that a good part of the impetus for the supplying of the cabinets had come from the dealers themselves. The only reference in the record to any specific competitive situation where any respondent had utilized a cabinet as a vehicle for obtaining an account was in the testimony of the representative of Meadowland Dairy, who claimed that Arden had taken an account from him by furnishing them a self-defrosting cabinet in place of the "older-type equipment" which Meadowland had there. Outside of the witness ipse dixit there is no evidence in the record that the account in question had been induced to switch because of the self-defrosting cabinet or, in fact, that Arden had even supplied the account with such a cabinet. Furthermore, other evidence offered by counsel supporting the complaint indicates that the account in question had not switched, but was actually being served on a split basis by both Arden and Meadowland.

The evidence with respect to the supplying of cabinets S1JnpJy boils down to the fact that cabinets are becoming more expensive and some manufacturers would prefer not to have to supply them. However it was reeognized that such cabinets ha,ve a legitimate objeetive to perform and may result in increases in sales and savings in costs. 1\loreover, there is no reliable evidence that the practice of supplying cabinets, either initially or during the mote recent period, was instituted by either Arden or Carnation, or that either has used this practice as an aggressive competitive we,apon to obtain accounts 'fronl competitors or to secure accounts in competition with competitors. The size, and type of cabinet best suited to a particular account involves the exercise of a sound business judgment on the part of the ice cream supplier, and there is nothing to indicate that either Arden or Carna- M The account in question Is Singer s Market; ex 175, page 4, Identifies this as a split account.

CARNATION COc.PAN ET AL. 1423 1274 Appendix tion acted contrary to ordinary business pl1dence in furnishing cabinets to dealers which were larger than were needed or of a better type than were needed, or that they were of!ered as an inducement for the dealer to become or remain a custOlner. Kat a single dealer in the State of Oregon was ca.lled to testify that the supplying of a particular cabinet to him was the reason for his doing business with Arden or Carnation, or had any influence on his decision to do business. There was no evidence of!ered that exclusive dealing or exclusive storage provisions in connection with the furnishing of cabinets presented any problem in the Portland market. The complaints relating to cabinets were directed at the expense involved, and not at any exclusive agreements used in connection therewith. The only witness ,vho referred to the latter subject was a representative of Polar Pie who indicated that such restrictive provisions had little practical eflect since most of the dealers handled one brand only and that when either party was dissatisfied with the arrangement it could be readily terminated.

The onler practice which was the target of considerable complaint was the matter of rendering financial assista,nce to dealers. 1VhiJe did not appear to loom as large in the minds of competitors as the supplying of expensive cabinets, some of the competitor witnesses indicated that the lending of iinancial aid to dealers, cither in the form of outright loans to assist thml1 in renlodeling or in financing the purchase of equipment, presented a serions problem to them. Those who placed the most stress upon the financing as a problem were :iHcadow1and Peter Pan and Polar Pie. As was the case with much of the testimony relating to the furnishing of cabinets, a large portion of the testimony on the subject of financing involved rather general complaints about the expense involved in rendering financial assistance to dealers and the financial inability of some companies to engage in it. There was little reliable evidence that the engagement in these practices by Arden or Carnation was responsible for the loss of, or inability to acquire dealer accounts on any substantial scale.

The representative of :Meadowland testified in general terms that the "biggest thing" he had to do to acquire accounts was "loaning money " and that he was losing his bigger accounts "mosUy on financing. " IIowever, there is little or no evidence connecting the respondents with 11eadowla,nd' s alleged diffculties. The evidence indicates it to be one of the smallest operators in the Portland market. It does very little advertising and the ice cream business appears to be one of several lines of endeavor in which the principals of this company are interested. The witness made no reference to Arden as being responsi- Appendix 60 F.

ble for any of .Meadowland's alleged diffculties due to financing. He did refer to two accounts into which Damascus had split, allegedly because of financing. I-Iowever, his hearsay testimony concerning the assistance rendered to these accounts was largely contradicted by a Dalnascus representative who also was called in support of the com. plaint. According to the uncontradicted and credited test.imony of the Damascus \vitness, one of the accOlmts received only limited assistance (less than one-fourth of the amount testified to by the Meadowland witness) in purchasing a refrigeration cabinet, and the other account not only did not receive any filaHcial assistance but did not even have an ice cream cabinet from Damascus in his place of business. neither case is there any evidence, even hearsay evidence, that the financial assistance or alleged financial assistance was a factor in inducing these accounts to add the Damascus brand. The J\Ieaclowland witness made no claim that he 'was so advised by either account and no representative of the dealers in question was called to testify. The representative of Peter Pan testified generally that he had lost accounts or had been unable to acquire them clue to his inability to make loans or fina.nce equipment. Although he testiIiec1, in response to a leading question by eowlsel supporting the complaint, that he hacllost such accolUlts to respondents Arden and Carnation, he could actually recall only a single account falling within this category, ,which he claimed was lost to respondent Arden. Not only is there no reliable evidence that Arden ever financed the account or that financing was a factor in the account's changing suppliers, but there is other evidence in the record that Arden did not acquire the accowlt in question from Peter Pan but from another manufacturer. The complaints of the Peter Pan representative with regard to financing were not limited to the respondents, but covered most of the other competitors in the field. In fact he indicated that he did not believe the practice of making loans or of supplying equipUlcnt would cease merely by tile termination of such activities on the part of Arden and Damascus. 45 TJJe first account mentioned by the Meadowland witness was Joe Hanna, ..'here Damascus allegedly had financed $8 000 worth of equipment. According to the Dumuscus branch manager, the only assistance given to this account was the sale of a regrigeration cabinet for $1 875, under a conditional sales contract. \Vltll respect to the second account, !task Brothers, to whom Damascus had allegedly agreed to Joan money for the emodeling of the store, the testimony of the Damascus manag-er indicates that no loan was made or offered to this account able that the account was liot e'.en supplied with the customar;j' ice cream Cdbinet. According to the Damascus witness, botll of these accounts had indicated dissatisfaction with .Meadowland service and meJ'chandisjng policies.

ro The account, which was identified as !llcKeel' , was acquired in 1953 from Mayflower Dairy, according 'to the uncontradicted fwd credited testimony of the Arden manager who was called as a witness by counsel Supporting the complaint. CARNATION COMPANY ET AL. 1425 1274 Appendix The representative of Sunnybrook Farms (Polar Pie Ice Cream Company) was somewhat more specific than the- other witnesses in seeking to assess responsibility for a decline in his company's volume during 1954. According to the Sunnybrook witness, his company had lost approximately five accounts to Arden and two to Damascus because of loans or financing. lie claimed that he had lost these accounts after first being asked to make loans by the owners and declining to do so. However, in only two of the seven instances referred to is there any reliable evidence that a loan ,,,as ever made to' the accounts in questions The representative of Rogers Ice Cream Company, while stressing primarily the supplying of cabinets as presenting the most diffcult problem to his cOlnpany, also claimed that his company found it difficult to meet demands from deniers for financing. The Rogers witness could only rccal1 a single account which his cOlnpany had lost to 11 respondent because of financing. The account in question had s,,-itchec1 to Arden in April 1954, End the record discloses t.wt t"\YO months later it received a loan to assist it in renlOc1eling a llew store to "\which it was moving. :No evidence was oftered to establish that the loan ent.ered into thc decision of the dealer to ""jtch to Arden. Tllat such loan did not "captivftte:: the dealer, as suggested by cOllnscI supporting the complaint, is indicated UJ' the fact that. despite a substantial balance all the Iml1: the accollnt swit.ched to I\'Iayfiower Dairy six months later. ,Yhile the Rogers' representative sought to leave the impression that his ol\n cOUlpany s financing efforts \were 011 a very modest basis, evidence offered by respondent rden indicates that Rogers in fact ha,s made loans as large as $:20 000 and $:30 000. The only ot.her compet.itor who indicated that the matter of loans presented a problenl I\as Je'lycll Ice Cream Company. The re.presentative of that company diclnot object to the practice of assisting ; Although specifying seven accounts as having been lost on account of loans, only five were specifically nameu by the witness. In tlVO instances there is inclepenucnt documentary evidence in the record and corroboration by an Arden offcial that Arden gave financial assistance to the accounts in question. One instance involved the VGA Iarket which received a loan from Arden, and the other ,vas Rose Park Food Market where Aruen had guaranteed a bank loan to the dealer. These loans were used for remodeling or expansion purposes. The Arden representative denied that his company had ever served the third account mentioned b:r Sunnybrook, viz., Stacey & Young. The fourth account referred to by the Sunnybrook witness, TIarney Hil Grocery, dirl not recei\€ any firHlDcial assistance at the time it switched to Arden in 1953, but tile dealer diel receive a loan two years later for tLJe purpose of remodeling his establighment. This loan obviou!;ly could. have had no connection with the account' s switching. In the case of the only specific instance involving Damascus, viz., Schwary s Grocery, the Damascus representative testified that thie' account had been acquired from Farmers Dairy and not Sunn;rbrook. In any event, there is no reliable evidence that such account received any financial assistance.

Appendix 60 F.

customers financially a.s such. In fact, he indicated that his company had assisted customers in remodeling and that it had resulted in increasing the volume of these accounts 'Substantially. Like,wise, he indicated that his company had had very little loss from its loans. However, he claimed that a new pra.ctice had a-risen recently of making loans without interest and this he objected to as tantamount to cutting the price of ice cream. The witness conceded that he hadn t "heard" of Arden making such loans, hut claimed that he had lost an account to Damascus due to an interest-free l0l1n. There is not a scintilla of evidence in the record, aside from the ,vitness hearsay statement, that Damascus has made any interest-free loans in Port.andy The evidence indicates that many of the ice cream manufacturers in the Portland area make loans to lssist their customers, pflrticularly for remodeling purposes. The record fails to establish that Arden a.nd Carnation s activities in this respect are different from those of their competitors, except possibly insofar as they may have a greater number of customers than many of their competitors and therefore possibly may have made a greater number of loans, although this is by no means established by the evidence. Carnation makes approximately twenty loans a year in the Portland area, of ,which about 90 percent are made to their existing customers and the balance are dis tributed between new openings and customers of competitors. At the time of the Portland hearings, Arden had 10 loans outstanding out of a total of 500 to 600 accounts in the area. These figures Imrdly suggest that either respondent has engaged in an aggressive loan campaign to pirate customers away froln competitors or to induce new dealers to trade with them.

There is not a scintil1a of evidence that either respondent had anything to do with instituting the practice of assisting customers n.nanciaJly. On the contrary, the representative of both Peter Pan and Sunnybrook attributed the inception of the practice of making loans on any considera.ble scale to Swift & Com pay. The. extent to which others in the market engage in the pract.ice may be judged from the testimony of the Peter Pan representative, who stated that the practice of making loans by ice cream manufacturers could not s 'The witness did not identify tile account in question, other than b\. referring to the strect on which it was located. He conceded t1Jat he hadn t pf'rsorwlly followed the ice cream bl1siness for ten years and didn t know what competitors were doing, except for what hi\3 partner-brother told him.

49 TIlere are no ag-reements in evidence llser! in connection ,viti: the maldng of loans by Damascus in Portland, Such evidence fls there is concerning loans in the nren indic!ltes that interest is charged (CX 274, PD. 84 and 100), A form of agreement usedin connection with financing the sale of cnbinets likewise contains provision for the payments of interest (CX 271A).

).

CARNATION COlvAo'f ET AL. 1427 1274 Appendix be stopped merely by the tcrmination of such activity by Arden and Damascus.

While the vast preponderance of the evidence at the Portland hearings related to the practices of supplying ice cream cabinets and making loans, several of the competitor witnesses referred to other miscellaneous practices as being troublesome. These included the supplying of cabinets for frozen foods other than ice cream or permitting the dealer to use ice cream cn.bincts for storing some frozen foods the furnishing of signs, the painting of buildings, giving lower prices and giving gratuities. As was the case with so much of the other testimony, these complaints were of a most vague and general nature and R.almost none of it was directed at the activities of respondents Arden and Carnation.

The only specific evidence involving the supplying of frozeu food cabinets related not to the respondents but to Swift & Company. A number of the competitor witnesses indicated that dealers frcquently used a portion of the ice cream citbinet for the storage of frozen foods and that it wasa constant battle to endeavor to discourage, them from doing so. There is not a scintina of evidence that either Arden or Damascus are the leaders in this practice or that their activities in this respect are any different from any other manufacturers. In fact there is no specific evidence of their engagement in the practice or that any of their competitors lost or were unable to acquire a dealer due to this practice.

With respect to the furnishing of signs, the record discloses that most manufacturers supply an ideutification sign to their customers the major portion of which is devoted to the name of the ice cream manufacturer and containing a smaller "privilege panel" with the name of the retail customer. There is no evidence that the activities of Carnation or Arden in the supplying of signs are any different from those of any of their competitors. In fact, there is no specific evidence of their supplying signs or that any competitor lost or was unable to acquire any account because of respondent's engagement in this practice.

Insofar as the other miscellaneous practices mentioned in the COIDo The representative of Rogers Ice Cream Company, who was formerly employed aR manager for Swift, testified that his former employer had given a frozen food case to one of his accounts, which he later tried to acquire without success. He also testified that it had been Swift's policy while he was with the company to permit dealers to store frozen food in the ice cream cabinet if their volume was suffciently large. U The only reference to signs was made by the representative of Sunny brook (Polar PIe Ice Cream Co. who testified that his company required aU dealers to whom It supplied sig-Ds to enter into an agreement which required the exclusive purchase of Its let cream for a specific term.

719-603--64-- 1428 FEDERAL TRADE COMMISSIO:: DECISIONS Appendix 60 F.

plaint are concerned, the record is more vague and general and lacking in any connection with the respondents than the evidence above discussed. The representative of Suunybrook (Polar Pie Ice Cream Company) testified generally to having encountered competit.ion in the form of lower prices, painting, putting in a new floor or paying a.n advertising bil. Although this witness, in response to a leading question by counsel supporting the complaint, claimed that he had encountered these practices by Arden and Carnation, when pressed for specific instances thereof on cross-examination, he stated that his t.est.imony on direct examination "was directed in a general manner to all competitors" and not to Arden and Damascus specifically. Later the witness purported to rccall two accounts which had allegedly received assistance from Damascus falling within the above categories one of which hc claimed had received a $100 gratuity and a home refrigerator for the omer, and the other had had its store painted by Damascus. at only is there no evidence to corroborate the witness hearsay testimony with respect to the giving of a gratuity by Damascus, but the Damasclls representative specifically denied that his company had made such a gift." ' With respect to the alleged painting of a grocery store by Damascus, not only is the establishment in question not identified in the record, but the Damascus representative testified unequivocally that it was not this company's policy to paint stores for cllstomers..'3 Although, as above indicated, some of the competitors in the Portland market complained about certain of the practices engaged in in that market, particularly the supplying of cabinets and the financing of accounts, and in some instances sought to attribute the loss of an account or their inability to acquire an account to these practic-es, the evidence as a whole fails to indicate any substantial injury to, or lessening of, competition in the market due to respondents' use of these practices. while certain of the competitors claimed that their volume of ice cream sales had declined, it also appears that the volume of other competitors has remained fairly constant and that in some instances competjtors' sales have increased. Significantly, the volume of both respondents Arden and Damascus has declined in Portland 1j According to the Damascus witness the account referred to by the witness had formerly been a Damascus account and had been acquired by Sunnybrook on the basis of the latter giving the owner $100 and an electric range for his home. Since this statement is based entirely on hearsay Information received by the witness from the owner, no finding' can be based on it any more than a finding can be based on the hearsay testimony of the Smmybrook witness.

53 This incident, invol..ing the alleged painting of a grocery store, 1s of questionable rele'..ance uilder the complaint siIlce Sunnybrook was Supplying the account with milk and not ice cream.

CARXATIQX COMPA:"\"1 ET AL. 1429 1274 Appendix since ,Vorld ,Var II. Not only does the evidence not sustain any fiding that the decline in volume of some competitors is due in any substantial measure to the practices complained of, but there is sub. stantial affrmative evidence that other factors in the market have played a significant role in the competitive picture. The only competitors who claimed that they had sustained a substantial loss of volume as a result of their loss of llCCOillts were Meadowland and Peter Pan. Meadowland claimed that its volume had declined from 78 230 gallons in 1947 to 58 84' gallons in 1954. Since this company s estimate.d volume for 1952 and 1953 was likewise approximately 58 000 gallons, it seems evident that the decline of approximately 20 000 a year must have occurred during the period from 1948 to 1951. The testimony of most of the competitor witnesses suggests that the supplying of cabinets and financing of accounts began to become a noticeable problem arouud 1952. It therefore seems apparent that Meadowland's decline prior to 1952 must have been due to other factors. The representative of Peter Pa,D estimated that his company s volume reached its mnximum right after the end of ,Vorld ,Var II, at approximately 80 000 gallons, and that it had thereafter declined by approximately one-third. There is no indication in the record as to the rate of the decline or as to the period in which it occurred.

Two other competitors also indicated that there was some decline in their business, but the extent thereof was somewhat uncertain. The Jewell representative testified that his company's present gallonage was approximately 273 000 gallons and that this was somewhat below its 1947 gallonage, although the extent thereof was not indicated. The ltogers' representative, who was its salesmanager from July 1950 to September 30, 1954, indicated that when he came with the company its gallonage was approximately 300 000 a year, that the amount thereafter increased until it reached about 400 000 gallons in 1953, and that when he left the company in September 1954 it had begun to decline. The amount as of the time he left the company's employ, which was over a year prior to the Portland hearings, was somewhat uucertain, but apparently it was the same as the 1950 volume. Contrasted with the experience of the above competitors is that of three other ma,nufacturers \vhose entry into the ice cream business postdates that of most of the above competitors. The Dairy Cooperative Association, which entered the PortIa,nel market with ice cream in ,' The also\' e figures fire Rpparent:v' Ilct\Jal ugnres, of which the w!tIles hnd IDllde It memorandum before testifying. This represents one of the few i:nstances wbere a witness Jjad come prepared with some actual figures. 1430 FEDERAL TRADE CO IMISSION DECISIONS Appendix 60 "' 1948 as Mayflower Ice Cream Company, built up its annual gallonage from nothing in 1948 to approximately 300 000 gallons as of the time of the Portland hearings in October 1955. The smaller Farmers Dairy began manufacturing ice cream in 1941 , which it originally sold through its own store, and as of March 1955 (when the witness who was the former controller left the company s employment), its volume was approximately 100 000 gallons. This represented a doubling of its volume during the period between 1950 and 1955, when some of the other competitors were complaining that they ' were finding it diffcult to compete. Sunnybrook Farms, which went into the ice cream business as Polar Pie Ice Cream Company in 1949, increased its volume from approximately 75 000- 000 gallons in the 1949- 1950 period to approximately 135 000 gallons in 1955. IVhi!e the representative of this campa,ny at first claimed that its ice cream operations were not profitable, he declined to produce the pertinent records and later conceded that during the latest six-month period his company was making a substantial profit.

suffer a decline While it may be tlmt a few of the competitors did in sales between 1947 and 1955 and that a few did not move ahcad during that pp,riod, the record fails to support a Hurling that the practices charged in the complaint played any substantial part in this situation. On the contrary, there is considerable evidence in the record that other factors were responsible in large measure for this condition. fost of the competitor-witnesses were agreed that 1947 represented a high water mark for the ice creanl industry in the Portland area. Following the lifting of sugar rationing imposed durjng the wat and the return to a peace-time economy, there was a tremendous upsurge in the pent-up public demand for icc cream and other frozen desserts.

With the increase in demand, new competitors began to become active in the market such as Farmers Milk, Mayflower and Swift & Company. In the next few years new competitors of another kind entered the market. These included the vendors of soft ice cream such as Dairy Queen, and retail establislnuents which manufactured their own ice cream in counter freezers. In addition, some of the chain stores, such as Safeway and Fred Meyers, began manufacturing M This ,vitness was sUhjected to strenuous cross.examlnation concerning the question of his Increased costs, which allegedly prevented him from making a profit, and he finally agreed to bring In his records to substantiate his claims. However, during the interval provided tor his obtaining' the records he had a change In heart, due in part at least to advice received from counsel supporting the cOIDplaint, and he declined to produce any records to substantiate his testimony. In an apparent effort to ayold having to bring in his record", he conceded, for the first time, that his company was operating at u profit. CARJ\TATIO::T COMPANY ET AL. 1431 1274 Appedix hard ice cream themselves, thus withdrawing as potential customers from some of the Portland manufacturers who had previously supplied them. That the competition from the soft ice cream establishments and counter freezers has become a substantial factor for the traditional ice cream manufacturers was attested to by the representatives of Mayflower, Jewell, Meadowland and Peter Pan. The representative of Jewell estimated that the counter-freezer operations and soft ice cream establishments now account for approximately 30 percent of thc frozen dessert business in Portland. The representative of Jewell also acknowledged that during the period from 1952 to 1955 unfavorable climatic conditions had had an adverse effect on ice cream sales generally.

Somo of the competitor witnesses indicated that their decline in volume was not due so much to a loss of accounts as to a decline in volume of ice cream sold pel' account. The Jewell representative attributed this decline in large part to the competition of counter freezers and soft ice cream establishments, which gave the consumer larger portions for the same price. Other manufacturers attributed the decline in sales per account to the fact that more ice cream was being solel in grocery supermarkets than had formerly been the case, to the disadvantage of the smaller grocery store and bulk ice cream establishment. \Vhile some of the competitor witnesses complained about their inability to get into the supermarkets because of the complaint practices, there is no substantial evidence to support these claims most of which have been discussed above. The aggressive, medium sized companies appear to h 1Ve obtained their fair share of supermarket business. The smaller companies, as the testimony of the Farmers Dairy representative indicates, never had many superma,rket accounts even be.fore the inception of some of the complaint prilctices. The sales and production figures of respondents Arden and Carnation, which are in evidence, fail to establish any such improvement in their position as to suggest that they had been utilizing unusual novel or aggressive practices during the period complained a.about. In fact the figures disclose that both companies were going through the same downward and side\vard experience as some of their competitors. The sale.s figures for Carnation s Portland plant disclose that from a peak of DGO OOO gn1Jons in 1M7 it declined to 772 000 66 This witness testified that the summers from 1952 to 1955, which were the periods of hen vie t cOllsumption of il:e cream, had been unusually cool and short. or Although tllere was reference made to cabinets and other complaint practices as affecting the Ilbflity of competitors to get supermarket business, some of the witnesses indicated that there were other importllnt factors, such lis price, which affected tlleirabllity to obtllin these account!'. 1432 FEDERAL TRADE C02VDIISSIQX DECISIONS Appendix GO F.

gallons in 1951. Sales in 1952 rose to 870 000 gallons but thereafter declined to 854 000 gallons in 1954. This decline occurred despite a substantial increase in its territory. In the year 1950 Carnation share of the Portland market was 18.6 percent. By 1%5 this had declined to 17.4 percent. Its experience in the state as a whole has been similar, with its production declining by 115\000 gallons beb een 1947 and 1954, and its share of state production from 10.8 percent to 8.8 percent during the same period. In the year 1955 it did experience an upturn of 65 000 gallons! but ivas still 1.3 percent. below its 1947 production share.

A similar situation exists in the case of Arden. \Vhile its actual sales figures for the Portland market were Dot in evidence, it was estimated that its sales had declined by approximately 50 000 gallons between 1951 and 1954. Its share of the Portland market declined from 18.9 percent in 1950 to 17.1 percent. in 1955. Its production of ice cream products in the State of Oregon declined by 326 000 gallons between 1947 and 1955, and its share of state production from 27.9 percent to 22.0 percent. The decline experienced by both companies took place in the face of a population increase of 22.63 percent from 1947 to 1955.

The record fails to establish any significant cha.nge in t.he ranks of competitors during the period when Arden and Carnation were supposed to be particularly active in the use of the complaint practices viz., :from about 1950 to 1955. During the postwar period there was the significant entry into the market of the local ice. cream company, 1\layflower Ice Cream, which enjoyed a rapid rise. The most significant departure was that of Swift & Company, a so- called nat.ional company of the type 'which counsel supporting the complaint contends has the capital to engage in the complaint practices, 'Vhile the evidence indicates that fOllr small Ioeal companies ceased doing business in the postwar period, there is no evidence to connect their departure with the practices compla.ined about. Two of the companies, 'Vest.over Dairy n.nd Holly Dairy, were acquired by Carnation in 1946 several years prior to t.he time when it was chtimed the practices in question had become a competitive problem, and at a time when aU companies in the area were experiencing their best sales. The third company, Bl'oadview Dairy, with a relatively small volume of 40 000 gallons, was acquired by Carnatjon in 1951, there being not a scintil1a of evidence that the complaint practices had anything to do with its selling out. A fourth company, Maplewood Dairy, ceased doing 68 The 1954 figure is more nearly comparable to those of competitors since tJJ/lt Wits the Jatest ,"Car for which they gll,-e Ilny sales or prodnctJon fig:nres- CARNATION COMPANY ET AL. 1433 1274 .Appendix business at some unspecified time for reasons not disclosed in the record. It is not amiss to note that Carnation s increase in gallonage by almost 100 000 gallons, after reaching its lowest volume in 1951 coincides almost exactly with the gallonage which it purchased from two of its competitors. 59 To the extent that respondents Arden or Carnation engage in any practices falling within the scope of the complaint, the record fails to establish that they originated them or used them to the substantial detriment of competitors in the Portland market, or that there has been or is likely to be any substantial impairment of competition in the Portland market as a result of the engagement by said respondents in any of such practices.

a. Salem, Oregon There are five companies selling ice cream in the state capital of Salem and the surrounding territory. Four of these, Arden, Carnation, Mayflower and Meadowlaud, have plants in Portland and distribute in the Salem area. The fifth is a localmanufaeturer, Deluxe Ice Cream Company. Arden has sold in the territory for a great many years, while Carnation began selling there around 1950 or 1951. Neither the )favflower nor the Meadowland witness. who testified in Portla, , made any reference to competitive conditions in the Salem market, their testimony 'being confined generally to the Portland metropolitan area. The only witness callrd by counsel supporting the complaint who testified concerning competitive conditions in Salem was a represcntatiyc of Deluxe Ice Cren.m Company. dealers were called.

The Deluxe witness J'cfcrre, cl to the jucre,ase in the expe,nse of supplying cabinets due to the increased cost of such cabinets, and to the gradnal disappearance of the former practice of charging rentals. fie also testified that it was necessary to make loans to the larger accounts, a practice in which his company did not enga.ge because of its aI1eged financial inability to do so. The testimony of the De- Luxe witness was directed at competition generally in the market and not at any particular competitor. He specifically stated that he did not know who started supplying customers with more expensive equipment and made no effort to attribute the decline in the practice of collecting cabinet rentals to any particular competitor. The only effort which the witness made to attribute to any respondent the loss of, or inability to acquire, any account involved a single M'The gallonage of Westover Dairy was estimated at 40 000 gallons a year. Carnation also acquired 55,000 gallons by purchase from Swift & Company when the latter left tbe market In 1951.

1434 FEDERAL TRADE CO:MMISSION DECISIONS Appendix 60 F.

ftCCOlmt which he had endeavored to take away from respondent Arden, but regarding which his salesman later reported the owner had changed his mind about switching because Arden had "taken up half the note" which" fixture company had on the dealer s equipment. In the absence of testimony by the store owner or other reliable evidence to indicate that Arden had, in Lact, financeel the account in question, no finding can be based on the UllcOlToborated, second-hand hearsay testimony of what the witness' salesman reported to him concerning a conversation with t.he store owner, who in turn related what Arden had done for him.

Despite his alleged inability to acquire this account, the Deluxe representative conceded that his company had acquired as many ae. counts from Arden as the !fLttor had acquired from him. I-lis volume had increased from approximately 73 000 gallons in 1947 to a.pproximately 117 000 to 123 000 in 1954, and his 1955 volume was expected to exceed the previous year. \Vhile the witness claimed that his profit per gallon had decreased since 1947 due to increased dist.ribution and manufacturing costs, he made no effort to attribute. this condition to any of the complaint practices. On the contrary, he stated that a large part of his increase in expenses was due to' increased labar costs. He made no cla,im that his over-all, as distinguished from unit, profits had declined.

There is no evidence in the record to establish that there has been any injury to' competition in the Salem area as a result af Arden or Carnatian s engagement in any af the complaint practices. In fact there is no evidence that either respondent was able to' acquire any customers in the arefl by the use of any of the complaint practices Dr has ever endeavored to' dO' so. 2. Seatte, Washington The hE'RTings at Seattle involved witnesses from TDllr diffe.rent areas in the state, viz., Seattle, Snohomish Count.y, Aberdeen and Bellingham. Ea.ch Df these appears to be a separate market area, with substantially different groups of competitors and competitive conditions, except that respondents Arden and Carnation sell in each of the areas. Each of these respondents has a plant in Seattle and sells in the Seattle area, as well as other parts of the State of 'Washingtn. a. Seattle Area The competitors Dperating in the Seattle areh, include, in addition the two' respondents, DairigDld feadDws"eet VelvR , Vita Rich Richmaid, Horluck' , Happy Valley and Royal Dutch. Two other CARNATION CO:MPA: ET AL. 1435 1274 Appendix competitors, Arctic and Vita Freeze, sell ice cream novelties only. There is also Regal Ice Cream Company, which is owned by Safeway. The only competitor witness to be called from the Seattle area was Royal Dntch. 'Vitnesses from Dairigold (which is next in size in the area after Arden and Camation) and from Horlnck's Creamery were both excused at the request of counsel supporting the complaint after having been subpoenaed. Not a single dealer witness from the Seattle area was called to testify.

The main complaint of the representative of Royal Dutch was that during the past five years the cost of cabinets had increased from a range of between $350 and $400 up to $600 and $800, and that as a result of the more frequent changes in cabinet styles the life of a cabinet was now about five years as compared to the previous life expectancy of about ten years. He stated that as the stores became larger and more modern they demanded larger and newer equipment. The witness made no effort to attribute this condition to any of the respondents, but stated that ali companies were "in the same boat" insofar as being subject to the demand of dealers. The Royal Dutch witness indicated that he would prefer to charge rentals for supplying cabinets, but indicated that this practice had begu to decline in 1940 and was no longer in vogue in the area. He made no effort to attribute the decline in the practice of charging cabinet renta.ls to any particular company, stating that his comp'wy found that it was generally not the practice to charge rentals. No complaint was made that the supplying of cabinets involves any exclusive arrangements. The Royal Dutch witness gave no indication that his company had lost any acc01mts or was unable to ilcquire account.s because of cabinets nor was any claim made that his company had sustained any loss in sales. On the contrary, the witness conceded that his company had grown in size since 1940. There is likewise no definitive evidence that the Royal Dutch Company has sustained any decline in the profitability of its operations. The witness did make the ambigllous observation that his company was "not any richer" as the result of the expense involved in furnishing the newer cabinets and that "if we don make any profit ,ve are going backwards." IIowever, the examiner cannot infer from this vague statement that the company had actually sustained a loss in profits, or that if it had that the loss was substantial , more importantly, that such loss is attributable to the supplying of cabinets by respondents.

6t The Arden sales manager testified that approximately half the accounts in Seattle were spIlt, stating that this was particularly true of the larger stores. He estimated that 35 to 40 percent of Arden s larger accounts were split. Appendix 60 F.

In any event, whatever may be the situation with respect to the individual competitor Royal Dutch, there is no evidence of any jnjury to competition generally in the Seattle market. As above jndjcated none of tho other seven competitors testified and the fact that two of them were excused, includjng particularly the thjrd hrgest company in the area, hardly suggests that these compet.itors had any complaints regarding C0111petitive conditions. Certainly it cannot be argued that the testimony of the two coil1petitors who ,were excused could have been cumulative on the basis of the testimony of a single competitor from the area. The fact that cOllnsel supporting the compla,int in Portland called six of the seven competitors in the area hardly suggests that the excusing of t\yO competitor witnesses in Seattle was due to cumulativcness.

There was no evidence introduced to indicaie any undue mortality among competitors in thc market. The so-calleclnational company, Swift & Company, ceased operating in the area, arouncl1D51, but the reason therefor does not appear frolll the record. A local company, Alpine Dairy, sold out to Dairigold, whose representative counsel supporting the complaint excused. Dairigolcl is the most recent entrant into the ice cream business in the arcm and has worked itself up to the number three position in the market. Despjte It 14.82 percent population increase in Seattle between 1947 and 1955, Arden sales increased only 5.28 percent eluring this period. Its 1954 gallonage was 2.51 percent below its 1947 gallonage and was lower than its gallonage in 1926. The record contains no information with regard to Carnation s experience in the Seattle market although, a,s will hereafter appear, its position in the state as a whole has not improved sjgnificantly.

b. Snohomish COlmty Area Snohomish County hes directly north of Seattle. The principal competitors include Snohomish Dairymen s Association (a farmer cooperative of Everett, ,Vashington), respondent Arden and feadowsweet Dairy, also of Everett. Carnation only operates on a limited basis in the area. There are two other minor competitors, Horluck' and Happy Valley from Seattle. The only competitor witness called ITom this area was Snohomish County Dairymen s Association. No dealer witnesses ,were called on to testify. The representative of the Sllohomish County Dairymen s Association had no complaint. against any competitor, unless his reference to the fact that the former practice of charging cabinet rentals had been abandone.d within the past five years may be c.onst.rued as a complaint. CARKATIOK COMP""VY ET AL. 1437 1274 .Appendix However, he made no claim .that any competitor was responsible for this condition. In fact he specifically stated that the abandonment of the practice was not due to Arden and Carnation ,md that he had u,abandoned it because it cost more to collect the rentals than it was worth. He also stated that the supplying of cabinets by Arden and Carnation had had no effect on his business. He further indicated that he expected the increased sales resulting from the better display cabinets to offset the cost thereof.

811011011i8h County Dairynml1 s Association is the llrnnIJer one C0111pany in sales in the area " followed by .Meadowsweet, Arden being number three. There is no indication of mortality among competitors or of any change in relative size of competitors in the are.a. e. Aberdeen Are"

The Abcrdeen area is Jocated about 100 miles southwest of Seattle. The principal competitors are Arden, IIay, :Newman, Arlalld' Dairigold, and Firlands. The only competitor called as a witness was one of the owners of Ha.y s Dairy. There were no dealer witnesses. The principal complaint of the representative of Hay s Dairy was that cabinet costs had gone up from about $200 for the older type cabinets to about $700 to $SOO for the modern open-top cabinets, ane! that he had to supply more of the latter to his customers, 1-Ie "'118 not prepared to state that Arden \Vas the first. company in the area to start. using the more model11 cabinets, but cla.imed that. the practice of supplying cabinets on a Inore liberal basis occurred about the time that Arden entered the territory)'.

Tho evidence discloses that. Arden ca.me into the Abm' cteen area in 1946 by the purchase of Smith: s Da,iry ,,,which was then the lrllgest. company in the Area. Prior to that time, according to t.he Hay's witness, t,he competitors jn the, n1'ea had a "gentleman s agr('emenf that they "'"'Quid not, offer Olle allother s customers better cabinets. Although Hay s apparently would have preferreel -,lrden not t.o have broken the gentleman s agreement by offering better eabincts, the witness r:oncedrd that the, nc",ver type of cabinets had actually hcJpecl his company sell more jee cream, that it probably ",",. f1 good thing for the ice cream business, and that the sl1pp1yjng thereof had not caused his comprmy any diffcult.ies.

In addition to the matt.er of supplyjng c.cabinet.s the, flay s representative indicated that some of the competitors loaned money to dcaJcrs, but. that this ,,-as Hot a \\ic1espreac1 practice. I-Ie did endeayor 1 While the Association s witness (1ec1!ned to reveal Its galloDugc he conceded that was in excess vf 300 000 gaIJol1s Appendix 60 F.

to attribute to Arden his c.company s inability to acquire two accounts a year pre\"iOllsly because it could not comply \\lth requests for financial assist.ance, but his testimony in this regard was pure hearsay, there being no reli lble evidence that Arden had utTcrcd any financial asssist.ance to the accounts in question.

Despite Arden s alleged breach of the gentleman s agreement with respect to soliciting competitors' accounts, I-Iay s Dairy has been a.ble to increase its volume by m-er 2;) percent since 1947. Its profit pic Lure has likewise impJ'O\"ed betwel'J1 1U50 and U);'j;,) . \Vhile llay had beeJl number two in the llUll'ket, ranking hehinL1 _\.rclf'n s predecessor (Smith' s Dairy), it now has at least;)O percent of the volume in the area. The record is utterly Jacking in any evidence to sustain a finding of injury in the Aberdeen area.

d. Bellingham Area-\Yhatcom County Thatcoll County is located in the northern part of the state, direc!.1y north of Snohomish County. The principal city is Bellingham. The main competit.ors are \Vhat.com County Dairymen s Asso eiation (a farmer s cooperative selling under the name Dairigold), Arden, Cyr Brothers and Metcalf Dairy, the latter being a recent cntTant. into the market. Respondent Carnation entered the territory a few weeks prior to the Seattle hearings and apparently had only it rew accounts. Represent.atiyes of \Vhatcom County Dairymen s Association (DairigoJd) and of Cyr Brothers w.ere caned to testify by counsel supporting the complaint. Like\Y1se, for the first 6me during the hearings in the Pacific Northwest four dealers were called.

Although Arden had sold in the territ.ory Tor about 25 years, it was not. too active uutillD52. At that time it had about. 5 or 10 percent of the ",Yhateom County market, as compared with approximately 90 percent held by Dail'igo1ct. In October 1952 it sent a salesman np from the Seattle territory to solicit. new business. As a result of these sales efiOlts, Arden was able to acquire about 25 accounts during the pe.riod from lH52 to ID54 and to increase its volume to the point where it. had about 20 percent of the market as compared with 70 percent on t.he part of Dairigold.

The l'epresBntat,i,-es of Dairigold and CYl' Brothers claimed that they had lost accounts to Arden, mainly because the latter offered newer and larger cabinets, which in some instances were used to store frozen foods. Reference was also made to other inducements such i6 The witness. ut one point estimated the Increase at 25 percent, but later conceded that it was possible his g-ullonage had actually do,ubled since 1947. He stated he could testify better if he had his figures with him, but had not been requested to bring !lily. CAR)(ATIOX COMPA"'Y ET AL. 1439 1274 Appendix as outright gifts, signs and paid vacations. "lost of the testimony as to what Arden had offered dealers was hearsay, being based on what dealers had allegedly told the witnesses Arden had offered them, and counsel supporting the complaint was advised by the examiner that it \vould be necessary to offer independent evidence as to the nature of the alleged offers made by Arden to dealers, in order to 811 pport a finding concerning such offers. The Arden salesman who was also called as a witness in support of the complaint, testified that his sales approach was based on excellence of his company's products and its advertising and merchandising methods, and that the matter of cabinets was referred to only as an incidental matter in connection with assuring the dealer that he would receive a cabinet appropriate to his establishment to replace that from his present supplier. The witness indicated that he found a number of new style cabinets already installed in the territory. The Dairigold witness claimed that his company had lost about 25 accounts and about 50 000 gallons in sales between 1952 and 1954 after Arden became more active in the territory. This, however, was llot a net loss since his company regained about 13 accounts, including some it had previously served. It did this by becoming more active in advertising its product and by supplying its dealers with more modern equipment. The Dairigold witness conceded that the furnishing of better equipment to customers had increased their sales of ice cream, and that competition had forced his company, which previously had had little competition in t.he area, into becoming a better company. Its sales, which had allegedly fallen from approximately 200 000 in 1952 to 150 000 in 1954, increased again by approximately 17 percent in 1955 and were running at the annual rate of about 175 000 gallons.

Although counsel supporting the complaint called two Dairigold customers, neither was involved in the somewhat extravagant giveaWRY referred to in the hearsay testimony of the Dairigold witness. One witness, a 'Woman who operated a food market with her husband in Bellingham, had changed from Dairigold to Arden in 1952 because her husband, whom she described as "the boss of the family, decided that Arden 'Was a "better ice cream." The \vitness volunteered the fact that she concurred in the change because she "liked the new case. The owner of the other account: also a food market in Bellingham testified that he had changed from Dairigold to Arden becallse the former s cabinet was inadequate, it being a small, storage-type ca,binet intended primarily for frozen foods. However, he later switched back to Dairigold ,'\hen he became dissatisfied with Arden s service and Appendix 60 F.

because there was a considerable demand for the Dairigold brand in his territory. The latter supplied him with an equivalent cabinet and agreed to service his frozen food cabinet, as well as its mYll ice cream cabinet, whercas Arden has serviced only its own L'quipment. Significantly, after this store had switched from Dairigold to Arden it experienced an increase in sales, ,\"which the witness attributed to the open display feature of the cabinet.

The representative of the other competitor \witness, Cyr Brothers likewise complained about the fact that he could not meet the demand from merchants for the marc expensive equipment. He conceded that much of what he heard from dealers concerning -what. other llmllUfact.urers were oilering was "hearsay. " Although testifying without the aid of books and records, the Cyr representative claimed tlmt his company s gallonage had fallen from about 125 000 in 1945 to about 000 in 1954, and he estimated a further decline to 55 000 in 1955. It is evident from the testimony of the Cyr ,Witness that this decline cannot be attributed "holly or primarily to the respondents since he lost 25 accounts during' this period and only chimed that Arden "as responsible for six of these and Carnation for two. These accounts were not further identified and there is nothing in the record to inclicatc that any of the complaint practices ,,-as responsible for the respondents' acquisition of such accounts, assuming arguendo that they were acquired by the respondents. The test1l1lany concerning the loss of accounts to Carnation is particularly dubious since, according to tho Dairigold representative, Carnation had only COlle into the area two or three weeks prior if the hearing.

In seeking to determine the true cause of Cyr s decline, it is significant that his company had had a gradual growth until 1951, at which time the company sold out the milk end of its business and continued only in ice cream. That t.he decline in ice. cream began \''ith the sale of the milk business is no mere coincidence, as the Cyr representative himself conceded in his testimony that port at least of his company s decline was due to the fact that it was now operating only in ice cream. Competitors in other areas stressed the advantage to a company of being in both milk and iee cream. Even accepting the witness' estimate of the number of acemUlts he had lost to Arden and Carnation there are 17 other accounts which must be aecounted for. It is obvious that other competitors have been active in the area. It may be noted in this connection that 1fetcalf, which '\as not represented at the hearing, is fl. recent entrant into the ,Vhateom C01mty market. The testimony of two dealer witnesses, who were former CYl' custol11ers, indicates that the eompallY was far from be.jug an active and , CARNATION COMPANY ET AL. 1441 1274 Appendix 1'P..-progressive cOlnpetitor. One of the witnesses, the operator of a taurant in Bellingham, testified that he had an old bobtail fountain from Cyr which had a leaky sink and which was so small that he would run out of ice cream on weekends. He was thinking of quitting Cyr before Arden even appeared on the scene. Arden supplied him with a small fountain and also a small cabinet for the storage of package ice cream. The latter cabinet enabled him to increase his sales, since he had not been able to store package ice creilIlI in the old-fashioned Cyr cabinet. The other dea.1cr witness, a "oman who operates a grocery in Bellingham, testified that she had a small, old-fashioned Cyr cabinet which was 16 years old, and that the Cyr driver had agreed that she needed a new cabinet, but, despite the fact she had been promised one for a year, nothing was clone about it until the day after they had received a new cabinet from Arden. The testimony of the two dea.1er witnesses suggests that the. statement by the Cyr witness that his company "has more or less been inactive, relative to sales since 1951 has more than a grain of truth to it, although not for the reason he gave, Yiz., that his competitors had caused him to be less active.

The record is lacking in subst.antial and reliable evidence that there has been any injury to competition in the Bellingham- VVhatcom County area. "ihat it does show is that one company, "\Vhatcom County Dairymen s Association (Dairigold), almost completely dominated the area, that it was able to maintain its position by the sheer momentum of history until Arden began a concerted selling campaign in the area. Wl1ile this resulted in some Joss of gallonage by D"irigold it later regained a large part of its loss by modernizing its operation inc1ulling the adoption of an aggressive advertising campaign, doubling the number of its flavors and supplying its customers with more modern equipment where required. The activities of Arden caused Dairigold to become, in its o n words a, better competitor, and not to take its previous dominant position for granted. The advance of Arden from an insignificant share in the market to approximately one-fifth of the volume in the area, was primarily the result of a selling job on its part. The furnishing of cabinets by it was a secondary matter and simply filled the vacuum created by its competitors' failure to furnish dealers with adequate equipment appropriate to their needs. The other competitor, Cyr, apparently has still not adapted its selling methods to the times and has continued a policy of drift following the discontinuance of its milk business. Accepting at faco value the testimony of the Cyr offcial, Arden was responsible for only six of the twenty-five accounts he lost, and there is no reliable 1442 FEDERAL TRADE COMMISSIO:\ DECISIONS Appendix 60 F.

evidence that any of the complaint practices was used as an inducement to acquire those accounts.

Viewing the State of Washington as a whole, the record fails to disclose any substantial improvement in Arden s position at the expense of Hg competitors. On the contrary, its sales in the state have declined from 3 124 000 gallons in 1947 to 2 735 000 in 1955, while at the same time the population in the state had increased by 16.24 percent. In terms of its share of state production of frozen products, it sustained a dccline from 25.88 percent in 1947 to 17.91 percent in 1955. Carnation has undergone a similar experienccj although its decline was not as prononnced. Its share of state production declined from 16. percent to 15.0 percent between 1947 and 1955. 3. San Francisco, Califomia The hearings in San Francisco involved witnesses from five different markets in the Northern and Central California area: San Francisco- Oa,kland, ValIcja, Sacramento, :Modesto and Lodi. Before discussing competitive conditions in these areas, it should be noted that the dairy industry in California is regulated by state law, so that certain practices which are commonplace in many parts of the country are prohibited or are permitted only under prescribed conditions. Among the practices regulated by state law are the making of loans, the sale of equipment, the furnishing of refrigeration equipment, and the charging of ofi-Hst prices.

Under the California statute the making of money loans to a retail ice cream dealer is specifically prohibited as an unfair practice. However, it is permissible to sell equipment to a dealer (including refrigeration equipment) for cash or under conditional sales contracts. In the latter instance one-third cash must be paid at the time of sale and the balance must be paid on a monthly installment basis for a term not to exceed eighteen months, with interest at current rates. Ice cream cabinets and other refrigeration equipment carmot be supplied free of charge, but may be supplied on a rental basis, in accordance with a schedule of rentals fixed by the state. The icc cream supplier may furnish only such refrigeration facilities as are reasonably necessary to preserve the frozen products of the supplier. The payment of secret rebates refunds or unearned discounts is made an unfair practke. However, the meeting of a htwful competitive price in good faith is permitted, even though below the supplier s list price, but the 6;\ Agricl1ltUl' 1 Code of California, Cb. Hi, Sec. 4125--143. CARNATIO COMPA."\-Y ET AL. 1443 1274 Appendix latter is reuired to submit evidence to the state of the basis upon which the special price is being oiIered.

a. San Francisco-Oakland Area The ice cream companies doing business in the Bay area include Spreckels-Russell Dairy Company, Tomales Bay Creamery, Dreyer Grand Ice Cream Company, Green Glen Ice Cream Company, Swift & Company, and the respondents Borden, Arden, Beatrice, Carnation and Foremost (the latter doing business under the name Golden State Ice Cream Company). The evidence at the San Francisco hearings consists of the testimony of representatives of two competitors, Spreckels-Russell and Dreyer, as well as testimony by an offcial of Borden and Golden State, respectively. Representatives of two retail chains were also called.

The evidence discloses that ice cream cabinets have been supplied to dealers in the San Francisco area at least as far back as 1929 when Spreckels-Rl1ssell entered the ice cream business. :Jiost of the companies in the area at the time were so-called independent local companies, and they supplied the cabinets to dealers free of charge. This practice continued until the time of the passage of the California law which required that a rental charge be made. The two practices mainly emphasized by the Spreckcls- Russell witness were "financing)) and price cutting. In the case of financing, his testinlony was somewhat ambiguous, confused and contradictory. first he appeared to be complaining about the increase in the cost of furnishing ice cream cabinets, which he claimed had risen from a former maximum of $500 to as much as $5 000 in the larger establishments. l-Iowevcl', he later indicated that ice crealn refrigeration equipment was not usually financed, in the sense of sellng it to the dealer on a conditional sales basis, but was supplied under a rental arrangement. He conceded that the increase in the cost of such equipment presented no problem since he "\aB able to conect a rental for the cabinets under state law to compensate him for the cost thereof. He also agreed that the newer type cabinets had helped considerably in increasing ice cream sales. The type of financing which he apparently regarded as objectionable was the sale of other equipment Hnd of fixtures to remodel or open a ne,y establislunent. and the Although complaining generally about "financing" creased cost thereof, the SpreckeJs-Hussell representative made no reference to any particular company 01' companies RS having initiate.d the pra.ctice or as having used it aggressively to acquire any of his accOlmts or to prevent him from obtaining accounts. He declined 719 603--64-- 1444 FEDERAL TRADE COM:ISSION DECISIONS Appendix 60 F.

in response to the leading question of counsel supporting the complaint, to attribute the practice to the entry into the market of the big outside companies, although he did claim that the practice became "progressively worse" after that time. :However, the company or companies involved were not ident.ified, nor was the nature of the so-called finaneiug. As noted above, the California Jaw permits the sale of equipment on a conditional sales basis, one-third down and the balance in eighteen months with interest at current rates. lt is not clear whether it was this practice about which the witness 'ivas complaining or some possible deviatio from the st.ate law. lie expressed the opinion that some companies were guaranteeing bank loans, but conce,cled t.hat his information 'i\fls hearsay and that this would be a violation or state law.

vvith respect to the witness price complaints, he referred in general terms to the fact that '; ice cream companies" deviated from their published prices in order to acquire "certain accounts. I-Iowever, no identificatjon was made of 'i\which companies deviated from their published prices, nor is there any other indication in his testimony that any or the respondents were so involved. X 0 specific accounts that Spre.ckels-Russell lost or failed to acqnire by reason of such deviations were mentioned. As previously noted, the California, law prohibits price deviations, except to meet competition and then only upon a filing of notice of such deviation with propel' state offcials, giving a justification thereof. It is not clear whether the testimony of the witness involves deviations of this type. In any event, there is no evidence that the respondents were involved in such deviations.

Despite the Spreckels-Russell witness' general complaints, the company has managed to ma,intain a consistent pattern of growth. though having no records availa.ble, its representative estimated that its ice cream gallonage had inercased from about 300 000 in 1934 to 750 000 in 1955 , and that its gallonage in 1955 was greater than it had been five years previously. The company s dollar volume of sales in 1955 ,vas in excess or $1 000 000. Its capitalization increased from approximately $500 000 in 1929 to about $1 000 000 in 1955. The company built a new plant in 1952 worth about" milion and a quarter dollars. It has expanded its operations from San Francisco and San Jlateo Counties into IVfarin and Santa Clara Counties. It serves a very substant.ial number of hotels and restaurants in the San Francisco area.

While the Spreckels-Russell representative complained that his company only served 15 or 20 supermarkets in the area, there is , \\ CARNATION COMPANY ET AL. 1445 1274 Appendix no rcliabJe evidence in the record as to the llu1nber of such markets in the area or anything to indicate that his company has an inordinately small percentage of such markets. In any event, there is substantial evidence that any respondent or group or respondents is responsible for the company s alleged inability.y to acquire more of such accounts, or that such inability is due in a,lly \Yay to respondents use of the complaint practices.

The other competitor called as a "wit.ness \nls Dreyer s Grand Ice Cream Company which does bllsiness principally in Alameda County (of which OakJancl is the main community) although it makes some slLJes in San Francisco. The Dreyer relJrescntative complained that his company was prevented from getting into the newel' stores in the area because of :'.fna.ncing arra.ngements or priec alTangements. ' He did not furt.her identify the nature of the "fLlTflngements" or indicate t.hat a.ny respondent was involved in such arrangements. Approximately 20 percent of Dreyer s volwne was estimated to be in the snmller, so-ea.lled independent stores which Dreyer serYcs on an ex" elusive basis, and the balance is in the larger establishments which are split with other suppliers. Apparently Dreye.r ,,-ouJcl like to sen.c more of the 1nl'ge.r establishments. 1-1is alleged il1flbility to do , hmn'yer, is not. based on any refusal to "finance :: sllch establishments since, admit.tedly, he was never asked to finance such accounts; nor is t.he company s inability to acquire 11101'0 of such lcconllts clue. to any exclusive dealing arrangements '\with other ::nppJiers, sinco many of them are spl it bet'\"ecn more than one supplie.r, anrl the witness conceded t.hat he nls never advised that an exclusive dClLling arrangement. was the reason for any store s refusal to purchase his product.

Despite the vague insinuations of competitive difIeulties with un- Hamecl competitors, Dre,yer has been able to make remnrJmble progress in its area. Prior to 1947 the company was selling under another llame exclusively to a chain of retail confectionery store.s. It reorgnuized under its present name in 19-17 and began to solicit other types of esta.bJishments. From il. volume of only 50 000 gallons in 1947, it had grown to approximately 225 000 gnllons in 1955. This growth is all the more rema.rkablc because the company sells only a single premium brand oT ice area.m oT the high butter-fat variety, unlike most of its compet.tiors who have a standard or so-called ';price brand, in addition to the.ir premium brand. There is no evide.nce of any significant. mortality among compet.itors in either the- San Francisco or Oakland areas since t.he war, although there were a number of mergers and consolidations in the Appendix 60 F.

1930' s. A new company ent.ered the ice area,il business in San Francisco in 1954, Tomales Bay Creamery. In the Oaldancl area, Dreyer is substantially a postwa.r entrant, since its prior operation was more or less that of a "captive ' creamery in that its sales \were made exclusively to a ,ingle group of stores. Challenge Creamery has also entered the Oakland market in recent years. That the respondents who clo business in the Korthern California area do fiance some of their customers, in the sense that they seu fixtures and equipment either for cash or under a conditional sales contract, is not disputed. However, so far as appears from the record the sales arc made strictly in accordance with the California law. The customer is required to pay at least one-third down and the balance within 18 months. In addition to such sales of equipment under conditional sales contracts, t.here is evidence that two of t.he respondents, Arden and Foremost: lease equipment other than refrigeration equipment, such as store fixtures and showcases, to retail establishments on a regular rental basis. In the case, of Foremost, such leases are made by a wholly owned subsidiary, Acme Investment Company. The latter is primarily in the investment business, in t.hat it makes loans to milk producers and distributors and owns stock in grocery supermarkets. In addition, Acme leases store fixtures and other equipment from equipment mnllufacturers or jobbers and, in turn sub-leases such equipment to retail dealers. Arden makes similar lea,se arra,ngements with retail dealers. In nOlle of such a.rrangements is there any requirement that the retail dealer must purc.hase his ice cream from the lessor.

The two retail dealers caned by counsel supporting the complaint both involve instances where Foremost and Arden, respectively, had leased store equipment to a retailer. In the case of Foremost, the dealer was Littleman Grocery Store, which operates nine supermarkets or superettes in San Francisco and two in the adjacent counties. In its suburban stores, Littleman carries the ice cream of both Spreckels-Russell and Foremost's affliate, Golden State. In its San Francisco stores it handles only Golden State. In Littlenmn newest store in San Francisco, it leased $15 000 worth of fixtures from Acme Investment Company on n regular rental basis. 1-1owever, this \Vas not responsible for the decision to de,al with Golden State since, according to the testimony of the LittJeman Iyitncss, his orgu.nization had be,en selling Golden State in its other stores in San Francisco for a good number of years !1nd had found its merchandising ftnd tdYertising program "very beneficial to our operations." So far as a,ppoal's from the. record this was its sale 1'en50n CARXATIO:\T COMPANY ET AL. 1447 1274 Appendix for conttlluing to deal with Goldm1 State at. its newest store in San Francisco. There is no provision in the lease requiring that LittlenUUl purchase Golden State s products during the term thereof and according to the ,,-itness "we can change (from Golden StateJ right n0\1.

The other instance of the leasing of equipment involves a large drugstore in the heart of downto\\"u San Francisco, owned by :\1:lton F. Kreis Enterprises, which also operates four drugstores in other areas, At the San Francisco store, which represents an investment by the owner of approximately $350 000, part of the equipment and fixtures having a value af approximately $100 000 is rented from Arden at a monthly rental of approximately $1 600. Although the pur-lease is for seven years, there is no requirement that the les chase Arden ice cream. According to Kreis:

'Ve have no obligation to Arden at all. If their product does not come up to '" Ii $ specifications, we can throw them out. The witness stated that seven manufacturers had tried to get the account and that he had chosen Arden because, after a visit to their very modern plant, he was convinced that they would manufacture the ice cream properly in accordance ,,,ith his specifications and in the quantities which he required. It may be noted that Arden does not have a similar arrangement at the other stores of the chain, three of which are located in Southern California and are supplied by another ice cream manufacturer under an arrangement similar r to that in San Francisco.

The record fails to show any marked improvement in the market position of respondents, as might be expected from some of the testimony of the competitor witnesses. Borden s share of the San Francisco market has actually declined from 12.3 percent in 1950 to 10. percent in 1955, ,vhilo Beatrice s share has declined from 4.9 percent to 6 percent in the same period. C,m1ation has shown only a slight increase during the same period from 8.4 percent to 8.9 percent, while Arden s share increased slightly from 6.0 percent to 6.3 percent. No comparative figures are available for Foremost since it did not enter the market until1954 by the acquisition of Golden State. b. Vallejo Area Vallejo is northwest of Oakland in Contra Costa County. The respondents doing business in that area include Foremost (Golden State), Carnation and Beatrice. Borden does not do business directly in the area, but sells through a jobber. The local competitors include Red Top Dairy of Vaneja and Milk Producers' Association, a , ,, 1448 FEDERAL TRADE CO 'IMISSION DECISIONS Appendix 60 F.

farmers' cooperative. Red Top Dairy was the only competitor from the area represented at the hearings. No retail dealers were called. The principal complaint of the Red Top Dairy witness was that most of his accounts were the smaller "mamma and papa:' stures and that he couldn t get into the larger supcnna.rkets, most of which are chain establishments. The principal chains operating in the area are Safeway, Hagstrom and Purity. However, there is not a scintilla of evidence that Red Top s inability to get into these chains has any cOllnection with the complaint practices. Safeway and Hagstrom are captive" outlets, i. , they have their own ice cream manufacturing facilities and hence do not buy from outside manufacturers. Purity, according to the witness, buys from Beatrice, but the only reason the witness could give for their not buying from him was that "probably they "just liked Beatrice." Red Top does sell to some of the independent supermarkets, a large percentage of which handle more than one brand of ice cream.

The Red Top witness also complained about his company s inahility to sell to several drive-ins and hamburger establishments beca,use one was allegedly financed by Carnation and the other by Golden State. Outside of the witness' hearsay testimony, there is no evidence in the record that Carnation or Golden State financed either establishment nor is there any evidence that if they did hat the nature of such financing "was, or that it had any connection with either esta.blishmenes choice of a supplier.G'J In the case of the establishment served by Golden State, the record discloses that the so-called financing oc- Cluded prior to the time that Golden State was acquired by Foremost and the testimony in this respect was stricken from the record. The witness also referred to two ha,mburger establishments served by Carnation, to which he stated he was unable to sell "uecause of price." There is no reliable evidence in the record as to what price the establishments in question ,,'ere paying Carna.tion. 1:render the state law an ice cream manufacturer is required to sell in accordance with his est"blished price schedule, except to meet the lawful price of a competitor, and then only upon filing evidence of the price reduction and the reason therefor. It cannot be assumed, in the absence of evidence to the contrary, tha.t the so-called "price" of Carnation \yas other than a lawful price lmc1er the California statute. Despite the witness' hearsay and col1clllsor:y testimony that some of his compet.itors were not living np to their establishccl schedules, there is not a . The witness ' testimony with respect to the Carnation account was based partly on what the owner allegedly told him. and partly' OD what he bad learned from several former CiJrnatioD employees three ears lifter they had left Carnation s employ. CARKA'l' IOK CO PA1' Y ET AL. 1449 1274 Appendix scintila of reliable evidence in the record to support a finding to this effect in the Vallejo area, and certainly not with respect to any particular respondent. Moreover, there is no evidence that the price arrangements were conditioned on exclusive dealing, as alleged in the complaints.

The record is lacking in evidence at any significant mortality aTIlong competitors in the Vallejo area since Red Top entered the ice cream business in 1944. One local compa,ny, Lakeside DlLil'Y, has been taken over by another local company, j\:Ilk Producers' Association, for reasons which do not appear in the record. In addition, Carnation and Beatrice have entered the area, as "ell ns the Borden jobber. would therefore appear that more eompanics are competing for available business since Heel Top s e.ntry into the. market. Hmvever, to counterbalance this, there has been it significant population increase in the area.

Despite Red Top s inability to acquire every a,account it has sought to get, the evidence indicates that it has made excellent progress in the competitive st.ruggle. Starting 1With no account.s in 1944, it had managed to acquire 120 accounts by 1955, either exclusively or on a split basis. Its gallonage grew from zero in 1!144 to ;')0 000 in 19;'0 then doubled t.o 100 000 by 1054 and it was still incrcnsi1lg in :!ove1lbel' 1055. From a market share in the Vnllejo arcn of Jess than 10 percent in 1950 it had increased to approximately 20 percent in 1955. Red Top s growth is all the more remarkable because it sold only a single premium brand until 1954: when it began to manufacture' a competitive standard brand.

Its president conceded t.hat the company was holding its relative position among its competitors. Ilis main concern seemed to be the drift of sales away from the smaller establishments to the supermarkets. RowoveI' most of these, as above indi.eaten., are ca,ptive establishments and there.olc involve a situation which is outside the issues in these proceedings. ,With respect to the nonchain supermarkets, there is no reliable evidence that the engagement by any of the respondents in the complaint practices has prevented Hed Top from getting into these establishments.

c. Sacramento Area The manufacturers selling ice cream in the Sac.nunento area include the respondents Arde) , Ca.rnation, Borden, Foremost (Golden State), and Beatrice. and the 10eal companies Crystnl Cre"mery, Home Milk, Country YIaid, and Taylor Dairy. The only witness 65 The witness conceded that "in many cases" when he had checked on reports that competitors were offering a better price he found it was "not a fact. Appendix 60 F.

called from the Sacramento are,a was a representative from Taylor Dairy. A representative of Crystal Creamery "-as excused at the request of counsel supporting the complaint.

lost of the st.ores in the Sacramento are,a sell h o and sometimes three brands of ice cream. Only about 10 percent of the accounts own their own ice cream cabinets. The balance rent them from their ice cream suppliers. None of the suppliers permit dealers to keep another company s brand in its cabinet. As in man v other areas there is a trend in the sale of ice cream away from the smaller establishments toward the chain stores and supermarkets. However, this has not hurt Taylor Dairy but has actual11y "helped" it because the company is in " all t.he local chains." The only national chain store in the area is Safeway, which manufactures it.s own ice cream. There is also a state-wide chain, the Lucky Stores, to which Taylor sells milk but not ice cream. The Taylor representat.ive s only explanation for not selling them ice cream was that he "guessed" he was a lousy salesman.

The Taylor witness claimed that he had tried to get into some supermarkets in the area (which he did not identify), but had been told" that if "we would finance we could get. in some." The financing was described by the witness as "financing equipment for stores. The Taylor representative failed to identify any respondent as being involved in such financing, and even conceded that "whether it ,vas being done by our competitors, I do not know. " The only account specifically referred to by Taylor as being involved in any competitive situation 'was a drive--in which had allegedly requested a loan of $75 000, with the- understanding that he would get this account. as well as another establishment owned by the same individual. According to the Taylor witness he "laughed it off and that was the end of it. The establishment at. the time was being served by Borden and later changed to Beatrice. There is no evidence that Bither of the latter two companies loaned the establishment anything or fina-need it in any way. In fact, under the California I , a loan of money would have been ilega!.

Taylor made no claim that his compa.ny was having any sel'jous competitive problems in the area. The company s profits have increased between 1952 and 1955, as has its volume. During 1955 its volume increased 17 percent over t.he previous year. This improvement. in sales is particularly significant. in view of the fact that Taylor s price is 15 cents a gallon higher Hllm that of most of its competitors. Taylor s share of the market has increased from about 5 percent ill 1946 to approximately 15 percent in 1955. CARNATIO:\T COMPANY ET AI,. 1451 1274 Appendix There is no evidence of any significant mortality a.among competitors in the area. The only company to cease operating since 1941 (when Taylor entereel the ice cream busine.ss) is HOlne Ice Cream Company, which sold out to another local competitor, Country Maid. The latter conlpany has enter,rcd the market since 1941, as have Ca.rnation a, Beatrice. The area is rapidly growing in population. The largest competitor in the area is a local company, Crystal Creameries, a repre. scntatiyc of "which was subpoenae.d, but ,,-as later excused at the request of counsel supporting the complaint. The record is lacking in evidence that competition in the Sacramento area is anything but vibrant. d. Modesto Area J\Iodesto is locatcc1 npproximately 93 miles PASt. of San Francisco in Shtnislnus COlmty. The only ,,,holesale ice cream manufacturer in l\fodesto is Velvet Ice Cream Company, ,,,which operates throughout Inost of Stanislaus COWIty and in parts of San Joaquin County to the north and :I\ercecl County to the south. The other principal local company is J\Iilk Produccrs' Association of Central Ca,lifornia, a farmers coope.n1.tive which sells ice cream under the name Peters01l Icp, Cream Company. In addition, two small companies, Richmaid of LocE and Farm :l\aic1 of J\Iaclera, operate 011 the northern and southern fringes of the j\Iodesto area. The respondents w hieh operate in the area. inelude Borden, Carnation, Arden, Beatrice and Foremost (Golden State). Likewise, the nonrespondent national company, Swift &: Company, sells in the area. The only \vitness called from Jiodesto was a representative of Velvet Ice Cream Company. A representative of Richmaid also testified, but his testimony related primarily to the Lodi area and is discussed below.

1\lost of the testimony of the V cIvet. witness related to certitin accounts which his company had allegedly lost 01' had been lmable to acquire clue to the activities of several of the respondents. For the most part, the testimony was of a he,usay nature as to what the witness had been told certain competitors had done, for the accounts in fInestion. The testimony with respect to three of the six accounts mentioned by the witness was so unreliable that it was Ordered stricken. The other lia One instance involved the alleged giving of free ice cream to offset tbe rental charge by Arden to a food market in Modesto. " Another involved the charg-Ing of a "distributor price hy Arden to another market which allegedl.) was not entitled to such a price. both instances the information had allegedly been gleaned by the witness from a former Arden driver at the time he was seeking empioyment from Velvet. The third incident iuvolved tbe alleged failure b y Carnation to cbarge a rental on some of the cabinets which it had supplied to a market in :Modesto. (This information was aUegedly reported to Velvet by an employee of the market. All three instances, if true, ,,"ould have constituted violations of the state law. In only the last-mentioned incident did Velvet claim to have reported the incident to the state authorities. So far us appears from tbe record, the state authorities fau to sustain Velvet's complaint. 1452 FEDERAL TRADE cO!\nlISSIO:\ DECISIONS Appendix 60 F.

three instance.es also involved hearsay evidence as to whnt a store owner or manager had reported to V cIvet at the time an account was lost or could not be acquired. The e\ridence was recei, , subject to the offering of independent evidence that the three accouuts had been favored in the manner inclic.ated, but no such evidence was ever offered. One or the three instances mentioned involved the alleged "financing" of a drive-in by Carnation: the nature, extent, or even the fad or which, was never established for the record. The other instance involved a Chinese restaurant in :Wodesto to which Velvet had agreed to sell certain equipment- on a conditional sales time-payment basis but which Borden allegedly acquired by agreeing t,o "put up the money to pay for that equipment. ' According to the V cIvet representative testimony, the owner informed him of the Borde,n oire,r but agreed t.o give Velvet the account if the company wouldloa.n hiin $10 000 to pay for the equipment. Not only is theTe no evide.nee to support the witnes.';; ' hearsay t.est.imony, but there is reliable affrmative evidence by It Borden offcial that what Borden did for the restaurant owner was precisely what Velvet had offered to do, viz., to sell him the equipment on a conditional sales basis, in accordance with the California law one-third down and the balance within eighteen months, and that no loan was made to the owner'.6S The third incident involvoo the loss of a drug store in Iodesto to Cal'ation because the Jetter had allegedly given it a chain store discollnt. Although the st,ore was apparel.ntly part of a chain, the Velvet witness objeeted to the practice of giving a volume discount to the separate stores of a chain, based on the chain overa.ll volmne, it-being his opinion that the discount should be based on the volume of each separate store. There is no reliable evidence in the record as to what discount, if any, Carnation gave. the, store. in question or that it granted special prices to any accounts in the are, The record fails to establish any substantial loss of business by Ve.Jvet. The company s principal complaint was not that it had lost gallonage, but that its y01mne of approximately 200 000 gallons had not increased since 1947, despite.e a substant.al increase in populat.ion in the arch.69 I-Iowever, there is no reliable evidence that this static eT The witness at first claimed that the drive-in was financed "partially " by Carnation but later expanded this to claim that the owner had Informed him it was being "financed 100 per cent" by Carnation. The witness' suggestion that his testimony could be corroborated by subpoenaing the owner was not adopted by counsel supporting the complaint. !' The testimony of the Borden offcial indicates that his company had been serving the owner at another location, and that the owner had approached Borden for assistance in purchasing Borne equipment at the time he contemplated opening an additional restaurant. 69 The Velvet witness was unable to give any exact figures as to his 1047 volume since he had no records with him, but lie estimated his volume as approximately 200 000 gallons. The latter appears to have been merely Ii rough approximation of his gallonage during the eiuHer period.

CARNATIO:' COMPANY ET AL. 1453 1274 Appendix conditioll is clue to the llse of any of the complaint practices by respondents. In fact, at least two of the three respendents referred to by the Velvet 'iyitness as having been involved in specific competitive situations appeal' not to have fared any better than has Velvet. The sales of Borden s Modesto Branch have declined sha11Jly from 216 000 gallons in 1947 to 134 000 gallons in 1955. Arden has only ten or twel ve customers in the area ) with an estimated annual gallonage 000- 000, which has not changed much in recent years. Ko comparable information appears \"\itll respect to respondent Carnation. however, from its static position in t.he nearby San Francisco market (referred to above) and in the state as a whole (which will hereafter be discussed), there is no reason to believe that it has made any significant adva,nee in the l\iodesto area. There is no information in the record with respect to Golden State s or Beatrice s volume in the market, but it should be noted that no claim was made by the Velvet witness t,hat Golden State or Beat.rice had been responsible for any of his companies diffculties.

The only significant recent change' in the status of competitors, re ferred to by the Velvet witness, is the fact that Swift & Company " gradually going out of business * * * for some unknown reason" and tha.t fL loca.l compet.itor, Peterson Tracey, has sold out to another local company, Milk Producers' Association of Central California. There is no reliable evidence that these departures are connected in any way \with the complaint practices.

e. Lodi (San .Toaquin County) Lodi is located in San Joaquin County which is directly north of :Modesto. The only company manufacturing ice cream in Lodi is Richmaid Ice Cream Company. 8m"end other Ideal companies which have their plants in nearby areas also sen in competition with Riehmaid. These incJudc )lilJr Producers' Association of Central California (Peterson Ice Cream Company), Crystal Crea.meries of Sacramento, which competes in the northerll part of Riclunaid s territory, and Velvet Ice Crelun Company of 1Iodesto, which competes to a small extent in the southern part of the territory. In addition, respondents Borden, Arden, Foremost (Golden State), Carnation and Beatrice sell in most of the territory. Swift & Company competes in the Stockton area.

The only witness called from the area was the head of Ric1nnaid Ice Cream Company. The Richmaid representative claimed that his '70 'I' he only reference to Golden State by the witness was that Golden State had replaced Borden in one of the chain stores which Velvet bad been splitting with Dorden. (fowever this had 1)0 effect on Velvet's salt's to the estllblishment. Appendix 60 F.

company s volume had gone dmvn during the past year due to "fiancing and furnishing fancy equipment without compensation." He also claimed that his company could not compete for supermarket business because of "low prices and the type of equipment they arc furnishing. There is little evidence of a specific nature in the record to sustain the blanket claims of the R.ichmaid witness, and no reliable evidence upon which to base any fmc1ings that any of the respondents are responsible for the company s alleged diffculties.

While at first claiming that his company s gallonage had declined during the past year (i. , during 1954-1955), the Richmaid offcial later conceded that he hRd lost only one account. eluring the year. then claimed that he had lost a number of accounts to Carnation four or five years previously, soon after Carnation had entered the territory. Although this would suggest that his major decline occurred during 1950 or 1951, the Richmaid ga.11onage. figures indicate that the company's sales inereased from 65 000 gallons in 1950 to 80 000 gallons in 1951, continuing in the latter fi110unt during ID51, and did not decline again l1until1953 when they returned to 63 000 gallons, Aside fronl this confusion in the testimony of the l ichmaid witness there is not a scintilla of reliable evidence to support a finding that the company s decline in gallonage is due to the use of the complaint practices by any of the respondents. 110st or the Hichmaid "\witness testimony consisted of unsupported conclusions or hearsay. Indicative of the insubstantiality of such testimony is that rebting to the one accom1t which the R.ichmaicl witness claimed he had lost during the past year. lie claimed that the owner had asked him for a-loan or $10 000 t.o remodel the establishment. aucl that when he refused he lost the account, which is now being served by Borden. N at only was no reliable evidence offered to indicate \\hat, if any, assistance Borden gave the account in question, but the testimony or a Borden offcial affrmatively esbtblishes that Borden did not fiwt1ce the acCOtUlt in any WH,y a.nd, in fact, that the account later switched to a nonresponclent competitior. The evidence suggests that Richmaid's loss of the account may have been connected with the fact that the owner was considerably in arrears in the amount which he had owed Richmaicl on its purchases of ice cream and that he resented the fact that t.he latter had started suit against him.

Another specific instance cited by the Richmaicl offcial was an account which he hncl sought to acqnire from ..1'len but ,which later .Althou,eh the Rlchmaid witness denied that bis company had instituted suit against the former customer, dOClllDentarv evidence offered by respondent Borden establishes that such suit was in fact instituted.

CARNATION COMPANY ET AL. 1455 1274 Appendix allegedly told him it had decided not to change because it was "all tied up with Arden. Kat only 'nls no eviden ce offered to indicate what way Arden had "tied up " thc account in question, but an Arden offcial denied that the account was tied to it in any ,yay. As already indicated, Arden does not have any exclusive dealing contracts in California. 1-1.another instance cited by the witness to illustrate his general charges involved an account frolll which Richmaid had received a request for a loan, which it declined, and Carnation later acquired the account. The witness admitted that he did not know what, if anything, Carnation had done for the account. The final incident cited involved an account which had allegedly asked for a loan, so that the balance of a loan from Golden State could be paid of!. :Not only is there no reliable evidence to establish any loan from Golden State but an offcial of Acme Investment Company, the Golden State affliate denied that his company ever made any loans. Moreover, such practice is specifically prohibited by state statute. The Richmaid witness also claimed that he did not even try to get supermarket business beca,use he could not meet the low prices that were being ofI'erec1. However, no evidence was offered to show that such supermarkets were being served by any of the respondents or as to the prices being chaTged or that there was any clement of exclusi,' dealing involved in such price arrangements. Assuming the accuracy of the figures given by the Richmaid witness which indicate a decline in gallonage of 15 000 gallons between 1952 and 1953, there is nothing to suggest that any of the respondents is responsible for this decline and, more ilnportantly, there is nothing to indicate that their use of the complaint practices played a significant role therein. The Richlnaid witness' reference to the fact that he couldn t meet the low prices in the supermarkets suggests that ordinary price competition was a factor in the company s diffculties. In any event, there is no indication that any of the respondents referred to by the witness has experienced any unusual improvement in its position in the area. The sales of Borden s Stockton Branch (which includes Lodi) remained almost constant between 1949 and 1953 (the period covered by the witness' testimony). Arden has only four or five accounts in the Lodi area, and the number and gallonage of its accounts in the area are smaller than in previous years. "\Vhile there is no information as to the position of Golden State (the third of the respondents referred to by the witness), it was not acquired by Foremost llntil 1954 and, according to the Riehmaid witness, his compD. s losses had occurred prior thereto. 1456 FEDERAL TRADE CmIMISSIO DECISIONS Appendix 60 F.

The record contains no meaningful information with regard to any departures from business in the area during the postwar period. While the Richmaicl witness did refer to seven companies he had seen come and go \ there is no indication as to when such companies ceased operating or as to the reason therefor.

The evidence offered at the San Francisco hearings fails to establish that competition in the northern and central area. of California is being adversely affected by respondents anel, more importantly, that any diffculties which are being experienced are clue to the complaint practices. Four of the six 'competitors cancel have substantially imprm" their market position or sales in recent years. One has remained on an even keel, while the sales of one have declined sol1mvhat. The record fails to establish any significant improvement in the position of respondents in the area. Their position in the state as a whole likewise does not appear to have improved markedly. In fact the production shares of three of thc respondents have declined between 1947 and 1955. Arden s has declined from 13. 8 percent to 12. percent; Carnation s from 11.1 percent to 10.7 percent; and Borden from 8.2 percent to 6.6 percent. Beatrice s share has increased from 1 percent to 7.5 percent. However, a large part of this increase is due to its acquisition of Creameries of America in 1953. Foremost' production share has increased from 16.84 percent in 1954, when it acquired Golden State, to 17.79 in 1955.

4. Washington, D.

The hearings in 'Washington, D. , lllVolved evidence of competitive conditions III four distinct areas, the 'Washington Metropolitan area, the Baltimore area, an area around \Vinchester, Virginia, and an area around Cumberland laryland. Each appears to be a separate market area, and the evidence with respect to each area is discussed separately below.

a. 'Washingtn, D. , Area The respondents doing business in the Washington area include Kational (Breyer and Southern Dairies divisions), Arden (Melvern- Fussell subsidiary), Beatrice and Borden. The local companies include Colonial Ice Cream Company, 'Washington Maid Ice Cream Company and Briggs Ice Cream Company. There are also a number One of the companies mentioned was Peterson Ice Cream Company which, as prevlously Doted, sold out to :MIlk Producers ' Association of Central California, an active competitor.

CARXATIQX COMPA: n- E'l' AL. 1457 1274 Appendix of substantial regional companies which have plants or sell in the Washington area, including Hichmond Dairy, Abbotts Dairies, Delvale Ice Cream Company, Mayfair Ice Cream Company, and Hershey Ice Cream Company. In addition there are several "captive" manufacturers, which sell only through their affliated stores, including High' , Giffords, Howard Johnson, Hot Shoppes, and Safeway. Counsel supporting the complaint called as wituesses representatives of two ice cream manufacturers, Colonial and ,Vashington Maid, and eleven dealers. A representative of the other local company, Briggs was present during the hearing but was not ca.Jed. The testimony or the two competitor witnesses indicates that it has been the practice or ice cream manufacturers in the ,Vashington area to supply ice crean1- cabinets to their dealers since the earliest days of the industry, even before any of the so-called national companies entered the area. Both local manuracturers agreed that it ,"' as necessary and desirable for the ice cream manuracturer to furnish equipment ror storing and merchandising the ice cream, and to service such equipment. The representative of Colonial was particularly emphatic in his testimony that the industry should furnish and maintain the equipment through which the ice cream is sold, for the reason that the product is highly perishable and that if the cabinets are not functioning properly the manufacturer will be called upon to replace the ice cream which has become spoiled. While the Washington Maid representative indicated that the cost of furnishing the cabinets repre. sented a considerable expense to a smaller manufacturer, he also agreed that a great many dealers would not carry ice cream if the manufacturer did not supply them with a cabinet. The Colonial witness claimed that when he entered the business in 1826 it was customary to make a rental charge of five cents a gallon to defray the expense of supplying a cabinet, and that this practice was discontinued around 1845 or possibly earlier, with the Breyer Division of National Dairy allegedly taking the lead in the discontinuance of such rental charge. The ""Vashington :flaid witness, however, testified that So far as he was aware, and going back to 1932 when his company was started, it had not been the practice to make any rental charge in connection with supplying ice cream cabinets. Irrespective or which of these versions is correct, it does not appear that the failure to make any rental charge has had any adverse effect on the industry since, as the Colonial witness testified, the price of the ice cream was adjusted to take care of the discontinuance of the rental charge "so that it did not make any c1ifferPllce finally to us one ,vay or another.

, .

1458 FEDERAL TRADE COMMISSION DECISIOKS Appendix 60 F.

While the Colonial representative did not feel that the matter of furnishing or servicing ice cream cabinets was a significant competitive factor in the ice cream industry in Washington, he did express disapproval of the practice of making loans to dealers. However his testimony gave no indication that any of the respondents was responsible for this practice or had used it aggressively against his company. On the contrary, the testimony of the Colonial witness indicates that the practice has been utilized as far back as 1926, which antedates the period when the major national companies entered the Washington area, and that Colonial and other manufacturers in the area do make loans to assist their dealers. The Colonial witness conceded that the making of loans to independent retailers for modernizing purposes has helped such dealers compete with the larger chain establislm1ents.

Although the Colonial repl'esentatiyc did !lot refcr to HllY of jrespondents as having been responsible for his loss of any acc011Jts or for his company's inability to acquire any acc-aunts because of loa.nt:, COlUlsel snpporting the complaint (',111et! Olle' l'etililel' "\yitncs:: who hrld recP,ived a, lonn and whose testimony indicated that Colonial had sought to acquire the aCcOlUlt. The dealer in question \vas the operator of a drngstore which had receiyec1 a $4 000 loan from Southern Dairies in connection with opening up his establishment. The proprietor had previously operated two other drugstores at different periods, in one of which he had carried Colonial's ,Vadrex brand and in the other Southern Dairies' Se.a1test brand, Before opening up his newest establishment, the owner had had a consumer survey made, for which he paid $100, and found that Sealtest was the most popular brand in the neighborhood. Based on the results of the survey and his own satisfactory experience with Scaltest at the latest of his two prior locations, he chose Sealtest, So far as appears from the record, the loan \Thich was made to assist him in opening the store had nothing to do with his choice of Southern Dairies as his supplier. In fact he had r eived similar owners from other competitors, including one from Colonial Ice Cream Company, which had loaned him llone ' at OIle of his prior locations, It seems apparent that the loan 11i('h "\YflS flmply secured by a chattel mortgage and "\which, so far ,IS the "\",itness ,yas aware, conta.ined no requirement that the dealer ll e Sen1test ice cream, was not a "'ignifieant factor in his choice.e of suppliers.

The area "\Y!there, Colonial has been the weakest is in the supermarket and chainstore field. "\Yhile claiming that requests for loans flnd equipment had been involved in these accounts, the Colonial CARNATION COMPAl\ Y ET AL. 1459 1274 Appendix ,,:itness conceded that "price ,yas the princip tl factor" which had prevented his company from obtaining such accounts. In fact, he coneec1cc1 that the supplying of a large chain would be beyond the capacity of his company's present plant, and that he was reluctant to tool up the plant to serve such a chain because of the possibility that he might lose it if all of a sudden somebody gives him a better price. " \Vhen the wheat is separn ted from the chain in the testimony of the Colonial witness, it is clear that the reason for the company not obtaining the larger accounts was not the making of loans by competitors or any of the other complaint. pract.ices, but the fact that the company has not ma.c1e any serious eilort to obtain such accounts, as the witness himself conceded, The rea.son for t.his is that the company has had a very conservati ve business approach, feeling that it is "more safe in doing business with independent people than I am with the man that can walk and cancel an order all me for 200 000 gallolls." It has apparently been the compallY s LHlsine.ss philosophy that there is "security * * * (inj numberLsJ." According to the Colonial witness, his volume has de.cined by about 50 percent since the peak years of 1947 and 1948. However he made no euol't to attribute this in any way to the respondents 01' to their engagement in any of the complaint Pl'(l,ctices. On the contrary, the record indicates that other factors were largely responsible. In 1948 about 60 percent of Colonial's sales were to drug stores where the ice cream was mainly sold jn bulk. Since that time the trend in ice cream sales has been away from the drug stores to the food stores (where it is sold in package form). ' Within the food store category, there has been a marked shift in sales away from the smaller neighborhood grocery to the supermarkets and chain stores III the h"Ll'ge shopping areas. ColoninFs failure to sell to the latter est.ablishments, so far as iLppears from the record, has been clue to the fact that it has been reluctitnt to go a:after these accounts aggressively becnuse of its "safety in numbers" philosophy, and its unwillingness to compe.te. on a price basis for such business, 's As the Colonial witness somewhat plaintively conceded: CTJhis deyclopment with the parking-shoppilJg' urea and tile o:haiu store with its facilities today on a large-sized scale, has developed a ne v field for ice o:rearn that heretofore we in the ice o:cream industry, some of lB, missed, prubably, tlnd others saw the advantage and went ahead 'with iL 7" The CoJonhll witness testified that while his company did give quantity di couJjt had in fact initiated the practice in the Wa hingtoD area, it would not give a I"'cial price to 11 chain or cooperlltive buying group, based Oil the total purchases of the stores, ;;inee that would be unfair to the independent merchant. 19-603-64-93 1460 FEDERAL TRADE CO:\IMISSION DECISIONS Appendix 60 F.

It seems evident froln his testimony ihat the Colonial witness reg-circled his company as falling withill the fanner eat-egory of those 'who had missecr: the boat. This cannot. be attributed to the. respondents or the complaint practices.

The. evidence olle.red by the 'V ashington :Iaicl witness likewise fails to ludicate any marked loss of business 01' inability to acquire bllSin8S by reason of the. engagement by any of the respondents in any of the complaint practices. ,Vhile he testified in general terms that dealers asked for loans, rebates, bonuses a.nd "everything else that , his testimony "\"\a8 extremely vague insofar a.shall can imagine l'stn, b1ishing that any of the respondents had engaged in such practices or ha(l caused his company any competitive diffculties. The "\Vashin rt.on Llidl'epl'esentat.ivc cited only three instances where his company hndlost 01' been unable to acquire an account because of the demanch; of dealers and in only one of such instances is there any evidence in the record to indicate that any respondent met the demands of" de"lel'.

Qnc instance involved an alleged request lor a loan by an account to enable it to move to another location. Although the witness elaimecl that the account was later acquired hy Beatrice, there is no e,'idence in the record that the account received a loan or anything else from Beatrice. Another incident involved "\Vashington :Mailrs a.alleged inability to acquire a drug store account, which it was soliciting, due to Beatrice s a.allegedly offering the mnler a lower price. Not only is there no reliable evidence that Beatrice offered such a. price to the ac count in quesiion but there is no cyidence that such price represented flUY deviation from Beatrice s regular price list or involved any exclusive arrflngcment. The third instance cited involved an account \which had requested "\Vashington \:Iaid to put ill some neon lights to light up the front of its establishment and later switched to Southern Dairies when the former refused. This rcprescnts one of the relatively few instances in the record ""here the dealer referred to by a competitor ,vas calleel to testify. The witness in question, while testifying in response to the leading question of counsel supporting the com plaint that he " guessed" that the lighting of t.he sign (which he estimated cost 550) was one of the things that interested him in Southern Dairies, also stated that the fact that Sealtest had 1 national reputation and his feeling that he could get better service than he had been receiving ,"ere the. basic reasons for his change. The testimony of the witness also indicated that his volume. of sales had increased substa.lltia.Jly after the change.

, CAR:\ ATIO:\T COlV1P A:\TY ET' AL. 1461 1274 Appendix Assuming, without deciding, that the supplying of some neon lights worth about $50 was the reason why 'Washington :\Iaidlost this account, the record fails to establish this as a significant factor in IVashington Maid's loss of accounts or in its inability to compete. Although the IVashington Maid witness chimed that he had lost 70 to accollnts since 1947, he also conceded that he had gained more accounts than he had lost, so that he actually had about 300 accounts in 1955 as compared to 200 in HH7. His volume, however, has not increased sineo 1947 because of the fact that his individual aCCollnts arc selling less ice cream per account. I-Iere again the reason is somewhat similar to that of Colonial. \Vashington l\Ia.id serves mostly sll1all restaurant.s and groceries. As already noted, the trend in ice cre,am sales in the Washington area has been away from this type of establishment to the supermarket a.nd chain store. It 'was these est.ablishments which Colonial could not acquire, mainly beefluse of price competit.ion. There is no reason t.o believe from the evidence in the record that the situation is any different in the case of \Vashington :.Iaic1. The fact that IVashington Maid's volume has remained constant since 1947, while that of Colonial has declined by about 50 percent does not necessarily mea.n t.hat abnormal conditions in the market were responsible. The evidence discloses that 1D47 and 1948 were the biggest years in the ice cream indust.ry. The volume of ice cream sales in the are" has declined by about 20 percent. In addition there has been a substantial increase in the number of competitors in the area. These include Briggs, which came into the area in 19I53 by acquiring a local company and no\" has a substantirtl volume. Several regional manufacturers, including Hershey, Richmond Dairy, Abbotts and l\Iayfair have also entered the \Vashingt.on market since the war. Safcway, Hot Shoppes, High' , and Hmrard Johnson, which have all expanded in recent years, likewise ha.ve been substantial competitors for the eonEumcr s ice cream dollar. Despite Colonial's anel 'Vnshington l\faid's problems, both appeal' to be in good financial shape. The Colonial witness conceded that his company had not lost any money in its operations and expecteel to make a profit during the current year. 1,Vashington Iaid is also operating at. a profit, although its representative claimed that its profits were down in 1955 . Both companies have paid di''iidenc1s regularly to their stoekholc1ers. The record fails to establish any significant. improvement in the market position of the respondents operating in the 'Vashing-lon area. Arden which entered the market by the acquisition of :Melvern-Fnssell in 1953 hen its ma.rket share was 11.0 pe.recent, declined to 8.3 percent by 1D55. Beatrice s share declined from 9.4 percent in 1 )50 to 7.8 per- 1462 FEDERAL TRADE COl\1fISSIO DECISIQ::S Appendix GO F.

cent in 1955. Borden, whose share \vas a minute 0.4 percent, rnanaged to increase modestly to 1.4 percent in 195..5. N ationars share has remained almost static, being 24.9 percent in 1950 and 25.4 in 1955. In addition to the two dealers referred to above (a former ' Washington :liaid dealer and a.n account for which Colonial had bee.n competing), counsel supporting the complaint called nine other dealers in 1Vashington, none of ,,,hose tCBtimollY related to any of the competitor witnesses. Three of the dealers were the owners of drug stores and OIle the owner of a. confectionery establishment, all iour having receiveclloans fnnn either,r the Southern Dairies or the Breyer division of N atioual Dairy in connection with the opening of a new store. In each instance the ownor had been dealing with National Dairy at an existing esta.blislunent for a nmnber of years and had approached National Dairy for loan to assist him in opening a new store. In each instance a cOlnpetitol' had also otfered to finance the dealer in opening a nmv establishment and, in sonle instances, had even offered more favorable terms than 1\ational Dairy, but the O'V11er preferred to deal with N atioual because of the reputation of its brands (Sealtest 01" Breyer s), and the consumer demand therefor. .In the two inst.ances ,vhere colu1sel supporting the complaint broached the subject with the witness, the dealer indic;lted that he c1ichl t. know or hadn t paid any attention to whether he was obligated by contract to buy National Dairy products exclusi ,rely during the period of the loan. One of the dealers stated that if he desired to change from ationnJ Dairy for any re,ason he ,,-auld pay oft' the loan and change suppliers. The owner of the confectionery establishment indicated that without the financial as istance recei,-e.cl from j\' ational Dairy he never could ha,-e opened np his new, anclllllch lnxgel' establidlInent located in a suburban shopping center. 'Vhile he also had received oilers from other sl1pplie.rs he was only intcrcsted in K ational (Breyer) because of his past highly satisfactory re1aiionship with them over a period of ten years.

Of the five l'Cllajnlng establishments, Olle involved a large supermarket chain ,with 31 stores and a volume, of approximately 200 000 gallons a year. i.. The evidence offered with respect to this account was that it had received n, volume discount frolll Southern Dairies based on the maximum discount in the better s published schedule. 1n addition, the. account receive,a it discount in fOOlle of its stores for t.he, use of c1eaJrr-OIvnec1 equipment to store ice ('Team. The c.chain had been dealing -with 80n1he1'n Dairies foi' ;1 111l11her of years and the.re 7* 'l' 200 000 gallon account to which the Colonial witnl'SS made referl'Dce . as being one which he would be reluctant to handle, was the dealer in question. CAHXATIO::,T C011 A:\TY ET' AL. 1463 1274 Appendix was no testimony that the discounts had entered into the decision to choose Sout.hern Dairies as a supplier or nuy evidence that exclusive dealing ,,'as involved in the granting of such discount. The, fact that such diseonnt dirl not helve the eiled of ;'capt.ivating: the account is demonst.rated by the fact. that, ,,,within a year following the hearing, the acc01Ult had swit.ched to a, local competit.or, Briggs Ice Cream COllpany.

Two of the remajning ", itness('s ,,-ere owners of smu)l supermarket who had received acl\'ertising nllowallces from Beatrice and had switched to that eOlllpany from Briggs. In one ill tance the advert.ising allowance ".as $2 000 and the owner was under no aLligation to spend the Jnone." exclusively for arh-ertising. The, other establishment received a $500 so- caJJed advertising llo\Yan('e for which signed a demand note, \,hieh ,nmld be cancelled if the store stayed ".-j1.h Beatrice for hyo years. In the latter instance the granting of the allowa.nce appe,ars to have entered into the account's deeision to s,vitch to Bf'atrice. Both of the so- called allowances \yonlcl appear to be snspeet, as lp,gitimate nclvertisillg allo\Yfl.ces, a.lthough apparently only one of tllelll invoh' ed un exclusive dealing arrangement. 110w('ve1'1 i1 does not appe,ar that this type of prrwtice is engaged in to any substantial extent by respondent Beatrice, and, more important, it doe, not appear that it has had any significant eireet in t.he \Vashington market. The company primarily affect,Gll by the 8,dtc.h of the, t,yO supermarkets, Briggs Ice Cre.a,m Company. ,yas not. calleel as a itness although a representative of the company \vns present in the. hearing room. The lack of probability that the competitive position of this company has been serionsly jeopardized is suggested by the fact that it was able to regain one of the two accounts approximately it year later, in addition to acquiring: the 200 000 g:a11on8 of the 31-store food chain, re.fe.rred to above, from Natlomd Dairy. The last two dealers involved in the "Tashington hearjngs were relatively small accounts. One ,\Y11S a neighborhood grocery and t.he other a bakery, both of which had received some free ice, cream from Breyer s at t.he time they switched from Briggs. In onc instn.nce the dealer was the neva owner of an exist.ing store to ,,,ham. the, Breyer sa.1esman offered $100 'worth of ice cream, without charge, to help him get started,d jn his new enterprise. The 0\\"1e.r had initially approached Bre,yer about handling its brand. The owner of the second est.ablishment received $30 worth of ice cream, free, to assjst him in maj;:ng t.he 5witeh from Briggs, to ,,' hom he still owed 8:30 on R $50 advance from that. supplier. Thc furnishing of free ice crea, , over and above what is required to re.pln.ce the remaining stock of tJle former supplier 1464 FEDERAL TRADE COM1HSSION DECISIONS Appendix 60 F.

would appear to be a quest.ionable practice. It docs not appeal', however, that any exclusive dealing arrangement was a condition of such liberality. In any e\-ent, considering the small amounts involved and the fact that they related to the single supplier Briggs, there is no substantial basis for any finding of injury to competit.ion. b. Baltimore Area The respondents doing business in the Baltimore area, arc Beatrice Borden, and N atianal. Borden does business under its O\Tll name and under' the name of I-Iendler, a company which it acquired. Na, Lional Dairy s products arc distributed through its suusic1iary, :Marvadel Ice Cream Company, "which distributes both the Breyer and Scaltcst brands in the area. National Dairy's sales are limited Lo the area, outside the city limits of Baltimore since a local ordinance prohibits sales within the city by any company not having its plant inside the corporate limits of the city. Laeal companies having the,i1' plants in the city and distributing in the Ietl'opalitan area include Delvale Ice Cream Comp,llly, Eckels lee Cream Company, J\fount Ve1'lion Ice Cream Company and Brimer s Ice Cream Company (Good IIUlllor). Likewise, the regional company, Abbott Dairies which recently bought out the local competitor BettaI' Ice Cream COlnpany, operates ill Baltimore. The only local company to testify at the headngs was ::Iount Vernon Ice Cream Company. In addition foul' retrlil dealers 'were called as witnesses. A reprcscntative of Eckels Ice Cream Company was excused from testifying at the request of counsel supporting the complaint.

Ionnt Vernon Ice Cream Company is one of the smallest companies, in the Baltimore area. It originally sold through its own retail store and breI' through vending machines. It began selling at wholesale round 1040. The company had an rlllll1al \"volume of approximately 000 gallons as of 18;")6 , and the eompmlY re.presentative e,stimated t.hnt. it had been increasing at the rare of approximately 2 000 gallons a veal' since 1947.

he J\lount Vernon witness testified that his company served only the smaller establishments and could not get into the bigger stores. He attributed this primarily to the fact that his brand was not too \vell known. ,V11ile the \,itness also referred to the fact that his company ,\"as not in a position to supply cust.omers "ith anything, other than a cabinet or sign, there is no evidence that t.his allegeinability has been responsible for his company s inability to acquire Jargel' outlets. Although counsel supporting the comphlint suggested that the company s inability to make loans had been an inhibiting CAR::ATION COMPANY ET AL. 1465 1274 Appendix factor, the witness indicated that the company had been requested to make a loan in only on8 instance which involved an Rcconnt later lost to Borden. He conceded that outside of this account his infor ation as to what inducements other companies were offering was mostly hearsa:i' . The witness could recall only on8 instance of soliciting a supermarket account; However, he conceded that he had not been asked for 11 loan or any other form of assist-anee by this Hceonnt. He also eoncec1cd that the fact the company does little or no advertising was a major factor in its slow growth, stating that the only ,yay it is * * * possible t,o expand is to start advertising, the way I see it " since the "larger percentage: of the public buy " a brand preference" basis. Inclicati\'e of t.he Jack of demand Tor J\-Iount YenlOn s brand is the fact that even where the company has been able to get its product into a largEw store alongside of one of the ,yell-known brands, 1Iount Vernon s brand admittedly docs not "move fast"

The only incident which the 'witness cited ",here a loan had been involved in the Joss of an account involved n. restaurant, the owner of ,\'which was also calleel as a witness by counsel supporting the complaint. The owner of the establishment had originally sought to do business with Borden because of the quality of its iee cream and its good reputation in Baltimore. However, the latter company refused the owner s request for a 87 500 loan to assist him in opening the e.tablishment, 50 he made arrangement to buy l\iount Vernon s ice cream. The latter could not offer him a loan, but gave him a better price on the iee cre U11. Later when the business began to decline the, owner sought to borrow $500 from Mount Vernon. The latter refused because the owner already was in a,rrears for six weeks on his ice cream payments. The restaurant owner then persuaded Borden to assist him with a loan of $3 000 and switched to the latter. This loan helped to keep the establishment in business for a fe\\O" months longer, but it finally closed stil owing BOlden $2 000. This undoubtedly is an instance where Borden was able to acquire the account of a competitor because of a loan. However, Borden did not solicit 01' seek the acconnt. but literally had it thrust upon it and would have been better off without it, as later events disclosccl. In addition to the restaurant ,which had been a J:Ionnt Vernon HCother whpre the 0\\"1181' of .1 small store, in anticipation of an increase in volume in the area by reason of the ope,ning of :l new school, asked C1'11011 refused, the O"l"nc1' Tor a big,.'er cabinet. ,Yhen 1\Iount V switched t Borden which supplierl him \with a larger cabinet. I-Iere again, Borden did not seck the nCcOlmt or oHeI' it the inducement of 1466 FEDERAL TRADE COMMISSION' DECISIONS Appendix 60 F.

a larger cabinet, but was sought. out by t.he mnlCl' and, so far as appears from the record, made a reasoned business jl1dgment as to ,vhether the null s anticipated increase in volume 'iHmlcl justify a biggr,!' cabinet. The ,,-itness also mentioned two other very small accounts ,yhieh had switched to EOl'dell. H o\\ever, in both cases he was about to take ont his cabinets beca use the volume did not justify them, and the witness conceded that neither accollnt represented any real loss to his company.

In acldit.ion to the restaurant. -which had been a \Iolll1t V crnon account and which later closed clown after receiving a loan from Bol'- (len, counsel supporting the complaint called three other dealer witness8es. Hm,ever, none of these ,\.,-ere former )'fount Vernon accounts, or fLccounts which the latter had sought t.o obtain. Two were Borden accounts and one was a Beatrice ae-count. In only one of these instances had the account been acquired from another icc cream manufacturer.

The first of the ,yit.ncsses '''as the comptroJ1er of a group of three food stores ,which had been receiving a discount of 10 cents a gallon from Borden on a portion of its ice cream purchases. The arrangement t.o pay this discount antedated t.he witness employment with the food chain and he knew little about it except that it was in tho nature of a refrigeration allowance to compensnte the stores for permit.ting Borden to use store-owned storage facilities for storing additional ice cream during pcri0(18 of special sales and other periods of peak demand. Coullsel supporting the complaint suggested that possibly the storage facilities were not actually used to any signifieant extent, and that the discount was therefore a subterfuge, but the witness indicated that this was a matter with which the store ma,nager was familin,r and that he had very little knowledge about it. In any event, there is nothing to indicate that the stores in question had chosen Borden as their supplier because of this arrangement or that any other supplier had lost or been unable to acquire the account because of such arrangement.

Anot.her witness was the president of a group of supermarkets two of which were company-owned and nineteen were operated under a franchise arrangement pursuant to which all purchases were made centrally. The chain had originally sought to purchase its ice cream from Borden, out had been unable to do so since it had been Borden policy in prior years not to service, supermarkets. Accordingly, the chain flrI'ftllged to purchase its iee cream from Delvale. 1-1o,..ever a.after the Bardell policy changed, the chain in question switched to Harden. The ,..itness' testimony inclicfltes that the c.IHin was recciv- ,, CARNATION COMPANY ET AL. 1467 1274 Appendix iug a quantity discount based on its total purchases, that it had a.lso received a $6 OOO loan from Borden, and that Borden made a con tribution toward the cost of the stole s television advertising program. In no instance \YHS any evic1ence offered that any of these represented more favorable treatment than the firm had been recei ,'ing from Delvale or that they operated as an inducement for the chain to change suppliers. Insofar as the quantity discount is concerned he witness testified that the stores had received a similar discount from Delvale and that the net price of each company was the same. 'Vhile he did buy his ice crenm exclusively from Bordeu j the 'itness indicated that he had done the same when dealing ,..ith Delvale beca,use he preferred to deal with a single supplier. The Joan did not enter into the decision to switch to 130rden since it ,,,as not made until three years after the chain lmdyhanged to Borden. The eontrilmtion to the television program amounted to $100 weekly, out of a total weekly cost of $750, and represented Borden s proportionate share of the advertising which it received on the prograln, to which other suppliers of the chain likewise cOlltrjlmt.ed. The third dealer ,vitness \Vas the owner 01 a drug store who had received" $15 000 Joan from Beatrice when he opened his place of business three years previously. The witness indicated t.hat he had borrmved money from the bank, but was in need of additional funds and went to Beatrice for assistance. He a.lso received equivalent assistance from ot.her suppliers in the. form of merchandise on credit. There is no evide,nce that any ot.her supplier was bidding for the account or was unable to acquire it on account of the loan. On the contrary, the '.Iitness testified that he ha.d c11o:':cn Beat.rice because of his faJnily's close social relationship \\' ith certain of the local offcials of the company and that he had made no eport to contact any other ice cream manufacturer. The, e,'idence also establishes that the owner received a refrigerat.ion allmyance of 10 cents a gallon for ice cream stored in the owner s own refrigeration facilities. Thereis nothing ill the record to indicate t,ha.t, this was anything but a bona fide refrjgeration allowance or that it was an inducement for the owner to choose BenJric.e as his suppEer. COlUlsel supporting the complaint also called as a witness an offcial or the ational Dairis subsidia.ry, l\lnrvac1el Ice Cream Company, hieh distributes Breyer s and SenHest. in the Baltimore suburban areas. The testimony of this witness estnblishes that the company has 25 loans outstfllding out of a tota.l of 378 customers, with the la.rgest of thctie loans amount.ng to $1 919. The J\Inrvaclel offcial testified that the company originally did not make any loans, but 1468 FEDERAL TRADE COM IISSIO.v DECISIO:\T Appendix 60 F.

that after.I" seyend years e.experience in the area it found that it was necessary to furnish iinancial assist.ance to sornc customers in order to e,nnble t.hem to do a good merchandising job nnd t.o take full tldvnntnge of t.he me.rchandising assistance oflered them by the company. Some of sllch customers had sought bank assistance unsuccessfully. The customers receiving such loans are required to purchase their frozen products from the company during the period of the loan, since the repayment of the loan is keyed to the purchase of ice cream, being ba.sed on a surcharge of 20 cents per dollar of purchases. I-Iowevcl' , the 1witness indicated that this hau not prevented dealers from s\yitehing when they "ere dissatisfied with the company for one 1'enson 01' illlother, and cited f1 recent instance where there was still a ba1nnce of $1 700 due on a Joan which the dealer paid off and switched to Dehnle.

The record of the Baltimore hearing is 'wholly deficient insofar as establishing that the complaint practices have injured any competitor let alone competition, in the area. The evidence with respect to the only cOlnpetitor ,,,itness called, :\Iount VerIlon, discloses that that company has made (l, gradual, albeit not a spe( tacular, improvement in its position. 'Vhilc the company has failed to make rapid strides in recent years, this cannot be att.ributed to the complaint practices, but rather to its failure to advertise ,uld to popularize its brand, to its lack of an organized selling eifort, and to an increase in competition genentlly in the area, including competition froni some of its local competitors. Delvale Ice Cream Company, which advert.ises extensively, has made excellent progress and serves the A&; P chain. ,Vhile it does appear that respondent Borden managed tc acquire (l single account from DeJvale, the record does not establish that t.his eha,nge was clue to the complaint practices. Another local eompetito1', Eckels Ice Cream Company, has managed to build up a, ,colume substantially in excess of ::fount Vernon s. Although ;l repre entati"e of Eckeb WflS subpoenaed to testify, counsel supporting the complaint excused the "itness.

The record also fails to show any significant improvement in the position of the responc1cnts in the Baltimore area during the postwar period. Borden has actually suffered a. substantial decline in gallonnge, with Bonlon s HendJer branch s,LJes declining from 2 179 739 gallom in 1946 to 1 -102 679 in 1955, and the Borden branch's Baltimore sales c1ec.ining from 1 091 663 in 194G to 7D9 52G in 1955. Borclen s market share in Ba,1timore has declined from 30.8 percent in 1950 to 28.0 percent in 1955. Its share of production in the State of Maryland as a whole has declined from 36.0 percent in 1947 to CARKATIO CO).JPAXY ET AL. 1469 12i4 Appendix 23. 1 ,percent in HJ35. The sales of Be.,ltl'ice, s \Yashington plant, \which inc.llde its sales in the Baltimore' area Jwye declined from 1 G64 394 gallons in 1946 to 1 2;10 882 in 1955. Its sha.re of the Baltimore market incre,!sell by only one pen:ent between 19;'.10 and 1955 , being 14. percm1t in the better year. It!: share of production in the State of 11ary1aml as n whole declined from 10. 8 percent in 19-17 to 9.5 percent. in 1955. Nationars market share in the Baltimorc market in 1955 \\HsonJT 6.0 percent, as comparl'll \with fi.4 percent in 1950. c. ,Vinchester, Virginia, Area The respondents operating in \Yinchester, Virginia, and surrounding areas in norch\ycstel'n Virginia. include National Dairy (Southcrn Dairy and Breyer di\-isions), Arden Fnnlls (::Ielvcrn-Fusi3el1), Borden, Fairmont Foods (Imperial), awl Beatrice. Other companies operating in the area, are Garber Ice Cream Company, J\Ticodemus Brjckstra\f Hoyal Dairy, Iainc Ice Cream Company, :l\onticello Ice Crernn Company, 11or8hey, and Penn Dairy. The only witness to test.ify from the area ,yas the owne1' of Garber lee Cream Company, which has its plant in \Yinchesier. .Another local competitor from the area, ::ico(lemns: "as subpoenaed to testify but ,yas Jater excused n t tbe request of counsel supporting t.he complaint. For the most. part, t.he testimony of the Garber witness consisted cf gossip, rumor and hearsay. lie testified yaguely about the "big boys" a.nd of having lwarc1 OUlt dealers were being promised "everything from the. skyc1o\'i' . :JIost of his t.testimony was of a highly subjective nature, relating to the suppl:ving of more equipment to dea.lers than he thought. .iust.ifiec1 some of "hic.h he surmised was being llSN1 for frozen foods other than ice cream. The ,vitncss could name only f,\yo or three accounts ,vhero this 'las allegedly involved. One wns a restnUrfllt in 'Yinchestex to ,,,which Garber had suppliers a. six-hole cabinet f1ncl which later switched to Fairmont l.after a.l1egedly receivillg- hyo six-hole cahjnets one of which the owne1' had told him couhl be used fol" "meats and stuff'. On c1'ossexamination it c1eyeloped that the ilCC'OllJt had aC"unl)y changed owners Hnd that the nmy mnler had picked Fnirmont ns his supplier. No l'yidenc:e ,, us offered to e tablish that the furnishing of an additional cabinet, \Ya a considerat,Jon for the new mnler s f3electing Fairmont that it ,yas snpp1ied for The storngr of frozen fooels or that it was nctua-Jly use.c1 for that purpose. ,,,ith the kllO\dec1ge of Fainnont. In the same category is a cliner in Front Royal, which the ,witness claimed he had tried to acquire from Fairmont but. was unsuccessful because 1470 FEDERAL TRADE CO:\MISSION DECISIONS Appendix 60 F.

the latter hac! allegedly supplied the account with an additional cabinet for frozen foods.

Finally\ t,he witness referred to another restanrant on the highway outside of ,Yinchester which he had allegedly lost to :Yatiomt. Dairy (Breyer) because the latter had furnished it ,m additional cabinet. The witness conceded that he had no information as to whether Breyer had supplied the additional cabinet for the storage of frozen foods and admitted that he fOllnd dealers placing frozen foods in his 0\\11 cabinets, despite the fact that he did his best to discourage such practice. Not only is there no evidence 1:0 sustain the "\Witness hearsay testimony, but a 1\'ational offcial testified that it \yas not the company policy to supply cabinets for anything other than the storage of ice eream, and the Breyer salesman later testified that according to the company s records the account in (Illestion hacl only one "used" cabinet in its place oJ business.

It should be noted t.hat the Garber \vitness' testimony \'as directed at the nse of cabinets for the storage of products other than ice ere-am, a.nd not, at the practice of supplying cabinets as such. The witness indicated t.hat it had been the practice for his company to supply ice cream cabinets for a.s long as he could remember and that there never was any rental charge made. J\T ot only has the company supplied such cabinets, but it has serviced the. cabinets and, as an accommodation to the dealer, has likewise serviced the denier s own re,frige.ratioIl ('fJnipmcnt.

Another competitive practice referred to briefly by the witness was that of making loans, but he indicated t.hat he knew of only one sneh instance. The witness' testimony in this respect, was somewhat COIlfnsea. On direct examination ile referred to the fact that he had been informed by the Q\yner of it new restaurant in Front Royal that Breyer had "loaned" him about $14 000 "in equipment furnished,!: On cross-exa.l1ination he referred to this account as involving- a loan of money. l-Imye.ver, he concec1e,d that he didn t know 'who had made the, loan, although the rpstaura.nt wa.s serving Breyer s jcp cream, There is no reliable evidence in the record as to what, if anything, t.he ac(' count in question received fronl Breyer s, The witness also referred to a.;") flncll0 cp-nt store in ,Yinchester which he had been trying to get from Fairmont but that t.he owner had informed him Fairmonfs price was 32 cent.s a gaj10n below his. There is no reliable. evidence, as to ,,yhat Fairmollt s price was, or that it \yas anyt.hing other than its regular schedule price or that it 'YHS eonneetec1 in any way with an cxelusin: dealing aJ'rangement.

CARNATION COMPANY ET AL. 1471 1274 Appendix Despite the allegeclloss of or inability to acquire the acenunts referred to above, for whatever reason, there is no evidence that Garber has sustained any competitive injury in the area where it operates. While it allegedly was unable to obtain one 5 and 10 cent store in \Villchester, it serves the stores of another such cha,in in both Front Roval and vVinchester. Its volume has increased from about 9000 gallons 22 years ago to 130 000 in 1947 and 160 000 in 1955. This may be compared with a decline in sales of approximately 190 000 galloIls bet,,' cen 1947 and 19i55 by )l at-ianars branches operat.ing in the area.

The Garber witness expected his business to keep improving in the future. He had just spent 830 000 for a new ha.rc1ening room in ordcr to expand the company s capacity. His principal complaint was that he wasn t progressing rapidly enough since ",Vorld ,Val' II. 11owove1' , he did not attribute, this to the complaint practices, but to the fact that so many additional competitors had come into the area since the war and that there are now "so ITlallY places handling ice cream all over the country and along the roads * * * and every hole in the wall in to'YI1 * * * has got ice cream, with the result that e.ach ineliviclna.l stop is selling less ice cream. Another factor which may havo contributed to the. company s lack of progress is t.he fact that the company employs no salesmen wd the owner only goes out three or four times a year to solicit accounts.

d. Cl1mberlancl, l\Iary lanel, Area The respondents operating in the Cumberland, l\Iary land, area are National and Fairmont. There are two local manufaetllrers, Lear 8. Oliver, and Speelman Ice Cream Company. Several other non-rpspondent companies having their plants elsewhere also sell in the Cumberland area, including ",Valker, 11ers11e)', and IIagan. The latter t\yo companies entered the area. from Pennsylvania after ,Vorid 'Var II. Both of the local nmnufacturers ''\re called as witnesses at the ,Vashington, D.C. hearings. In addition, two dealer witnesses were called to testify at hearings later helel in Pittsburgh. Franklin Lear, a partner in Lear &; Oliver, testified that his com pany s gallonage had been steadily declining and was approximately 000 gallons in 1955 , as compared to 100 000 gallons a few years previously. He attributcd the decline primarily to thc fact that there were more competitors in the are. , ,-.which had rcsnlted in more stops selling ice cream and less ice eream being sold per establishment. 10\\ever. he also c.aimerl that pa.rt of his company s derJine "as due t:o a loss of accounts. ,Vhile he at first estimated he had lost six accounts in fOllr years, he later conceded that this "as not a net loss since 1472 FEDERAL TRADE COM:MISSIQ)l DECISIO),TS Appendix 60 F.

he had also gained some accounts during this period. Like\ 'i1)e, he at first suggested that he had lost "several" accounts because he could not lend them Inoney to remodel, but on cross-examination it turned out to be a single account which he had lost to respondent K at-ional Dairy in 1950. The witness also spoke of competitors putting in more equipment than he could afford to do: but on cross-examination he conceded that he had lost only one account to a competitor for that reason. The competitor was unnamed and he could not recall the name of t.he account. The witness also attributed the loss of one account to respondent Fairmont in five years, but the name of the account and the reason for its loss was not given. In addition to the loss of a few accounts, the witness also referred to his inability to acquire new accounts. lie attributed this primarily to his company:is unwillingness to supply the nmver open-face cabinets which customers were demanding. His company likewise has made no effort to obtain supermarket business. He conceded that this was not because of the equipment involved, but because he couldn t " moot the price. 1Vhile he indicated that respondent National serves the L\. & P and Acme stores in the area, there is no evidence as to the price being charged to these accounts or of any exclusive dealing arrangement in connection therewith.

The sole dealer whom Lear could recall ha.ving lost to a respondent wns called as a witness in Pittsburgh. This was the dealer to ,yhOlil National had made a loan. The evidence concerning this transaction indicates that it was more a lack of imagination, than a. Jack of finances, which was responsible for the loss of the account. The account in question was a combination general store and grocery. It haa been steadily going clown hill and had to either enlarge and modernize its premises in order to encourage new business or go out of business. The owner asked Lear, with whom he had been dealing for some time for a loan. The latter was somewhat indecisive and inclicntml that he \vanted to consider the mauer. In the me,lltime, the store proprietor talked to the Kational Dairy salesman who had been calling on him from time to time and explained his predicament. ..\.after consulting with a compfUlY offcial as to the feasibility of assisting the accollnt, K ational agreed to loan the O\vne1' 8- 000 at 6 percent interest secured by a chattel mortgage. Shortly thereafter Lear advised the o,yne1' that his company would make the loan at 3 percent interest, but the. owner had cleeided to deal with I\ ational. After completion of the repairs, ,which cost 817 000, the business gradually improved until its ice eremn '"oJume had increased from 1 000 gallons a year to 3 000 gallons, and the balance of its sales increased proportionately. , CARNATION C01vIPANY ET AL. 1473 1274 Appendix While undoubtedly the loan was an important factor in tho account's decision to change suppliers, the evidence demonstrates the sound business motivation for a supplier s willingness to assist an account in remodeling or modernizing its establishment. In any event, as the evidence as a whole indicates, this single transaction had no significant effect on the fortunes of Lear & Oli\'er. Aside from the factors adverted to above, there is more than fl suggestion in the record that the decline in the fortunes of Real' & oliver ha,s coincided with the death of the former members of the faluily who had previo11s1y run the business.

The other local Cumberland ma,nllfacturer, Speelman Ice Cream Company, testified that about fi\'e years prior thereto his company's ice cream gallonage had started "slipping a little" (for reasons which he did not specify), but that he had a(lded frozen foods to his ice cream line went out and plugged pretty hard", and that its gallonage thereafter improved to the point where it was "up to where it should " (arouncl 75 000 gallons). I-Ie did, howe\'er, complain that he had been tilable to get two grocery stores because they ,,, ere allcgcclly tied up " with ational Da.iry due to a loan. In the case of one of the establishments, no evidence was oHered to indicate that it had ever received any loan from respondent ational In the case of the other establishment, the proprietor was called as a witness in Pittsburgh and indicated that respondent ational had loaned him appI'oxi mately $2 000 in 1950, after he hac! been dealing with them for about ten years, and that he received two adc!itiunalloans of approximately 000 in 1952 to help remodel his establishmeut in order to be iu a better position to compete with a new supermarket that had moved into the area. Irrespective of "hat agreement he signed at the time the ,vitness was under the impression that he was under no obligation to continue purchasing lLtional Dairy s ice 'cream, and that if lie wished to switch he could simply make his monthly payments at. the bank as he had been doing. lie denied having advised any other ice cream company that he was tiecl up "dth K a.tional "because I never thought about it. It is the best icc cream there. In addition to the two LCcounts which were allegedly "tied up" with 11 ational, the witness claimed th"the couldn t sell to the A & P stores because the divisional manager of the stores had told him that the chain was going to de,aI with "one of t.he big ice cream companies that could make it nM-ional for them, over the country. :' The witness indi(',ited that the A & P stores in Cumberland purchased their ire cream from ltional Dairy whjch makes it up under a privflte Inbel. There is, of course, no allegation in the complaint ,,'which chanenges the right to Appendix 60 F.

sell ice cream under a private label or the right of a chain to deal with a single suppJicr in all or any portion of the country." The witness also referred to the fact that the worst competition his company had in the area was the low price at ,,,which A & P was retailing its ice cream, I-Iowever, there is no evidence in the record as to N adonal Dairy s price to A & P and nothing to indicate that it involved an exclusive dealing arrangement.

Aside from not being able to obtain two accounts frolll respondent Kational Dairy, the witness could only recall having lost a single acr.count which his company had lost to j\ ational in three or fonl' years. He claimed that the owner had informed him N atjonal had given the store an additional cabinet for frozen foods. There is not a scintilla of evidence in the record to support this he-arsay testimony. The witness also testified to having lost a few sma.ll accounts to respondent Fair n10nt (for reasons unspecified), but conce,decl that he. had gained as many from them and thought he ,,,as about even as far as that company was concerned. 1-Ie also concedecl that he actually had more accounts than he had ii, e years previously, but claimed that each account. was selling less ice cream. This cannot, of course, be attributed to the complaint practices, but would appellI' to be clue to the same condition referred to by the Le.ar & Oliver witness! viz., an increase iJl t.he. llmnber of competitors in the area and the nmnber of ice cream establishments. The evidence. fails to establish that respondent K ational has used loans or cabinets as an aggressive competitive weapon in the Cumberland area, or that there has been any substantial injury to competition in the are.a, from the few loans it has made or due to any of the other complaint practices. The record indicates that t.he sales of its Cl1m berland branch have actually declined by oyer 50 000 gallons between 1947 anel1955. The evielence is wholly deficient, insofar as establishing that respondent Fairmont has engaged in any of the complaint practices in the area, Jet alone been responsible for any injury competition.

5. Rich1nond YiTqirda The respondents doing business in the Richmond area are Pet Beatrice and National Dairy (Southern Dairies and Breyer divisions). Other companies selling in the area are Virginia Ice Crenm Company! Awalt Ice Cream C011IHtny! Arnett Ice Cream Company, Perkinson Ice Cremn Company, Richmond Dairy and Swift & Company. Hepre- In point of fact, the witnc s was llot properly informed since tbe evirf'nee 3how A & P does deal with different suppliers in difierent sections of tlle country; e. , In thePittsbnrgb area a local manufacturer supplies the A & P stores in that area with all their ice cream- CARNATIOX COMPA.'I ET AL. 1475 1274 Appendix seutatives of Virginia lee. Cream Company and A walt Ice Cream COffN pany were called as witnesses by counsel supporting the complaint. K a dealer witnesses were called. However, respondent Pet, during the presentation of its separate defense, offered the testimony of 14 dmler witnesses in Richmond.

The testimony of the A walt. witness indicates that his company has made good progress in tho Richmond market and is not experiencing any serious competitive diffculties. The company, which began manufacturing ice cream for sale through its own retail store in 1936 gradually began to sell at wholesale and the number of its customers became quite substanti,tJ during the period after ' IV orld IVar II. The company is now at the peak of its gallonage. The A wnJt witness was reluctant to state whether his company s gallonage was now in excess of 200 000 a year and merely commented: "Well, I make a pretty good living at it. I started with nothing and I make a pretty good living at it. I-Ie indicat.ed that the matter of supplying cabincts had presented no problem to his company. It has been able to purchase the cabinets on credit from equipment manufacturers and has found that in the ordinary case ice ererun sales will be sufficient to enable the company to payoff a cabinet in about tvv'o years. As of the end oJ 1955, the company had about 123 aceonnts, of which it has supplied cabinets to about 100. Customers who own their own equipment receive a special 10 cent a gallon discount. A walt services al1 its ow' equipment. and, in addition, services dea.ler- mvnecl refrigeration equipment, charging the dealer only for replacement parts. The advent of the newel' type glass-front or open-top cabinets in the Richmond market does not appear to have caused A walt any serious diffculty. The witness agreed that the newer type cabinet.s do sed more ice Cream in the propel' location, but indicated they were nol suitable for the smaller grocery stores or service stations to which he mainly caters. 1Vhile the \vitness did cite an instance where Beatrice' had allegedly supplied an open-top cabinet in place of one of his conventional cabinets, 110 evidence was otfereel to establish that this was the reason why the owner had switched. Although the Beatrice cabinet was of the open-top variety, it was actually smaller t.han the cabinet Awalt had supplied the establishment. The only other specific accounts cited by the witness were a school to which Beatrice had allegedly offered a lower price, and an unnamed account to wJlic!J Pet had allegedly offered a lower price, both of which accouuts hc 70 The witness also referred to the ff1ct thflt he had been told Beatrice had furnished the account inquesUon with a sign and other assistance. However, he con( eded that this W,IH "all hellrsar" 1u1l1 dici not know what the account had actulI113. received. 719-60ii-64- , Appendix 60 F.

was able to retain. There is no .reliable evidence in the record to support the witness' hearsay testimony as to what Beatrice or Pet had offered these accounts.

While the Awalt witness testjHcd that his comp'wy had lost two or three accounts in the last year 01' two, he also indicated that his company has been able to acquire about ten HOW accounts each year so that its net position has gradually ilnprO\Tcd despite these small losses. The witness made no claim that the fact the company serves mn,inly smalJel' establishments is due to the respondents or to the complaillt pract.icps. cb\alt h lS failed to solicit any of the national chains in the are,a because of its m\ner s alleged understanding that these chains prefer to deal with some big company on the basis of arrangements made through their eelltral offce in Chicago, J\T ew York or some other city. The company likewise has not solicited the local independently-owned supermarkets because, as stated by the ,vitness I just don t have the time to call 011 them and call 011 them and call on them, so I just leave the.m go. : \Yhile the witness also added that he was reluctant to seek such accounts beet use they allegedly requested advertising allowances and special prices in connection with special sales, ho indicated that he had no personal knmdec1ge. of this, but had learned it from a "very close friend of Iline ' (who was ot.herwise unidentified). Despite its a.allegedly limiteel representation in the supermarket field, A walt has made good progress in the Richmond market.

The evidence oflered through the representative of Virginia Ice Cream Company was perhaps the most confused and contradictory of that received from any competitor '''.ltness. The owner of the company, L gentleman of Ne,lr East origin, had considerable diiIiculty in understanding questions addressed to him and in making himself understood. In additioll, his account of alleged losses, unsupported by any recoreIs, was so confused as to merit little or no credence. The evidence indicates that when t.he witness entered the ice cream business 25 years previously, his only competitors were ational Dairy (Sout,hern Dairies division), and Perkinson Ice Cream Company. IIowever, a number of other companies, both loea,l anclnational, have entered t.he market in the succeeding years, resulting in a substantial increase in competition in the market. The witness made the sweeping assert,ion tha.t as a result. of thesf', changes: " The small people no given a chance. " The primary basis for this sweeping claim appeared to be that competitiors ,,,ere servicing dea.ler-owned refrigeration equipment ,,,it-hout making Hny charge the.refor. The only specific instance which t.he witness could cite of this practice ".as an account CARNATIO COMP VY ET AL. 1477 1274 Appendix which had allegedly been .takenfrom him by respondent Nat.ional. Not only is there no reliable evidence in t.he record t.hat respondent ational acquired t.he account by agreeing to service the dealer s own refrigeration equipment free of charge but., according to the uncont.radicted and credited testimony of a K ational Dairy offcial on t.he t1YO or three occasions when his company had serviced the dealer s equipment it charged for both parts and Jabor, unlike the practice oJ IWWY llHIllfactlll'e,' S zjnc1uding the local manufacturer Aw,llt) ",ho chul'ge only for parts. The evidence also discloses that within a year after the loss of the account, Virginia Ice CrC!lm Com pany ,,-as able to reacquire it. The witness conceded that he had not 10st "much accounts to National.

The witness was able to cite only one account. which he had lost. t.o respondent Pet., allegedly because of the fimmcing of fixtures. Ilis c.onfused testimony concerning the transaction, based either on COlljecturo or hearsay information received from the fixture company, was stricken from the retard. fIis remaining testimony with respect to the loss of unidentified accounts to Pet was so thoroughly confused and contradictory as t.o ue unworthy of credit. At one point he claimed t.hat Pet. took "twenty.y to twenty.y-five" accounts from him by giving them ';collpJe ext.ra machines, couple extra stuff. lie loaned the, money:,'.' Then he asserted that "Richmond DaiJ Y was the culprit" (rather than Pet). Thereaftcr he whittled the 20 to 25 ftcconnts do\yn to " t\,O" and t.hcn increased it slightly to "five or six but conceded that the customers "don t tell nothing" as to why they had changed suppliers. Nevertheless, tbe witness insisted that Pet must ha,ve '; give something to take them . However, the witness fll1n.l1y conceded that Pet had not. taken "much" from him since the accounts they had aeqnired were "just small stops ' and that " 1 don worry about them (Petl" The witness also claimed to have lost. two, three small places" to Beatrice, but gave no reason therefor. After considerable backing and filling, the witness finally conceded that he had lost most of his accounts to Riclunoud Dairy and that they were his " best st.ops, It should be noted that during the period in question, Richmond Dairy was an independent local company, al though it was later acquired by respondent Foremost following the issuance of the complaint in this proceeding. Aside from the fact that the record fails to establish that any of t.he respondents has been respunsible for any subst.antialloss of business by Virginia Ice Cream Company, the record is so thoroughly confused as to how' much of a loss the company sustainc(l that no specific finrlillg' can be marle thereon. Testifying wit.hont, records, the , : . . Appendix GO F.

witness at first estimated his 1946 gallonage as 58 000 and claimed that this had declined to 35 000 to 40 000 at the time of the hearing. At a later point he gave his 1946 gallonage as 55 000 gllllons and his present gallonage as 20 000 to 22 000. However, when he was asked if his gallolULge was less than it had been previously he testiiied: ;;r am not much hurt " and conceded that he had a "good bllsiness . The company still has about 120 accounts, which is approximately tho number it had in 1946.

It is significant that during the period whe.11 Virginia Ice Cream was allegedly suffering a. decline 1n volume, its marc recent local competitor, Awalt, ,vas able to build up a substantial volume and was still grmying. It may also be noted that Virginia Ice Cream Compa.nis experience is not dissimilar to that of respondent X ational. The sales of its Southern Dairies division in t.he R.richmond area declined by 270 000 gallons bet,,-eeu 1947 aud 1955. Its share of the Richmond market declined from 3:3. 1 pci' cent in 1950 to 28.5 llel' cent. in 1955. Hesponclent Beatrice s sales ha.ve remained ahnost static between 1950 and 1955, and its share of the market has declined from 9 pel' cent to 5. 2 pel' cent.

Counsel snpporting' the complaint also called as t1 witlle the mana.ger of Pet' s Hichmoncl plant. The testimony of this witness establishes that Pet makes loans to selected customers, a fact \\'hieh is not in dispute. These accmUlts, for the most part, are drug stores \which require assistance in remodeling, and arc mainly Pefs existing accounts. Of the fourteen dealer witnesses called by respondent Pet during the defense hearings in R.richmond, most had been acquired from respondent K ational. None were former Virginia. or . walt accounts. In most instances any loans which t.hey received were made a.after the account had been dealing with Pet. III no instance was the account under any legal obligation to confine its purchases to Pet and in one instance, was actual.1ly purchasing a. portion of its requirements from another supplier.

The record wholly fails to sust"in a finding that there has been any injury to competition in the Richmond market or that any decline ,,'which any competitor may have experienced was due to any of the complaint practices.

a.. Da.nvil1e, Virginia, Area The respondents doing business in Dallvil1e which is located in the extreme southern portion of Virginia near the Korth Carolina line are Pet, Beatrice and Nationa.l (Southern Dairies division). The only comprmy with a plant in Danville is Danyi11c Dniry Products Com- CARNATIOK COMPA:- ET AL. 1479 1274 Appendix pany. Several other competitors with plants in nearby areas arc Qua.lity Dairy and South Boston Creamery of Lynchburg, and Coble Da.iry, Boston-Durham Dairy and Blue Ribbon Dairy of Kort.h Carolina.. The only witness cnlled to testify regarding the area ,"as it representative of Danville Dairy.

The gallonage figures for Dallville Dairy from 1950 to 1954 ,were given asfollows: 1860-158 000; 1951 1;J1 000; 1952-136 000; 1953- 128 000; and 1954-134 000. The witness sought to attribute its decline in sale.s brgely to a loss of accounts resulting from the fact t.hat competitors \\"'1'e furnishing free refrigeration service all c1dealer-o\vllcd equipment. lie also claimed that eompetitors 'were. supplying elaborate signs a,nd deep-freeze boxes, and were seJJing other equipment to cust.omers at cost. The witness agreed that the making of loans was llot it competitive factor in the area, and made no claim that the supplying of ice Cl'ealll refl'igernt.ion equipment a.s such, had caused his company any diffculty.

While conceding that no one company could be c,,!level the leader in the practice of furnishing free service. on dealer-owned refrigeration equipment., the witness claimed that respondent. Pet had given his company more trouble in this respect than any ot.her compet.itor. JIo\\ever, t.here is no reliable e,vidence in the record to support the witness bald assertion nor to support his other conclusory testimony as to why he had been losing accounts. The. \vitness could name only a single account which he hacllost to Pet in recent years. 'Vhile seeking to attribute t.his to the furnishing of free refrigeration service, a. new ice cream cabinet, a deep freeze for the storage of all frozen products and a fluorescent sign, t.he \"itness conceded that he had no direct knowledge of why he had lost the account (the facts testified to by him having been received secondhand from his salesman). Aside from the fact that the witness: testimony is unreliable hearsay, insofar.r as establishing ,,-hat Pet supplied to the account or as to the reason for the 8\vitch, the witness' own te. stimony indicates that this incident was magnified out of all proportion to its significancc. The witness conceded that the cabinet supplied by Pet was merely a replacement of a similar onc which his company had furnished the account and that the so-called deep freeze '"Vas nothing but a. depreciated ice cream storage cflbinet who-se fwtual vnJue was substantially under $100. It. is customary for manufacturers t.o supply such eabinets to vo1mne accounts for use in storing excess ice cream in the back of the store, and customers periodical.lly avail themselves of thc use of the box to store additional frozen products. The Danville witness conceded that his company had also furnished such depreciated cabinets to some of its customers. 1480 FEDERAL TRADE cO).nnSSIOX DECISIONS Appendix 60 F.

the case of the so-called ftuol'escenLsign, it does not appearthat it-was anything more than the routine sign supplied by lllal1lf,lrtUl'erS for the primary purpose of advertising their ice erearn. Insofar as the primary charge of the. ,vitness, relating to the free se.rvicing of equipment, is concerned, 1.he record is "holly lacking in reliable evidence that this has been a siglliiicant factor ill Danvi11c loss of business. According to the re.liable testimony of a Pet oHiciaI it is not the regular practice of the company to service dealer-owner1 equipment. 1Iowevcl', where a servi e man is 011 the dealer s plt'.llises servicing the company s mvn cabinet he may in some instances, as an rwcollmodation, seneice dealer-owned equiplnent whidl has beeJI giving trouble, but a charge is always made for replnccment parts. Theamount of time and money involved in this practice is too negligible to ha,ve represented a se,rions competit.iye problem to Danville Dairy. The Da,nvilJe witness estimated that his company had spent approximat.ely $1 300 a year during the past scvcral years in seryicing aU l'efl'igerationequipmcnt for customers, both dealer-owned and company-owned. The amount repre- cnted by the cost of servicing dcaJcrowned equipment presumably represented only a. fraction of the $1;300. It is inconceivable that the Dallville Dairy could hn.vp lost any significant number of accounts because of its unwillingness to perform an additional service for its dealers in the order of magnit.ude referred to by the witness. Another manufacturer in the Fredericksburg area who referred to this practice, in(licatccl that it representeel more of a.n "inconvenience:: tJulll an important competitive problem111. In addition to the single incident involving the loss of an account to Pet, prima.rily because of alleged free refrigeration service, the Danville witness cited another account which it allegedly lost to Pet because the latter had furnished a, box for cold r!I'inks. The hearsay testimony of the witness regarding this incident, based on the oral report of his salesman, was stricken fronl the record. 1-1o\\ever, it may be noted that Danville regained the accOlUlt within a week without supplying an additional box for the storage of cold drinks. '''hil. it also appears that Pet supplied the account in question with a modern ice cream cabinet, the Danville "itness made no claim that the supplying of the new cabinet was t reason for the s"\Yltch to Pet. The witness made no complaint against the supplying of a modern cabinet as such. On the contrary, he indicated that he had been able to cut his loss of gallonage, resulting from the loss of accounts, by an increase in sales through his existing accounts due to supplying them with Hew glass-top display cabinets. He further concederJ that he had acquired accounts from Pet by furnishing- them with new cabinets and indi- CARj\ ATIO:\ COMPA: 'rY ET AL. 1481 1274 Appendix cated that the question of furnishing a particular type of cabinet involved the exercise of a sound business judgment on the part of the ice cream manufacturer, as to which cabinet was best suited to merchandise ice cream in t.he. particular establishment. The Danville ,,'itncss made- the bald assertion that he had had similar experiences in t.he loss of accounts to Southern Dairies, as those involving Pet. However, he could not name a single account which he had lost to Southern Dairies, and finally conceded that his problem with Southern Da.iries was not one of losing accounts but of not being able to acquire some of Southern Dairies\ accounts. He indicated that he had had no diffculty wi1 h the latter on account of price, siurr its prices were higher than his. Insofar as respondent Beatrice is con. cerned, the witness conceded that he had had no competitive problems with that company.

There is no evidence in the record, other than the witness' own unsupported conclusions, to support a finding that the use of any of the complaint practices by any of the respondents has been responsible for Danville s decline in gallonage. On the contrary, the witness' own testimony strongly suggests that other factors have played a role therein. As indicated by the gallonage figures cited by him the principal decline in gallonage occurred in 1951 nnd his sales since then have fluctuated within a relatively narrO\,- range, with 1954 being slightly above 1953. The witness conceded that a strike in one of Danville s large textile plants had resulted.c in a decline in consumer demand during 1951. In addition, he indicat.ed that several new competitors had come into the area, including Coble and Blue Ribbon from North Carolina, both of whicll he admitted had given his company "severe competition." In addition, Boston-Durham entered the market in 1953 and became a substantial factor. It may be noted in this connection, that Danvile s gallonage dropped by 8 000 gallons in 1953, coinciding 'with the period \yhen Boston-Durham entered the market.

The failure of DrLlyille to make significant progress in recent years appears to have been due primarily, as in many other areas\ to the entry of additional contestants into a hitherto relatively uncontested market. Such increase in competition has affected not only Danville Dairy, but also respondent K ational Dairy as well. From a gallonage of 187 002 in 1947, Nat.ional Dairy's sales in the Danville area declined to 172 641 gallons in 1950 and then to 166 537 in 1951. V11ile its sales climbed back to 180 447 in 1952, the downward trend was re::umecl in 1953 , when they declined to 176 901 gallons, and then to 169 107 in 1954.

, , 1482 FEDERAL TRADE COYL\nSSION DECISIONS Appendix 60 F.

b. Portsmouth-Norfolk Area The respondents operating in the Portsmouth Norfolk area include rational Dairy (Southern Dairies division), Pet, Beatrice, and Arden (Melvern-Fussell). Another so-called national company operating in the area is Swift & Company. Local cOlnpanies in the area include Virginia Ice Cream Company, Birtehard Dairy, Rosedale Dairy and Best Ever. High's Dairy manufactures and sells through its own outlets. The only witness called was t.he owner of Virginia Ice Cream Company or Portsmouth (not to be confused with Virginia Ice Cream Company of Richmond).

The Virginia Ice Crealn Company witness testified that business was " cry good" until right after 'IV orld IYar II, but that thereafter it began "to get sJack because a lot of ice cream people came in." The exact extent of the decline in Virginia s gallonage is difficult to determine from the somewhat confused testimony of the witness, testifying as he did without the aiel of any books and records.77 At one point he claimed that during the period of the war his company was selling 500 000 gallons, maybe 400 000." However, in the next breath he stated that in 1948, after the war business was very good " although his gallonage had declined to approximat.ely 175 000. If the witness estimate of 500 000 gallons or "maybe 400 000" was even reasonably accurate, it is c1ifIcult to understand hmv business was still "very good" in 1948 when his gallonage was only 175 000 (representing a decline of 255 000 to 325 000 gallons). :Y evertheless, he claimed that business continued " very good" until about 19;'2, when it declined to 150 000 gallons and business became "slow, TIow the witness' business could decline by over a qua.rte.r of a million gallons and remain very good'" and then decline by only 25 000 and become "slow " involves iinancial considerations which are beyond the comprehension of this examiner, The ,vitness sought to attribute the company s aJ1eged decline in gallonage to the fact that competitors were giving customers "big cabinets big" signs, and "anything to get a customer." The witness conc.eded that he too supplied customers with cabinets and signs, tind when pressed for an explanation of what his c.ompetitors did beyond what he did for customers, he replied: "'They give a Jot of stuff which they ain t supposed to giYC. That is all; I don t know." He coneeded he had no direct l\:lmyJeclge of "yhat compptitors "-ere furnishing cllstomers.

17 Tbp wHupss conceded that he Wile! nusur0 of his complluy s gallonage since: "TlJat's on the books, find I don t stay inside the plant. I am outside the plant. CARXATIOX COMPANY ET AL. 1483 1274 Appendix Insofar as the furnishing of cabinets 15 concerned! the Virginia Ice Cream ,,,itness agreed that it was necessary to supply dealers with a cabinet in order tv assure that the ice cream v'will reach the customer in the proper frozen state. His principal complaint in this regard appeared to be directed at the practice of furnishing more llloclern display cabinets to customers. This was not based on the fact that the :furnishing of such cabinets is not desirable! since the \witness conceded that ,,,hen he had supplied such cabinets to cust.omers their!' sales had increased. The ground of his complaint i\a.s rather that his company could not a, ft' ord to supply more of such cabinets. However the witness couid recan only one account lost to a compet.tol' because of the furnishing of a cabinet. 1-1e claimed to have lost this account to respondent Beatrice because of a cabinet for ice cream and a freezer for "storage . There is nothing in the record to indicate that there was anything unusual about t.he cabinet 1which Beatrice allegedly furnished, it being merely a six-hole cabinet, or that the freezer was intended or was used for anything other than the storage of ice cream. Moreover, there is no reliable evidence in the record to est.ablish that the furnishing of such equipn1tnt was the reason for t.he account's change of suppliers.

1With respect to his accusation t.hat he had lost. flCcollnts due to the supplying of signs, t.he witness finally conceded that he cOllldn t recall any accounts which he had lost because of this practice, and that he was merely referring to the supplyjng of sign by ot.her ice cream manufacturers to their own a.accounts. K 0 particular competitor was singled out as supplying any more 01' any different signs than any other competitor.

One of the principal reasons for the clec1ine of Virginia Ice Cream Company of Portsmouth appears 1..0 be the substantial increase in the number of competitors in the area. For many years his principal competitors were Southern Dairies and J\Ielvern-Fussell (prior to its acquisition by Arden). In the last ten years Swift, Beatrice, Pet Birtchard and Rosedalc ha VB entered the market. The witness agreed that Birtchard, in pa.rticula.r, had become a substantial competitor Rud while he declined to hazard a guess as to ,dlether t.their gallonage had reached 500 000 a year, he agreed that, they -were ';much bigger than his own c01npany which h lS been in business since 1D22. Birtchard, a local company, was recognized by the Virginia, witness as very aggressive, as having engaged in an the practices about which While the witness' testimony Indicatel1 that the account had changed to Beutl'i . be maoe DO claim that the account bad informed bim that it had switcbed because of the t'l1Ppl 'ing of stich equipment.

, ,, Appendix 60 F.

he complained, ann as ha v-ing taken i quite a few flccounts" from his company. Another factor contributing to Vil'ginin, s decline, according to the testimony of its representatiYc, has been t.he fact that for several years business in general has been "slow:: in the an:a, and not merely in the ice cream business. There is nothing to indicat.e that the extent of the decline of Virginia Ice Cream s sales has been any grep.ter than tha.tof business gene,rally in the area. )101'8 importantly, there is no cyidencc in the record upon which a finding may 1m made that any such c1ecJine has been due, to tuly substantial degree, to the eng:tgement by any of the respondents in the practices charged ill the complaint.

The record fails to establish Hny signifcant improvement in the position of any of the respondents ope-rating in the area. The sales of :'ational's Xorfolk phlnt (which distributes in Portsmouth) have declined from i 000 in 1047 to 685 000 gallons in 10,;5. Its sales in 1951, when Virginia Ice Cream lJegan experiencing its decline, 1\ere as low at; 550 000 gallons. :K ationa.ls share of the N orfoJk market declined from 20. :"5 percent in 1850 to 18. 8 percent in 195;). Beatrice\; share of the nJ:lrket declined from 1.2 percent to 0.9 percent in the same period, and Arden s from 10.5 percent. in 105;3 (when it entered tho market) to 8.7 percent in 1%5.

c. Frcdcricksbl11'g, \/irginin. , Area.

The respondents operating in the area of :Fredericksburg, Virginia (which is located approximat.ely half way betwe,en \Vashingtoll and Riehmond) inclncle X ational (Breyer and Southern Dairies di\Tisions) Arden (:Ie1vem-Fnssell), Beatrice and Pet. There is only one local mannfactnrer in the area, Fanners Creamery Company. In, (tddition there ate the Safeway and High chains, which manufacture their own ice cream, and it number of soft ice cream establishments such as Dairy Queen. The representative of Fanners Creamery ivas the only witness from the area called by counsel supporting the (',complaint. The Farmers Creamery representative indicated that his companies gallonage had declined from approximately 330 000 in 1048 to 250 000 in 18:54. This decline, ho\\ever, has not been due to any loss of accounts, the company having more accounts today than it had five years ago, but to decline :in sfLles per account. The witness attributed this decline mainly to the fact that there were more competitors in tllc area than in former years and more estnbIishments selling ice cream. The witness cited as an example a change 1which had taken place in the downtown area of Fredericksburg. In former years his compenny had se,rved a drugstore hieh was one of the few ice cream CARXATIOK CO).fPANY ET AL. 1485 1274 Appendix outlets in that section of downtown Fredericksburg. Thereafter, the F. ,V. ,Voolworth store located next door, ",which had not previously s01d ice cream, expanded its store and began to sell Fussell's ice cream. Shortly thcreafter, the J. .J. Newberry store also began selling ice ('cream (the brand sold being unnamed by the "vitness). During this period the drugstore which Farmers Creamery had served went out of business and when it later opened up under it new owner it began to serve Breyer s ice cream. The witness made no claim that the choice of Breyer by the llew owner 1nts due to any of the complaint practices. He nttributed it to "good salesmanship" and commented hat he had "no complaint on it" .'9 The witness did make mention of the fact that customers were nmv asking for more than the,y did in prior years, such as merc.han dising-type cabinets in place of conventional closed-top cabinets service on dealer-owned equipment, and signs. I-Iowcver, he made no chtim, nor does the evidence establish, that any of the respondents were responsible for these demands, nor that Farmers Creamery lost any accounts by reason of competitors supplying more than the witness felt justified.

Insofar as the furnishing of cabinets is concerned, the Farmers Creamery witness agreed that it was necessary for the manufacturer to supply the dealers with such equipment in order properly to merchandise their product, although he claimed that it was sometimes diffcult to finance such cabinets. \Vhile citing a,n instance where he had allegedly had to supply one of his customers with a display cabinet because of R, report from his salesman that Ere,yer s would get the account, there is no reliable evidence in the record as to 1vhether Breyer . had in fact offered such equipnient to the account. :Moreover, in connection with another account which his own company had taken from Breyer s and to ",which it had supplied a display-type c.cabinet in place of a conventional-type cabinet, the witness stated that this had nothing to do with the account's switching. He conceded that there "-ere many reasons for an account switching nnconnected \with the fact t.hat it received a newel' type of cabinet. III any event tile witness made no claim t.hat he had lost any accounts or had been unable to acquire any because of his unwillingness or inability to suppl:y an appropriate e-abinct.

79 While he referred to the fact that Breyer s had fi large stol'flge box in the hack of the store, he malle DO dalm tJHlt It was being USE'd for anything but ice cream. lie induc.'ten that it was his l1udel'standlng- the box WI\.'; put in for Breyer s conyenlence, rather t1!an t.he owner, ",ince Breyer made only weekly c1liveries to the store, whereas his own company had served the former owner daily.

1486 FEDERAL TBADE COMMISSION DECISIQXS Appendix 60 F.

'Vhile, as above mentioned, the witness also referred to theprad,ice of scrvicing dealer-owned equipment, he agreed that this involved a matter of "slight expense" and was merely "an inconvenience, . No claim was made that he had lost any accounts by reason thereof or that it presented a serious competitive problem to his company. 1\101'8 over, he made no effort to attribute this practice to any or the respondents. In the case of the supplying of signs, which he claimed was a more recent innovation, he conceded that they ,were a benefit to his company because of the advertising value. The cost thereof, including sign, pole, and labor charge, was estimated to be around $40.00. No claim was made that he had lost any accounts or been unable to acquire any because of such signs.

Outside or the single drug store account, which had changed to Breyer s under its new' ownership, and the account to which, according to the hearsay testimony of the witness, Breyer s had offered a displaytype cabinet, the. witness made no other re.ference to respondent National Dairy as having been involved in obtaining or seeking to obta.in any of his accounts. No mention was made by the witness of any competitive diffculties with Arden or Beatrice. 1'0 claim 'was made as to having lost any accounts to Pet, although the witness did testify that Pet had obtained an account which he too was seeking to get but no reason was given for the htter s success. ,'11ile it may be that the Farmers Creamery witness does not approve of some of the practices which he cited, it is clear from his testimony that t hey have had no significant euect on his company s decline in gallonage between 1948 and 1954. As already mentioned the witness himself conceded that this was due mainly to an increase in the number of competitors and ice cream st.ops. Other factors have the loss ofbeen the decline in ice cream sales g-enerally in the area, the three Safeway stores in the area, which Farmers Creamery served on a split basis with ),felvern-Fussell and which now make their o\vn ice cream, the entry of the. High stores into the nmrket which make their own ice cream, and the growth.h of soft ice cream establishments in the area.

Despite these problems, Farmers Creamery has mnnaged to retain 70 pcl" cent to 80 per ceJ t of the. ice cream business in the Fredericksburg axeR. The company has also acquired a 51 per cent interest in another,r dairy operating in the ranassas area and a 100 per cent in- Interest in another company operating in \Vestmoreland County.50 contrast to this ational Dairis Southern Dairies division sales in !' A witness from the latt r COlnpo.n ' wus subpoenaed to testify, but was eXCllf'ed by com 1'1 supporting the complaint.

CARNATION COMPAl'Y ET AL. 1487 1274 Appendix Fredericksburg have declined from 12 107 gallons in 1948 to 3 358 in 1954. Breyer s sales in the area in 1954 were less than 10 000 gallons. Counsel supporting the complaint has failed to establish any injury to competition by reason of the use of the complaint practices by any of the respondents in Rny of the areas above discussed or in the State of Virginia as a \whole. The evidence in the record, for the state as a whole, establishes that none of respondents has made any significant improvement in its position. Of the respondents referred to most frequently by the competitor witnesses, respondent National's sharc of the state production of frozen products has declined gradually from 20.9 per cent in 1947 to 14.1 per cent in 1955. nespondent Pet which had G.3 pel' cent in 1947 and was able to increase its share to 10. 5 per cent by 1951, thereafter began to decline and reached 3 per cent in 1955. These figures hardly suggest that these respond cnts are engaged in any aggressive campaign to take over the Virginia market.

6. Easton, Maryland Easton is located in the center of what is known as the Eastern Shorc of Maryland, separated from most of the rest of the state by the Chesapeake Bay. It has a relatively small static population, but during the summer months there is a considerable influx into the seashore and bay communities. The only respondents doing business in the arm are National Dairy (Breyer and Southern Dairies) and Borden. The local companies include Cupid Ice Cream Company, Stoker lee Cream Company, Cook's Ice Cream Company and Stephen s. There are also a substantial number of regional companies operating in the area" including Delvale Ice Cream Company of Baltimore and \Vashington, and Philadelphia Dairy, Penn Dairies Abbotts Dairy, Hershey and nichman, all of Pennsylvania. The competitor witnesses called from the area included representatives of Cupid and Stoker, and the mvner of another company, Shoremaid which had sold out to Delva.le. A witness subpoenaed from Cook' Ice Ore,run Company was excused at the request of counsel supporting the complaint. A single dealer from the Eastern Shore testified. The local companies opera6ng in the area are almost iniinitesimal in size ,,,hen compared to most of the other competitor ,witnesses who testified in these proceedings. They operate on a very marginal scale and have been slow in supplying customers e\Tcn with the most rudiment.ary services. l\fost of their complaints revolved about the fact that competitors were supplying deale.rs with cabinets (not la.rge 1488 FEDERAL TRADE COM).lISSIOK DECISIONS Appendix 60 F.

merchandising cabinets, but ordinary electric storage cabinets) and with signs, which t.hey claimed they could not afford to furnish. The evidence indicates that cabinets 11a ve been supplied by ice cream manufacturers in the area. since the earliest days of t.he inuustry and apparently present.ed no problem when they involved the non-mechaniea.! wooden cabinets. I-IO\vever, when the mechanical electric cabinets came into vogue during the middle 1930's SOlle of the local companies were sl0'1 in making the change and lost many of t.their accounts. Very little of the testimony clear1t with the activities of the respondents, as such, but iln olvccl competit ive conditions generally in the area. The evidence indicates that there has been a. onsidel'able inflnx of non-respondent regional companies into the area in recent years, and that they have acquired n. number of former loral compani8:' and hllve been very aggressive in the.ir sales efforts. In the case of Cupid Ice Cream Company of Greensboro, 1\Iarylall(L the cyidencc indicates that it had hegun to decline long before most oJ the companies nmv on the scene came into the area. By admission of its owner, it was among the last companies in the area. to conn rt to electric cabinets, and from a maximum of 300 accounts in 1080 it hall declined to 100 Hceonuts by 1047, unlike the exprrirnce of most. other competitor witnesses ',rho testified that 1947 represented a high-\vatcl' mark in sa.1es. At thc time of the hearing Cupid had approximately 60 accounts and its sales amounted to approximately $45 000 a year. The COmp:-lly does no radio or newspaper advert.ising although it, does utilize name signs antside of its cllstomers: places of business. It engages in 1itt 1e solicitation of new accounts. It. J1fl1ufact ures and sells only four ice c.cream flayors, unlike most of Hs competitors who distribute a wide variety of flavors.

Cupid' s decline has involved partly a loss of accounts and partly a decline in sales per account. The latter has be.pn the result of an increa-se in the number of competitors in the area and in the number of establishments selling ice cream. As an example of this the Cupiel witness cited the town of Greensboro, ""here t.he. company s plant is located, which SeVB11 years previously had only foul' rot ail outlets sc11ing 'ie8 cream nnd at the time of the. hearing had 18 such e bhlis11111;nts. Insofar as the loss of accounts is concerned. this has involved not merely the swit.ching of accounts to competitors: but the fact that ':quite a few" or the companies eustomertj have. gone. out 01 business. Of the accounts ".which had switched to other competitor (estimated by the witness to he approximately 18), most had switehed to the non-respondent. comp tnies, I\.'.nn Dairy Hnd Philac1elphin Dairy; several h d switched to respondent i\atioml1 alll one to l' .

CARNATION COMPANY ET AL. 1489 1274 Appendix spondent Borden. K a evidence ,,,as offered from ,which it ean be found that any of the accounts which switched to the respondents did so because of the complaint practices. The witness conceded that. the only reason he had ever been given by farmer customers for switching was that they wanted a more highly advertised brand. 1Vhile the witness testified that customers ,ve.re denmnding nmv cabinet.s and signs, 110 reliable evidence '''as ottered to establish that any of the ,,'itness' :former customers had switched to aIW of the responde.nts by reason of such indncpments. The evidence with respect to Stoker Ice Cream Company indicates it to be microscopic in size. The present company is the suecessor af two companies, Calnbl'idge Ice Cream Company (which was operateu. by the present OTfIwr\; father) and Corkran Ice Cream Com, pan)' (,,' which was operated by his under). Stoker achieved its maximum valmne around ID2D 0.1' 1Di30 ::lld tocIay is merely a shell of an oper ltion. The witness indicat.ed that. most of the company s good flecounts, which consisted of large fountain staps, were lost during the 1D:W' s. It does not a.appear ,,,whether such accounts simpJ y went Ollt of business or ,were acquired by competitors or \\-!lat the roason for the loss was. Today the company operates " more 01' less ::, back road business on the otlbeat highways . The company has it gallonage of approximately 15 000 to 18 000 a, year a.nd is operated in combination with a wholesale candy business. It docs no advertising, furnishes no. point-ai-sale material and doe-s nat exen have its name printed on its package. \VhiJe it did at one time supply signs to customers around 19:34, it has ceased this practice also. The only "-ay a. consumer could know "'here the company\; ice cream was being solel ,,,auld be by word of mauth from persons in t.he eOmll111ily. So inncti\' e and unaggressive. is the company t.haJ, when the comllunity center in its home-towll of Cambridge decic1c(l to. put in ice cream, the company was not even asked to supply an ice cream cabinet, but a c,lbinet '''as obtained from Penn Dairies. Likewise, the local elementary school (lid not even ask the company to submit a, bid, but obtained its ice cream from PenH Dairies.

The only respondent referred to by the Stoker witne::s ,,,as Borden to ,whom he claimerl his company had lost: three necounts. The only indication o-iven by the ,witness as to why such acconuts sly-itched ,yas his l1nder tallcling that :om(' deale, rs had bepll rolrl by BOl':cn that if they s,vitched to a nationally nc1n!rtisecl branch1 their gct1lull::gc ,,,onld increase. Since St-oker ,yas a.1rcfl(ly operating on (1, very marginal Gasi.s )ong bdore most of tJw present competi1'ors entered the Appendix 60 F.

area, it seems evident that reasons other than the complaint practices are responsible for its present moribund condition. Tho third competitor witness, the owner of the former Shoremaid ICG Cream Company, entered the ice cream business in 1947 in Salisbury, :Mul'yland, and sold out in March 1955 to Delvale Ice Cream COlllpany. The "reasonably steady progress: which this small company admittedly Illclc1e bet,yeen 1947 and the time it went out of busi. Hess suggests that factors other,I' than the supplying of signs and cabillets ,were responsible for the sorry condition of t.he other local competitor v,witnesses who testified at the hearing. Compared to Cupid lco Cream Company, which \fcnt into lmslness .in 1021 and declined to 100 accounts by 1947 and then to 60 accounts in 1955 with an flllllllal gallonage of les than 40 000, and Stoker lee Cre,am Company which had been in business since 1910 and had managed to work itself dmnl to 75 customers in 1D46 and to 50 in 1955 ,with a gallonage of 000 to 18 000, Shoremaid, starting "ith nothing in 19:17, was able to achieve a g,lllonage of 50 000 in 1953 ,with 75 customers. The Shoremaid ,..itne.ss gave as his reason for selling out the fact t.hat he did not t.think he could compete with the, bigger companies in the coming :years. \Vhile, hc referred to a gamut of competitive practices, including the "buying of accounts :' he conceded that his ini'ol'matLon was hearsay and that the only practice of which he had any personrd h:nowledge was t.he furnishing of large signs to customor8.81 The Shoremaid witness claimed that the fnrn1shing of such signs was responsible, for his loss of some accounts because he could not ailorcl to supply them. Although conceding that it had been the practice to supply such signs to the bigger accounis ;;as long as I can remember, he da,imed that the practice had been extended in recent :years to the little country stores, which ,,,as the type of establishment he served. However, he singled out Penn Dairies as the initiator and ;;worst offender " in the use of this pract.ice. \Vhile he included respondents National and t.he Borden Comp,lly, as falling ,,-within the category of "all t.he companies:' who followed "after that", it is dear that the better companies were lnerely following the patte.rll which had been set. The Shoremaid witness made, no cla,illl that eit.her Nat.ional or Borclen had taken any accounts from him because of this practice. The only company specifica.ly nalled was Penn Dairies, which he clairned was the "worst offender in the matter of extra ice crealn cabinets and signs 61 The witness estimated the cost of such "large" signs at approximately SlOO. . pl CM! of erection which lie estimated at $50.00. CARNATION COMPANY ET AL. 1491 1274 Appendix The Shoremaid representative claimed that his gal10mtge had declined by 8 to 10 per cent in 1954. However, he attributed this more Lo ;1 decline in sales through his existing accounts than to any net loss of accounts. He indicated that his main problem was his inabil ity to acquire any new accounts, since he could not afl'orci to supply the equipment that W LS required. Shoremaid's competitive problems were made more diffcult by the entry into the market of the additional contestants, Hershey and Delvale, in 1952 and 1953. 'With respect to the Jatter, it ma,y be noted that it not only bought out Shoremaid in 1955, but earlier took over three other local competitors, Blossom Ice Cream Company, Gill Brothers and Delmarva Ice Cream Company. The testimony of the only dealer witness on the Eastern Shore called by counsel supporting the complaint tends to support the hearsay testimony of some of the competitor witnesses concerning the role played by national advertising and national brands, as a factor in the sy.,ritching of accounts. Presumably the witness was called to establish that he h"d been induced to deal with Borden instead of a local company because of a Joan which he had received from the former. The dealer in question opened a restaurant outside of Salisbury on a main northsouth arterial highway. In order to equip his restaurant with a soda fountain and booths costing $12 528, the dealer put up $5 000 in cash and received a loan from Borden in the amount of $7 528, covered by a promissory note with interest at six per cent and secured by a chattel mortgage. There is no evidence that any local competitor ever solicited the account. The witness testified that he was only interested in an ice cream with a nationally established name since his restaurant is located on the U.S. highway to Florida and catered to a considerable transient, non-local clientele. Although the loan ,vas paid off three years previous to the hearing, the establishment continued to handle Borden ice cream despite the fact that it was under no obligation to continue handling the latter s product. The deale.r \Vas also supplied with a plywood noll-neon sign, which bore Borden s name in at least six places, as ,,-ell as the name of the restaurant. It is clear that such a sign located on a main highvmy is of distinct advantage to an ice cream manufacturer and warrants the expense involved, ","hieh is insigl1ificant. \\'hen compared to t.he cost of billboard advert.ising on the highway.

,;y-rhatever may IHlve been the cause of the. diffculties of the local competitors on the Eastern Shore, ,,,whether it be a lack of sufficient en-pital to supply c.llstomers with such customary equipment as ordinary ice crefUTI storage r,abinets and signs indicat:inf! the brand of ice cream sold, or an increase in the number of competitors, or an 1n- 719-603- 6-- Appendix 60 F.

crease in the number of establishments selling ice cream" the record is lacking in reliable evidence that respondents National's or Borden Use of the complaint practices has been a significant factor in such decline. The record discloses that both of the respondents involved in the testimony, ational and Borden, have experienced a very substantial decline in their own sales on the Eastern Shore. The sales of Kational's Salisbury, ;VIaryland branch declined from 716 000 gallons in 1947 to 550 000 gallons in 1955. The sales of Borden Laurel, Delaware branch declined from 284 000 gallons in 1047 to 181 000 gallons in 1055.

7. Oharlotte, North Oamlina At the hearings in Charlotte, North Carolina, evidence ",vas ouered as to the competitive conditions in the "cst central portion of the state and with respect to several areas in South Carolina. Although tho hearings were held in Charlotte, no competitor witnesses were called from that city, nor were any competitor witnesses called from the other larger cities of orth Carolina such as Asheville, Durham R.aleigh, ,Vinston-Salem or IVilmington. The only competitor witness from any sizea,bie community was Clover Brand Dairy of High Point. The other competitor witnesses \were Alooresville Ice Cream Company of l\1ooresville, a cornmlU1ity of less than 10 000 population and Cabarrus Creamery of Concord, a community of about 15 000. Although a witness from Coastal Dairy of Wilson, in the east central part of the state, was subpoenaed, he was excused at the request of counsel supporting the complaint. In addition to the competitor witnesses referred to above, counsel supporting the complaint called three dealer 'iVitnesses from Charlotte, another from lligh Point and another from 'Vinston-Salem. Since the evidence with respect to Korth Carolina and South Carolina involves different competitive areas, each is discussed separately bclo\v. a. IYestern Xorth Carolinlt Area The evidence offered through the three competitor witnesses from North Carolina involves almost entirely communities in the west central portion of the state, including leigh Point, Greensboro, Burlington Salisbury, :.1ooresvil1e and Concord. None of the cOlnpeti tor witnesses operates throughout the area. Clover Brand does not operate in either 1\1:00re81'ille or Concord where 1\IooresvilJe Dairy and Cnbarrus Creamery operMe, and the latter two did not refer to Clover Brand as one of their competitors. Cabarrus Creamery operates only in a small portion of the area served by i\Iooresville Dairy. CARNATION COMPANY ET AL. 1493 1274 Appendix The respondents operating in most of the west central portion of the state are Pet, National (Southern Dairy) and Borden. Foremost does not compete with Clover Brand or ),fooresville, but does sen in the area. where Cabarrus operates. The non-respondent local com panies include, in addition to the three competitor witnesses, Coble Biltmore, Guilford, Lyndale, Buttercup, Dick' , Honeykist, Gastonia Superior, and Carolina Dairy. Of these, only Coble and Biltmore operate throughout the entire area.

The largest of the competitor witnesses called is Clover Brand Dairy of High Point. The company appears to enjoy a very favor able position throughout the area where it operates. Its volume is between 200 000 and 300 000 gallons it year, and it h L8 experienced a pretty steady" increase over the five-year period prior to the hearings (early in 1956). Its volume of sales in 1955 represented an increase over 1954. The compa,ny is affliated with a Virginia company of the smue name, doing business in the southwestern portion of Virginia adj aeent to North Carolina, and between them the t,vo companies have a volume of over one million gallons a year. There are a. greater number of companies doing business in the area where Clover Brand operates than when the company first entered business, with at least three Jocal companies having entered from nearby K Glih Carolina areas.

The Clover Brand witness indicated that it was the practice for all ice cream manufacturers in the area to furnish their customers with ice cream cabinets, signs and compressors for soda fountains, and to service the cabinets and compressors. l\fost companies also make some loans to assist customers. The cabinets are fui11ished without any rental charge, and there is no indication in the testimony of the Clover Brand witness that this practice has presented a financial burden or a competitive problem. The furnishing of neon signs containing the name of the ice cream manufacturer and a smaller pancl with the name of the retail establishment has been a more recent innovation although the furnishing of pla.in metal signs with privilege panels did nothas been customary for a great many years. The witness however, attribute the initiation of the practice of furnishing neon signs to any of the respondents. In fact, the first such sign which the witness noted in the area belonged to a local competitor, Buttercup. Respondent. Pet docs not use the more expensive metal neon signs, which range in cost from $250.00 to $300. , but supplies its customers with a less expensive plastic sign. The witness made no claim that the furnishing of signs had resulted in his company's loss of or inability to acquire any accounts.

1494 FEDERAL TRADE COML\lISSIO:: DECISIO Appendix GO F.

The making of loans is not too widespread a practice in the. area. Clover Brand makes loans to some of its customers and had a.about 000 in Im11s outstanding at the time of the hearing. The only account which he claimed to have lost because of a loan IYRS one 'which switched to respondent Pel The establishment, a drive- , had re ceived a loan from Clover Brand at its original location and later tried to get a further loan to assist it in moving to a new location. However, CJover Brand refused to make the loan because there was still a balance clue on the old loan and the account had not been prompt in its payments. The owneT tried to get a loan from the bank but \yas refused. He t.hereafter approached Pet and received a $1 500 loan. while the owner of the establishment, who was called as a witness by cOWlsel supporting the complaint, claimed that his friendship witll some of the Pet employees was a factor in his switching, it is clear from his testimony as a y.,rhole that the making of the loan was at least an important reason for the switch.

The only other indication of any competitive diffculty by CJover Brand was the claim of its representat.i ve that it. has been unable sell ice cream to the supermarkets and chain stores in the area. I-Iowever, tho witness made no claim that this was due to any of the complaint practices. He indicated that he had been advised by the stores that they preferred to handle a national brand of ice cream. Despite Clover Brand's alleged inability to acquire any of the Jarger supermarket or chain accounts, the company has, as already mentioned made steady progress and increased its sales. It is now the number one company in sales in the city of High Point, which has a population of 40 000. The witness summed up its position by stating, in response to the question whether the company was in a "pretty sound and solid position, that "\Ve arc discounHng our bills, and just getting along fine.

The evidence offered with respect to l\Iooresville Ice Cream Company indicates that that company also enjoys a favorable position in its market area. 'Vhile its volume was not given, the witness stated that it had "increased appreciably since the war, despite the fact that "a1J ice crea,m men will agree CHJ46J was the lHopia of the ice cream busi ness. The company had "nice increases in 1D53 and1Di54", although the witness anticipated that 1855 Inig-ht be dO\Yl1 ;' just slightly It is the common practice. in the 1\100re.5\'i11e t.trade area for ice CTeam suppliers to furnish their dealers \Tith icc cream cabinets and to service them. The Jloorcsville represent.ative expressed the opinion that most dealers would not go to the expense of purchasing an ice cream11cabinet if it were not supplied by the manufacturer, because it CARNATION COMPA.-v ET AL. 1495 1274 Appendix is a type of equipment that is not suited for the storage of other products and therefore has limited utiity to the dealer." He also inclicated that it ,vas desirable for the manufacturer to own and mainta.in the equipment, since it encouraged the dealer to request maintenance service promptly in the event the cabinet began to act up, thereby assuring the manufacturer that his ice cream ,",auld reach the public in "saleable composition" and reliedng him of the obligation of replacing defective ice cream. Iost of 11001'e31'i11e s customers are supplied by the company with an ice cream c"binet. The minority of dea,lers who own their own equipment receive a special discount of fiyc per cent from the reguhu'list price.

::Iooresvil1e also supplies its customers with a relatively inexpensive Sig11, which identifies its ice 'crean1 and also conbtins a panel with the name of the dealer. The witness expressed the opinion that the supplying of such signs wa,s well ,vorth the expense involved because of the Hlvertisillg value thereof, and that the additional expense. ill providing a privilege panel for the dealer s name was justified on the basis of the advertising value or the sign. The company has expended 000 for signs and, in addition, has supplied about 100 of its dealers ,with electric clocks for use inside the store, which advertise its brand of ice cream. JIooresville does not supply the larger neall-type signs although it does lutVe one in front of its plant. The witness had no recollection of being requested to supply such signs to any of its customers or of having lost any account for this reason. y!ooresville has between 2 500 and 2 600 customers. 'While, "8 previously indicated, the company has had a slight decline in sales in 1955 the company witness could not state whether this was eausec1 by a decline in sales through its existing accounts or by a loss of some accounts. The company sells in some of the local independent supermarkets but, except for the A & p does not sell in any of the national chains. Tlw wjtness did not attribute this to the fact that such chains were receiving signs or equipment. or loans. The only reason he had ever been given '"as that they ,,,anted to receive the benefit of the national advertising supplied by the larger companies. -\nothBl' reason given vms that they were getting t better volume (1discount. However, t.he witness claimed that even though he had no volume discount his base prices \'\ere lower t.han the big companies, even after including their discollnts. Another reason assigned by the witness for his in- B. The witness stated that the ice cream cabinet is dissimUar from the home freezer be. cause of its much heavier construction . He also indicated that the temperature at which the freezer operated in maintaiaing lee cream was different from that of n refrigerator utilzed for milk or meat.

Appendix GO F. T.

ability to obtain the chain account.s is the fact that the choice of a supplier is not made by the local manager of the store but by the divisional manager, who may be located in another city or state. V\711i1e the company has only a single food chain store account, it does serve a number of drugstore accounts and was able to acquire the most recently opened drug store in rooI'esvile. In addition to a slight decline in sales in 1955, for which the witness could not account, the 1\1001'e8\'i11e representative indicated that his company's rate of profit had not increaseel since U)50 and had possibly clecJlnecl some. IIowever, he attributed this to the fact thilt its costs part.icularly raw milk and cartons, had inereased sjnce 1950, ,vhi10 the price of ice cream had remained constant.

The 100resvil1e witness had no complaint about the activitie.s of any particular competitor. The only company to which he made reference as having acquired any of his accounts recently "Was Coble Dairy, which he indicated was a big competitor in the area. Respondent Foremost has ceased coming into t.he area. The last bme JUooresville hndlost any apprcciable number of accollnts to Pet was back in 1932 for reasons not appearing in the record. Vie'idng the evidence as a whole, :.100resvi11e lee Cream Company appears to be in a relative.y favorable c0111petitive position in its trade urca. In the main, it has enjoyed a steady growth and has not lost any n ppl'cciable number of accounts. ,Yhils its represcntatiye ,"\ould not confirm the fact that his eompa.ny enjoyed 70 or 80 percent of the business in the J\fooresville area, he, conceded that it had "a good majorit.y of the. business The third competitor witness from North Carolina, representing CnbalTus Creame.ry: appears to have Jared equally as well as the two other competitor witnesses. The company appears to be considerably smaller in size nnd operates principally in CabnlTllS County. It entered t.he ,yholesale ice cream business in 1D-:l7, aiter having operated a retail store from about 1928. Purchasing 33 cabinets in 1D47 which it supplied to va.rious retail accounts as they ,were acquired, by 1955 it had a total of a.approximately 150 dealers with an annual gallonage of 75 000 to 80 000 gallons.

The witness testified in general terms to having lost some accounts because they had been supplied with "up-to-date cabinets" Or neon signs, and as to having bee.n advised by dealers which his company was trying to acquire that they were "financed or tied :in some manner:' to their present supplier. However, the names of the accounts and the competitors involved 'were not idenLifie, , except in two or three instances, and the \Vitness conceded that his hearsay and conclusory testimony was not based on any actual know ledge. CARNATIO COl\AN ET AL. 1497 1274 Appendix One of the few accounts referred to by the witness was a supermarket which the witness' driver informed him had been lost to respondent S ational because the latter had supplied thc account with a cabinet for storing frozen food. The witness conceded that he had no actual knowledge as to 'what National had furnished the account, and his hearsay testimony was stricken. The other instance involved the alleged supplying of a neon sign by Foremost to one of Cabarrus' accounts. There is no reliable evidence that the supplying of such sign assuming it did occur, was the reason for the change of suppliers. The third instance involved an account having two stores which the witness sought to acquire from respondent Pet, but was allegedly unsuccessful because of the fact that Pet was giving the account a quantity discount based on the volume of both stores. There is no reliable 81,idence that the account (not identified in the record) received a discount from Pet or that, if it did, such discount was other than the regula.r quantity discount based on Pet's price list, Or that such alleged discount was in any way tied to an exclusive dealing arrangement. The witness conceded that the practices of the local North Carolina companies, Biltmore and Coble, were comparable to those mentioned in connection with several of the respondents. Despite his apparent lack of approval of some of the pract.ices of his competitors, the witness' testimony indicates that the company volume is still growing. He attributed this to the more aggressive advertising and merchandising policies which his company had adopted about two years previously, including radio and newspaper advertising and the emphasizing of special flavors. This has resulted in an increase in sales through its own accounts. 17\1hi1e the 'witness claimed that most of the new accounts acquired were small grocery stores, he conceded that they served some chains and supermarkets including -- & P and Dixie stores. The company s ice cream business is admittedly operating at a profit and is, in fact, 110re profitable than its milk business. 'Within its trade territory it is at least second to respondent National Dairy in nlarket share. Viewing the evidence as a whole, it does not appear that the company is in any serious competitive diffculty and, to the ext.ent it is confronted with competitive problems, there is no reliable evidence upon which a finding can be made that this is due, to any significant extent, to the engagement by any of thc respondents in the complaint practices. As previously mentioned, cowlsel supporting the complaint called five dealers in addition to the three competitor witnesses. In only one instance did the testimony of these witnesses tend in any respect to Bupport the allegations of the complaint. This was the High Point 1498 FEDERAL TRADE COM:\ISSION DECISIONS Appendix 00 F.

dealer, previously referred to, who switched from Clover Brand to Pet after receiving a loan of $1 500. However, while the loan may have been an "inducement" in the account's switching, the loan agreement contained no exclusive dealing requirement. Accordingly, there is no record basis for concluding that the account was iuduccd to handle Pet's ice cream "exclusively . Furthermore, since Clover Brand itself had originally financed the account in the purchase of a fountain, its refusal in this case was based on the exercise or it business judgment, rather than a policy against loans. Another dealer witness was the owner of six restaurants, five in Charlotte and one in Gastonia. Pet is the supplier for four of the restaurants and the local competitor, Biltmorc, supplies two. There is no evidence that Pet has supplied the account with anything which is not customarily supplied by competitors in the area. The owner has handled Pet ice cream for 23 years in various establishmcnts operated by him. In one of the restaurants, where there is a soda fountain Pet supplies the compressor for refrigerating the fountain. As has already been noted, the local North Carolina company, Clovcr Brand also supplies compressors for soda fountains to its customers. Pet services the refrigeration equipment used for selling ice cream in the stores handling its product and Biltmore does the same thing in the stores which it serves. The witness indicated that he was required to pay Pet for replacement parts and, in the case of extensive repairs had to pay for both labor and parts. Since the dealer in question owns the ice cream cabinets in some of the stores, he receives the customary five per cent discount granted by most ice cream manufacturers. There is not a scintilla of evidence of any exclusive dealing arrangement between the account and Pet. The witness specifically denied the suggestion contained in cOllnsel supporting the complaint's lending question that he -was a "captive" of Pet, but stated that on the contrary I could quit Pet Dlliry tomorrow if I so elected. The third dealer witness was the owner of a drug store in Charlotte who had purchased a fountain for $1 850 from respondent Nlltional under a conditional sales arrangement, at the time the O\vn8r opened up the establishment. There is no testimony that N atiolml induced the dealer to handle its products by the sale of the soda fountain on a time-payment basis. On the contrary, the witness testified that he had contacted the respondent with regard to purchasing its ice cream based on the recommendation of an offcial of a drug manufacturer or wholesaler. The agreement accompanying the sale does, in this instance, reflect an exclusive dealing arrangement since it requires the owner to purchase all of his dairy products from respondent National CARNATION COMPANY ET AL. 1499 1274 Appendix until payment in full of the purchase price of the fountain or until the last installment under the contract falls due "whichever is later. However, despite this arrangement, when the owner became dissatis. ticd with National Dairy s rebate payments he rcpaid the balance on the fountain and switched to the local North Carolina manufacturer, Coble Dairy. Although respondent National could have insisted that the owner continue to deal with it under the "whichever is later clause of the contract, because the date of the last installment (based on a 24-month installment period) was later than the date of thc repayment of the balance, it nevertheless made no attempt to hold the account. Accordingly, in addition to the lack of evidence of "inducement", there is also a lack of evidence that the written agreement, in its practical operation, had any tying effect. The fourth witness was the owner of a drug store in Charlotte, who had received a $10 000 loan from respondent National to assist him in buying out his partner. He had been handling Sealtest ice cream since 1941 and when he moved in 1945 to another store, which had been handling Biltmore, he soon switched to respondent National. The loan, however, was not made lUltil 1949 and there is no evidence that it constituted an inducement for the account to 8\\"itch to, or deal with, respondent N a.tional. "'Vhile the loan agreement did contain a so-called requirements clause calhng for the exclusive purchase of the respondent's frozen products, the loan had been paid off several years prior to the hearing and the account had received no further assistance from K ational but, nevertheless, continued voluntarily to deal with it. There is no evidence that this transa.ction had any effect on competition in the Charlotte area, there being no evidence that any other competitor in the area sought to obtain or was unable to obt,ain the account. In fact, as above indicated, no evidence of competitive conditions in the Charlotte area was offered through competitor witnesses. The final instance involves the O\vner of a grill and soda shop in \Vinston-Salem, \"ho at different times had received loans from rcspondent Borden and respondent National, but who is now dealing with the local competitor, Coble Dairy. During the period when the account was handling Borden, it had received a "small" loan, the amount Lnd terms of which do not appear in the record. Later the owner decided to open another establishment and asked Borden for a loan, which that company declined to do. The owner then obtained a loan of $4 000 from respondent National and moved into the new establishment, transierring his ice cream business to that respondent. About a year later he needed additional assistrmce and turned again to respondent National, which this time refused the request. Thereupon Appendix 60 F.

the owner made arrangements to obtain a loan of $4 500 from the local company, Coble Dairy, which enabled him to payoff the balance of the loan due to respondent National and gave him suffcient additional funds for his needs. 'While this iucident indicates that a loau may be an inducement for an account to change suppliers, it also demonstrates the volatility of supplier-dealer relationships and the fact that a loan cannot hold a dealer if he wants to switch, despite thc fact that he has signed an exclusive dea1iug cont.ract. It also demonstrates that the two respondents involved do not make loans indiscriminately, for the purpose of acquiring or holding accounts, but do so only when they think the account is a good business risk. It further indicates the availability of fjnancial assistance from Ioeal manufacturers. The evidence offered ,,-ith respect to North Carolina fails to indicate any weakening of competition or any 11larked improvement in the position of respondents. Vhen Clover Brand entered the ice cream business in 1925 there were only two other local competitors in its area, Lyndale and Buttercup, and there wero also two of the respondents doing business, National and Pel Since that timo additional local companies have entered the area including Guilford, Dick' s and Biltmore, as well as thc respondent Border!. The only company to have gone out. of business in the western part O'f North Carolina is Gibson, which was purchased by respondent Borden in 1949. Outside of the western portion of the state, there are approximately hmnty other ice crea.m companies operating in North Carolina. One of these Coastal Dairy, entered the business at the end of ' World \Var II and has "grown very substant.iany, according to the Caba.rrus witness. A representative of Coastal was subpoenaed to testify, but 'Was excused by counsel supporting the complaint.

The state production shares of respondents Pet a,nel National have declined slightly between 1947 and 1955. Pet's production share in North Carolim1 was 7.7 percent in 1947 and 6.:) percent in 1955. Hespondent National' s production share "-as 24 percent in 1947 and 23. percent in 1955. Respondent Borden, which entered the North Caro- Lina market in 1948 when it a,chieyed 1.1 percent of the production of the state, was able to increase its share to 7.1 percent in ID51. I-Iowever, since then its share has remained almost constant, with its 1955 share being 7.4 percent.

b. South Carolina The respondents operating in South Carolina include Borden tional (Southern Dairies), Foremost and Pet. Another so-called national company operating in the area is Swift & Company. The local CARKATIOK COMPANY ET AL. 1501 1274 Appendix comp,mies include Purity Ice Cream Company of Charleston, Paradise Ice Cream Company of Orangeburg, Caromaid Ice Cream Company of DiJJon, and Velvet Ice Cream Company of Newberry. In addition the Xorth Carolina companies Coble, Buttercup and BiltulOre operate in portions of South Carolina. Counsel supporting the complaint called as witnesses from the area offcials of Purity Ice Cream Company and Paradise Ice Crmllll Company. X 0 dealer witnesses from the area testified.

The two competitor witnesses who are located in Charleston and Orallgeburg, respectively, compete with one another and with tho respondents above named, except that respondent Pet does not COll pete to any significant extent with Purity and the latter s competition with Foremost is limited to the area outside of Charleston. The evidence offered through the two competitor witnesses fails to disclose tlult they are experiencing any serious competitive problems. Purity did not enter the ice cream business until 1947 when it purchased Raphe.n Sanitary Dairy in Charleston. About a year later it acquired the machinery and equipment of Carolina Ice Cream Company, which 'vas in the process of going out of business. Beginning with a nucleus of about 50 or 60 accounts and a gaJJonagc of approximately 50 000 in 18. , Purity had managed to acquire 350 to 400 accounts by 1955. \Vhile the amuunt of the increase in terms of gallunage was not revealed by the witness, it is admittedly over 100 percent of the company s 1847 gallonage.

While the Purity witness indicated that his company had lost a fc,v accounts to some of the respondents, there is no reliable evidence that the company has had any serious competitive diffcultjes arising out of the complaint practices. The witness identified two grocery accounts as having been allegedly lost to respondent X ationnJ because of larger cabinets. Not only is there no reliable evidence to support the witness' hearsay and conclusory testimony (based on information recei\red from his salesman) as to -why these accounts had switched to respondent )J ational, but there is affrmative evidence in the record offered by counsel supporting the complaint 'ivhich directly cont.radicts the 'ivitness' testimony. In one instance '1'here the witness eJaimed that his company's eight-hole cabinet had been replaced by a larger display cabinet, the evidence indicates that respondent N ationallikewise supplied the account -with an eight-hole cabinet. More over, the witness' testimony indicates that the account did not request a larger cabinet from his comp U1Y and that the account switched to respondent Kational at the tinle when it joined a cooperative buying group of stores which was then being served hy 1502 FEDERAL TRADE COMMISSro" DECISroXS Appendix 60 F.

respondent National. A more likely explanation for the account' switching would be the fact that it became associated with the buying group already being served by K ation:11, rather than the furnishing of any cabinet. In the case of the other grocery establishment referred to by the witness, documentary evidence offered by counsel supporting the complaint directly contradicts the witness' testimony since it appears therefrom that the account received no cabinet from respondent Xational. The Purity witness recognized the advantages of the mOfe modern cabinets because of the "better display, and indicated that company was replacing older ice cream cabinets with newer and better types, including some of the open- facc variety. The Purit.y witness also complain cd that he could not sell to drug stores because "it takes entirely too much advertising, billboards, neon signs, concessions, so we just let the others have them." The witness woes able to identify only one drug store which had been lost to a respondent, viz., Borden, bccanse the latter had allegedly supplied it with a soda fOllnta.in. However, he conceded on cross examinatjon that he had no direct knowledge of what, if anything, Borden had supplied to the account, or whether either Borden or National had financed any soda fountains for drug stores in the area. The only reference made by the witness to respondent Foremost was that he had lost a group of two grocery stores to the latter when the stores became part or a chain which Foremost was servicing. There is no indication in the record that any of the complaint practices was responsible for Purity s loss of these two stores. Assuming that the chain is receiving a quantity discount (as to which there is no evidence in the re.cord), it cannot be inferred that this was a faetor in the ac.connfs switching since Purity also grants a quantity discount to a collective buying group of twelve or thirteen stores which it serves based on the group s overall purchases. Outside of this incident, the witness indicated that his company competes only to a very limited degree with Foremost, since the latter does not sell in Charleston where Purity does the bulk of its business. 'While at first claiming that his company compete.d with Pet on the fringes of its territory, the witness finally conceded that they did not compete and that he had had no competitive diffculties with that company. The evidence fails to disclose that the loss of the few accounts referred to by the witness has had any significant eneet on Purity's competitive position. The company, as previously indicated, has grown from 60 accounts to 350-400 accounts in a space of approximately eight. years. vVl1ile claiming that his company s progress had been slowed somewhat in the past two years, the witness conceded that CARNATION COMPANY ET AL. 1503 1274 Appendix he expected the figures for the latest year (1955) to reveal it to be one of the best and that he was "proud of it, tickled to death". What particularly significant about this record of achievement is that two years previously the company had lost several government installations, which had accounted for approximately 25 percent of its volume because of a lower bid by an unspecified competitor or competitors. Despite this, the company was able to improve its position to the point where the witness expected 1955 to be close to his best year. lf the company s rate of progress has been slowed somewhat in the past few years, as claimed by the witness, the more obvious explanation would appear to lie in the loss of its valuable government business rather than in the complaint practices. The Purity witness also conceded that his company made a "fair" profit. WIlile claiming that the mte of profit had declined in recent years, the witness did not attribute this to the complaint practices but rather to increases in the cost of materials, gasoline and drivers' salaries and to an inability to increase prices.

The evidence with respect to Paradise Ice Cream Company likewise fails to disclose that that compa,ny is experiencing any serious competitive diffculties. On the contrary, the company appears to be making reasonably good progress and its sales arc on the increase. while its representative also complained about some of the practices of competitors, his testimony was of a rather general nature and insofar as specific accounts were referred to, the testimony was for the most part based on unsupported hearsay information. Paradise has approximately 350 accounts. While the company has made "some gain" since 1950, the Paradise witness claimed that in general it had been "standing fairly still, so to speak" since that time. Although no records were available against which to measure the witness' claim of " standing fairly still", he conceded on cross-examination that the latest year, 1955, was the company s best year and that the company had been increasing the number of its accounts. The evidence indicates that until the Paradise witness joined the company ten months previously as general manager and salesman, the company had had no sales stall and relied entirely on the incidental solicitation of its drivers to acquire new accounts. The fact that the company s sales resumed an upward trend following its institution of a concerted selling campaign, suggests that its lack of forward movement in the previous few years may have been clue to a lack of sening effort. In any event, there is no reliable evidence upon which to base a finding that the claimed static situation which exist.ed for a few years was due to any of the complaint practices. Appendix 60 F.

The Paradise witness had no complaint lbollt the practice of supplying customers with ice cream cabinets. In fact the witness agreed that some of the smaller stores would not carry ice cream if they httd to purchase their mvn cabinets. The witness likewise had no COIHplaint about permitting dealers to store other frozen foods in ice cream cabinets, since his company handles a line of frozen foods and permits its customers to place them in the company-supplied ice cream cabinet. -. 0 complaint was made about the making of Hny monetary loans to dealers by any competitor. The Paradise witness did, however, claim that he had been unable to acquire some drug store and other fountain accounts because respondent National had financed t.their purchase of soda fountains, a practice ill -which his COlnpany allegedly could not afford to engage. 55 The -witness mentioned no specified drug store which his company had been unable to accluirc but did refer to two drive-in restaurants for which respondent National had allegedly financed a fountain. There is no evidence to support the witness' hearsay testimony concerning the alleged financing of fountains by respondent National in these two instances. Furthermore, after claiming that his company could not afford to finance fountain equipment, the witness admitted that in at least two instances his company had taken oyer the iinancing of the balance due on fountains which had been sold by respondent Xational when his company acquired such accounts.

Another practice to which the 'witness attrilmtcd his loss of accounts was the granting of volume discounts to chain stores. He indicated that one of the cha.ins was being served by respondent X ational, another by respondent Foremost and the third by both his former employer, Coble Dairy, and respondent Kational, and that some of the store managers had advised him that "they were getting a volume rebate based on their volume sales, and if we were interested in doing that they would bc glad to figure with us. 1'0 explanation was offered as to why the witness did not "figure" with these stores, it appmtring that his company does give a volume discount to some of its larger accounts.

The record fails to support a finrling that Panulise Ice Cream Company has experienced any seriolls competitive diffculties because of the engagement by any of the l'espondents in any of the complaint prac- EJ ribe witness admittecl that his company 11ad obtained a grocery account from respondent Pet by installing a cabinet for both ice cream and frozen foods, after Pet bad declined to furnish the accou1It with a ('cabinet for frozen foods. M The only reference to loans which the witness marle was to his former employer Coble Dairy, which he testified did mal;:e Joans in the Columbia area. &, The witness aclmowledgcd that be encountered no such problem with respondent :Borden.

CARNATION COMPAL'\ ET AL. 1505 1274 Appcndix t.ices. The company was able t.o resume its upward climb by virtue of using ingenuity and sales effort, and had more accounts at the time of the hearing than it ever had. Although the witness claimed that these were mostly smaller accounts, he conceded that the cOlnpany had a number of good accounts including a five-anel-ten variety chain store in Orangeburg, and most of the other good accounts in that Coll- Inunity. Its gallonage in Orangeburg is greater than that of any of its competitors. No cla.im was made that the company s operation is not profitable or that its profits are declining. The evidence dealing ,with the South Carolina area fails to disclose any injury to competition in the area. Although counsel supporting the complaint sought to show that several South Carolina companies had gone out of business, most of these sold out to respondents' competitor, Coble Dairy, and there is no reliable evidence that any of these cessations wa.s clue to the engagement by respondents in any of the complaint practices. The evidence also shows that one of the competitors (Purity) was able to buyout a moribund company and the assets of another company, and build a thriving business in a competitive climate no different from that of the local companies which had sold out. The evidence also indicates that another small local company, Velvet Ice Crealn Company, has recently entered the ice cream business in the Newberry, South Carolina area. The only community in the state for which there is any market share information in the record is the state capital of Columbia. From this it appears that respondent Borden s market share has declined sharply from 53.0 percent in 1951lo 26.9 percent in 1955. Respondent .tional's share has declined slightly from 20. 8 percent to 20.0 percent. Respondent Foremost's share has increased modestly from 11.2 percent in 1951 to 14.2 percent in 1955. The only respondent for \which there is any state production share data in the record is Borden, which is apparently the only respondent with a phllt in the state. Borden s share of state production ha,s increased sharply frolll 11.3 percent in 1947 to 29.6 percent in 1955. This increase occurred in 1950 and 1951, and appears to be the result of its acquisition of the production of two other companies, rather than an increase in production by existing facilities.'s Borden was unable to retain all of this increase, since its 1D55 production share was 3.1 percent below that of 1951.

sa As of .Tude 30. 1950, Borden nCfJuircf! Grecnwood Creamery-' with sales of $40'1,000. and Riellland Dairies with sales of $3i:S, 000. 1506 FEDERAL TRADE COM.\1ISSIOK DECISIO Appendix 60 F.

8. A atlanta, Georgia The evidence offered in Atlanta by cOllnsel supporting the complaint involved three competitor witnesses, one representing an Atlanta company, another representing a conTpany in the nearby :Marietta a-rea, and the third representing a company in Columbus which is in the extreme I'mtsern portion of the state. Two other witnesses, one representing French Ice Cream Company of Atlanta and another representing Happy Valley Farms of Rossvillc were exeused at the request of counsel supporting the complaint. :Yo dealer witnesses were called. Since the Atlanta-Marietta an a appears to be un entirely separate market area from Columbus, involving substantially different groups of competitors, the two areas are considered scp"rately below.

a. Atlanta-NIarietta Area The only respondents doing business in the Atlanta area are National and Foremost. Swift & Company is another so-called national company which operates in the area" The local companies lllclude lrvindale Farms Dairy, Georgia :Milk Producers Association Atlanta Dairies, Grcenwood Dairy, George 1\fool'e, French Ice Cream Company, :Modern Ice Cream Company, and Druggists' Cooperative. Tho only Atlanta witness to t.estify was an offcial of Irvindale, a representative of French Ice Cream COlnpany having been excused. The evidence with respect to lrvindnle indicates that the COlllpany has mn,de very significant progress since it entered the ice er' am business in 1947. Prior to that year the company had been solely in the milk business in Atlanta and entered the ice cream end of the dairy business in order to hate an outlet for its surplus 11lilk. Its principal operation is still in mille Starting with no ice cream gallonage in 1947, it managed to reach a gallonage of slightly more than 100 000 by 1953, and in the last full year prior to the Atlanta hearing in January 1956, it had a,chievecl a gallonage ,yell in excess of 250 000. The Irvindale witness indicated that the company had an the ice cream business it could handle with its present facilities, and was in the process of building a new plant with a capacity of one 11illion gallons.

Irvinclale is well represented in the large grocery chains in Atlanta. It is the main supplier for the Big Apple Supermarket chain Ivhich has 30 stores in the Atlanta a-rea. At aile time the chain was served by respondent Foremost, but Irvindale '\\" as able to acquire the bulk of the business. Some of the stores are split with Foremost and some with the local competitor, Greenwood Dairy. Irvinc111le also serves CARNATIO COMPAL,'Y ET AL. 1507 1274 Appendix most of the 20 Kroger stores in Atlanta, although it splits some with respondent ational and a few with respondent Foremost. It also serves 10 of the 40 stores of the Colonial Stores chain, and at the time of the hearing was "working" on getting into the other stores of the chain.

Irvindale supplies cabinets to most of its customers. Those who own their cabinets receive a lO-cent a gallon discount. Since it supplies 300 cabinets to approximately 225 customers, it is apparent that some of the larger accounts have more than one cabinet. There is however, a trend among the chain stores to install their D\vn cabinet equipment in order to receive the benefit of the customary discount paid to dealers who own their own equipment. This has been true of some of the more recently opened stores of the Big Apple and Kroger chains. The Irvindale witness indicated that he would prefer not to have to supply cabinets because of the expense involved, and that he vmuld prefer to give the dealer a lower price in lieu thereof. 1-10\vever, this would not result in any significant benefit to the consumer since, as the witness conceded, the dealer would have to figure the cost of the cabinet in computing his retail price. Irvindale has its own service department and has a regular preventive maintenance program. The witness agreed that the ownership and maintenance of cabinets by the manufacturer helps him to preserve his product better. The Irvindale representative also made some reference to the fact that customers placed other frozen foods in the ice cream cabinets and indicated that it was a constant battle to keep customers from doing this. However, he conceded that he knew of no competitors who supplied cabinets specifically for this purpose. The only testimony by the Irvindale witness regarding any specific competitive difficulty with any competitior related to the company a.alleged inability to acquire a restaurant account because of the amount of equipment which respondent ational had supplied. :However the ,vitness conceded that he had no knowledge as to what equipment 1\ ational had furnished the account other than the hearsay information which he had received from the owner. No finding can be made as to why Irvindale was unable to acquire this account, based on the hearsay, conclusory testimony of the witness. 1Yhile the Irvindale witness claimcd that his company lost "about ten accounts a year, he did not assign any reason for this and conceded that the company gained more accounts than it lost. Such losses appear to be part of the normal turnover experienced by all ice cream companies. The company, which employs three full-time salesmen steadily expanding its sales, both in the acquisition of new accounts and 710-603--64-- 1508 FEDERAL 'trade CO:M nSSION DECISIQXS Appendix 60 F.

in sales through existing account.s. The Irvindale witness attributed the latter increase, at least in part, to the use of open-top display cabinets.

The evidence as a whole fails to indicate anything but a bdght fut,ure for Irvindale in the Atlanta area. Its O\V11 confidence in its future appears to be amply demonstrated by its recent construction of a plant which will enable it to increase its present production fourfold. The company has been able to acquire not only the Dig Apple chain from respondent Foremost, but also one of the largest department stores in Atlanta. It has also succecded in acquiring a 32 000 gallon account from respondent ational. There is no reason to believe that the compl11Y will be unable to hold its own in Atlanta. There is no evidenco in the record to indicate that the position of other local cornpetitiors in the Atlanta area is any Jess favorable than lrvindale It appears that at least one, George lVIoorc, is a substantial factor in the market, having a greater number of delivery trucks and presumably a htrger gallonage than Irvindale. Atla.nta Dairies is an -even more recent entrant into the market than Irvindale, having entered business in 1952.

In the Marietta area, which is approximately 25 miles from Atlanta the position of local companies appears to be no less favorable than in Atlanta. In addition to Economy Ice Cream Company, a representative of which testified at the hearing in Atlanta, the other local competitors include Cobb Cooperative, which entered the market around 1950, and Aristocmt. There is also Drug Mutual which sells to many of the drug stores in the area. In addition, Irvindale of Atlanta competes in the Marietta market. The respondents doing business in the area are Foremost and 1\'" ational, and to a small degree, Borden. Swift & Company is also active in the area. Economy Ice Cream Company, the only Uarietta company represented at the hearings, has had a rapid rise in the market. Until World War II it sold almost exclusively through its own retail stores. Thereafter it disposed of most of these stores and began to scll at wholesale to non-affliated retail accolU1tS. At the time of the hearing tho company had approximately 95 accounts, which was the largest number it had ever had since entering the \vholesale business. The year 1955 represented one of the company s best years. 'While the company had Jost a few accounts during the year, it was "not enough to amOlmt to anything" and was "more than offset" by accounts which it had gained.

The witness identified only three accounts as having been lost to the respondents since it had entered the wholesale business. Two CARXATIO-=T COMPA1''Y ET AL. 1509 1274 Appendix were lost to Foremost, allegedly because the latter had supplied a cabinet for frozen food in addition to one for ice cream. There is no evidence outside of the witness' hearsay testimony as to what Forcmost furnished the accounts in question. The witness also cited an account allegedly lost to respondent National because of a neon sign but conceded that he had not yet seen the sign up, and there is no evidence in the record to support his hearsay testimony. The only other complaint of the witness was with respect to his company s inability to get into the big supermarkets, which he claimed were being served by the "big dairies, viz., Na,tional, Foremost and Swift. His only explanation for not being able to get into these markets was that they "want the ice cream too cheap . There was nothing to indicate that these supermarket accounts (not specifically identified in the record) received their ice cream at other than National's and Foremost' s published prices or that any price arrangement made with them was conditioned on their purchasing their exclusive requirements from these respondents.

The evidence as a whole indicates that Economy is making reasonably good progress in the 11arictta market, considering its size and the recency of its entry into the wholesale ice cream business. There is a complete la.ck of reliable evidence that the engagement by any of the respondents in any of the complaint practices has been responsible for any significant competitive diffculties by Economy, let alone has resulted in injury to competition in the )iarietta market. b. Columbus Area The evidence of competitive conditions in the Columbus area is barren of any suggestion of injury to competition by any of the re sponclents, for any reason. The respondents doing business in the area include Xational, Foremost and Borden. S,yift & Company also operates in the area. The local companies include ICinnett Dairies, Columbus Ice Cre:Lm Company and ,Veils Dairy Cooperative. VeJda (Plentation Food) or Florida also sells in the territory. With the exception of Foremost lllll Kinnett, aU of these companies have entered the market since ,Yorlcl 'Val' II. There arc more companies operating in the area than there have ever been and t.here is no evidence of any business c,-1snaHies ill the area. Kinnett Dairies \\"as the only company from the area to be represented at the Atlanta hearing. The company is a substantial factor in the Columbus market, operating 12 to 15 delivery routes and having 200 to 1 500 accounts, with an annual gallonage of 600 000 to 700 000. The company s volume has been on the increase since the war and 1510 FEDERAL TRADE COM.\issio:- DECISIONS Appendix 60 F.

it is now enjoying its maximum volume, except for a period during the war when it was servicing the military installations at Fort Benning, which the witness volunteered would not he an appropriate basis of comparison.

The only respondent to which the Kinnett representative made any reference as having been responsible for the 10s8 of any specific account was respondent. Borden, to \which his company had allegedly lost a drug store, after declining to make the account a loan because it still owed his company several hundred dollars. The Kinnett witness conceded that he had no knowledge as to whether Borden had ever made the account a loan. Despite this loss, whatever llay Imvo, been the reason, ICinnett serves a majority of the drug stores in Columbus. It also serves most of the grocery chains, including A & P Colonial Stores and Kroger s. The witness indiclLted that his eompany had lost some of its chain drug store and variety-store accounts to respondents Foremost, Borden and National when thc national headquarters of these stores began to enter into contracts for the purchase of ice cream on a national basis, rather than through the local managers. However, there is no evidence that the loss of these accounts \vas connected in any way with the complaint prachces. Despite such losses the witness stated, in answer to the question of counsel supporting tho complaint as to whether he was "holding his own" in the market, that: "I think I am doing better than holding my own." lie indicated that while the company lost some accounts, it had gained more than it had lost.

Aside from tho single instance of an alleged loan by Borden, the, only other complaint practice referred to by the witness was the furnishing of signs. He indicated that his company supplied his customers with signs, including some containing a privilege panel for the dealer s name, and that the company regarded it as an advantage to place signs with their name in a "strategically good spot" . Kinnett has never lost or been unable to acquire an account because of the furnishing of a sign by any competitor. The \vitness also made oblique reference to the practice of supplying frozen food cabinets. He made no claim that his competitors supplied cabinets for this purpose, and commentcd that he would not be surprised to find his customers put6ng frozen food into his compa, s ice cream cabinets despite the company policy of discouraging such practice. Although Kinnett allegedly sells on the basis of "one-price policy the company has been more than holding its own clue to its aggressive. selling program, and considers itself !:t,he leaders in the field". The witness indicated that he felt that he could "hold my own with thc CARNATIOX COMPANY ET AL. 1511 1274 Appendix big boys . The only way in which he felt that he was at a disadvantage was when a contract was made by offcials of a national retail chain on a national or regional level, rather than through local management. IIowever as above indicated, there is no evidence that the loss of some chain drug or variety store accounts has been connected with any of the complaint practices. In any event, any such losses have had no significant effect on the fortunes of Kinnett which has enjoyed a steady growth in sales since the war, and is now at its peacetime peak.

The evidence fajls to disclose any injury to competition in either the Atlanta-:\larietta market or the Columbus market or in any other area of the state. The evidence also fails to disclose any significant improvement in the competitive position of any of the respondents operating in the Georgia m.arket. Respondent N ationaI's share of state production has increased modestly from 7.0 per cent in 1947 to 11 per cent in 19M. Respondent Borden, which did not enter the state until 1950 when it acquired two existing companies, has enjoyed a modest increase from 10. 3 per cent in 1950 to 15. 8 per cent in 1955. Comparable data for Foremost respondent does not appear in the record.

9. J aclcsonville, FI01-ida The respondents operating in the Jacksonville market are Foremost, Borden and National (Southern Dairies). Foremost and National manufacture their product in Jacksonville a,nd Borden has a distributing branch there. The ice cre lm solel in the area by these companies is manufactured entirely in the State of Florida. There are two local Jacksonville companies, J. H. Berrier Ice Cream Company and Dinsmore Dairy. In addition V clda, which operates throughout the State of Florida and in parts of Georgia, also sells in the Jacksonville market. Counsel supporting the complaint call eel as witnesses representatives of the two local Jacksonville companies. No dealer witnesses testified. However, counsel supporting the eomplaint was permitted to read into the record, by agreement of counsel a list of accounts which had received loans (secured by chattel mortgage) or had been sold equipment on a conditional sales basis by respondents Foremost, Borden or K atianal, as recorded in the Recorder of Deeds' offce.

87 The treasurer of Foremost, who approves all IOlins in the area, WfiS J: Jduced as a witness but counsel supporting the complaint declined to examine him. , 1512 :FEDERAL 'trade COMMISSION DECISIONS Appendix 60 F.

At the time of the Jacksonville hearing in .Tmnmry 1956, the Berrier Company was almost entirely out of the whalesa.le ice cream business serving only four or five accounts which picked up their ice cream at the campanis plant. The cOlllpany was then distributing through three retail stores which it owned and was a.about to open H, fourth. The owner of the company, Jefl'erson R.. Berrier, is a somewhat quixotic individual who has had a rather checkered career in the ice cream business. Berrier had originally been in the ice cream business in Jacksonville during the 1920' , until he sold his business to respondent Foremost in 1929 and went into the ice cream business in Richmond, VirginilL. \Vhile still continuing his Richmond operation' he returned to Jacksonville in 1936 and joincd his brother ,,'hu had a small ice cream business serving fifteen or twenty accounts. the time of his resumption of business ill J a.cksonville he decided tha.t he would not supply his accounts with ice crea1n cabinets, although he did sell cabinets to such accounts as wished to purchase them and also serviced customer-owner equipment without making any charge except for parts. Despite the fact that his ,YUS the only company which did not supply enbinets to its customers, Berrier ..vas able to increase the nunlber of accounts served to approximately 70-100 by 1952 or 1953. In 1953 Derrier decided that the wholesale ice cream business was not suffciently profitable and ceased making deliveries to his accounts, wit.h the result that it lost all but four or five who "'Bre willing to come to the plant to pick np their ice CreHJn needs. The company at this point opened three stores and at the time of the hearing was in the process of opening a fourth. In the meantime in 1950, J. R. Berrier discontinued the ice cream business in Richmond, Virginia, when he sold out to. respondent Beatrice. o finding call be made, based on the somewhat desultory testinlony of Berrier that his company s decision to cease business in Jacksonville in 1953 was due to the engagement by any of the respondents in any of the complaint practices. "\Vhile Berrier te,stified that his business had been going downhill because his bigger accounts were being taken u...vay "by the big boys, which he identified as National Foremost, Borden and Velda, he c.oneec1ed that he had no knowledge as to why he lost these accounts I only know I lost. them. The witness did refer to various practices which he had been told the " big boys \were engaging in, but no specific accounts "\Were identified and there is no reliable evidence that. ally of the respondents acquired any of Berrier s accounts, whe1.hel' due to the eomp111int reasons or otherwise. The lack of probability that the activities of any of the respondents \were responsible for Berrier s decision ta go ant of the wholesale CARNATlO:\ COMPANY ET AL. 1513 1274 Appendix business is suggested by the fact that according to his own testimony, his company had reached its high point arollnd1952 or 1953, just prior to the companies termination of wholesale activities. \Vhile it had had u "bad period after the war" i l which it lost money, the witness indicated that his "being out of town so much I guess contributed to it some . It therefore appears that the decision to go ont of the wholesale ice cream business occurred after the company had resumed profitable operations.

,Vhether the company's unwillingness to supply its customers with cabinets was an inhibiting factor in its growth cannot be determined a policy appe,arsfrom the record. The reason for its adoption of such to be wholly incomprehcnsible in the light of the Berrier witness' own it was he who firstexperience in the business. By his own admission sllPp1iccl cllstomers wit.h mechanical cabinets in the J acksonvil1c market in 1924, before most of the respondents had even come into the a.rea. Likewise, during the period when he was in Richmond from 1929 to 1950, his COITlpany there had supplied its customers with mbinets. 'When asked why, in the light of this experience and background, he adopted a policy not to supply cabinets when he resumed business in Jacksonville in 1936 , the witness gave the following response:

FOI" some unknO\Yll reason I got by with it and made a litte money. The reason I slipped 1vag that I 'Was just out of 101l:- too much, I guess. You see, normally I spent one-third of my time out of town and one year I spent over half of it out of town when I as putting machinery in ill HiebmoDll. (Iilllphasis supplied.

The witness finally conceded that he ' just wasn t a. good enough man to take care of both p1a.ces right" , and that if he hadn t had his Richmond business and had concentrated on .Jacksonville, he could have remained in the wholesale ice cream business. No finding can be made, based all the testinlony of Berrier, that t.he engagement by any as responsible for his of the respondents in t.he complaint practices compa.ny s going out of the wholesa.le ice cream business. The other Jacksonville manufacturer, Dinsmore Da.iry, has made reasonably good progress considering the brevit.y of its experience in tho ice crea,m business and its purpose in entering the business. Dinsmore operat.es a dairy farm of about. 1 400 head of cattle and is primarily in the business of processing and selling milk. It went into the ice cremes business around 1952 in order to have an outJet for its surplus milk. DinsTI10re adopted a. somewhat more realistic attitude than Berrier when it entered the ice cream business" Finding that it was customary to supply customers with cabinets, the company pro- 1514 FEDERAL TRADE C01LvrISSION DECISIONS Appendix 60 F.

ceeded to do so, fixing its price at a level which would be suffcient to cover the cost of the cabinet. The Dinsmore representative estimated that it cost the company 10 cents a gallon to supply cabinets and those few customers who own their own cabinets receive a discount of 10 cents from the list price.

By January 1956, Dinsmore had been able to acquire about 30 to 40 wholesale accounts, plus a "reasonable share of the school business in the area. It also delivers ice cream to an indeterminate number or its regular home milk customers. The record does not indicate what Dinsmore s gallonage is since the witness declined to supply this information. fie claimed, however, that most of his accounts were small and that as soon as they were developed the other companies would take them away. The witness singled out Foremost and Velda as being responsible for acquiring most of the accounts which his company had lost, indicating that it had lost none to respondent National and, in the case of respondent Borden, was unable to obtain only one account for which both companies had competed, While singling out Foremost and the non-respondent Veldl1, as being responsible for the loss of most of his accounts, the Dinsmore representative failed to indicate the number of such accounts which had been lost or the reason for such loss. 'While the witness did claim, at one point in his testimony, that he had been asked by customers and prospective customers for loans of money "several times" and for special prices, and that unnamed competitors had painted stores and put in neon signs, his testimony was not directed at Foremost or at any other competitor, nor was there any indication that he had lost or been unable to acquire any accounts because of these practices. The witness made reference to only two specific accounts during the course of his testimony, OTIe of which involved respondent Foremost and the other respondent Borden. In neither instance is there any reliable evidence in the record to support the witness' claim that he was unable to acquire these accounts due to any of the complaint practices. The Foremost incident involved an account identified as A. .J. Donelson which the witness claimed had l1asked him for a loan of $2 300, out of which $2 000 was to be used to repay a balance of a loan from respondent Foremost. There is not a scintilla of reliable evidence in the record to support the witness' hearsay testimony. 6B It may he noted that Dinsmore does make loans in its operations, except that It limits them to the farmers from whom it ohtains its milk and does not make them to retail stores. It also supplies its customers "with some signs. 8\ The examiner s ruling that he would not make any finding concerning a loan by Foremost based on the witness' hearsay testimony, brought forth the comment by the witness that "the way to get information direct Is, just like the Examiner says, to subpoena the man, the customer. You don t have to go any further than yon cnn throw a stone from this building'" . . " The witness' suggestion was not adopted. CARl\ Alion COMPANY ET AL. 1515 1274 Appendix The list of loans made by respondent Foremost in the .Tacksonvile area, which was placed in the record by counsel supporting the complaint, does not contain the name of A. J. Donelson. The second account referred to by the witness was one which he was allegedly precluded from obtaining by reason of the fact that respondent Borden had prevailed upon the account's milk supplier to make it a loan. '" ot only is there no reliable evidence to support the witness' hearsny testimony but, according to the credited testimony of a Dorden offcial Borden n1ade no arrangements for the account to obtain a loan from the account's milk supplier (with which Borden has no connection) and, while the account requested a loan from Borden, the latter declined to do so and got the account without furnishing any financial assistance.

There is no reliable evidence in the record from which it may be found that Dinsmore Dairy has been injured or is likely to be injured because of the engagement by any of the respondents in any of the complaint practices. \Vhile, as above indicated, counsel supporting the complaint was permitted by agreement of counsel to read into the record a list of transactions involving respondents Foremost, Nationa.1 and Borden in which the latter had made certain loans or sold certain equipment under conditional sales contracts, this evidence furnishes no basis, either separately or in conjunction \'with other evidence, for concluding that any competitors were injured thereby. None of the dealers involved were called to testify that the assistance received from the respondents was an inducement for their dealing with the respondent. Neither of the two competitor witnesses referred to any of these accounts as being among those which they lost or could not acquire. It cannot therefore be assumed that any competitor was injured as a result of this fmancial assistance to customers. The record discloses affirmatively that within two years after the foul' transa,actions involving respondent atjonal, that company had lost two of the accounts, and that in the case of respondent Borden, only one of the eleven transactions in which it was involved represented account which had switched from a competitor. Not only does the evidence fail to support a finding of injury to competition from the activities of respondents, but the likelihood thereof appears to be remote in the light of thc evidence offered with respect to market share trends involving these respondents. Respondent l\ational's share of the Jacksonville llarket has dcclinec1 from 23. eo Tbe four transactions inyolving respondent National and the eleven involving respondent Borden represent tbe total number of accounts assisted by those two, companies in the Jacksonvile area during 1954 and 1955. , Appendix GO F.

percent in 1950 to 18.9 percent in 1955, while respondent Borden share has declined from 11.0 percent in 1950 to 7. 1 percent in 1955. Respondent Foremost has increased its share only slightly from 32. percent in 1950 to 33.1 percent in 1955 in the Jacksonville market in which one of the company s principal offces is located and where it is one of the oldest companies in the ice crcmTI business. 10. j11i"'l1i, Florida Tho hearings in :Miami involved mainly evidence of competitive conditions in the Palm Beach-l\1:iami areas. The evidence discloses that there are a number of companies which do business in both areas and several whose operations are restricted to one or the other of the areas. In view of the considerable ovcrlap of territories and the geographic proximity of the two areas, the evidence concerning both areas is herein considered together.

The respondents operating in the :!1iami-Palm Beach area arc Foremost, Borden and National (Southern Dairics). Swift & Company also operates in the area. There are also a number of so- tllcd independent, Florida companies which do business throughout the J\liami- Palm Beach area. These include Velda, Alfar, Land 0' Sun, Superior, DeConna and Rich. Several cOlnpanies sell primarily in the l\liami area, including :MacArthur, Dressell and \Vebor. The Howard Johnson retail chain has recently gone into the wholesale ice cream business in the l\liami area. '1'here has been a considerable gro"wth in the number of soft ice cream establishments throughout the south Florida area.

The only competitor "witnesses called by counsel supporting the complaint were representatives of Which Ice Cream Company and "Weber Ice Cream Company. OJIciaJs of Alfar, DeConna, Velda and Dressell were subpoenaed to testify, but were excused at the request of counsel supporting the complaint. Three dealer witnesses from Miami also testified.

Hieh Ice Crea,m Company, ,,,hieh was represented at the hearing by its owner Willard H. Rich, and by its sales manager, has had what appears to be a reasonably good record of achievement. It entered the ice cream business in Lake "lVorth in 1947 and moved to a larger plant in "IV cst Palm Beach in 1950. In the following year it expanded into the frozen food business, including frozen bakery products. It gradually extended its territory from the area surrounding Palm Beach south to Miami. Originally storing its frozen products for sale in Miami in a large truck, it leased storage space in 1955, and CARNATION COMPANY ET AL. 1517 1274 Appendix in 1957, following the Miami hearings, it moved into a larger distributing plant in the area. Rich started business in 1947 with one truck and by 1956 it was operating six delivery routes. Its volume has been increasing steadily since it went into business and by the end of 1955 it had 675 retail accounts and its annual sales were approximately $500 000. Rich supplies most of its customers with modern cabinets and with signs. It has also sold soda fountains to some of its customers on a conditional sales basis and supplies some of its frozen food customers with freezers which are paid for by a meter arrangement attached to the cases. It grants advertising allowances to some of its customers and gives a five percent discount to those customers who own their own ice cream cabinets. The owner of Rich, who has not been too active in the sales end of the business for approximately five years, complained that the most diffcult problem with which the company had to contend was tho "tie-in relation of the milk and ice cream sales by some of the companies that have a joint operation with the two products." lie explained this as involving the furnishing of extra equipment or the giving of a better price to an account in connection with its milk business in order to obtain its ice cream business and vice versa. To the extent that the additional equipment and more favorable prices involve the Inilk end of the business, the practices are not, of course, within t.he present complaints. Insofar as the witness' testimony was directed to the ice cream end of the business there ",vas no reliable evidence onered to establish that the companies loss of ice cream accounts or inability t.o acquire aCCOlults was due to any tie-in between milk and ice cream sales. VhiJe it is possible that Rich has been somewhat at a competitive disadvantage in competing with companies who operate in both milk and ice cream because of the preference of S011e customers to make the.1T purchases of both products from a single supplier, this is a matter that is outside the scope of the complaints.

The testimony of Rjch and his sales manager involved majnly an enumeration of approximately 17 accounts which they claimed the company had lost or been unable to acquire as a result of the competitive activities of the three respondents doing business in the south Florida area. It may be noted, initially, that approximately half of these accounts were drug stores or drive-in theaters who presumably make only limited milk sales and, accordingly, would not appear to involve any tie-in arrangement of the type which Rich claimed represented his main problem. Aside from this, however, in most of the instances referred to, the reason assigned for the loss of, or inability Appendix 60 F.

to acquire, the account was not one falling demonstrably within the complaints. In nine or ten of the accounts mentioned, price was assigned as the principal reason or as an important factor in Rich' loss of, or inability to acquire, the account. However, in none of these instances is there any reliable evidence as to the price being charged by the particular respondent to the account in question, nor is there any evidence that such price was other than the regllJar list price of the respondent or that the granting of such price was connected in any way with an exclusive dealing contract or arrangement. Another account the loss of which would appear to have no relation to the complaints is one which Which allegedly lost to respondent Foremost because the latter had extended the account credit whereas Which had put it on a C. D. basis after the account hac) become slow in its payments. Aside from the Jack of apparent relevance of this incident, there is no reliable evidence in the record to support the hearsay testimony that the account had been extendcc) credit by respondent Foremost.

Failing at least partially within the complaints were several accounts where it was claimed that one of respondents had either loaned money or sold equipment all a. conditional sales basis, or supplied exeessive equipment. Ono such insta,nce involved an account which Rich and National had been supplying on a split basis, and which it was claimed was lost entirely because of a loan made by N ational. jX at only is there no evidence to support the hearsay testimony of Which' s sales Inanager, but according to the credited testimony of a National offcial no loan had been made to the account in question in any \Hl,y, shape or form. Some of the flccounts involved the alleged supplying of more equipment than Rich thought justified. However here again, no reliable evidence was offered as to what equipment had actually been furnished to these accounts and on what basis. In only two of the instances referred to by the Rich ' witness is theTe any reliable evidence to indicate what assistance had been supplied 1 In several instances Rich, who has not been active in sales for five ;years, conceded that he did not know what his competitor s price was. In some instances Rich' s information was based on hearsay reports received by his sales manager. Indicative of the lack of reliability of this hearsay Ilnd conclusory testimony is the conflict between Rich who attributed the loss of a drug store account to respondent Borden s lower price, and his sales manager, who attributed the loss of the same account to respondent Foremost' lower price.

a The only thing that respondent Katlonal had done for the account was to paint a sig-n . with its Sealtest emblem, on the outcr wall of the account's premises, at a cost of RPproximately $35.00. By the time of the defense IH'aring" respondent Kfltional had already lost the account to the local competitor, Land 0' Sun Dairy, which me'.cly painted its own name over the Seal test emblem. II In several instances the Rich witness conceded that he was unccrtain as to the nature of the equipment furnished by respondents. CARX ATIOX CO:v A1 -- ET AL. 1519 1274 Appendix by any of the respondents" One involved a drug store account to which respondent K ational had allegedly sold a fountain and which '\vas reported to have told R.ich:s sales manager that it was "tied up on an equipment deal". The owner of the drug store, \\'ho \vas called as a witness by respondent K ational, denied making the stat.ement attributed to him by Which's representative and testified that he had already paid for the fOlUltain purchased :from National \vhen the R.ich representative called upon him and \yas under no obligation to National at the time, but continued to deal with the company because of friendship and his long, sat.isfactory relationship with the company. The second instance involved a drug slUldry store, the owner of which had also allegedly told Rich' s sales manager that the account was tied up with National because of the purchase of a fOlUltain. The owner of the establishment, a woman, admitted having made the statement attributed to her by Rich's representative, but claimed that she did so merely as a way of getting rid of the salesman since she had no desire to change suppliers. "\Vhile it does appear that respondent National had assisted the account in the purchase of a soda fountain, the wjtness testified that Rich's salesman had offered to "buyout" the fountain and meet respondent's price but that she, nevertheless, decljned to change suppliers.

\Vhile corroboration does appear in the record for the testimony of the Rich witness concerning the assist.ance by respondent :K ational in two of the jnstances cited, the evidence as a whole is too unreliable to support t finding that the respondents have been responsible, in any substantial number of instances, for Rich' s loss of or inability to acquire accounts. It should be noted that in one of the two instances for which t.here was corroboration, National's assistance had already ceased at the time of the solicitation and the account denied the statement attributed to it. In the second instance, where both the fact of assistance by National and the statement made to the Rich reprcsentn,tive were corroborated, the evidence discloses that Rich had offered to meet :N atianars terms and that its inability to acquire the account was not due to the sale of the founta.jn but to the account's unwillingness to change suppliers. In the bulk of the instances referred to by the Rich witness the evidence of assistance by respondents was largely of a hearsay, conc.usory nature, not warranting the basing of any findings thereon .0 PI Tbe examiner can place no mol C reliance on such hCllrsay rcports than Cfin Rich bim eJf who, ,\.hen asked by counsel supporting the complaint if' defilers could be giving him "imag-inary fig-UHS las to con:petitor ' prices). in order to get you to come down in price testifled:

, I think there Is no Cjuestion about that. There is 11 great rlelll of' that, yes, sir. 1520 FEDERAL TRADE CQ:MHSSIOK DECISIO:\T Appendix 60 F.

In any event, despite Rich's claims with respect to his company loss of or inability to gain certain accounts, the record discloses th the company has been steadly growing and expanding. It further appears that the company has acquired a considerable munber of accounts frOlTI respondents and has apparent.y had no diffculty in meeting the needs of these aecm.lists. In fact, Rich's owner conceded that his cOlnpany had acquired 1110re accounts frolll respondents National and Borden than they had acquired frmll his company, and had supplied some of these accounts with signs and 1101'e modern equipment. 'Vhile the witness claimed that his profit ratio was declining despite increased sales, he declined to produce any records Jar use in connection with cross-examina,tion by COlUlscl rega-rcling the basis for such conclusion. However, he acl1nitted that the decline was clue to an increase in labor costs, packaging cost.s and materials such as fruits and flavors. These costs cannot, of course, be attributed to the complaint practices. The other competitor witness called by counsel supporting the complaint was a partner in 'Weber s Ice Cream Company of Miami. This company has been in business since 1948 , a,nel specializes in a highquality, catering-type ice cream, which it sells mainly to hotels and restaurants. It confines its business nlainly to :Miami Beach. It has an annual gallomtge of just under 100 000 gallons. The vVeber ,,-itness complained that it 'YRS diffcult to obtain accounts because the larger companies were furnishing excessiye equipment, granting high rebates and were assisting tCcounts financially. However, when it came to designating the companies responsible for his diffculties, he conceded that he had had no competitive problems with respondents Foremost or Borden for at least several years. In the case of respondent National, the only competitive cliirculty to which the vVeber witness made reference was the loss of one hotel account which he claimed had been supplied with an extra cabinet by respondent National. I-Imvever, he conceded that he had no knowledge as to what equipment respondent had supplied the account and had just surmised the fact" because the account threatened to maIm a change. Furthermore, it appears that the account was not a desirable one and t.he 'Weber representative indicated that he was "glad to losc it". No finding can, of course, be made as to the reason for the loss of this account based on the witness' hearsay conclusory testimony. Not only does the record fail to disclose any serious competiti,diilculties between Weber and any of the three respondents doing business in the area, but it appears affrmatively from the witness testimony that the source of most of his company s alleged problcrJl:' has been another competitor, Swift & Company. According to the CARNATION COMPANY ET AL. 1521 1274 Appendix witness, Swift ,vas the "worst" competitor in the area and had offered accounts which he ha,d tried to get. "the most fantastic propositions and deals, which is far beyond anything I could surmise . Further elaborating on his competitive problems the witness testified: PIJy inabilty to make progress is due to the fact that the hotels have been solidly sold on denis, and I would say that Swift has taken the lead aml has practically overpowered Borden, Sealtest and Foreruost in those transactions. They have nmv come to the point where there isn t a hotel that isn t opened up on the Beach that you can say Swift hasn t got. '\Vhile no finding can, or needs to, be made based on the witness conclusory testimony with rega.rd to Sv.,'iffs u,activities, it is clear from his testimony as a whole that the activities of the three respondents doing business in the fiami area have not been a significant factor in 'Veber s alleged inability to make more rapid progress. It may be observed, however, that considering that the company did not enter business until 1948 and has confined its activities prirmtrily to the Miami Beach area, and that its nutin product is a high-grade, catering-type ice cream which has appeal only to a limited number of establishments, the fact that it has grown to approximately 100 000 gallons by early 1956 hardly bespeaks a serious Jack of progress on the part of the company.

In addition to the two competitor witnesses, counsel supporting the complaint called representatives of three dealer accounts. One of the dealers was the operator of a soda fountain concession in a drug store located in the fiami area, which had switched to respondent Foremost froln AHaI' and had received a discount of 47 cents R gallon on most of his ice cream purchases. Presumably this testimony was offered by counsel supporting the complaint to show that the discount offered by Foremost was the reason the account switched. I-Iowever according to the uncont.radicted and credited testimony of the witness the price quoted by Foremost ,vas not the reason he sw"itched. The witness had handled Foremost ice cream at another location for eight years, and when he leased the fountain concession in his present location he found that the prior owner had been using F'oremost milk and AHar ice cream. Because of his former good relations with Foremost and his belief that it would sclJ better, he changed his brand of ice cream. There was also some dissatisfaction with Alfar s onceweek delivcry schedule. The witness indicated that AHar and a number of other ice cream companies had oHered to meet the Foremost price offer, but that he declined because of his preference for dealing with Foremost. A Foremost representative, who ,,"as also caned as a witness by counsel supporting the complajnt, testified that Appendix 60 F.

the 47 cent discount had been computed on the basis of the account' projected gallonage. Because of the higher Foremost base price, the net price offered by it was only 10 cents a gallon below the Alfar price. Irrespective of whether Foremoses price was on or off list the testimony of the witness indicates that it was not a factor in hi switching suppliers.

The same dealer also testified that many months after he had changed to Foremost, the latter supplied him with an additional box for milk, pies and vegetables. The Foremost witness familiar with the transaction testified that it was not typical, since his company did not customarily supply cabinets for other than dairy products, but that this represented an emergency transaction where the account had had some products which were spoiling and that since Foremost had a storage box not in use it agreed to furnish it to the account. The box was used partly for storing milk which Foremost sold the account. It does not appear from the witness' testimony that the supplying of the box acted as an inducement for the account to continue dealing with Foremost. There is, moreover, no evidence that the supplying of the cabinet or the giving of discount was connected in any way with an exclusive dealing arrangement or contract. The only competitor aiIected by the situation, Alfar, was excused from testifying by counsel supporting the complaint.

The second dealer witness was the operator of two supermarkets in Miami. Prior to 1951 the account had been handling the milk and ice cream of 1Vhite Belt Dairy (a company not referred to by any of the competitor witnesses). During 1951 the account switched to Foremost' s milk, on which it received a price concession, and several months later it switched to Foremost's ice cream for which it paid the regular list price. Since the discount received on milk is outside the issues in this case, no evidence concerning this portion of the arrangement was permitted by the examiner. Insofar as the milk transaction involved an apparent understanding that Foremost would later get the dealer s ice cream business, it is likewise not covered by any allegation of the complaints, since the transaction regarding the sale of ice cream docs not involve any of the complaint practices. The third dealer witness in l\liami was the operator of a (lrug store which hflCl re.ceived assistance from Foremost in financing the remodeJing of his store and the purchase of ecruipment. The. n.mount involved was approximntcJy $7 510, of which the store owner paid $2 000 in cash and the balance was iinanc.ed by Foremost over a three-year pe,riod, under 11 c.onditional sales nrrnllu"ement. The agreement provi(lo(l that the account ,youJcl nse. Foremost's products exclusively CARKATION COMPANY ET AL. 1523 1274 Appendix until the balance was paid off. The record does not disclose what, if any, other compa,ny the account had dealt with prior to taking on Foremost s products. The dealer indicated that he had received offers of assistm1ce frolll a number of other ice cream companies, including N atiomd, Borden, Swift and Velda. However, he chose Foremost because it sold a quality ice cream and because they were ,villing to allow him to choose his O\V11 equipment dealer, whereas the other companies wanted,cl him to purchase his equipment at places -which they designated. The witness indicated that he did not regard the assistance as anything unusual since, to his knosvledge, ice cream companies in the area had been giving financial help to retail dealers "for thirty or more years . The evidence regarding this transaction fails to shmv that J'oremost obtained this account became e it Wits wjlljng to finance , while other companies were unwilling to do so. All that appears is that from among a nml1ber of compe6tors, all of ,whom were willing to assist the account, the owner chose ForenlOst because, among other t.things, he ,yas given the latitude of selecting his own equipnlent dealer.

Counsel supporting the complaint also introduced in evidence a number of recordings of loans (secured by chattcl mortgage) and sales of equipment under conditional sales contracts by the three respondents during 1955. However, with one exception, the lastmentioned witness, none of the dealers ere called to testify. There is no indication that any of the other accounts were obtained from competitors or that other competitors sought to acquire the accounts. Since counsel supporting the complaint does not, apparently, contend that the transact.ions in question are illegal per se, the absence of ilny evidence to show any actual or probable eHect of these transactions on competition in the :Hiami arc,t makes them of marginal relevance. The evidence adduced at the lHinmi hearings fails to demonstrate any significant adverse effect on cOlnpetltion in the area by reason of the engagement by any of the responchmts in any of the complaint practices. The two competitor witnesses chosen can hardly be called representative of c01npet.it.ive conditions in the area. Rich operates mainly in the Pa-lm Beach area and, mOl'eOn, the evidence indicates that the company has made reasonably good progress since its entry into the ice c.cream business, and has not. experienced any serious competitive diffculties due to the complaint practices. The other competitor, ,Veber, operates primarily in it Limited area around lVlinmi Beach and caters to a limited clientele. This company likmyise has made good progress ,,,within a relatively short time. Of the competitors who were excused, it appears that A1far Creamery has :1, substantial part 719-G03--64-- 1524 FEDERAL TRADE COMlIISSION DECISIOKS Appendix 60 F.'r.

of the business in the Palm Beach area and serves a number of the good drug store accounts. Velela. is a sizeable company, selling both milk and ice cream, and serves a lllillber of supermarkets, including the Food Fair st.ores. Land 0: Sun is a "big factor:: in the market is in both milk and ice cream, and also sells in S011e of the super markets. :No information appea"rs rega.rding the other excused witness DeConna.

Safar as appears frolll the record, competition in the south Florida area is vibrant, with a good number of active local companies competing with one a.another and with the so-called national cOlnpmlies. The latter do not appear to have obtained any special advantage, particula.rly insofar as the use of the pra.ctices charged in the complaints is concerned. Of the three respondents doing business in the area two have ldually sustained a subst.antial loss in market position. Respondent Xational: s market share in 1iami has declined from 27. per cent in 1950 to 17.4 per cent in 1955. Ucspondent Borden s slmre has declined from 10.4 per cent in 1950 to 5.0 pcr cent in 1955. Respondent :Foremost, on the other hand, has increased its position from 15. 1 per cent in 1950 to 26.9 per cent: in 1935. I-Iowever, there is no evidence that this has been accomplished at the expense of its local competitors Uld, particularly, by the use of the complaint practices. Both National and Borden, who engage in the same practices, have actually declined during the period that Foremost \yas flclvancing. It is just as likely that Foremost:s gain was at the expense of its fellow respondents than that it came out of the business of local competitors. 1J5 The testimony of the Foremost offcial called by counsel supporting the comphtint indicates that the company s growth in the area has been due mainly to increased sales through its existing accounts, resulting from improved a,clvertising and merchandising methods. The same witness indicated that nlost of the companies loans -were made to its exist.ing accounts to help increase the sales of such accounts. For the State of Florida as a whole t". of the respondents have sustained a substant.ial decline in their share of state production between 194:7 and 1955. Respondent Kat-ionars share has declined from 30. 1 per cent to 10, 0 per cent, while Borden s share has declined from 18.7 per cent to 11.2 per cent. There is no state-\yide data in the record for respondent Foremost. I-iowever, it does appear that its Division doing business in nine southern states, including Florida, had a production share of 6. 15 per cent in 1950 anc18. 27 per cent in 1955. 95 It may be noted that Foremost' s increase of 11. 8 per cent is less than the combined decline of 15. 7 per cent by ::ational and Borden, CARNATION COMPANY ET AL. 1525 1274 Appendix 11. H OU8 ton, T ewas The HOllston hearings involved testimony and evidence ,,ith respect to three separate market areas, the Houston area, the Beaumont-Port Arthur area and the San Antonio-Austin area. Each of these appears to be a separate market area, having substantially different groups of compehtors, and mich is separately discussed below. a. Houston Area The respondents doing business in the greater Houston area are Borden, Foremost, Carnation and Arden (Camel1ia). Swift & Comp1:luy also does business in the area. The local Texas companies operating in the area include Oak Farms Dairy, Sun Up Ice Cream Company, Sanitary Farms, Lily Ice Cream Company, Lone Star Creamcry and Velda Ice Cream Company. Three former local competitors have ceased operating. These are Shamrock Dairy, which sold out to Oak F,uIUS Dairy in December 1955; Smith Ice Cream Company, which sold out to Lily Ice Cream Company in 1954; and Kline Ice Cream Company, which ceased operating at some indeterminate time for reasons not appearing in the record. A representative of the latter company was subpoEmaed to testify, but was excused ,It the request of counsel supporting the complaint. Representatives or four Houston manufacturers .were ca1Jed to testify. Two were from the now defunct companies, Shamrock and Smith, and two from the still active competitors, Lone Star and Sun "Gp. Representatives of five retail dealers were also called as witnesses. The evidence adduced at the Houston hearings fails to establish substantial injury to competition, or the reasonable likelihood thereof, due to the engagement by any or the respondents in the complaint practices. The evidence consists in large measure of unsupported opinions, conclusions and hearsay concerning the activities or respondents and, to a considerable extent, involves matters not covered by the complaints. The evidence offered through the various competi tor witnesses is discussed below.

The testimony of the former owner of Shamrock Dairy involved mainly a recital of the facts relating to eight accounts \',which that company had allegedly lost to various of the respondents. Five of the accounts were alleged to have been lost to respondent Arden (Camellia), two to respondent Carnation, and one to respondent Bordrn. The principal reason or one or the important reasons assigned by the witness for the switching of the accounts in each instance, with one exception, was the fact that the account had received a discount Appendix 60 F.

or rebate from one of the respondents. IImvever, except for one account, there is no reliable evidence in the record as to ""vhat discount or rebate, if any, the account had received; nor docs it appear that such purported price concessions were connected in any ,yay with an exclusive dealing arrangement. The one exception involves a dealer 'who was also called as a witness by counsel supporting the complaint, and who testified that he had received a 10 cent a gallon discount from respondent Carnation, which made the latter s price "just a JiWe less" than Shamrock's. However, the dealer indicated that an important factor in his decision to change suppliers was his feeling that Carnation "could do a better job" for him because of its advertising and point-of-sale program. The dealer s sales of Carnation did, in fact, increase substantially after he had changed suppliers. The price concession apparently had no significant effect on the ac count' s loyalty to Carnation since by the time of the hearings inllouston it had already s,Yitched to a non-respondent supplier. It does not appear in this instance whether the discount was other than the regular seheduled quantity discount; nor is there any evidence that it involved any exclusive dealing arrangement.

The one instance where price vl"as not referred to by the Shamrock "itness as a factor in an accounes switching was one ,,,here it was claimed that respondent Arden had agreed to supply the account ,with it sign valued at 81 350, plus a large ice cream case and a cabinet for frozen foods. The testimony of the 0\vner of the establishment, who was also called as a witness by counsel supporting the complaint, is at variance with the conclusional andhearsay testimony of the Shamrock witness. The mvner of the establishment in question testified that the reason he had s,yitched was because he had received it 10-cent a gallon discount from Camellia. The equipment ,,,hieh CamelliR installed was substantially the same as he ha.d had from Shamrock consisting of a modern case to display ice cream and another old case for storage. ,With respect to the sign, the dealer testified that Camellia had not promised to give him any signs, but had agreed to cont.ribute a portion of the cost of the sign (the amount not being specified). I-Iowever, as of the time of the hearing, which was approximately five months after the switch had occurred, the dealer had not ;yet made any deeision with respect to the purchase of a sign. In several of the instances ,,,he1'e price was alleged to have been an important factor in the loss of an account, the Shamrock witness also referred to the fact that Camellia had supplied the account with various types of equipment ,,,which he regarded as excessive. The t.testimony of the witness was based largely on his own opinion CARNATION COMPA:I ET AL. 1527 1274 Appendix conclusions as to whet.her the equipment was excessive and whet.her the furnishing thereof was a factor in the account's switching. Furthermore, reliable evidence is lacking in most instances to establish what, if any, equipment these accounts received. o finding can be based on the witness' testimony, based on hearsay and surmise, concerning these accounts.

The evidence with respect to Shamrock:s history indicates that the company started in the ice cream business in 1947 and by 1954 had built up a volume of approximately $300 000, or 200 000 gallons. The witne.ss claimed that in the following yea,I' his sales had declined by approximately $75 000 and that he decided to sell out because he sa-\V the handwriting on the wall with all the give-away plans and secret discounts and marquee signs * * *' . There is, however, little reliable evidence in the record to sustain the witness' broadly stated conclusions and opinions. To the extent that respondEmts ful11ish equipment or signs or grant discounts, it does not appear that their practices differ from competitors generally in the market. Competitors in the area for the most part supply their customers with ice crCiun equiplnent, which equipment ha.s become more expensive as the costly display-type cabinets have come into vogue. 'Vhile dealers have apparently sometimes taken advantage of the equipment supplied to them, in order to store frozen products other than ice cream, this is it practice which ice. cream nlanuf Leturers as a whole try to discourage, but not always with success. ,With respect to signs the Shamrock witness said that he had no objection to the supplying of neon signs and giving the dealer a privilege panel, but did object to supplying signs on which the ice cream manufacturer s name does not appear. No evidence, however, was offered to indicate the existence of such a practice or that it wns engaged in by any of the respondents. Insofar as "secret discounts" are conce.rnecl, there is no reliable evidence that the discounts and rebates referred to in the testimony involve anything ot.her than the regular quantity discounts or relmtc.s of the respondents. In any event, there is no evidence that any of the practices referred to is t.ied to an exclusive-dealing arrangement. On the contrary, the Shamrock witness complained that whereas for the first six years he had served accounts exclusively, the more recent trend in Houston Wits toward the splitting of accounts. 1-1is testimony in this respect is corroborated by that of some of the other Houston witnesses.

The fact. that Shamrock sold its business is one "which cannot be overlooked. IImvever, the examiner cannot automatically infer from this fact that the engagement by responde.nts in the complaint practices 1528 FEDERAL TRADE CG:EVISSION DECISIO Appendix 60 F.

was 11 significant factor in Shamrock' s decision to sell out. K or can the examiner find this to be a fact merely because of Shamrock' generally stated accusations. The facts which he related do not lcegaJly support his broadly stated assertions. One of the most significant facts allegedly involved in the case of most of the accounts was price competition. Yet the complaint does not charge this to be illegal, as such but only where used to induce exclusive dealing. There is no evidence that this \Vas the purpose or effect of such price concessions. The examiner is not obliged to make any finding as to why Shamrock went out of business, but only to eliminate the fact that the complaint practices \were 11 significant factor therein. fIowsvor, it may be noted that while selling out as Shamrock, the former owner of the company has remained in the se1fsame market where he allegedly could not compete, as the assistant sales manager of Oak Farms Dairy, under a long-term contract and at a salary equalling that I""which he drew from his myn ocmpany. This appears to suggest that the former owner preferred the security of working for another, larger company to bearing the brunt of the management of his own company with all of the responsibility which the latter entails in the rough and tumble of the competitive struggle.

Another competitor witness was the representative of Lone Star Creamery, which is in both milk and ice cream. Its annual iCB cream sales were stated to be in the $200 000 to $300 000 bracket, and it was claimcd that they had declined by approximately $50 000 during the past five years. The Lone Star witness testified that the ""orst competitive practice which his company had to face was that of supplying customers with extra cabinets which were used for storing frozen foods other than ice creanl. Ifowever, he indicated that he had not encountered much of that type of competition from respondents Carnation, Foremost or Borden. The bulk of the witness' testimony was directed at respondent Arden (Camellia). The Lone Star witness referred to six accounts which his company had allegedly lost because of competitive diffculties. One account involved a drug store which he claimed to have lost to Camellia primarily because of a 10-cent a gallon discount. There is no reliable evidence (other than the witness' hearsay testimony as to what the owner told him) to establish that the account had in fact received a discount from Ca.mellia, nor is there any evidence that such discount was off list or was conditioned on any exclusive dealing arrangement. "\Vhile the witness also referred to two cabinets which the account had received and some lettering worth fl,ppI'oximately $75, no claim was made that these had motivated the account in switching. There CARNATION COMPAl';'Y ET AL. 1529 1274 Appendix appears to be little likelihood that this was the case since the cabinets were merely a replaccmcnt for two which Lone Star had supplied to the account and t.he lettering was apparently a replacement for a neon sign with a privilege panel which Lone Star had furnished to the account. The witness also referred to another drug store account which he claimed had been lost to Camellia because of the supplying of a frozen food cabinet free of charge. 0 finding can be made based on the witness' hearsay and conclusional testimony, that Camellia furnished a frozen food cabinet without charge to the account in question. Reference was also made by the witness to a Camellia account which he tried to obtain and was allegedly advised that Camellia had supplied the account with two cabinets and a sign. Despite these reported facts, Lone Star was permitted to install one of its own cabinets and to split into the account. It ,,"auld appeal from this incident that the supplying of cabinets and signs by Camcllia is not tied to any exclusive dealing arrangement. The fourth account involving Camellia was one which Lone Star had been unsuccessful in obtaining because, as the account advised him, Camellia had moved some of the dealer s equipment from another location and had promised to service it. There is no reliable evidence to support the witness' hearsay testimony regarding this incident, nor docs the evidence establish that this was the reason Lone Star could not obtain the account. Of the remaining accounts referred to by the Lone Star witness one involved respondent Carnation and the other respondent Borden. The witness claimed that he had lost a drive-in market to respondent Carnation because the latter had sold the account a cabinet for frozen foods. There is no reliable evidence in the record with respect to the alleged sale and, moreover, Lone Star was able to regain the account in question ,vi thin a month thereafter. The incident involving respondent Borden pertained to a chain of stores to which Lone Star had sold ice cream cabinets with the understanding that they would be paid for out of thc gallonage rebates. However, when the ice cream sales were not suffcient to meet the installments on the cabinets the account asked Lone Star to repurchase them, but the latter declined. The chain made arrangements later to have Borden serve Thea number of the stores and the laUeI' supplied them with cabinets. record is lacking in reliable evidence that the supplying of ice cream cabinets by Borden was the reason the account switched. The Lone Star witness indicated that he did not regard the supplying of cabinets for ice cream as an objectionable practice, although he did whero they were supplied for other frozen foods. There V\aS nothing unusual about Borden s supplying the account with ice cream storage 1530 FEDERAL TRADE COM:vISSION DECISIONS Appendix 60 F.

cabinets, in accordance with the prevailing custom in the area. The Lone Star witness himse.1 conceded that it was not the usual practice of Borden to u:;c cabinets as a seIJing weapon. If Lone Star is having any competitive diffculties, thc record fails to establish that such difficulties are due sllbstan6ally to the engagement by any of respondents in the complaint practices.

Another competitor l'cpresentecl at the J-Iouston hearings was from Sun Up Ice Cream Company, ,,,which ranks fourth or fifth in volume in the market, according to the testimony of its president. Sun l,T has an fllllua) volume of approximately 600 000 gallons, with sales amounting to a,ppI'oximately $778 000. The. Sun lJp witness' testimony consisted mainly of a recita.l of the facts \Yith respect to his company s loss of eight accounts, six of which ,were lost to respondent Arden (CmneJlia), one to Forcmost and one split with Borden. The loss o:f most of the account.s involving Cmnellia. was attributed primnrily to the furnishing of equipment, inc.ucling cabinets which could be used for storing frozen foods and, in one instnnce, a sign alleged to cost $0 000. The witness made no claim that hc was advised by the accounts in question that they had switched because of the furnishing of the equipment in question, but his testirno11Y appeiu' s to have been based primnrily on his 0"\11 conclusions as to the accounts' motivation in switching. In no instance was any reliable evidence offered as to 'what equipment., if any, had been supplied to the accounts in CIuestion. Jfost of the establishments referred to ,,'ere grocery stores a.fflinted with a buying group lalO'\ll as the, Lucky Seven Stores. The witness conceded that in at least several instances the store owners had advised him they thought they should give t.their business to Camelliit because the Jatterhad agreed to spend subst.antial amounts in eo operative advertising with the group. The testimony of a Camellia offcial who testified in the defense hearings indicates that the Lucky Seyen group had invited bids from a number of ice c.remn manufacturers and that. his company had submitted a bid calling for a discount of 15 percent off the list price and an agreement. to spend it certain amount for cooperative advertising on television and in newspa.pers. The 15 percent. discount "' arrived at after Arden had learned that the price offered by its competitor, Swift, was lower than its O'1'n. It ,,"auld therefore appear that the account was lost mainly on a price basis and not because of equip1nent. Kat only is there no evidence of any exclusive dealing a.rrangement connected with Arden s bid, but the Arden offcjal testified that his company only supplied 70 percent of the volume of the CAR TATIO - COMPA.l\ ET AL. 1531 1274 Appendix stores, the balance being split with competitors who are in 40 percent of the stores.

The one account involving respondent Borden ivas also a member of the Lucky Seven group. The store was being supplied by Sun Up on an exclusive basis and had received two new automatic self-defrosting cabinets from Sun Up. The witness claimed that Borden was able to split into the account after selling the proprietor three cabinets similar to his own, his own cabinets be.ing returned to him, and that the account stored his ice cream in Borden 8 cabinets and asked him for a refrigeration allowance. There is no reliable evidence in the record that respondent Borden did, in fact, sell any cabinets to the account or that this was the reason why the account switched. It may be noted that Sun lTp s criticism is directly contrary to Lone Star The Jatter compJainecl because Borden had furnished cabinets rentfree to an account to which it l1id sold cabinets, whereas Sun Up criticized it for doing the exact opposite" viz., selling cabinets to an account to which Sum Up had supplied cabinets rent-free. Apparently nothing Borden did would satisfy both of these competitors. In any event, uoth Sun Up and Borden were soon terminated as SU))peers when the account switched to Camellia, for reasons not appearing in the record.

The final complaint of the Sun Up witness involved two of the l\finimax stores, to which reference has already been made above in connection with the Lone Star witness. The Sun Up representa tive claimed that these stores had switched to Foremost because of a discount on milk and ice cream, and that the latter paid the balance dllC on several cabinets w11ich Sun lTp had recently sold the account. There is 110 reliable evidence in the record, aside from the witness' hearsay test, imony, as to ,vhat, if any, discount the aCcolmt had received from Foremost, nor is there any evidence that the transaction involved a,ny exclusive dealing Hl'rfll1gemcnt. In any event by the time of the flouston hearings, the stores in question were handling Camellia and had ceasedlulnc11ing Foremost and also Borden which had apparently Iflter split into t.he fLCCOlU1t. Despite Sun Up s aJ1eged loss of accounts, the witness conceded that his company s sales in U);J5, flillounting to S778 000, and its gallonage of 600 000 gallons, represellted an increase over the past. fiveyea.r period. 1-Ie also conceded that the company had had a gradual increase in business since 1946. J-Iowever, he claimed that the e011panis rate of profit lw cl dce-inecl nbont 2:5 pel' cent from ,,,hat it ha.d been prior to HH7 or 1948. There is no rcl1,lble evidence in the record that this alleg-ed decline in profit mte is due to the eompbint prac- 1532 FEDERAL TRADE C01vL\1ISSIOK DECISIONS Appendix 60 F.

tices. In fact., the witness conceded that his profits had been affected to a large extent, by increases in the cost of manufacturing ice cream including paper, labor and ingredients. lie also conceded that profits in the ice cream industry as a whole had dropped after lU46 or HH7. Another competitor witness, the former o ner 'Of Smith Ice Cream Company, testified briefly that his company had sold out in 1954 to Lily Ice Crean"! Cmnpany. The owner is now employed in a nearby community by another competitor, Oak Farms Dniry of Dnllas. He claimed that he had sold out because "conditions got to where it was impossible for me to make money out of Lthe businessJ." The "con c1itions" were described by the ,..itness as "finance deal(sJ and t.he frozen food cabinet.s and the t.things like t.hat. that customers demand to ha \Te their business 0 reference was made to any of the respondents as being responsible for any of these conditions nor for Smith' Joss of or inability to acquire any specific account. No claim was made that Smith had lost any considerable number of accounts, or that it had sustained any substanti8.J loss of gallonage prior to the time it sold out. On the contrary, it was at. its peak gallonage (approximately 100 000) 1\hen it sold its business, having entered the ice cream business in 1941. The testing10ny of the witness has no substantial evillentiary value.

As above indicated, cOllnsel supporting the complaint. called representatives of five retail dealers in IIouston. Three have already been discussed above in connection with the testimony of the Shamrock and Lone Star witnesses. The fourth witness was a former customer of Klein Ice Cream Company which had switched to respondent Camellia. While the testimony of this witness indicates that one of thc three cabincts which had been supplied to him by Camellia was being used for the storing of frozen foods, it also appears that he had three cabinets from JOein, one of which was likewise being used for the storing of frozen foods. The principal reason given by the witness for his change to Camellia was that he wanted a more modern display cabinet for his ice cream and that Klein had refused to supply one. Following the change to Camellia and the installation of the display cabinet, the account's ice cream sales increased substantially. There is no evidence that the supplying of this equipment by Arden was in any way connected with an exclusive dealing arrangement. Assuming that Arden did supply the account with one cabinet to be used for storing frozen foods, its action \Vas obviously calculated to meet the competition of Klein which had supplied a cabinet for a similar purpose.

CARXATIOK COllPM, ET AL.. 1533 1271 Appendix The fifth dealer witness was connected with a drive-in grocery chain having 42 stores, the chain being the largest in the area. The chain handles at least two brands of ice cream in each of its stores, including Sanitary, Sun 1Jp, Oak Farms, Carnation and Camellia. It receives a volume rebate from each of these suppliers. According to the witness, a salesman representing one of Arden s competitors had informed him that a competing supermarket chain was gettinga better discount from Arden, and, after the witness had cOITDunicatecl with an Arden representative, the latter agreed to give him a discount in the same amount. Iiolmver, according to an Arden offcial who testified during the defense he trings, the granting of the additional discount was due to a bookkeeping error and was later rescinded. This entire transftction would appear to have no relevance to the issues in these proceedings since there is no evidence that either the original discount or the increased amount was based on any exclusive dealing arrangement. The testimony of the witness does, however, serve to emphasize the tendency toward the splitting of accounts in the Houston area. It may also be noted that despite the Arden discount, its price to the chain was higher than that of t,yO of its local competitors, Oak Farms and Sun Up. Furthermore, its sales to the chain represented only 75 per cent of the chain s ice cream purchases, compared with the 39.15 per cent share of its local competitor Sanitary. Not only does the evidence concerning the Houston market fail to indicate any substantial injury to competition in the area or to any competitor, but it also fails to indicate any startling changes in market positioll in favor of re,spondents. Respondent Foremost's market share has actually declined substantially from 11.9 pci' cent in 1950 to 3 per cent in 1955. Respondent Carnation s share has declined from 16.3 per cent to 14.8 per cent during the same period. Respondent Borden s share has also declined during the same period from 14. per cent to 13. 5 per cent. Only respondent Arden has shown any increasc, viz., from 7. 1 per cent in 1950 to 10.0 per cent in 1955. Its increase of 2.9 per cent is substantially less than thc aggregate decline of 8.8 per cent of its fellow respondents. Presumably other competitors in the Houston market have been increasing their share of the market, while three out of the four respondents have been declining. b. The Beaumont-Port Arthur Area Beaumont is located approximately 90 miles cast of I-louston, and P0l1 Arthur is approximately byenty miles east of Beaumont. i\Iany of the companies operating in the area do business in both communities, although t.here are some\yhat fc cr companies in the Port Arthur , 1534 FEDERAL TRADE COM:VIISSION DECISIONS Appendix 60 F.

area. Counsel supporting the complaint caned two competitor witnesses from the area, a representative of Dairy i\laid Ice Cream Company of Beaumont and a representative of Townsend Dairy of Port Arthur. No dealer witnesses from the area were called. The respondents doing business in the Beaumont area are Carnation, Foremost, Borden and Arden (Camellia), the latter operating only on the fringes of the area. The other principal competitors inelude Swift, Bergen, Consumers, Sun Up, Oak Farms, Tmvnsend and Dairy :\Iaicl. Dairy :\faicl Ice Cream Company of Beaumont is one of the largest companies in the are,a. Its gallonage had grown from approximately 200 000 gallons in 1947 to approximately 300 000 at the time of the Houston hearings in 1956. The Dairy ",raid witness testified that its present gallonagc represented a decline of approximately 10 000 gallons from its previous peak, but indicated that he did not reg,nd this as a significant decline. He attributed the decrease mainly to the entry of new competitors into the market, mm1ing specifically the non-respondents Swift, Sun Up and Oak Farms. The Dairy faid witness testified that \"while his company s sales had increased substantially since 1947, its rate of profits in 1955 ,yas one of the poorest it had experienced. The extent of such decline in profit ratio and the over-an profit position of the company was not, however, indicated. lie attributed such decline to the "increased activity that came into our area." Such increased competition caused t.he company, according to the te.stimony of its representative to do things that normally we didn t need to, such as adycrtising, to increase its sales personnel and to change from the conyentiol1fll type of cabinets to the glass-top and scJf-defros6ng type. cabinets. The Dairy Maid witness attributed the bulk of his company s trouble to the non-respollc1ent Swift and indicated that most of the business it hac110st during the past yerlr had been to Swift. 1-Ie e1nimecl that Swift had been itble to obtain accounts " 011 a price cleal" and permitting customers to pick out their OIyn slide-top cabinets from an assortment of cabinets transported on it Swift delivery truck to the dealers' premises. It is unnec.essary for the examiner to make any findings with respect to the reliability of the ""itness' general asser tions ,vit.h respect to Swift. since that. company is not a respondent in these proceedings. Hmvever, it seems clear tlult the recent. decline in sales a.ncl profit ratio which Dairy JIaic1 has experienced cannot be attributed to the respondents, to any signifieant degree, in yie\'\ the fact that. the. witness himself a ttribllted his company's losses to Swift "rather than to these other peoplo"

CAR"ATION COMPANY ET AL. 1535 1274 Appendix The Dairy Maid witness did refer, in the course of his testimony, to several accollnts lost to some of the respondents. Aside from the fact that such losses, by the witness' own a, admission, were of no signiiicance, there is no reliable evidence that any of them was clue to the complaint practices. Thus, the witness attributed the loss of a good account to respondent Foremost because the latter had supplied the Recount wit.h a sign, but conceded that he had no personal knowledge as to \vhether such a sign had eyer been supplied. In any event, it appears that Dairy :Maid was late.r able to split back into the account with Fore.most, despite the alleged supplying of a sign. Since Dairy laid was able to split into the account, there was pre,smmLbly no exclusive dealing arrangement involved in the ac ounts dealings with Forenlost. The witness also attributed the loss of a drive-in grocery account to respondent Foremost because of the latter s lower price. No reliable evidence fis to Foremost's price was offered, nor does it. appear that any such price was c01l1ectecl with an exelusiye dellling arrange-- Incnt. Furthermore, it appears that the loss of the account. occurred shortly after Dairy l\Iaid had raised its price to the account and that the putative lower price of I oremost was exactly the same as Dairy J\faid' s price before t.he increase. It would appear more likely t.herefore that the account was lost due to Dairy :Maid's raising its price rather than to any undercutting by respondent Foremost. The Dairy :Maid witness attributed the loss of another grocery account to respondent Foremost because of the non-complaint reason that the wholesale grocery house which was supplying the account had put pressure on it. The witness conceded that his testimony concerning this incident was based "more or less (onJ rumors along the same line" as the other two accounts described above. )loroover, he conceded all crossexamination that he actually had not lost the account but merely split it with Foremost and that when he later put. into effect a 5 percent volume rebate he regained the account completely. Prior to instituting the 5 percent "olmne rebate, Dairy ?\Iaid "as on a, single price schedule, although it did give a few of its volume accounts a lower price. The witness attributed the institution of the sliding scale type of price schedule in the area to respondent Carnation. 1-1oweve1' , he expressed the opinion that Carnation was to be "colnmenrled" because it costs you just as much * * * to serviee a small account, as it does a. large account and therefore when you bring more merchandise into 11 store why t.hat man s entitled to a little better price. o refe.rence was made by the witness to the loss of any a(', counts to respondent Carnation because of the lntter s alleged quantity discounts, or for any other reason; nor "as respondent Rorden cited as 1536 FEDERAL TRADE CO L\USSION DECISIOKS Appendix 60 F.

being responsible for the Joss of any accounts. In the case of responc1cut Arden (Camellia), the witness indicated that his company competed with jt only on the fringes of their territory and that he had had no competitive diffculties ,with that company. The other competitor ,vitness from the area ",as a representative of Towllsend:s Da.iry of Port Arthur, which does business both in Port Arthur a.nd Be,aumont, as well as in the surrollnding counties. The Townsend witness testified regarding competitive cliftjculties with the non-respondent Swift, which he characterized as "possibly the most damaging competition we have had, " The only respondent referred to by the witness was Foremost, to ,which the loss of two accounts was attributed, one of v,hieh was a school district which was lost on the basis of a lower bid. \Vhen the ,,,itness declined to disclose to counsel for Foremost certain memoranda "which he had nsedin testifying, most of his direct examination was stricken except for a portion ,which was not based on such memoranclml1.oo The record fails to establish any injury to competition in the Beaumont-Port Arthur area as a result of the use of the complaint practices by any of the respondents. e. Denton Area Denton is located approximately 38 miles from Dallas and Fort 1Vorth. The only ,,,itness called from this area was a representative of Brooks Dairy. The respondents who operate in the area are Borden, Carnation and Foremost. There are also four other Texas companies doing business in the area, in addition to Brooks Dairy, viz. Boswell, Vandervoor, Oak Farms and Cabell, the first two having their plants in Fort IV orth and the latter two in Dallas. Swift & Company is also active in the Denton area.

The testimony of the Brooks Dairy witness fails to disclose that there has been any injury to competition due to the respondents use of the complaint practices or otherwise. Brooks has a volume of approximately 100 000 gallons and is the largest supplier in the area. Its volume has been increasing each year and its profits have been stable. \Vhile the witness indicated that the company s costs had increased clue to the necessity of furnishing customers with more expensjve equjpment, he made no effort to attribute this to any of the respondents. His testimony indicated that S,"\ift had been a le,ader in supplying custOlners with neon signs and refrigeration equipment and in granting rebates.

The witness was later given an opportunity to have his te!itimony reinstated, after he had indicated that be might hat"e undentood the examiner s ruling as to what he was required to exhibit to counsel for Foremost, but again declined, with the concurrence of counsel supporting the complaint, to permit any examination of memorandfi used to aid him ill tcstifying.

CATISATIOX COMPANY ET AL. 1537 1274 Appendix The only respondent to whom the Brooks witness attributed the loss of any account was Carnation, which he claimed acquired one of his accounts after agreeing to purchase an old ice cream freezer from the owner of the establishment. Not only is there no reliable evidence (aside from the witness' hearsay testimony as to what the owner told him) that Carnation purchased the freezer or to indicate that the price which it paid was not comlnensurate with the value of the freezer but the reason assigned by the witness for the alleged loss of the account does not fall within the scope of the complaints. The Brooks witness testified that his company had had no competitive diffculties with respondent Borden in recent years, characterizing that company policies as very conservative. The only reference made to respondent Foremost was that it had taken one llnnamed account from Brooks and had been troublesome to some extent in making Brooks meet its discounts. Ko specific accounts were mentioned and there is no indication that the prices being charged by Forcmost were other than its regular list prices or that they "'ere in any way connected with an exclusive dealing arrangement.

Insofar as the supplying of equipment is concerned, the Brooks witness indicated that it jll,d always been the practice for ice cream manufacturers in the area to supply a cabinet without making any rental charge. The only problem that had arisen, in this connection was that the cost of such cabinets had gone up sharply as the more modern display cabinets had como into vogue. The cost of signs has likewise increased. I-Iowever, none of these increases can be attributed to any of respondents, and the witness made no claim that they had used cabinets or signs as a competitive weapon. d. San Antonio-Austin Areas The only witness called from this area was fl representative of Jersey Land Creamery of San Antonio who had previously been connected with Polar Ice Cream Company of Austin. San Antonio and Austin are approximately 75 miles apart and there appear to be a number of diflerent competitors in each area. 110we\'e1', in view of the fact that the sole witness' testimony related to both areas and there is some overlap in competition, the evidence Iyith respect to these areas is discussed together below.

The respondents doing business in the San Antonio area are Borden Foremost and Carnation. The local competitors, in addition to Jersey Land Creamery, include ICnowlton, :.Ietzger, Tiner and Gyer. Swift & Company is also active in the area. Jersey La.nd Creamery has approximately 380 accounts with a sales volume of approximately , .

Appendix GO F.

$250 000. The number of its accounts has been increasing and its volume has also increased. The company s rate of profit has been stable during the past few years.

All of the competitors in the area supply their customers with cabinets without making a rental charge therefor, and a number supply them with signs. Jersey Land is one of the companies which supplies its customers with signs, the 'witness expressing the opinion that such signs were worth the cost thereof because of their advertising v,due. The company supplies cabinets to all but 35 of its customers. It also sells cabinets to some accounts on a conditional sales basis. Customers who own their own refrigeration equipment receive a five-cent a gallon discount, that being Jersey Land' s estimate of the cost per gallon of furnishing a cabinet. ,Vhile Jersey Land does not supply cabinets specifically for frozen foods, the witness indicated that it was not uncommon to find customers storing such products in the ice cream cabinet, although the company eudea Vols to discourage the practice. .Jersey Land, along with its competitors grants its customers a quantity discount on a slieling scale basis. The supplying of cabinets and signs and the granting of quantity discounts do not appear to be connected with1 any exclusive dealing arrangement since the majority of stores in both San Antonio and A listin handle more than one brand of ice cream. The Jersey Land witness spoke in broad-brush fashion about " vicious price circle '" * * amongst some of the majors, indicating that the prices of these "majors" (not otherwise identified) were quite fluid." The only specific testimony about so-called fluid prices pertained to two accounts in which respondent Carnation was involved. One of the accounts was the Post Exchange at R.andolph Field, where the witness cited thc alleged price of Carnation as reported to him by someone at the Exchange. K ot only is there no reliable evidence of Carnation s price in this instance, but there is not a scintilla of evidence of any exclusive dealing arrangement with the exchange. The other price incident involved a grocery account which had allegedly been granted a 10 percent discount by Carnation. there aga.in there is no evidence in the record, other than the ,,,itness' unrelia.ble hearsay testimony, as to ,,,hat. discount, if any, the account received from Carnation. There is likewise no evidence that the alleged discount represented a departure from Carnation s price schedule or was in any way tied to an exclusive dealing arrangement. , On the contrary, despite the impression given by t.he witness that he had been unable to aC(luire 1 As nlJove noted Terser Land lil,ewlse grants quantity (liscuunts to its customers on a sliding scale arrangement.

CARXATION COMPAj\-- ET AL. 1539 12i4 Appendix the account because of the alleged discount, it developed on C1"088examination that his company had been able to split into the account despite the alleged discount and that, in addition to Carnation and his company, another local company (lCnow1toll) was also serving the establishment.

In addition to the above two incidents, allegedly involving price considerations, the witness also cited two other instances of competitive diffculties Ivith Carnation involving the furnishing of equipment. Keither involved the loss of any accounts but pertained to accounts which Carnation was already serving and which Jersey Land was seeking to take away. Both involved the alleged supplying of cabinets (one allegedly for frozen foods) and signs by Carnation. There is no reliable evidence in the record, other than the witness hearsay testimony, as to what Carnation supplied these a,accounts or to indicate that the furnishing of the alleged equipment \yas the reason the accounts chose Carnation as a supplier, or that the furnishing thereof was connected with any exclusive dealing arrangement. The lack of any exclusive dealing arrangement being involved in these trmlSactions is apparent from the fact that in one of the instances cited Jersey Land was able to split into the account despite the alleged supplying of the cabinets and sign by Carnation. The witness' test.imony concerning the Austin area indicates that only two of the respondents, Borden and Carnation, do business in that area. Swift oJso is active in the area. The local companies inc.ude the ,vitness' former connection, Polar Ice Cream Company, and Lily Ice Cream Company, Austin Maid, Superior and Oak Farms. The only account to which reference was made by the witness as having been lost by his former company involved the non-respondent Swift &. Company. The '"fitness also referred to a Carnation account which his company had sought to acquire, but was allegedly unable to obtain be,cause Carnation ha.d supplied the account with a number of cabinets, including several for frozen foods. There is no reliable evidence in the record to substantiate the witness hearsay testimony concerning t.his account.. In any event, despite this alleged competitive diffculty with Carnation, Polar has been able to maintain its position as the second loxgest ice cream manufacturer in the Austin area with an estimated gallonage of 400 000 gaj1ons, as compared to an estimf1ted gallonage of 80 000 gallons M 'While tlJe witness did claim that he had scen frozen food in some of the cabinets, this does not establish that Cal'!lQtion had supplied the equipmelJt for that p1.Jrpose, since the witllf'sS Jdnu'elf conceded that customers !11t frozen food in his company s ice cream cabinets witlJOut permission. He 111150 conccrlerl tb,lt he had the experience of customers l'f' porting- tbings to him which tnrneu ant to be until'ie. 710-603-64-- 1540 FEDERAL TRADE COJVDHSSIO:\T DECISIONS Appendix 60 F.

for respondent Carnation. The largest company in the area is the local Texas company, Superior.

The evidence fails to shm-v any injury to c.ompetition or to any competitor as a result of the engagement by any of the respondents in any of the complaint practices in any area in Texas. The evidence likewise fails to indicate any significant improvement in the competitive position of respondents clue to the comphint practices. On the contrary it appears that Borden s share of state production in Texas has declined from 17. 5 percent in 1947 to 13.3 percent in 1955. Carnation s share increa,sed slightly frolll 2.6 percent in 1847 to 3.9 percent in 1950 and thereafter, follo\ving its acquisition of four lomll companies in 1951 , 1953 and 1955, its share rose to 7.5 percent by 1955. Arden s share increased almost imperceptively from a minimal 1.1 percent in 1950, when it entered the state, to 1. 6 percent in 1955. The record contains no separate information with respect to respondent Foremost's production share in Texas. However, it docs appear that its share of production in Texfls and Louisiana combined has increased only slightly fronl 7. 11 percent in 1950 to 7. 38 percent in 1955.

12. Phoenix, Arizona The hearings in Phoenix involve evidence with respect to bot.h the Phoenix and Tucson areas. The respondents involved are Carnation, Arden and Borden, which do business in both areas. Darden is a relatively recent entrant into the Arizona market. Swift & Company also operates in both areas. One of the local competitors Lily Ice Cream Company, also does business in both Phoenix and Tucson. Other local competitors arc Bratt, Frigid Products, Brik 0' Gold and Star, which operate primarily in the Phoenix area. The local companies in Tucson include Sunset and Tucker. Representatives or Lily and Tucker testified at the Phoenix hearing. Representatives of Bratt and Erik 0' Gold were subpoenaed, but were subsequently excused at the request or counsel supporting the complaint. No dealer witnesses were caned.

The testimony of Lily Ice Cream Company relates mainly to the Phoenix area. The evidence indicates that it has been customary for manufacturers in the area to supply their customers with ice cream cabinets. Prior to 1948 such cabinets were supplied without a rental charge. Beginning in 1948, and apparently following the lead of the companies doing business in California where a rental CAHNATION COMPAc"-Y ET AL. 1541 J274 Appendix trge was being lunde, ice cream manufacturers in Phoenix began to make a rental charge for supplying cabinets. l-Imvever, this prflctice was abandoned early in 1955. There is no evidence that any of the respondents, who apparently were instrumental in instituting the practice of charging a rental, had had anything to do with its abandonment. On the contrary, the testimony of the Lily witness indicates that his local competitor, Bratt, was one of the first to discontinue the charging of a rental a.nd was the callse for his own company s discontinuance of the practice.

The record fails to cstablish that the respondents have been responsible for any significant competitive diffculties by Lily, arising out of the complaint practices. The only evidence oiIerec1 of any compc6tive diffculties with the respondents involved four accounts in which Arden \Vas a supplier and one where Carnation was the supplier. The four aCcoWlts involving Arden included only one which had actually been lost to Arden, the other three being accounts which Lily sought unsuccessfully to acquire. The ,vitness sought to attribute the loss of the single account and the inability to acquire the ot.her accounts to the making of loans by Arden. Unlike most similar testimony, there is corroboration in the record of the witness' hearsay testimony, 'With respect to the making loans by Arden to three of the four accowlts referred to.'" However, there is no reliable evidence that the making of the loans was the reason why the accounts had chosen Arden as a supplier. The witness' testimony concerning these transactions was based 011 information received from his salesln nl which, aside from being hearsay, did not; evell purport to reflect any advice frolll the dealers concerning their motive for dealing with Arden, but merely represented the witness' mVll conclusion or surmise concerning the accounts' motivation. The fact that in no case, including the single account which it lost, was Lily requested to make a loan suggests that the making of a loan by Arden \vas not a controlling consideration in the choice of suppliers. Not only is there no evidence of any exclusive dealing arrangement in connection with any of these transactions, but the fact that \\"hen one of the accounts later change,d hands the new owner switched to Lily and nevertheless continued to pay Arden on the balance of the loan, would appear to be affrmativc evidence of the absence of any exclusive agreement. The lack of probl1bility that any exclusive arrangements "\ere involved is further buttressed by the evidence concerning another account (not referred to by the Lily wit- 9 Such corroboration appears in an extract from recordings appearing In the county recorder s offce. which was read Into the record by agreement of counsel. Appendix 60 F.

ness) which despite a loan from Arden decided to purchase a portion of its requirements from the local competitor, Bratt. Despite the apparent criticism of Arden for the making of loans, the Lily witness conceded that his company also made loans to customers. No claim was made that Arden was the initiator or leader in the practice. The single accollnt involving respondent Carnation was one which the Lily witness claimed his company could Hot acquire because Carnation had given the account a guaranteed re.bate which brought the price below,,, that of Lily. Not only is there no reliable evidence as to Carnation s discount or rebate to the account in question (other than the witness' hearsay testimony as to what his salesman told him), but there is no evidence that the alleged rebate was connected with any exclusive dealing arrangement.

The few instances related by the witness only' one of which involves the actual loss of an account, had had no significant euect on Lily fOliunes. Despite the \\"itness' reluctnIlce to reveal his gallonage fignres, he concecled that his company s sales amounted to "something like" 300 000 to 400 000 gallons a year. The company s production has steadily increased, albeit the witness claimed that the increase had not kept pace with the increase in poplllat,ion. The company i3 admittedly It substantial factor in the market and its products are well received by the retail stores and the public in the area. It has had to remodel its Phoenix plant. se\CeraJ times in order to keep pa,ce with its increased sales. It has recently acquirecl a compet.itor in the Tucson area and is building a new plant there. These facts hardly bespeak the existence of any serious c01npetit,ive problems for Lily l\laid. The respondents involved in Lily s testimony have not fared nearly as well in the Phoenix market. R,respondent Arden, which in 1950 had 40.4 pen ent of the Phoenix l\1.metropolitan market, experienced a very substantial decline by 1955 to 19.7 percent. Respondent Carnatioll sshare has declined from 24.2 percent in 1950 to 21.8 percent in 1955. No comparable figures are available for respondent Borden which has only recently come into the market and was not referred to by either of the two witnesses in Phoenix.

The evidence offered through the owner of Tucker Ice Cream Company of competitive conditions in the Tucson area is almost .wholly without probative value. The Tucker witness was an elderly, semiret,ired gent.leman "\\"ho had not called on any accounts for almost ten years a,nel had turned over the operation of his business to a young man who made deliveries for him. \Vhile claiming that his gallonage had deerea,sed by approximately one- third since ID51 the ,vitness had no idea what his gallonage was.

CARNATION CO ET AL. 1543 1274 Appendix The Tncker ","itne-s8 made the broa.d claim that he was unable to compete because competitors offer-ed better equipment and because their products were " better advert.ised, nationally known, and we are local", but was unable to give any reliable testimony upon which a finding could be based that any of the respondents Jmve been responsible for his competitive diffculties. One of the few specific accounts to which t.he witness made reference was lost to the nonrespondent Swift, for reasons not appearing in the record. vvr:rile he also referred t.o respondent Arden as possibly being one of two competitors invohced in some painting for another account which he had lost, he Jater recalled that the competitor invobred was Swift, rather tha, A rden. After flliher inability to recall any accounts which his company had lost or been unable t.o acquire the Tucker witness agreed that all he knmy about the accounts "would be hearsay, what my dri'iTer tells me, and suggested that the latter "would make a better witness than me because he has his fingers right on the pulse of everything. " The Tucker witness indicated that his company had never done much advertising and that in recent YCRrs it did none whatsoever. That the Tucker Ice Cream Company is in a. moribund condition \yon1cl appeal' to be strongly suggested by the evidence. However there is not a. scintiJla of evidence that this has been clue to any action on the part of the respondents. While not material to tJ,ese proccedings, it seems rLpparent that the root of its diffcult.ies is in t.he inactive role of its mynership due to age and state, of he.aJth, and the lac.k of aggressive selling, mCl'c.handising and advertising programs. The rec.orcl is barren of any c.ompetitive injury due to the engagement by a.ny of the respondents operating in the State of Arizona in any of the compbint pra.ctices. The only evidence offered outside of the testimony of the two competitor witnesses \\- as t list of loans and sales of equipment un(ler conditional sales c.contracts made by respondent Arden in various portions of the State of Arizona. 110we\'e1', no competitors \Were caned from any of the areas involved, outside of Phoenix and Tucson, and there is no evjdence that. the making of such loans or tho sales of equipment by respondent Arden has even produced a compp,titive ripple. Of the transactions appearing in such list, most involved the sale of cabinets to customers and, in a number of just,anees, the sale oft-rucks and equipment to non-retail ice cream dist,dbutors who purchase re.sponc1enfs ice cream for re.sale to retail customers. There were only 16 transactions from 1947 to 1955 in the entire State of Arizona involving loans to retailers ana only 13 :i1yolving sales of soda founta.in equipment to retailers. In no ca.se ,var Appendix 60 F.

evidence of exclusivity offered and, so far as appears from the record all accounts involved may have been Arden s existing accounts rather than accounts acquired rrOlll others.

In any event, the making or such loans and the sales or such equipment do not appe.ar to have resulteel iuany significant improvement in Arden s competitive position in the state, since its share or state pro duction declined drastically from 45.0 percent in 1947 to 21.2 percent in 1955. This hardly suggests that respondent Arden is oven helming its competitors in the State of Arizona. Respondent Carnation did not begin manufacturing in Arizona llntil1951. Iuits first full year or production in the State, 1952, its share of production ,vas 18.4 percent. By 1955 this had increased to 21.3 percent. Carnation s increase does not begin to offset Arclen s sl1bstantiaJ decline. Presumably other, nonrespondent competitors were increasing.their. share during this period.

13. Los Angeles, Califo1'nia The only witness ca.lled at the Los Angeles hearings ,,,as a. I'epl'e sentative of Christensen Ice Cream Company, which is located in San Bernardino, approximately 60 miles east of Los Angeles. The respondents operating in the area are, Arden Foremost (Golden State), Carnation and Beatrice. Other competitors are Challenge, Big Bear, Balian, Kranila and Swift. The testimony of!"ered through the sole wjtness called was substal1tial1y to the eiIect that (a) the California law requiring -a one-third down-payment on the sale of equipment and the balance in eighteen 1110nths was working out satisfactorily; (b) some ice cream competitors in the area are in the ,wholesale grocery business and are liberal in extending credit to customers on their grocery purchases; and (c) some com peti tors own stock in retail outlets. The witness suggested that the practice of extending credit through grocery affliates of ice cream compa,nies constituted an avenue for evasion of the provisions of the California, law limiting the e,xtensiol1 of credit on ice cream purchases. The witness cited the existence of a subsidiary of respondent Arden, known as I\1:arket \Vholesalers, which is in the wholesale groce.ry business and which he claimed some of his customer.rs had told him had extended to grocers "greater credit. than they could othendse get" OIl their purchase of groceries. The witness acknowledged that he was /lot in a position to sa.y whether such c1a,ims '''ere true. It appearing that such extension of credit involved the ,;hole ,ale grocery business, !lnc1not the frozen foods business, and wa,s therefore outside the scope of the complaints, objection to further interrogation CARNATION COMPA."" ET AL. 1545 1274 Appendix of the witness along these lines was sustained. Also sustained \-ras an objection to testimony by the ,,'it-ness concerning the alleged mvnership by respondents Arden and Formnost of stock in reta.il grocery stores, as being outside the scope of the cOlllpla.ints. Upon the sustaining of these objections, the witness \vas \yithdrawn and all other witnesses were excused by counse.l supporting the complaint. evidence was offered with respect to the use of the complaint practices in southern California, or as to the effect thereof on competition. There is, of course, no basis in the record for any finding of injury to competition in the San Bernardino area or elsewhere in southern California, as a, result of the engagement. by any of the respondent.s in any of the complaint practices. 14. A ew Y o7'c: N 6'U) Y o7' The respondents doing business in the New York j\ietropolitan area are National, Borden, Be(ltrice and Fore,most. The witnesses at the N e\y York hearings consisted or sixteen retail dealers and sales representatives of respondents Kat.ional, Borden and Beatrice. Although there are a considerable number of ice cream manufacturers in the N ew York area, counsel supporting the complaint failed t, call a single representative of a competing ice cream manufacturer. Of the sixteen dealer witnesses who 1were called, seven testified with respect tQ assistance from respondent )J ational, and seven with respect to respondent Borden; two testified concerning both Borden and National, ha.ving done business with both at different times; and only two testified concerning respondent Beatrice. 1\fost of the dealers were owners of small confectionery and candy stores or luncheonettes. Of the dealers who testified with respect to respondents Kational and Borden, thirteen had received loans from one or the other and :in two instances, from both. l\iost of the loans involved relatively small amounts of money ranging from $100. 00 to $500. 00. The loans \were made mainly for remodeling purposes and, jn some instances meant the difference between a small dealer s staying in business and closing up. In only a few instances did the testimony reveal that the making or a loan or other assistance from a respondent was a hLCtor in the account's decision to deal with t.he respondent. In three or four instances the loan was made to an account which was already being served by the particular respondent., and t.llCre wa.s no indiea, tion that a.anyone else had sought to acquire it. In none or the latter instances did the witness testify that the loan had anything to do \with his conUnuing to denl with the respondent. On the contrary, , 1546 FEDERAL TRADE C01-ISSION DECISIO Appendix 60 F.

in the case 01 one of Borden 18 accounts, when it became dissatisfied \with Borden it switched to a non-respondent supplier which assumed the balance of the Borden loan.

The evidence indicates that there is a very considerable switching around of accounts in the Kew Y ork arc and thc fact that there is an outstanding loan does not n.appear to be an impediment to the acquisition of such aCCOlll1ts by local compet.itors since the latter also make loans to customers. In fact five of the loans about which dealer witnesses testified, involved merely the assllmption by respondent Borden or National Df the. unpaid balance or a pre-existing loan received from a local competitor. In only one of these did the witness indicate that the making or the loan had anything to do with the account' s switehing. The decision to elumge, suppliers in the other eases \vas precipitated by some other circumstanc.e, such as dissatis faction ,with the service or product of the other supplier or complaints from customers. In the one insiance in which the \vitness testified that a I() n from respondent Kational (which cnabled him to payoff the balance of a loan from a locftl supplier) was "a very smitll factor in his choice of suppliers, he also indic.ated tll8the had been seeking for sometime to obtain NationaFs brand but had been unable to do so as long as another store in the neighborhood was carrying it. In only fl\ e instances did the loan transaction involve an initial loan by Kational or Borden. I-low8ver, here again with possibly two exceptions, there ,,,as either DO evidence tlwt the loan was an 1nducmnent for s,vitching, or it appeared affrmatively that other cire-umstances ,..ere responsible for the change of suppliers, such as dissfltisfaction lyith the other supplier or a preference for the products of the particular respondent.. Thus, aile of the clef\lcrs (t.he operrttor of a chng store) ,,,hose testimony suggests that possibly a loan from 11m,y have been a factorrespondent Nat.ional for remodeling pllrposes in his decision to change suppliers, also indicated that when his local supplier learned of this he too agreed to make the loan, as did several, other companies, but that he preferred respondent National's product because of its quality. Another dealer who testifled that a willingness to loan hirn $800 by respomlent National was one of the factors 'i\'which he took into consideration at the time he s\'\"itched from a local supplier also indicated that t.he local company s brand had been in the store when he recently purchased it and tha.t because of his satisfaction ,..ith Breyer s (National) at his previous location he continued to handlc the locfll company s brand "just as long as to make a transfer to Breyer However, when the dealt',' later had a personal difference with a reyer salesman, he switched back to the loe-al supplier, which assumed , , \ CARSATION COMPA ET AL 1547 1274 Appendix the amount of the balance of the Kational loan plus an additional sum. Thereafter, when his sales of the local brand began to fall off he s"\vitched to respondent Borden which merely assumed the balance due: to the local supplier. Although the balance had since been paid off the dealer continued to t.trade with Borden because of his satisfaction with that company.

There is no indication that the policy and practice of respondents in tho making of loans is more liberal than that of competitors generally. On the contrary, the testimony of the dealer witnesses indicates that some of the respondents arc more conservative than some of their competitors. Thus it appears that one of the dealers who had been dealing with respondent Borden sought a loan which the latter declined. He then switched to a local competitor ho loaned him $1 200 with the understanding that it wouldllot have to be repaid until the store was sold. 1Vhen his sa.les began to fa.JI off he sought to return to Borden a.nd finally induced the Jattel' to assmne the competitor loan. 110weve1', Borden did so only on condition that the dealer start repaying the loan on a regular installment basis. In another instance where the dealer had received a smaJj loan of $150 at the time of switching to respondent Kational from a local supplier, the respondent declined to later make another loan of $500, and the cleaIer switched back to his old supplier ,,-which made the loan. l\Iost of the loan tra.nsactions inyoh' ed conventional loans, secured by chattel mortgages, "\which had to be paid oil: However, in three instances the dealers hac1l'eceivecl advance rebates which ,,-ere treated as loans, but ,,-which did not lu,,e to be repaid if the account purchased a certain amount of ice cream or dealt with the respondent for a given period, usually a year. In only one of these instances, that involving respondent Beatrice, did the dealer indicate that the advance rebate was an inducement for his change of suppliers. In he second instance, also invoh-ing respondent Beat.rice, there is no evidence as to whether the payment acted as an inducement since the agreement had been made by the witness' father and she had no personal knmvledge regarding the transaction. In the third instance, involving respondent Borden, the so called advance rebate actually was a price concession intended to equalize the difference in price between Borden and a local supplier s lmve.r price.

Of the rema.ining dealers, one testified that respondent ational had supplied him with a compressor for his Jountain and ha,cl serviced it 100 Borden s price was 20 a gallon higher thun the competitor s. It agreed to pay the dealer $500 on condition that the dealer purchase 2 500 gallons. 2 500 gallons multplied 20q equals $500.

1548 FEDERAL TRADE CO:\fMISSION DECISIONS Appendix 60 F.

but indicated that this ,vas a C011mon practice by most m1tnUfactllTcrs in the Now Yark area. There ,vas no indication given that the supply iug of the compressor or the servicing thereof had anything to do with the witness' choice of suppliers. Another dcalcr testified that he had rece.ivecl no loans or advance rebate.es or anything else froln respondent National, other than the regular schedule rebate, which was paid at the end of the year based on the witness' volume. The de.'ller testimony fails to establish, except in a few instances that financial assistance by any of the respondents or the payment of advance rebates was a factor in the choice of suppliers. The testimony does disclose that local competitors engage in the identical practices and that, in a number.r of instances, the assistance given by respondents was merely a defensive measure to meet the competition of local competitors. The amounts of the loans 1nd rebates involved were, for the most part, so small that it cannot be assllmed thi1.,t local competitors were automatically precluded from obtaining or keeping the accounts. On the contrary, in at least five instances where a loan had been made by a respondent, a nonrespondent compet.itor was later able to acquire the account. 101 The testimony of the retail dealers called actually added little to the documentary evidence previously produced by respondents, \which indicated that respondents have engaged in these practices in the Nmv York area. In t.he absence of testimony by respondents: competitors in the J\ ew York are,1 indicating the effect or probable effect of these practices upon the.m, the. examiner cannot Cl,ssmne that the practices have had or are likely to have an adverse euect. The testimony of the dealer ",'witnesses, by itself, docs not furnish the basis for any such inference. In fact, if the testimony of the dealer witnesses establishes anything, it establishes the widespread use of the identical practices by respondents ' local competitors in the :K ew York area and the fact t.hat they ha.ve had no difficulty in a.acquiring accounts because of these practices.

As above indicated, counsel supporting the complaint also called sales representatives of three of t.he respondents. The testimony of these witnesses fails to add anything significant to that of the dealers who were called. \Vhile inclicat.ing that some of the complaint practices are utilized by the respondents in securing or retaining accounts a fact which is not seriously in dispute, the testimony indicates that In four instances the nonrespondent C0D111etitors assumed the balance of 11 respondent' loan, even increasing the loan in one case. In the fifth instance the dealer himself paid oit the $:3;;7 balance of a responIJe!lt. luan when he became dissatisfied and decided to chau,ie O'suppliers.

CARNATION COMPA:- ET AL. 1549 1274 Appendix fillch practi('es lire ut.ilized only to a minor extent and are used to meet ('()l1pet- ition.

The first of the sales witnesses calleel by counsel supporting the complaint vms the former sales manager of respondent Beatrice in the New York J\IetropoJitan area. The witness hrc1 left Beatrice employ six months prior to the New York hearings and there appeared to be a complete abse.nce of any motivation for coloring his testimony. The witness indicated that the prinlary sales approach of the company's salesmen "- as to eniphasize the merits of their product and of their cornprmy. lion-ever, in some instances, dealers sought to obtain something additional, such as a loan or some other form of financial assistalwe. Although having no records ftvailable to assist him and indicat.ing that hls testimony was based only on a "guess, the witness estimated that the l1mnber of new accounts ,yhere it W,lS necessary to give the dealer somet.hing ext.n1 to obtain the account would not exceed 1.1 per cent of such new accounts. However, he also indicated that such accounts ,ycre mainly of the smaller variety, having a relatively small gallonage, so that in terms of new gallonage acquired (as distinguished from the percentage of accounts acquired), the percentage wOllJd be Jess than 15 per cent. He further imlic'"ted that the making of such loans 01' other,r forms of assistance ere recognized industry pra,diees in the K ('w York area and were utilized by large and small companies alike, the latter having i.n fact initiated some of the more recent refmements of some of the practices, such as the payment of ad vance rebates.

The witness described advance rebates as involving the making of a payment to the dealer based on an est.imate of 11i8 gallonage over a given period, such as a year or a year and a half, and applying the regular volume rebate percentage to such gallonage. Such payments were ma,cle in the form of a Joan which the dealer was not required to repay if he remained with the supplier for a stipulated period necessary to earn the rebate. The Beatrice witness testified that during the period of his employment he could recall using this practice in only three or four instances out of "well over a thousand accounts. The test.imony of the National Dairy sales representative likewise rails to 1nd1eate any ,widespread or aggressive use of the c.QTIplaint prflctic8S. Tho witness indicat.ed that new customers were approached on the basis of NationaPs quality and the advantages of carrying their l11frc,hanclise, find tha.t they preferred to "let sleeping dogs lie \ as far as sHgg-testing a loan or some other form of assistance to the customer. The only except.on to this was in the case of accounts where the salesman felt (hat the gallom.ge could be increased by the installation of ,, Appendix 60 F.

a soda fountain \which would enable the account to increase its bulk sales of ice cream. However, any suggestions emanating from the salesman in such instances were restricted primarily t.o the company exist.ing accounts. The witness conid l'ceall only one instance in the past three years ,,,here he had suggested the sa.le .of it soda. fountain to an account, the cost of such fountain being a.approximately S800.00. The Xational Dairy witness ahio confirmed the testimony of the Beatrice witness concerning the existence of the practice of prepaying rebates, bnt it does not appear that the practice has bee.n used to any extent by his company. lie also reje.rl'cd to a. refinement of the practice., known as a "pel'fonnnnce eontrace' , where a stipulated sum is advanced to the dealer in the fonn of a loan, the repa:nnent of which is subject to being cancelled upon the dealer s purchasing a given gallonage or remaining ,with the company for a. stated period. However, unlike the prepaid rebate, under' a performance eont.ract the dealer may also re,ceivc his regular gallonage rebate, if his sales warrant it. This practice in eirect involves it double rebate, one paid in adv:mce and one as it is earned. IIowever, t.he Nn,tiollal Dairy witness indicat.ed that he h,1(l utilized such a contract in only a. Sillg1E instance and that it did not involve (1, new ,account, but an existing account which onc of the local competitors had song"ht toacCJuire on the basi:: of such a contract and whose offer National Dniry met in order to retain the account. The National Dairy witness indicated that in his experience cu Lomcrs who had signed performance contracts or received adnllcP rebates or loans switched just ns readily as accounts ho had not.

The testimony of the Borden sales representative was hmited to a single account ,,-which he had flcqnired in 195:2 on the basis of f\ t\Voyear "performance eontr,act" in return for the payment of $150.00. The witness indicated that. it was his understanding that it dealer receiving such a payment did not receive any further n bate in addition to such pa.yment and tha.t the payment ,,' , in ellect., an advance rebate. 1-1e fnrthel' indicated that this was the only D.account. in the past three, years which he had acquired by t.he use of Buchu contract. If the evidence of the Kc,," York hearings establishes anything, it establishes the volatility of the dealer-supplier relationship and the frequent s\Vitchcs of dealers from supplier (-0 supplier both natioJlftl and local lind between national and local companies, despite 10 l1s adval1ce rebates, perfonnance contra.c.s 01' all 7 other forn of supplier assistance. The evidence indicates that the complaint practices arc utilized only to a limited e,stent, that they arenscd by local companies nf, we,ll fls by the respondents nnd that the. respondent do not lise them Carnation Cm1pfu,l" ET AL. 1551 1274 Appendix to any significant extent in an aggressive manner in order to a.cquire accounts from competitors.

The record is ,yholIy barren or any evidence or injury to competition or the likelihood or such injury, in the New York area, by reason of the use or any or the complaint practices by any or t.he respondents. On the contrary, it appears affrmatively that such practices, to the extent they are utilized by respondent, have not had any significant effect insofar as improving the market positions of these companies. Thus, it appears that respondent Borclen s market share in the :Kew York Metropolitan area actually declined from 19. 6 per cent in 1950 to 14.9 pcr cent in 1955, while respondent National's share declined from 17. 8 per cent to 16.6 per cent. Only the market share or respondent Beatrice has shown any increase and that a modest rise from 2. pel' cent in 1950 to 3. 5 per cent in 1955. Respondents N national and Borden have both sustained a decline in their share of production for the state as a whole between 1947 and 1955. National' s share has declined from 25. S per cent to 8 per cent, while Borden s declined from 18. 5 to 14.6 per cent. Respondent Beatrice s small 1947 share of 1 per cent increased to 3. 6 per cent by 1955. 15. Pitt80'Ul'gh, Pennsylvania The respondents doing business in the Pittsburgh area are National (Rieck Division), Borden, Foremost and Fairmont. Among the n011respondent companies operating in the area are North Pole lee Cream Company, Penguin Ice Cream Company, 1. K. IIage. , Country 13el1 Green Vallcy Co-op, Meyer & Powell, Forbes, and Taylor Ice Crmnn Company- Another local company, ,Villi am Penn lee Cream Company, was acquired by Green Valley Co-op in 1955. There is also a large chain of retail stores, Isn1is, which manufactures its own ice cream. Counsel supporting the complaint called as witnesses four dealers from the Pittsburgh area and one from "\Vest Virginia.1G2 lie also calleel a. representative of one of the Pittsburgh ice cream manufacturers, Korth Polc Ice Cream Company. 103 . N ortll Pole is -in both the cold storage and ice cream business. The company sells to retail stores and also manufactures ice cream novel- 102 Two other (leDler called in Pittsburgh had prC'viOl1sl" dealt ,,,ItJ1 two Cllmbcrland ice cream rnall11fa t\1rers who testified at the Washington, D. , hearings. The testimony of these two ciealer:' has already been considered in connection with the discussion of tbe tp-stirnony of these two manufacturers at the Washington hearings. '0.1 'I'he ),Grth Pole witness was callell with some III1parent degree of reluctance, after the examiner had indicated that the callng of dealer witnesses only in a market did not afford a suffcient b!1sh;for a finding of competitive impact. 1552 FEDERAL TRADE COl\ilnSSION DECISIONS Appendix 60 F.

ties for sale to other ice cream manufacturers. Its total sales in 1955 were approximately 550 000 gallons. The' company had as many retail accounts in 1955 as it had in 1054. However, the North Pole witness claimed that the company s sales per account had declined in 1955, result.ing in a decline of approximately 7 per cent in its sales to retail accounts. On the other hand, its sales of nove1ities to other manufacturers have increased, resulting in an overall increase in ice cream sales. Despite this overall increase, the orth Pole witness claimed that 1955 was thc least profitable year that the comp,my had had since 1942. The extent of such decline ,,,as not inclieated by the witness. I-Iowever, the fact that the decline was not limited to the ice cream end of the business, but was distributed equally between the company s cold storage tnd ice cream business suggests that overall business conditions in the community \Were affecting the company operations.

The North Pole witness made no effort to attribute the 1955 decline in retail sales and in profits to the respondents or to the complaint practices. On the contrary, he testified that the decline was the result of the fact tllat the retail chains with their lower prices and, to some extent, tho soft ice cream stands, had taken away business from the corner grocer and drug store to which his company sold. North Pole, apparently does not serve many chain stores. The witness made no effort to attribute its lack of sales to chain stores to any competition from the respondents. On the contrary, he testified that his company had not gone after the clHlin stores because it ,,"ould entail a considerable gea,ring up of its equipment for increased production and the buying of additional delivery equipment. lie expressed the opinion that the small unit of profit involved in suell sales '\"as not ,vorth the risk or possibly being cut off after the company had expanded its business. The record does not sho\'\ that the respondents ate dominant in the chain store market in the Pittsburgh area. The A & P chain is served by the local competitor, Penguin Ice Cream Company. The Tsaly chain makes its o\Vn ice cream. Respondent K ational at one time served a local chain known as the Thoroughfare stores, but lost the account to respondent Foremost. There is no evidence in the record that the latter chain received a special price from either respondent or that the price paid 'vas in any way tied to an exclusive dealing arrangement.

The record indicaies that K ort11 Pole furnishes its customers with cabinets and signs, and assists them i1nancial1y through money Jmms or fmancing the purchase of equipment. The witness gave no inclication that the furnishing of cabinets has represented any problem CARNATION COMPAr-'Y ET AL. 1553 1274 Appendix to his company, although he expressed the opinion that he thought thero were more cabinets in the field than were warranted by gallonage. He also questioned whether some of the signs were worth the advertising vahle involved. In the case of loans and financing, he appeared to have no objection if they were limited to the ice cream department of a store and to ice cream equipment, such as a soda founhtin, which would result in increased ice cream sales. Although the Korth Pole witness expressed some general conclu sions and opinions regarding some of the complaint practices, he made no effort to attribute the leacle.rship in these practices to any of the respondents nor did he attribute to them the loss of any accounts or inability to acquire accounts. In fact he made no reference to his company s loss of, or inability to acquire, any accounts. As above indicated, his company dill experience it 7 per cent decline in dealer sales in 1955 as a result of a decline in sales per account, but there is no indication that the complaint practices were in any "' ay involved. Furthermore, the witness indicated that his company s business had begun to improve in the last three months of 1955 and was continuing at the same rate in 1956. The company has expressed its confidence in the future by recently completing the construction of a new plant which will give it greater productive capacity. Three of the five dealer witnesses,s called in Pittsburgh I"\ere or had been customers of Korth Pole. One was the operator of a drug store in suburban Pittsburgh. The dca,ler had purchased the equipment of a bankrupt store which had been served by Korth Pole. The latter held a chattelll10rtgage in the amount of $G 700 on a soda fountain and equipment which the dealer purchased from the former owner. After a period of eight months thc dealer switched to respondent l' tional, which supplied him with a cabinet and sign (the latter advertising Sealtest ice cream and containing a privilege panel for the dealer s name). Respondent National also assumed the balance of the orill Pole loan and increased it back to the original amount to enable t.he O\yner to do some remodeling work. There I\a,s no indication from the witness that the loan from respondent K ational or the supplying of a. sign had anything to do with his change of suppliers. the contrary, he testified that hc had been handling l' ational' s products at other locations for many years and sought out the company with the expectation of increasing his gallonage. However, since the store was loc:lted in an area where orth Pole was favored by customers the store s ice cream sales began to decline after the s,1'ltch to K ational. ,Within six months the clenJer swit.ched back to Korth Pole, which supplied him '''1th a sign and took over the, balu.nee of the ntionalloall 1554 FEDERAL TRADE COM:\IISSIOX DECISIONS Appendix 60 F.

increasing it to 88 000. The dealer gave no indication that the increase of t.he loan by North Pole had anything to do with his decision to return to his former supplier.

The second dealer was also a pharmacist who hn"d dealt with North Pole. The latter had supplied the dealer with neon tubing, costing about 8300, to illuminate the store. It had also paid the dealer approximately 8400 to cover the cost of transporting a Re.xall sign, the dealer having recently become a Hosall store. I-Im\' ever, the dealer who had previously dealt with respondent ;.ational at ot.her locations for some fifteen years, decided to change to that company hoping to increase his sales. The latter, which had been songhtout by the c1cnJer agreed to supply neon tubing in place of that supplied by or1h Pole and to advance the dealer the transportation cost or the Re.xaJl sign irhich the dealer expected to have to repay to Korth Pole. There is nothing in the t.testimony of the witness to indicate that respondent tiona,1 acted in an aggressive manner to acquire f,lie account. On the contrary, the dealer had sought out respondent J\:at.ioll, which merely met the assistance which the dealer had recci,"ed from Xorth Pole. The third dealer was the owner of a retail dairy store in suburban Pittsburgh who had originally dealt with North Pole, later switched to respondent National and then ",yitched back to orthPole. While dealing with respondent 2\T ational, the latter furnished the dealer with fl, sign and with 850.00 worth of ice cream in the new cabinet which it supplied to the dealer. However yhe,n the dealer s customers began to demand Korth Pole ice cream and it appeared that National's price was higher despite an allege(l rebate, the dealer returned to his former fiupplier. The latter :furnished him with a Yooden sign in place or the metal National sign. If the te,stimony or this dealer demonstrates anything, it demonstrates the importance of price and consumer preference to a dealer. ",Vhen respondent National's price turned out to be higher than North Pole s and his sales declined, thc sign and ne\v cabinet furnished by National (neither or \yhieh were indicated by the dealer to have been in the nature of an inducement), were unable to hold him.

A fourth dealer was the owner of a drug store who had dealt in turn with respondents National and Borden. Ko other competitor was involved. The dealer at various tirnes had handled National's and Borden s product, and had l'cceivedlofLns from each. The testimony of this witness indicates that there is keon competition among the respondents for accounts, and tends to negate the impression ft much of the argument of counsel supporting the complaint suggesting that the respondents act as an organize,d group, which concentrates on CARXATION COlVPfu'I ET AL. 1555 1274 Appendix obtaining the accounts of independent producers and have a gentleman s agreement not to solicit each other s accounts. The latest loan received by the dealer was frolll National, with whom the account was then dealing. The dealer s store had burned down completely and a loan frmn National enabled him to reopen.

The fifth dealer was thc operator of a restaurant in nearby West Virginia., who had been handling Fairmont's Imperial brand for many years. lie switched to the competitor, Ha,gen, because of a dispute with the Fairmont delivery man. According to the dealer s testimony, Hagen promised hiul some " fancy Sig11S" and told him he would " Lve money" on their ice cream. I-Imvever, within two lllonths, he decided to return to respondent Fairmol1t because the Jatter had a better volume rebate. IVhile the latter furnished him with a better back bar for the cabinet, its cabinet was inferior to I-Iagen s. So far as appears frolll the witness' testimony, neither this nor it highway sig11 worth about $50.00 had anything to do with his switching back to Fairmont, the controlling consideration being price. There is nothing to llldicate that the Fairmont price Iyas other than its regular list price or that it was tied in any way to an exclusive dealing arrangement. The record is wholly barren of any evidence of injury or of probablo injury to competition in the Pittsburgh a.rea. There is no indication of any signiiicant decline in the number of competitors in the area. ",Yhile it does appea.r that National increased its market share by four per cent, from 11. 5 pci' cent in 1950 to 15.5 per cent in 1955 its sales in 1955 were actually 210 000 glLllons below its sales in 1947. Similarly, while Borden s market share increased slightly from 5. per cent to G.O per cent in 195. , its 1955 frozen products sales 'were actually 460 000 gallons below 1947. o comparable data appears for Fairmont or Foremost. 1-101,ever, the former was referred to as 'being involved in competition for only (1, single account, and no reference was made to the latter by any "itness. 16. Philadelphia, Pennsylmnia The respondents operating in the Philadelphia area, include Borden and K ational (Supplee- IVills-J ones and Breyer divisions). IVhile respondent Fairmont was present at the Philadelphia. hearing because of its operations in the Scranton area, no evidence was offered with respect to it. Respondent Foremost has acquired Philadelphia Dairies since the date. of the complaint, but it was not noticed for the hearing and was not jnvolved in any of the testimony. 71D-603--G4-- , 1556 FEDERAL TRADE C01.IMISSIO:" DECISIONS Appendb:: 60 F.

There are f1 number or regional companies which operate in the Philadelphia area. Among these 1S Abbott' , which is not only active in Philadelphia but operates as far north as Xew York City and as far south as Baltimore and ,y fishington, D. C. Another large competitor in the area is Richman which operates in Delaware, :Maryland, eastern Pennsylvania, New Jersey and parts or Kew York. Other substantial regional competitors atc Penn Dairies (Penn Supreme) and Hershey, which operate in the eastern Pennsylvania south Jersey a,ncl )farylanc1 nYeas. Additional substantial competitors in the Philadelphia 1\let,ropo1itan are,a are YUE',ngling and Betsy Ross, the latter being owned by the Philadelphia Association of Retail Druggists. Other.r competitors in the suburban areas are Shearer Nelson Ice Crea.m Company (of Royersford Pennsylvania), Reading Ice Cream Company and Miler s (both of Reading, Pennsylvania), BrofhofJ (of PottsyiJJe, Pennsylnnia) and "Windsor Farms (of Hamburg, Pennsylvania). The.re are also fl. substantial number of soft ice cream esbblishmellis such as Carvel and Dairy Queen and a, number of retftil establishments "which manuf lcture their oIYn ice cream such as 1-Iorrard .J ohnson, 1-Ijgh's and the I-lot Shoppes. Counsel supporting the complaint called three competitor witnesses from the area. T,'i' 1\ere from the suburban ftrea Xelson Ice. Cream Company and ,Vindsor Farms. The third ,yas a representative of the regional company, Ric.hman Ice Cream Company. A representative of Shearer Ice Cream Company ,yas subpoenaed but was excaused at the reflllest of counsel supporting the complaint. Six dealer witnesses were also ca.J1ed to testify three of ,whom had been cu::tomers of Richman.

R.ichma,n Ice Cream COlnpany has its 11,lin plant in SharptOlYll New .Jersey. As above indicated, it operates in a wide area from Kew York on the north to I\iarylanc1 on the south. The company sells to both retail establishments nncl to \dlOlesnle distributors Vd10 in turn reseH to retailers. H.ichman supplies its customers ,,,ith cabinets on a rent-free bflsis, 1;"ith signs containing privilege panels and with compressors for fountains. It fllso flssists eustomcrs financiall by loans of money and by the sale of equipment on an installment ba.sis.

The Riel1man witness, its sales nUlllager since 1954-, had no critieism of the practice. of supplying c1tbinets to eust.omers. 1-Ie particularly defended tho furnishing of the more expensive modern glass- front di pany cabinets on the ground that his company had de.veloped an attractive package and that it helped increase sales to have. the package. displayed, rather than hid(1en in an old-fashioned black-top cabinet. CARNATION COMPANY ET AL. 1557 "274 Appendix The witness' criticism was directed mainly at the rendering of financia.l assistance to retail accounts, including loans and the sale of equipment. He conceded that the practice had been going on in the industry for "a long while, indicating that "it probably goes back before my memory of the ice cream business." He claimed that the extent of such assistance had increased since 1950, .as the competition began getting rougher." The Hichman witness made no claim that any particular competitor was responsible for the practice or for the alleged increase in the tempo of its use. ,Vhile he did refer to two accounts which his company had allegedly lost to respondent National (Breyer) because of financing assistanee, and one which his company ,vas able to rebtin despite an alleged offer of ns istance frolll Tespond ent ational, there is no reliable eviclenc.e in the record to support the witness' hearsay testimony -with respect to these accounts. 104 any event, there -was no clailn made that respondent Nat.ional had been a lea del' or an aggressor in the practice of assisting customers iinancial1y.

The Richman witness c1a,imed that his company had lost approximntely 500 out of 1500 or 1600 accounts which it had allegedly served in 1950, and that its sales to dealer accounts had deellncc1 by approximately 10 percent in 1955. The reliability of the witness' testimony in this respect is, hm,cyer, open to serious question. In a pamphlet recently distributed by the company to its dealer. , the chim is made that the company serves 3 000 retltil accounts. The witness, while purporting to testify wit.h respect to a decline which had occurred since 1930, actually did not enter the company s employment until 1953, when he \Vasa sa,lesm til in the New York area, and did not occupy a managerial position until 1954. He c.onceded that the figures he gave "Iere a roug.h flpproximation a,nel were based on company records which.h he did not have with him. A request. by counsel for one of the respondents that he produce the records against which the claims of loss of business could be verified was refused by the witness. "\Vhile the examiner declined to direct the ,dtness to produce the appropriate records, he inc1ieated that he would take the witness refusal to cooperate into consideration in determining the weight to be given his testimony.

Aside from the fact that there is some reason to question the witness' testimony with respect to the loss of 500 accounts, no claim was The witness' testimony wltb respect to (JDe of the accounts did not even purport to be basel! on the inform a Hon received from the owner 01' the establishrnent, but on secondhand heorsay Information obtained from the president of his own company. His testimony with respect to the other two o('connts was bf1 e(l on information received 1'rom his salesman, it not appearing where thr latter bad obtained his information. , 1558 FEDERAL TRADE CO:VLL\IISSIO DECISIONS Appendix 60 F.

made that the loss of such accounts was due exclusively or even primarily to the respondents or to the complaint practices. lie attributed the decline to three factors, (a) some accounts went out of business, (b) some accounts were dropped by the company voluntarily beeauso they were no longer profitable, and (c) others went to "com. petitive companies." The ,vitness gave no indication as to the proportion which thc latter represented of the overall number of accounts lost, or as to the proportion of such loss which was attributable to the respondents or to the complaint practices. Despite the allegcd loss of retail accounts, the witness conceded on cross-examination that the company s overall gallonage had increased fronl well under a million gallons in 1953 to between one and two million gallons in 1956. lie claimed that the increase was clue mainly to increases in the company wholesale, as distinguished from its retail, sales. W11ile claiming that the former were less profitable than the latter, he conceded that the company s net worth had increased each year since 1953. In view of the recency of the witness' employment in a managerial capacity, his obvious reliance on company records and reports froln compm1Y officials to substantiate his claims of loss of accounts, his unwillingness to produce appropriate records, and the contradictory evidence in the record, the examiner can give little weight to the ,vitness' claims with respect to the allegeclloss of five hundred accounts. In any event, no finding can be made on the basis of witness' testimony that any substantial proportion of such Joss of accounts has been to the respondents or that it has been due to any of the complaint practices.

In only one instance out of the three dealer witnesses who had been Richman customers is there any definite indication that one of the complaint practices was a significant factor in the acquisition of the account by a respondent. However, in that instance it appeared that Richman had already used the practice to acquire the account from respondent K ational and that the latter met fire with fire. The account which had been dealing with respondent :National from ,,-,rhich it had provio11s1y received a loan, s"\vitchecl to lhchman when the latter 11ad agreed to payoff the balance of the National loan and to increase the amount thereof. Respondent NatiOlml thereupon retaliated by offering the dealer a larger loan. "'\Then a Richma.n re.presentative became apprised of ationars offer he agreed to match it, but the dealer declined the offer.

The second account was the 0'\ller of a restaurant who had received a loan of $4 200 from re.spondent National to finance the purchase of whichequipment in connection with the opening of his esta,blishment, CARKATION COMPA:\7 ET AL. 1559 1274 Appendix was located on a main north-south highway in New Jersey. Respondent National also contributed $125.00 toward a sign costing approximately $600, and $25.00 toward the printing of menus. The dealer testified that he was only interested in handling one of the better advertised brands because the establishment was located on the main highway and that his choice had narrowed down to respondent National's Breyer brand and Richman. As between the two, he preferred Breyer because it was very well accepted in the Philadelphia area and he thought it would help his business. The company acceded to his request for a loan and a contribution toward the sign. In conversations with the Richman representative the latter had also indicated a wilingness to cooperate in the furnishing of a sign and the making of a loan, but hecanse of the dealer s preference for the Breyer brand he chose the latter as his supplier. In this instance the testimony indicates that both companies were wiling to assist the dealer and that his choice was made on the basis of a preference for the Breyer brand. The third dealer was the operator of a luncheonette in suburban Germantown who had originally handled Richman, but decided to switch to respondent National when the Richman service became poor. At the time of the change from Richman to respondent National the account mvcc1 Hichman a balance of $500 on a loan which he had received from the latter. Respondent National declined to assume the balance of the Hichman loan, but the account nevertheless switched to the respondent. Richman thereupon threatened to sue the dealer for non-payment on the loan and the latter, after eight months, switehed back to Richman. This incident involves one of the few illst.a,neBS in tho record (none involving a respondent), where an ice cream manufacturCl' threatened to sue or brought snit against a dealer for failure to live up to the terms of a loan agreement. None of these three incidents indicate that respondent National's activities in connection with the lnaking of loans ate any different from those of its competitor Richman. In the first instance it acted defensively to reacquire an account \which Richman took away by the offer of a loan. In the second instance both companies had made offers of loans to a pioneer establishment, which made a choice of respondent National because of a preference for its products. In the third instance no loan at all was made by respondent National in the acquisition of an account to which Hichman had made a loan. The second competitor witness, the o\vner of Nelson Ice Cream Company, has his pia,ut at R.oyersford, which is approximately 28 miles west of Philadelphia. It only operates to fL minor extent \within the tches of the city. city limits, having about 25 accounts in the outer 1560 FEDERAL TRADE COMlSSION DECISIONS Appendix 60 F.

The company sells to retail ice cream dealers and also makes direct sales to the consumer by the home delivery method. In addition, it sells ice cream novelties to other manufacturers. The witness indicated that it was the general practice in the area to supply dealers with cabinets (on a rent-free basis), signs and compressors. He also testified that as competition became more keen manufacturers offered to assist dealers by supplying thmTI with 811a11 things such as menus and napkins, painting their stores, Inaking loans or money without interest and cash gifts. The most common or these practices, according to the witnesses, was the loan of money. He claimed that his company did not make ontright loans, but that it did endorse bank loans made to its dealers.

The witness made no effort to attdbute the use or these practices to any company or group or companies. On the contrary, he indicated that they were pretty generally engaged in by competitors in the area and that he c01l1c1not single out any company as being more active in this re,spect than any other company. Among his competitors are not only respondents atiomd and Borden, but Philadelphia Dairy (which was recently acquired by respondent Foremost), Richman, Penn Dairies, Betsy Ross, Shea rer and a half dozen other unnamed companies. The witness lwd no objection to the supplying of cabinets to dealers a,nd the servicing thereof, indicating that the average dealer could not afford to purchase such cabinets or service the,m. lie also agreed that " 80 certain amount of sign work is necessary.)' His primary objection appeared to be to the nlaking of loans, since his company did not have the re30urces to make such loans directly, although it did endorse bank loans made to some customers. The Nelson witness claimcd that his sales to dealers had declined by 5 to 10 pci' cent over the past three years. However, this involved mainly a decline in sales by his exist.ing accounts rather than a loss of accounts. lie attributed such decline in unit sales to the increase in the number of establishments seiling ice cream in the area, and particularly to the shift in sales to chain stores. The witness made effort to attribute his compa, s inability.y to acquire chain store business to any of the respondents or to any of the complaint practices, but rather to the fact that such chains prefer to make a contract with a single supplier covering a. large group of stores (usually in excess or 100). He also indicated that his company did not have the facilities to serve such R la.rge group of st.ores.

Despite the alleged decline in sales through retail outlets, Nelson ovemlJ sn les have increased from approximately 200 000 gallons in 1954 to 250 000 gallons in 1955. This in turn represents a substantial CARNA'l' ION COMPA1\Ty ET AL. 15tH 1274 Appendix increase over the company s gallonage of approximately 125 000 gal- 05 The more recent increaseslons in 1946 when it started business. have reflected an increase in sales directly to the consumer and in the sale of novelties to other manufacturers. No claim was made that such sales were less profitable than those to retailers. While the Nelson witness claimed that his company had lost some accounts due to the fact that a competitor might have made a loan to the account, he did not refer to any specific accounts or indicate that any substantial number of accounts were involved. 1-1e agreed that it was not unusual for a company to lose 8 percent of its accounts per year through normal' turnover and estimated that his company might have lost thirty accounts in a five-year period, of which 10 percent might have represented accounts where a, 103,n was involved, but that the company might also have acquirec120 to 25 percent in new accounts. Very little weight can be given to the speculations of the \vitness with respect to the possible loss of accounts due to the making of loans by Ul1named cOlnpetitors. The witness conceded that he had very little personal knowledge concerning the acquisition or loss of accounts or the reasons therefor, since he was net too closely connected \with the selling end of the business and nlost of his testimony concerning comtoldpetitive practices used was based on what his sales manager hu.c1 him. Ilis O\,n testimony indicates that the decline in retail sales was due mainly to a decline in unit sales, rather than to a Joss of accounts. This, in turn, was attributed to an increase in the number of stores handling ice cream and a shift in sales to the food chains. The latter type or establishment is interested Inainly in price concessions, rather than loans. The witness conceded that his company does not have the facilities to serve any la.rge chain. The fact that the company does little newspa,per advertising and none on radio or TV may also account for its recent inahility to expand retail sales. The record fails to indicate any injury to competition in the area in which Nelson operates. The representative of the Shearer company was excused from testifying and no other witnesses from the area were called. Although it appears from the testimony of the Nelson witness that hvo small conlpetitors in the area have cea,sed operating, there. is no indication that this was the result of any activity by any of the respondents. One of thc companies, Smith Dairy of Doylestown sold out to the 10cnJ competitor Shearer and the other company, Rickey 105 The above figures arc admittedly rongh approximations since the witness testified without the aid of books and records. He indicated that he did not regard his records as confidcntial find ,..auld have been willing to produce them, escept that he bad not been requested to do so.

1562 FEDERAL TRADE CO:M\ISSIO); DECISIONS Appendix 60 F.

(of ,Vest Chester) sold out to another Pennsylvania company, Penn Dairies.

The third competitor witness called was the vice president of Windsor Farms of Hamburg, a company formed in 1950 by the merger of Smith' s Model Dairy with Windsor Dairy. .Windsor competes not only with respondents National and Borden, but with Penn Dairies Yuengling, Shearer, Reading, .Miller, Brohoff and Lehigh Valley (of Allentown). ,Vindsor Farms supplies most of its customers with ice cream cabinets, in accordance with the general practice in the area. Those customers who own their own equiplnent receive a discount of 10 cents a gallon. Windsor built up a large part of its gallonage by the practice of leasing and rehabilitating stores and then subleasing them to a retail dealer, with the understanding that he would purchase ,Vindsor Farm s ice cream. By 1950 the company had reached its maximum volume of 100 000 gallons and had about 100 accounts. However, the company s gallonage and number of accounts began to decline until, at the time of Philadelphia hearing in May 1956, it had 60 to 70 accounts and a volume of approximately 60 000 gallons. The ,Vindsor witness named only one account (in Allentown) as having been lost to a respondent, National's Supplee- v Vilis-Jones division. The account in question \Vas one where 1Vindsor Farms had leased a store and spent $12 000 in remodeling it, and then subleased it to a retail dealer, who later switched to respondent National when the latter ,allegedly made some further repairs and rendered financial assistance to the dealer. There is no evidence in the record, outside of the witness' unsupported hearsay testimony, to indicate what, if anything, respondent National did ror the dealer. In any event, shortly after the account had switched from ,Yindsor to X ational it changed to another competitor, Abbott Dairies, indicating the lack of holding qualities of respondent Kational's alleged assistance. The witness conceded that this was the only account which he could recall having lost to respondent National. He made no claim to having lost any other accounts to any other respondent.

tccQI'ding to the witness' own testimony the explanation for the company s decline appears to lie not in the makjng of loans or furnishing of assistance by competitors, but in the fact that the. compn, has not engaged in any active selling program and made little effort to acquire accounts. It likewise does no advertising to speak of. The -witness, whose title ,vas vice president in charge of sales, conceded that he "never was schooled in selling myself, and I never did a whole lot of Boning when I had to approach other companies: customers. His efforts have been restricted mainly to following up inquiries 1'e- CARi\TATIQj\"' CO:\IPAL'Y ET AL. 1563 1274 Appendix ceived from prospective accounts. The witness indicated that because he was "a little bit too timid'; * * to go out after business * * * and mls afraid to be rejected by somebody when I would try sell to them " he developed the practice of leasing a vacant store, ilnproving it tnd then subleasing it to a dealer on condition that the latter would nse the witness' ice cream. This practice has now been largely abandoned and the witness conceded that his company s decline in v.volume might be attributable to the fact that the company had changed its method of acquiring business. 1-1e also conceded that the company had "not made a. great effort in trying to improve the picture. Despite this, the company's sales have become stabilized in the past six months and the 'witness expressed the hope that it might increase " of its own 'LCcord." The record fails to establish that any of respondents have been responsible, to any significant extent, in the decline in sales of 'Vindsor Farms.

Of the three dealers called in Philadelphia, who were not involved in competition between Richman and one of the respondents, only one had ever done business with a non-respondent company. This was the owner of a drug store in Philadelphia who had originally dealt with respondent X ational, but had switched to Betsy Ross because respondent K atlonal refused to replace the refrigeration equipment in the store when it became dilapidated. Since the Betsy Ross price was consiclenLbly lower than that of K ational the owner decided to purchase his O\vn refrigeration equipment and to pay for it out of the price diiIerential. However, his volume declined significantly due to competition from several well-known brands in the neighborhood, including particularly respondent NatiomLl's Breyer brand. The owner later decided to sen the store but found that no one wanted to buy it if they had to purchase the refrigeration equipment. After about a year, he prevailed upon I'respondent National to buy the refrigeration equipment at its depreciated value and to resume selling to him. can hardly be said that respondent ational: induced the dealer to deal ,,'ith it in this instance. It had simply failed to supply the dealer with serviceable refrigeration equipment in the original instance, as is custornary in the area, and the dealer after an unsuccessful experiment with another suppller simply rcturned to respondent National who, at the dealer s urging, took over the cabinet which had become a burden to him and paid him the depreciated value. The other two accounts "ere dealers who had switched between respondents Borden and :\ational. Both were O\vners of luncheonettes in Philadelphia. One had originally handled National's Breyer brand but switched to respondent Borden because of the allegedly poor 1564 FEDERAL TRADE COMM:ISSION DECISIONS Appendix 60 F.

Breyer service. Sometime after the switch the owner received a loan from Borden, which had nothing to do with his decision to change suppliers. He did, however, receive an advertising allowance of $500 from Borden at the time of the change, which was to enable him to give his customers larger portions of Borden s ice cream. This was paid in order to overcome a customer reluctance to purchase the Borden brand after the store had handled Breyer s for ten years. The second dealer had originally handled Borden, but changed to Breyer after about five years because business was slackening and he thought Breyer, which is a well-known brand in Philadelphia, would help improve business. At the time of the switch there was an outstanding balance of approximately 8350. 00 on a loan from Borden which Breyer helped the dealer payoff. 'When the change to Breyer did not improve sales, the dealer decided to switch back to Borden. The latter gave the deder an advertising allowance of $150.00 to enable him to give his customers larger portions in order to help encourage Borden sales. Both transactions involved only the respondents and there no indication that any competitor sought to obtain any of these accounts or was unable to do so. In neither instance did the dealer indicato that he had been induced to switch because of the advertising al1mYlulce or a loan or a cabinet or any other complaint practice. The evidence regarding the Philadelphia arc a fails to indicate that respondents have used any of the complaint practices in an aggressive manner to acquire business from competitors or that their engngement in the::e practices differs from any of their competitors. There is ,a total absence of evidence that they have injured any competitor, let alone competition in the area, by the use of the complaint practices, or otherwise.

The evidence indicates that both of the respondents involved in the testimony of the witnesses, 1'iz., N ational and Borden, have sustained a decline in sales and market share. in the area. In the Philadelphia Metropolitan area, where respondent Xational in 1950 had 42.0 per cent of the market, its share had declined by 1955 to 32. per cent. Hesponclent Borden s share of the market declined from 3 per cent in 1050 to 3.6 per cent in 1955. In the nearby Allentown area, which was involved to some extent in thc testimony of the ,Vindsor Farms witness, 1'respondent, National's market share declined from 8. 9 per cent in 1950 to 5.9 per cent in 1955 and respondent Borden s share declined frotn 0.7 per cent to 0.6 per ee.nt in the same period. In addition to the decline in sales on a relative market share basis, respondent National also sustained a substantial decline on an absolute gallonage basis, its ga.lonage declining from 8. 3 11i1- CARNATION COMPA1\-Y ET AL. 1565 1274 Appendix lion in 1950 to 7.8 million in 1955. The sales of the Breyer Philadelphia plant, which comprises the bulk of its sales in the Philadelphia area, declined from 8. 3 million in 1947 to 5.2 million in 1955. The number of Breyer customers declined from 8 444 to 7 875 between 1950 and 1956, and average gallonage sales per account declined from 30D to 1 016 during the same period. In the nearby Allentown area the gallonage of the Supplee-v Vilis-Jones Division declined from 549 000 in 1947 to 452 000 in 1955, and the Breycr Division sales declined from 796 000 in 1947 to '160 000 in 1955. The sales of Borden Philadelphia branch have declined from 880 000 gallons in 1946 to 807 000 in 1955, and those of its Allcntown branch from 270 000 to 219 000 gallons during the same period. These figures hardly suggest that either respondent National or Borden is tending to overwhelm the Philadelphia market. There is nothing in these figures to suggest that they are using the complaint practices in an aggressive manner to injure competitors.

17. Knornville, Tennessee The testilnony and other evidence adduced at the I(noxviJle hearings involved primarily the Knoxvile nmrket.lO" The respondents doing business in the ICnoxville ma.rket are Pet and ational. S\Vift & Company is another so-called national company operating in the area. The local companies include Galo, Sani-Seal, French Broad, Broad Acre, Mayfield, Bacon, Kay s and Stoifcls. The only competitor witnesses called by counsel supporting the complaint \\er8 from Galo and Sani-Seal. Three dealers were also called by him. Respondent Pet called a representative of French Broad as its witness during the defense hearings, as well as a number of dealers. The defense evidence ofi:ered by Pet:is included only in its record. 100 A single witness, who had formerly done business In Johnson City in 1!J46 or 1947. was also called to testify by counsel supporting the complaint. The witness' testimony was included only in the Pet Dairy record since that is the only responaellt with whom the witness had competed. His testimony was to the effect that he had called on a number of accounts of his competitors and had been informed that the customers wanted financial assistance In order to agree to switch. The witness decided to sell out his business after fhe or six months. Be conceded that none of the Pet accounts upon which he had called had advised him that they could not do business with him because of a loan from Pet. There Is no evidence whatsoever in the record aB to the maldng of any loans or rendering of other forms of financial assistance to customers by Pet in 1946 or 1947. Since there is no indicatlcn that Pet was involved in any of the accounts TIP on whom the witness called, it must be assumed that the accounts where loans were requested were customers of the witness' other competitor, Southern Maid Ice Cream Company, which WfiS acquired by Foremost in 1952 but was then an independent com. pany. The testimony or this witness bas no probative value in finy of these proceeding's since none of the respondents appears to have been involved in his alleged competitive diffculties.

1566 FEDERAL TRADE CQ::::HSSION DECISIONS Appendix 60 F.

According to the testimony of the Sani-Seal Ice Cream Company witness, the company s gallonage declined from a peak of 220 000 gallons in 1946 to approximately 130 000 gallons in 1955, and the number of its customers declined during the same period 11'0111 approx. imatc1y 450 to about 300. The basic question for consideration is whether this 'vas due, in any substantial degree to respondents' use of the complaint practices. ,Vhen initially asked as to the reason for tho decline, the witness answered: ":More competition." The evidence in the record does support this testimony since it a.appears that between 1949 and 195:3 there was a substantial augmentation in the number of cOlnpan:ies in the area, including Pet, French Broad\ Bacon, Stoffels Broad Acre, and :Jlayfield. After further prodding and leading counsel supporting the complaint the witness nttributed his company decline "in some respects" to the f8.ct that he could not supply customeI'S with suffcient cabinets bec8.use he did not have enough capital. However, further interrogation as to the reasons for his company loss of accounts produced the response that it was clue to "electrical signs, advertisements, television programs, n8' spapel' advertisements billboard advertising" and because he could not afford to "paint signs on all of the buildings." To such methods of advertising by unidentified competitors he attributed 80 or 90 per cent of his loss. Since the complaint does not charge the use of advertising by respondents to be illegal, the ahove reasons given by the witness w-ould appear to fall outside the scope of the complaint, except possibly for the electric signs and painting of signs. Even as to the latter, it is clear from the witness' testimony that he was talking primarily about signs advertising the ice cream manufacturer s products, rather than signs supplied to customers containing privilege panels. Aside fron"! the confusion in the witness' testimony, his opinions and conclusions are of dubious value in view of his a.admitted lack of personal know ledge concerning the reasons for the loss of accounts since he never called on any of the accounts himself. This responsibility helonged to his former associate who had recently died and to his route salesmen. "\Vhile some of the latter were present in the hearing room, they \Were not called to testify. Despite t.he \Vit.ness admitted lack of personal familiarity with reasons why his accounts had ceased dealing \With his company, he nevertheless sought to assign reasons for the Joss of four accounts to respondent Pet and for the loss of one account to respondent ationo'1. The accounts acquired by Pet were alleged to have been lost because of loans or iinancing of equipment. The witness' conclusions in this respect were admittedly based on inform,.tion gained while CARNATIO:- COMPA:- ET AL. 1567 1274 AppendL-. listening to testimony given at the hearing. I-Ie admitted that none of the accounts had rpquested a loan from him and that he didn know whether competitors had made loans or not. His testimony concern iug one of the accounts, a drug store operating under the na.me Todd & Annisteacl, was contradicted by the owner 'who was also called as a witness by counsel supporting the complaint. The de,tler testified that he had dealt with Pet at another Jocation for a good many years and found National Dairy s ice cream (rather than Sani-Seal's) at a new establishment which he took over. Since he had dea-lt with Pet for many years at prior locations 118 had a personal preference for dealing with Pet. "'while the dealer admittedly had fianced the purchase of a refrigerated back bar, fountain and related equipment through respondent Pet costing $10 279, this was not the reason for his choice of Pet. IIc testified that he had made no cllort to request assistance from his former supplier, since "I was going to switch to Pet, regardless of money." The other dealer mentioned by the "itness, :Medical ..\1'ts Drug Company, had purchased a fountain from respondent Pet for $9 055. I-Iowever, there is no evidence in the record that the sale of the fountain had anything to do wH-h the aceounfs switching. :F'llrthcl'Inol'e, an exhibit covering this transaction, which was offered by counsel supporting the complaint, indicates that the 10rmer supplier \,as respondent Katlona- (Southern Dairies) rather than Sani-Seal.

The third account involving respondent Pet was a pha.rmacy operated by Clear Fork Coal Company of lIiddlesboro, Kentucky. According to the SfUli-Seal \witness, his company had lost the account to Pet because the latter had sold the dealer a fountain, after Sani-Seal had been requested to do so and declined. An exhibit offered in evidence by counsel snpporting the complaint reveals that respondent Pet did not sell the account a fountain, although it did repair a fountf1in without charge. The operator of the store (who was called as a l\ltJJCSS by respondent Pet and whose testimony appears only in the Pet record) confirmed the fact that Pet had not s01d it a fountain. The dealer testified that he had asked Pet to repair the fountain after 8nni-Senl hnd t.ried unsuccessfully over a two-year period to put the fOllnta,in in good running order. The Sani-Seal witness also referred to another drug store account, in ICnoxville, Smithwood Drug Store, as vlng Plln:hnsed a. new fountain from Pet. I-Iowever, there is no evidence in the record to Rupport the witness' hearsay testimony. The some account refe.reed to by the witness which involved respondent ational was a drug store, "which Sani-Seal had been serving at one location and \"which asked for its assistance in moying- a cOlmter to a Appendix 60 F.

new location. The counter was apparently too large for Sani-Seal's truck. Later the account switched to respondent National, after the latter had hauled the counter as well as 11 fountain to the ne,,, location. The witness conceded that he did not know whether respondent National had paid for the counter or the fOlUltain, and made no pretense to kt101ving why the aCColUlt had switched. Although 11 representative of the drug store had been subpoenaed and could have shed light on the reasons for the switch, he \Vas excused at the request of counsel support.ng the complaint.

The evidence oirered with respect to Sani-Seal wholly fails to establish that its decline in gallonage and in the number of its accounts has been due to the compbint practices. Insofar as respondent N atianal is concerned, it has been in the market for 11 great many years with Bani-Seal and the latter "\vas able to build up its gallonage during most of this period without any apparent diffculty "ith that respondent. The decline, \which occurred mainly in 1\)50 ancl19;,1, appears to have been clue lnainly to the entr:r of new competitors into the market and to Sani- Sea,l's lack of an aggressive advertising anclmerchanclising program. The witness himself attributed 80 to 90 per cent of his loss to his company s inability to advertise as competitors did. In any event, 1951 rcpresrnt-ecl the company s low "fateI' mark and it has since been able to increase its gallonage by approximately 10 000 gallons despite the competition from respondents and other companies in the market.

The testimony of the second competitor witness caned by counsel supporting the complaint, the president of Gain Products Company, indicates that the company apparently made good progress until the winter of 105;) "when it allegedly ran into competitive diffculties with respondent Pet. It may be noted, parenthetical1y, that while the Sani-Seal witness claimed to ha.ve had his main competitive diffculties with Pet during 1950 and 1951, Galo apparently \rent through this pcrioc. -.without encountering any notmvort.hy problems. Galo s period of travail occurred during the ';inter of 195:) and part. of 1054 .when l'esponclcnt Pet allegecll)' took a number of its larger customers by selling them ice creanl cabinets find granting them a 5 percent discount for owning their own refrigeration equipment. Galo s sales fell from approximately $;018 000 in 195;0 to $290 000 in J 954. In 1955 there was a further decline to 5261 000 and at the time of the Kno:syille hearings in Juno 1956 the itness clainlecl his companies sales were running at the rate of $250 000 annually.

'\V1mtever may hn,ve been the cn,use of Galo s decline in sales between 1053 and 1956 (assuming the rcliability of 11is cstimated sales figures), CARNATION COMPA.'I ET AL. 1569 1274 Appendix t.here is no reliable evidence in the record upon which to base any finding that respondent Pet or any other respondent ,vas responsible therefor. The Galo witness was unable to identify a single account as having been lost to respondent Pet because of the sale of a cabinet. 'Vhile the ,vitness did have with hiln a memorandum, prepared from reports received from his driver and sales manager relating to the loss of certain specific accounts, none of these accounts involved the sale of cabinets by respondent Pet.

Aside from the lack of reliable evidence to support the witness' conclusory and hertrsay testimony, other testimony by the witness as wen as by a dealer witness called by counsel supporting the complaint points up the lack of inherent probability in his claims. Thus, in connection with a specifically named account, \,'which was allegcdly lost to respondent Pet because the latter had granted it a 13 percent discount plus an a,c1ditional 5 percent for owning his Q1yn cabinet, the witness conceded that despite the alleged 18 percent discount granted by Pet his own companies price was still lower than Pet's. The witness also conceded that there \Were other such insti1nces where accounts had switched to Pet after a.1Jegeclly ree-eiving a discount despite the fact that Gala s price was lower than Pet's. Aside from the fact that the uncontradicted testimony of a Pet offcial called by counsel supporting the complaint and other evidence offered by him e tablishes that Pet's maximum quantity discount is 10 percent (not 13 percent), the fact that these accounts switched to Pet despite the lower G"lo price would appear to indicate that there must ha.yc been some other reason for the switch, other than that suggested by the witness' hearsay and conclusory testimony that it was clue to Pet's better price. Similar.rly, since the dealers receive no price advflntagc from Pet, visa-vis Gala, by buying a cabinet in order to obtain a 5 percent refrigeration aJlmyance, it seems obvious t.hat some other factor must have been responsible for the switching of the accounts from Gala to Pet. It may also be noted, in connection with the witness' testimony regarding the aJJegecl sale of cabinets by Pet to some of his customers that the basis of his complaint was not so much the sale of the tbinets as such, as it was the fact tlutt the sale allegedly "tied them up for five or six years "while they were making the payments." Yet one of the dealer witnesses called by counsel supporting the C01nplaint, to whom Pet had soh1 a cabinet (,,'ho had switched from National not Galo) , testified th"t the cabinet was sold for cash, not on time. An exhibit offered by counsel supporting the complaint covering this transaction corroboratas this fact. Furthermore, even where Pet does sell on an installment basis, there is nothing in the p(;.

Appendix 60 F.

agreement which requires the dealer to purchase only Pet' s products. In addition to the one account referred to above, the witness claimed to have received reports of the loss of seve.ra.! other accounts, including a local school, because of discounts received from Pet. N at only is there no Teliable evidence to support the witness' hearsay and C011clnsory testing10ny but, as above indicated, it appears highly improbable that the discounts \Were the 1'8O,son for the alleged switches since Galo s price ,vas lower than Pe.t:s even with the maxinlUm discount. ,\Yhjle conceding that respondent KationnJ was not involved in the loss of accounts due to the sale of cabinets (which allegedly wns the factor responsible for the loss of most of the accounts), the Oa10 witness claimed to have lost two accounts to respondent Ka.tional for other reasons. One ,,-as fLllegec11y lost, according to the hearsay report or his sales manager, when respondent Xational furnished the account with fl. large display cabinet and another for frozen rood. Kat only is there no reliable evi(lence to support the witness secondhand hearsay but a Rational offcinJ testified that the account in question, which.h was actually being split with another supplier, had been supplied "\'Iith a special cabinet for Ice crerun novelties (not for frozen food), and that when the denier "\\'as fmmd putting some frozen foods in the cabinet he. 'sas asked to re110ye them and complied. The other, account involving l'e.spondent a.tional "as aetuftlly being split with respondent Pet and "\'Iith the local competitor, French Broad. The alleged reason for the loss or the flccount by Galo "\1;as the fact that the ace-aunt had rec.eived a 5 pel' cent discount from National for owning his own cabinet. Aside from the fact that there is no reliable evidence in the reeorc1 to support the witness' hearsay testimony, the witness' failure to giyc this account a discount for o"ning his O"\U cabinet is contrary to Ole pract.ice of almost every competitor wit- Hess "\yho testified in these proceedings. Furthermore, the complaint charges such practice be illegal only when it involves an exclusive dealing ftrrnngement. Since the account in question was split there was obviously no cxclusivp, arrangement involved. Assuming, arguendo, that Galo lost a number of accounts to Pet because of the alleged saJe of cabinets, there is no evidence that the latter "\as the leader or aggressor in this practice since the "\vitness conceded that this practice, as \yell as the others about which he testified, \fore engaged in by competitors generally in the area. The witness named several accounts as having been lost to the local combtor, Broad Acre, because of the latter s a.alleged supplying of equipment. Oa10 itself admittedly sells cabinets to customers who wish CARNA1' ION COMPANY ET AL. 1571 1274 Appendix to buy them. There is no evidence in the record that Pet's terms to dealers are any mote liberal than Galo Only one dealer witness caned by counsel supporting the complaint had d81tlt with Galo. The dealet s testimony indicated that Galo ice cream was in a grocery store "which he had purchased, and that within a short time thereafter he changed to Pet because he thought their ice cream was better. 1Vhile the cabinet which he received from Pet was more modern than Galo, the witness testified that there was no discussion about furnishing him with a better cabinet at the tilne he had arranged to switeh. There is no indication that the dealer had asked G,tlo for a better box and bccn refused. ,Vhile the witness testified that occasionally he would put some frozen food in the cabinet if there was room, he conceded that he had received no permission from Pet to do this. The lack of importance of the ca.biuet as a reason for the switch is indicated by the fact that the account later switched to French Broad ,,-hen he became dissatisfied with Pet' service.

Despite the alleged competitive diffculties of the local competitors Sani-Seal and Galo, during the period 1950 1951 and 1953-1954, respectively, another local competitor, French Broad (which had preTiously been only in the milk business), enter.red the ice cremn business in April 1950 and was a;ble to build up a substantial sales volume. Beginning with sales of approximately $160 000 in the first year of operation, it increased to $308 000 by the fisca.l yea-I' ending !June 1956. During the three-month period from July to September 1957, French Broad' s sales ,were running in excess of $175 000 which, on an annual basis, would result in an increase in sales over the year 1956. It thus appears that a new competitor, operating in the same market as Gala and Sani-Seal a.nd competing "\with the same respondents, was able to double his sales volume during the period when those two companies were having alleged competitive diffculties. Several other competitors were able to enter the same market after French Broad, including :\1ayfield, Bacon and Stoffels, and no competitors have gone out of business. According to the French Broad witness, his company sales were second or third in the market and Mayfield, which had entered after his company, was close to French Broad' s volume. The French Broad ",'it.ness attributed his company's progress to hard work advertising and the development of an attractive package as a merchandising device. He referred to Sani-Seal and Galo and onc or two other competitors as companies which did not advertise or send out salesmen and as not being "hard competitors. ' \VhiJc he 1'e- 719-603--4--100 1572 FEDERAL TRADE CO SSIO DECISIONS Appendix 60 F.

ferred to respondent Pet as a "hard competitor, he also characterized them as "very fair.

The evidence with respect to respondent ational's and respondent Pet' s position in the market fails to show any such change in position during the period referred to by the complaining witnesses as to suggest the use of any unusual competitive devices by them. The sales of National' s Knoxville plant have actually suffered a very substantial decline from 516 000 gallons in 1945 to 325 000 gallons in 1955. Its share of production in the Stat.e of Tennessee has declined from 20.4 per cent in 1947 to 15.2 per cent in 1955. \Vhile there are no figures on Pet's sales in the Knoxville area in the record, it does appear that its share of production in the State of Tennessee, which was 12.5 per cent in 1947, increased gradually to 15.3 per cent by 1950 per cent in 1955.and thereafter began to decline until it reached 12.2 There is nothing in any of the evidence involving the Knoxville area to suggest any injury to competition by the respondents or to indicate that the respondents are overwhelming the market. 18. Chicago, Illinois The hearings in Chicago involved the testimony of three competitor witnesses and seven dealers operating in the Chicago l\fctropo1itan area, and a single competitor \vitness from DeKalb, Illinois. Since the testimony of these two groups of witnesses involves different market aTens, each is considered separately below. a. Chicago Area The number of companies manufacturing and selling ice cream in the Chicago area is almost legion. Respondents Borden and National (Ilydrox cJivision) are the only two respondents which operate within the city. Respondent Beatrice operates only in the suburban area. Among the larger local competitors in the area are IIawthorn-Thfelloc1y, Dean, Bowman, Bresler, Legion, Central-Highlander, Columbia Goodman-American, Deluxe, Kational Ice Cream Comprmy (not to be confused with National Dairy), Goldenrod, Roney, and Drexel. The so-called national company, Swift & Company, also operates in the Chicago area. Representatives of three competitors, Columbia Gooclmml and Deluxe were called as witnesses by counsel supporting the complaint.

The testimony of the three competitor "\yitnesscs -indicates that it is customary for most companies in the Chicago area -La supply their customers with cabinets and signs, to assist customers financially by making loans or otherwise assisting thenl in the purchase of equipment CARNATION COMPAl'Y ET AL. 1573 1274 Appendix and to pay rebates to prospective customers, including the advancing of rebates in the form of a loan based on an estimate of the customer gallonage with the understanding that the amount advanced will be liquidated after the cllstomer has remained with the supplier for a given period of time or has purchased a given quantity of ice cream. Many of the local companies operating in the area advertise the fact that they are willing to assist customers iinancial1y. As in other parts of the country, there has been n 111arked shift in the sale of ice cream from drug stores and other bulk stops to food stores and, ,vi thin the latter category, from local grocery stores to the chain stores. There has also been a marked increase in the number of soft ice cream establislllTIcnts in the area. A substantial llmnbcr of companies have entered the Chicago market in the post-war period, including some which formerly were in the milk business alone. The three competitor witnesses complained generally about the decline in sales or profits or their inability to increase sales after the peak achieved in 1946 or 1947. However, an anaJYBis of their testimony fails to support any finding that thc problems allegedly confronting these companies are due primarily, or e\'en in substantial measure, to the activities of the three respondents operfLting within the Chicago area and, more specifically, to the engagement in the complaint practices by such respondents.

The principal stress of the Columbia Ice Cream Company witness was on the fact that the COlllpany had not been able to grow since 1947 in proportion to the increase in population. lie indicated that its sales had probably decreased slightly, from approximately 400 000 in 1947 to somewhere between 350 000 and 400 000 gallons at the 6me of the hearing, a.nc1 that the number of its accounts had like,vise declined from approximately 750 to approximately 650. The Columbia witness sought to attribute his company s inability to grow to the fact that it had insuffcient capital to spend in the acquisition of newly accounts or the holding of existing accounts. lie emphasized partiClllarly the amounts which were involved in the making of loans and in the advancing of rebate.es to customers, although he indicated tlmt the latter practice had become less prevalent than it had been in the immediate postwar period. I-Iowevcr, the witness made no efl'ort to 8ttribute these t,, o practices to t.he re,spondents or to any group of competitors. On the contrary, he inclicfltcc1 that competitors generally in the area engaged in such practices, including his own company, which has flu advertisement in the Chicago telephone directory to the effect that it furnishes customers "it.h "Fountains & Cabinets" and cngn,ges in "Financial and Store Planning. 1-Ie conceded that his 1574 FEDERAL TRADE COJ.IMISSIOX DECISIONS Appendix 60 F.

compa.ny had even brought suit aga.inst one of its customers to which it had advanced $1 000, in the fOITn of an advance rebate on an exclusive dealing cont.ract, when the cllstOlner stopped purchasing its product. This is the only instance in the record of such a suit being brought in the Chicago rea.

The Colmnbi t witness not only made no effort to attribute the practices in question to thcresponc1ents, but made no cla.im t-hnt his C011pany had lost any account.s to the respondents. \Vhile he indicated that his decline in gallonage b1yolvcd the s"\vitching of accounts to other manufacturers, as ,veil as the fact that some aCCollnts had gOlle out of bUfOiness, no claim was lllllde that any of his acconllts had been acquired by any of the respondents through the use of any of the complaint practices. Although the ,witness did indicate tllft some of his competitors had increased their share of the ma.rket, he referred specifically to the local nonresponc1ent. cOlnpctitors I-Ia wthol'n-rde.l10cly Dea,n, and Bresler, and conceded that there had been a general decline in ice cream sa.les in the area since J 94- The witness from Deluxe Ice Cream Company likewise cln,imed that his company hnc1 sustainer1 f! 1o s in gf111on:l, (' 1)( we(,1l 10-17 and 10;'55 from 30:2 000 gallons to 2-:8 000 gallons. I-Imyen' , ill his ea"e the dechne was not. llccompaniE'd by any decline in the. number of accounts, it appearing that at the time of the Chicago hearin Q: in June 1956 Deluxe had a greater number of accounts than it had in 1947. The decline in gallona.ge 'Y1LS attributed to a decline in sales per account. This, in turn, was at.t.ributed to " increased competition" from chain stores and soft ice cream establishments, and only partly to the loss of some of the company s better accounts due to "advance rebates and other forms of financial assistance by competitors. The hitter pract.ices were not a.ttributed by the witness to the respondents or to any other group of competitors. On the contrary, the witness' original estimate that they were engaged in by "90 percent of the, companies in the Chicago a.rea since 194-(-", ,YRS later mnencled to read "100 percent" or "every company in this aren." The "itness conceded that his own company was among those which engaged in the practice and. that during the yeat 1955 a single salesman of his company had acquired 25 "fairly good accounts" by giving 1:lPrn money "in the form of ady1lnce rebates" on condition that they would remain with the company for one to three years. The witness c1aimec1 tlmt he later decided to discontinue the practice because of the expense involved. Only three specific accounts were referred to by the Deluxe witness as having been lost to competitors because of some form of financial assjstance, one to the local competitor Bresler, and two to the respond- CARNATION COMPANY ET AL. 1575 J.2i4 Appendix ent Borden. In the case of the lauer t\\' O aCcolUlts the witness conceded that both had originally been acquired from Borden by his company and that ho hu"cl no personal knowledge as to what, if anything, the accounts had received \vhen they switched back to Borden. lot Despite the return of these two accounts to respondent Borden, the witness conceded that he Imd acquired twice as many accounts from respondent Borden as the htter had acquired from his conlpallY during the past three years. He described Borden as "clean-cut competition and sing1ecl out t'iYO local companies, Ha\vthorn-JvIellody and Bresler as being his '; tol1ghest" competition. No reference was made to Beat.rice since Deluxe does not compete with it. ,Vhile it may bc that the respondents have made loans or paid adva,nce rebates in the Chicago area" it seems clear that they are by no means t.he instigators or leaders in such practices. On the contrary, accol'ling to the Deluxe witness, respondent Xational had ceased the practice oJ nmking adva,nce rebates several yml,rs previously, but the practice nevertheless continued. He expressed the opinion that the pract.ice could not be brought t.o an end merely by stopping respondent.s Borden and National since the others would continue, as they had in fact despite respondent National's discontinuance. Insofar as the decline in DeLuxo sa,Jes is attributable to the shift in bUfiiness t.o the chain stores, there is no evidence in the record to est.ablish t.hat the two respondents doing business in Chicago have been able t.o corner the chain store market by virtue of using any the complaint practices or have precluded Deluxe Ironi obtaining such business hy t.he use of these practices. On the cont.rary, the evidence :indicates that most of the chains in the Chicago are,a are served by other manufacturers. One of the largest grocery chains, National Tea Company, is served by Hawthorn-Mellody, which also serves Stineway Drugs reputedly one of the hrgest drug store chains in the Chicago area. Dean JIilk Company serves the J owen Grocery chain; Bowman serves the Kroger stores; and Roney Ice Cream Company serves the Hi-Lo chain. The IGA chain is split between Dear) and Central- Highlander. The latter also has the largest share of the Grocerland chain. Natioml,l Ice Cream Company (not respondent National Dairy) serves the Centrella chain, which has about 180 stores. Of the respondents, only Borden serves a large chain, viz., the A & P chain. Respondent Kationa, , so far as appears frolll the record serves only Del-Farms, a relatively small chain.

101 The whlle s indicated that he lme,,, he had lost tbe accounts Dut "whether Borden hlJu Jlnanced them or given any flssi tance. I don t know," He agreed that the best way to final out why the accounts had switched would be to can them as witnesses. .

1576 FEDERAL TRADE COMMSSIO DECISIONS Appendix 60 F.

"'hilc bemoaning the shift from the smaller stores to the chains, the Deluxe witness conceded that his company had not made any efrort to acquire such accounts. He attributed this to the fact that his product was llot nationally advertised and to the fact that the "price structure which exists today in the chain stores is a hard factor to meet. YVhile suggesting that some companies did not publish a price list or adhere to one, he made no effort to attribute this to any of the respondents or to indicate that such pricing involved any exclusive dealing arrangements.

The third competitor witness, the general manager of Goodman Anlcrican Ice Cream Company, was even more vague and less convincing in his testimony than his bvo predecessors, insofar as establishing any connection between the company's alleged diffculties and any of the respondents. The witness claimed that his company s gallonage had declined from bctwecn 500 000 and 600 000 gallons in 1946 or 1947 to approximately 300 000 gallons. This, however, was not accompanied by any decline in the number of its accounts, which are now at a pcak, viz., 800 to 1 000. The decline in gallonage was attributed primarily to a decline in sales per accounts, resulting from the fact tha,t, the company has traditionally served the smaller merchants who have suffered a loss in sales to the chain stores. The witness claimed that his company could not sell to the chain stores or cooperative buying groups because they would not buy "from a local person. He also claimed that his company had lost some large accounts because of loans and the furnishing of new cabinets. As above indicated, most of the chain stores in the Chicago area are served by nonrespondent local companies. The witness' explanation for the fact that such local competitors were successful in obtaining chain store accounts and were increasing in size despite their relatively recent entry into the market, was the fact that they were receiving financial assistance from "the same source " as respondents ational and Borden. According to the witness these companies are part of a "trust", which has some sort of esoteric connection with the stockyards. Tho witness named most of the leading nonrespondent companies as being members of the mysterious "trust. :: He was uncertain as to who was not part of the trust, except for his own company. The witness' basic test for whether someone was or was not in the trust was whether they sought to acquire one another s custOlners. In connection with the second reason for Goodman s decline in gallonage., viz. , the loss of S011e. of its better accounts due to Joans and other assistance from competitors, the witness referred to only two specific accounts, one allegedly lost to respondent National and one to CARNATION CaMPM" ET AL. 1577 1274 Appendix respondent Borden. The loss to respondent National involved an unnamed account which had allegcdly received a $20 000 Joan. There , or course, no evidence in t.he record to support the witness' hearsay and speculative testimony regarding any such loss to respondent National. The loss to respondent Borden involved the concession at Soldiers' Field in Chicago which had switched to respondent Borden rollowing a change in the management or the concession. The Goodman witness expressed the opinion that the account had switched because Bordcn had supplied it "ith modern cabinets to replace his own, which had been there for "many years." There is no reliable evidence in the record to support the witness' conclusions. A tender by respondent Borden of thc offcial of the Soldiers' Field conccssion responsible for the change or suppliers was declined by counsel snpporting the complaint. Since none or the other competitors referred to cabinets as a competitive problem in the Chicago area and there is no indication that Goodman had ever been requested to supply the account with better cabinets, it appears highly unlikely that the change of suppliers was brought about because of the furnishing of better cabinets. Outside of this single account, which had been acquired by Borden six years earlier, the witness was unable to recall a single other account lost to that respondent. one of the dealer witnesses from the Chicago area had ever been accounts of any of the three competitor witnesses, nor is there any evidence that any of them were solicited by these competitors. One dealer was the owner of a small delicatessen who had received a 875. payment in the nature of an advm1ce rebate from respondent K ational on condition that he would remain with the company for two years. The two-year period had already expired several years previously but the account was still dealing "with respondent National, although under no a.apparent obligation to do so. There is no evidence in the record that this account had ever been served by another sup peer it appearing that the dealer had taken over a store \which was already being served by respondent National.

The second dealer witness was the owner of two drug stores which had been handling the products of both Flint Da.iry (a local competitor) and respondent Beatrice. The dealer had swit"hed to respondent National after receiving a loan of $10 000. Both Flint and Beatrice had declined to make a loan. 1Vl,ile the dealer claimed that he had been considering changing to respondent National prior to receiving the loan, in order to get a better quality ice cream, and that certain financial diffculties had merely prccipitated an eR rly decision on his part to change, it seems reasonable to infer (hat the 1578 FEDERAL TRADE COl\MISSION DECISIONS Appendix 60 F.

making of u, loan by X a.tional was a significant factor in the account' decision to change suppliers. IIowever, the only companies which were affected by the change were another respondent, Beatrice, and a local competitor, Flint Dairy, which was not referred to in any other testimony involving the Chicago area. Although the loan had been paid off fi, e years previously, the account was still dealing with respondent K ational.

The third dealer was the operator of a grocery store who had, in succession, handled the ice cream of three other members of the mysterious "trust" , 'liz., Dean, Central, and Swift, who according to the Gooclman witness' testimony were not supposed to solicit aile another s accounts. The dealer testified thn.the ha.d wanted to change to National for some time, but hacl been unable to clo so until a nearby store which had been handling 1\; ationaFs brand was sold. At that time he sent for the National sale!3lTJan and induced the latter to make a payment of $500 in the nature of a rental for the space allocated to the ice cream cabinet, simihlr to advances received from the dealer s bread company supplier for granting it a certain amount of shelf space. There "as no testimony by the dealer that the I"tyment in question constituted t.he reason or inducement for his ( change of suppliers.

The fourth dealer was the owner of a confectionery store which had been handling the products of Central Ice Cremn Comprmy and had changed to respondent NationnJ after the latter had sold it a secondhand fountain in place of a leaky 31-year-old fountain which the dealer had in his premises. It does not appear whether the account had requested Central to supply him wit,h a fountain and the witness did not indicate that the fountain wns the reason for his chnnging suppliers. '\Vhile the witness signed a contract for the fountain, he had no recollection oiits provisions.

Two other dealer witnesses calleel by counsel supporting the comw plaint were from Evanston, Illinois. Their testimony did not involve any of the Chicago competitors and no competitors from the Evans- O\'\l1e1' of threeton area were called. One of the dealers \\"as the restaurants which had switched from a local competitor Badger Ice after Ba,dger had dec1inedCream Company to respondent Beatrice, to manufacture the dealer s ice cream under a private label. Respond- 000 ent Beatrice took over the $4 000 balance on two Joans of $15 and $25 000 which the account had received from Badger, and loaned the account an additional $1 000. The reason for the change from Badger to l\feaclowgold, according to the witness' ll1contraclictecl testimony, was that he wanted a private label ice Cl'Canl which Badger CARNATION COMPANY ET AL. 1579 1274 Appendix declined to make for him. Despite a two-year exclusive dealing contract, the dealer decided to switch back to Badger within a year when the latter agreed to make its ice cream under a private label, and the dealer had become dissatisfied with Beatrice s ice cream. The dealer had no apparent diffculty in repaying the balance due on the Beatrice loan, and the latter made no effort to hold the dealer to the two-year contract.

The other Evanston dealer had been split between Dean Milk Company and respondent National and changed from the latter to respondent Beatrice, but continued to deal with Dean. .While the dealer testified that he did not know why he had changed from respondent National to respondent Beatrice, an advance rebate of $575.00 apparently was a consideration for the change. However, despite the fact that an agreement with respondent Beatrice required the dealer to purchase his frozen products requirements frOlTI Beatrice exclusively for a period of two years, he continued to deal with his other supplier, Dean Milk Company.

Another dealer called was a former grocer from Gary, Indiana, who had switched from the local competitor, U-Joy, to respondent Borden because of a "better price" (not otherwise identified in the record). WI,ile the latter also loaned the dealer $158. , this merely permitted repaynlent of the balance of a loan in that amount which was due to the' local competitor U- Joy, and was not referred to as a reason for switch ing.

The above testimony serves to emphasize the volatility of the dealersupplier relationship and the inability of a supplier to hold a dealer when the latter is dissatisfied. In only a few of the above instances docs the testimony clearly establish that a loan or other assistance was a factor in the change of suppliers. Even the presence of an exclusive dealing clause did not prevent the recipient of an advance rebate from splitting his business with another supplier. IVhcll one of the dealers was dissatisfied with his supplier s product, as in the case of the Evanston restaura,nt o\V1101', no contract could hold him. ,Vhen the dealer was satisfied with his supplier s product he continued to purchase fr01n the supplier even though a loan had long since been paid 01'1' Assuming that the evic1euce does establish that the making of Joans or rendering of other assistance does motivate some dealers in changing suppliers or influences them in their original choice of a supplier, the evidence is wholly deficient insofar as establishing that the respondents have been responsible for instituting such pn1Cticcs or have been the leaders in the use of SHch practices in tbe Chicago area. The evidence Appendix 60 F.

likewise fails to establish that there has been any injury to competition or even to any competitors, as a result of respondents' utilization of any of such practices in the Chicago area. The evidence indicates that there are a large number of local competitors in the area, some of whom are substantial in size and several of whom are relatively recent entrants into the market. There is no evidence of any substantial caslla.lties among competitors in the market. The few local comprmies which ha.ve ceased operating since 1947 have done so mainly by selling out to other local competitors and not to the respondents. The respondents have not notably improved their position in the Chicago market. On the contrary, the Chicago area sales of both respondents National and Borden have declined substantially between 1947 and 1955. The former s sales from its Chicago plant in 1955 were 500 000 g,dlons as compared with 2 600 000 gallons in 1947. The sales of Borden s Chicago branch were 2 760 000 gallons in 1955 compared to 3 445 000 gallons in 1947.

b. DcKalb, Ilinois DeKalb is located approximately fifty miles west of Chicago. The respondents operating in the area are K ational, Borden, and Bcntrice. Swift & Company also sells in the area. The local competitors include ilinois Valley, Valley Maid, Colonial, ShurtJoeff, Badger, Holiday, and Hey Bros. The only competitor witness from the area called was a representative or I-Iey Bros. No dealer witnesses testified. IIey Bros. operates two plants, one in DeTClab and another in Quincy. The testimony of the Hey Bros. witness apparently related only to the DeIOab operation. The "\vitness, testifying without records, could not give his company's 1947 sales, but estimatcd its 1949 gallonage as being between 90 000 and 100 000. He indicated that there had been a gradual increase during the period of the I(orean War to approximately 110 000 gallons in 1953, and that thereafter the gallonage declined t.o the 1949 volume. The company had about the same number of accounts in 1956 as it did jn 1949, which the witness estimated roughly as between 150 and 200.

The Hey Bros. witness indicated that there was a certain amount of switching of accounts which went on at all times, most of which had nothing to do with any of the complaint practices. However, he claimed that the company had lost some accounts to respondents Borden. National and Beatrice due to some of the complaint practices. 1-Ie jndicated that the practices which he regarded as most troublesome were the making of loans and the supplying of equipment not related to the iee cream business.

CAIlKATION COMPANY ET AL. 1581 1274 Appendix TI,e Hey witness referred to a number of accounts which his company had lost or been unable to acquire as a result of the alleged making of loans or the furnishing of equipment or the granting of a better price by respondents Borden, Beatrice and 1\ ational. In most instances the witness' testimony did not even purport to be based on information received .from the dealer in question, but on the witness own surmise or on rumor or information received from his predecessor as manager. 1-1is testimony concerning the rea,sons for the loss of these accounts is so unreliable that no findings can be based thereon. Indicative of the lack of reliability of such testimony is that relating to a restaurant in Dundee, Illinois, to which Hey Bros. had allegedly declined to make an additional loan and which switched to respondent Beatrice because, according to the witness understanding, it had given the account such additional financial assistance. However, it was later stipulated between counsel that the only financial assistance received by the account in question from respondent Beatrice was a loan covering the exact amOlUlt necessary to payoff the balance due on the outstanding Hey Eros. loan. It seems obvious, therefore, that the reason for the account's switching could not have been the refusal by IIey Bros. to grant an aclditionalloan and the willingness by respondent Beatrice to render such assistance. Another account allegedly lost was a college which respondent N tional had allegedly acquired by giving a gratuity to the purchasing agent. This testimony was based on information allegedly re,ceived by the witness frolll certain unidentified persons f t the college. Yet an exhibit offered by c01Ulsel supporting the complaint indicates that the account had been served by respondent National (not Hey Bros. from 1944 to 1954, and that respondent National lost the account in October 1954 to its local competitor, illinois Valley Ice Cream Company, on the basis of tbe latter s lower bid. Several other accounts were allegedly lost to respondent Borden because of reported special prices or the making of ice cream under a private label, none of which is supported by any reliable evidence iu the record. The latter reason viz., manufacturing under a private label, is not even a practice charged to be ilegal under the complaint.

Despite the witness' complaints about the making of loans by competitors, he conceded that his company also made loans to worthy customers to help improve their sales. In fact, he indicated that the loans cost his company "very little" because most of the loans were discounted at the bank. Presumably there have been no substantial defaults on the loan payments so as to require the bank to seek recourse against Hey Bros.

Appendix 60 F.

vVllatever may have been the cause of Hey Bros. alleged problems there is no reliable evidence on which to base any finding that they are attributable, to any substantial degree, to the engagement by respondents in any of the cOlllplaint practices. In fact the \vitness conceded that most of his decline since 1949 was due to reasons having no connection with the complaint practices. The company s alleged competitive problems apparently have not interfered with its buying out at least two other competitors.

The evidence offered at the Chicago hearings, involving either the Chicago market or any other area in Illinois, :fails to establish that the respondents have been responsible for any injury to competition or that their engagement in the complaint practices is likely to lead to such a result. Tho figures offered hy respondents involving the state as a whole fail to indicate that any o:f them is gaining market position in the state. I,respondent Beatrice s shflre of state production has remained almost const!11t between 1947 and 1955 , being 7.5 per cent in the earlier year and 7.7 per cent in the later year. Respondent Borden s share has declined slightly :from 10. 1 per cent in 1947 to 9. per cent in 1955. Respondent National's share has declined significantly from 14.4 per cent in 1947 to 9. 6 per cent in 19.15. 19. Des Moines, I Q1Da The evidence adduced at Des :Moines involves three separate areas in Iowa, the Burlington area which is located in southeastern Iowa on the Mississippi River directly across :from Illinois; Davenport and tho Tri- City area, including Rock Island and Moline in Illinois; and several communities in western Iowa.. Each ,appears to be a separate market area and each is discussed separately below. Competitor witnesses from each area, were called, but no dealer witnesses testified.

a. Burlington Area The respondents doing busine.ss in the Burlington area are ational (Roszell division), Borden and Beatrice. Swift & Company also operates in the area. The main local competit.ors are 'i\TJlitehouse Dairy, and Lagomarcino-Grupe Company, both of Burlington. Another competitor, Corso, operates on a small scale in the area. Representatives of both 'Vhitehouse and LagOlllflTcino were called as witnesses.

There is no evidence of anything but a healthy competitive situation in the Burlington market. Both local competitors are vying for CAR:-'ATION COMPA1TY ET AL. 1583 1274 Appendix first place in the area. The WIlitehouse witness claimed that his company was first in the 111arket and Lagomarcino-Grupe second, while the witness from the latter made the reverse claim. Actually, if the figures given by the witnesses are accurate, Lagomarcino has the greater number of accounts, while vVhitehouse has the greater gallonage.

It is customary for manuf 1,turers in the area t.o supply their customers \with cabinets and with signs. "'Vhile it was the practice prior to 1936 to charge a rental in connection '",ith the supplying of cabinets this practice has long since eeased. The cessation of the chrugillg of a rental was not attributed by the witness to any competitor. Customers who own their own equipment receive a lO- cent a gaj10n discount. N'0 complaints were made about the practice of supplying signs, 'I?ith privilege panel. In fact, the ,Yhitehouse witness indica,teel that he considered the practice to be " good ethics" and that, his company considered it "good business good advertising" to supply sneh signs.

Tlle \Vhitehouse witness singled ant the grant.ing of "excessive discounts" and the supplying of "extra cabinets" as being two practices which he regarded as involving " bad ethics." 1-10wove1', no reliable evidence ,vas offered t.o establish that any of the respondents have engaged in these prrtctices in the Burlington area. The ,Vhitehouse witness conceded that customers would freqncntly put meat and other proc1acts in his cfLbinets without, permission. 1\7while claiming that his salesmen had told hiln of extra cabinet.s being offered, he conceded that he could not "remember where, or who it was." The witness' testimony was equally vague :in connection with the matter of " excessive discounts. He could not fecaJl a. single account which he had lost on a price basis and conceded that his company granted quantity discounts ranging as high as 18 cents a gallon. While asserting that he had the "impression " that the "out-of-to\vn people were "more Jenient' in the mn,tter of discounts, the only specific reference to such leniency involved t"o accounts which his company had solicited, but which were acquired by the nonrespondent Swift. The only specific accounts referred to by the \vjtness involving any of respondents were two accolmts \which ,Vhitehouse had allegedly lost to respondent Htional and where the witness had been "told" that the latt.er ha.d done some painting. :N'o evidence was oifered to snpport the witness' hearsay and conclusory testimony. It may a.1so be noted that by the time of the hearing, 'Whitehouse, had regaincd one aT the accounts a,ud Lagomarcino had acquired the other. 1584 FEDERAL TRADE CO:lnSSION DECISIONS Appendix 60 F.

Despite some apparent minor annoyances, the VVhitehouse witness agreed that his company had been able to maintain its position in the Burlington market. \VhiJe its gallonage of 150 000 gallons was down from the 1946-1947 ga11011age of approximately 200 000, he apparently did not regard this as sig11ificant since he indicated the earlier years were considered "banner years in the ice cream industry. ,Vhitehouse is actual.lly serving as many a,accounts as it did in the immediate postwar period, viz., 125 to 150. Despite some loss of accounts each year, the company has been able to gain at least as many accounts as it has lost and the witness regarded such turnover as normal.

The witness representing Lagom trcino-Grupe complained that his compa.ny had been unable to acquire any chain store accounts because the chains prefer a national bra,nel mune anel because of price. evidence ,vas offered, hmvevcr, to establish what prices the respondents wero offering to the chains or to indicate that the prices were tied to any exclusive deaJil1g arrangmnent. In fact, except for one instance it does not even appear that the chains are being served by the respondents. The only clmin referred to as being served by a respondent is a grocery chrtin which is actually being served on a split basis by the two local competitors along with respondent Borden, the latter making a private Jabel brand for the account. Another chain mentioned by the 1\itl1css is \Valgrecn, to which his COll1prtUY was selling ice cream under a privlLte label, but which was allegedly acquired by the nonrespondent Swift on the basis of a lower price. Lagomarcino serves at least one other chain in Burlington, ICresge The Lagomarcino witness also referred to the supplying of cabinets for frozen foods a.s a troublesome practice, but the only aCCOlUlt which he cited involved the nonrespondent Swift. One of the accounts which he mentioned had been served on a split basis by both IAlgomarcino and respondent National, and both allegedly had lost the account to Swift. The witness also cited an account 1which his company haclJost three years previously to respondent Borden because of a "deal" that he had been told was "too good * * ".' to pass up, the nature of which was not otherwise identified for the record; ancl he "ttribnted to respondent Kational his company s loss of a single a.account involving the alleged furnishing of equipment, based on a report which the wHness himself conceded was "strictly hearsay. " lod As far as respondent Beatrice m It mlly be noted that the witness was employed by the company Ils manager for only a year and ten months at the time of the hearing. :Much of his testimony related to events that had occurred as much as three yellrs or more prior thereto. CARNATION CO k,-y ET AL. 1585 1274 Appendix was concerned, the witness agreed that " (tJhey were fair competition we gct along pretty good.

Despite some Rllcged competitive problems Lagomarcino has been able to substmltially maintaill its gallonage and its position as one of the top two companies in the market. The witness estimated his gallOlmge as approximately 125 000, which he thought might be down bJ' about 6 000 gallons from the previous year. 'While the company had lost about seventeen accounts during the yea.r, thirteen of these represented accounts which h ld gone out of business, and only three or four involved accounts which had switched to competitors. The record fails to indicate that competition in the Burlington area has been injured by reason of respondents engagement in the complaint practices. The two main local compet.itors appear to be in a healthy condition. No evidence was offered of any mortality among competitors in the area. The area is a fairly static one, population- Wlse.

b. DRvenport (Tri-City) Area The respondents operating in the Tri- City area include National Borden and Beatrice. Swift & Company and Bowman of Chicago also operate in the aren. Local competitors include Peerless, Illinois Iowa Dairy, Baker, Downing and Model. Some of these complmies operate from the Iowa side of the river and some from the Illinois side. The only ,vitness from the area, called to testify was a representative of Ill-nois-Iowa Dairy of Da.venport, which is a farmers' cooperative. The company is primarily in the milk business and ,vent into the ice cream business only recently. The reason given for its entry into the ice cream business was that it wished to have an outlet for its excess milk production and to take care of some of its Inilk aCcOlmts desiring to purcha,se ice cream.

Illinois-Iowa Dairy s volume in 1956 was approximately 40 000 to 000 gallons, which ,vas the largest yolmne the company had ever achieved. It makes little enort to acquire new accounts since its plant capacity is limited and, according to the testimony or its representative, it does not care for additional business. Its sales a,re limited to accounts which sell its milk. The company supplies its customers 'Iith cabinets nnd grant.s a volume discount to large users. The 1Jlinois- Iowa Dairy witness claimed that the biggest ice cremn competitors in the area are Swift and respondent Borden. The only testimony by the witness which might be considered in the nftture of a complaint related to a single account which his driver had reported respondent Beatrice had sought to acquire by offering it a lmyer price on both milk 1586 FEDERAL 'rhode COMMISSION DECISIONS Appendix 60 F.

and ice area, , and a newer cabinet. The witness had no idea what the Beatrice price offer was, nor whether it was less than its regular Est price. He also conceded that the cabinet which he had supplied to the account was a "little agey. " In any event, he was able to retain the aCcOlmt by giving it a five-cent a. gallon discount on ice cream and supplying it with a newer cabinet. Outside of this single account there is nothing in the witness' testimony to indicate any competitive diffculties with any of the respondents.

The evidence concerning the Tri-City area wholly fails to establish any injury to competition or the likelihood of such injury. 'While the witness indicated that two local competitors in the area. had sold out to respondent Borden and one to Fairmont, no evidence was offered to indicate that these companies had experienced any competitive diffculties 1yjth the respondents arising out or the complaint practices. c. \Vestern Iowa The respondents operating in the "western Iowa area include Borden Beatrice, National (IIarding Division) and Fairmont. Among the numerous local cOlnpanies in the area ate Sac City Creamery, lanning Creamery, Blucbunny Ice Cream, Rosedale Dairy, Boone Dairy, Jef- 101'sonvi110 Creamery, Audubon Ice Cream, Fort George Creamery and Nelson Ice Cream Company. Representatives of Sac City Creamery and 1\Ianning Creanlery were called a.s 'witnesses by counsel supporting the comphtint. 109 The furnishing of cabinets and signs to customers appears to be customary practices in the area. Cabinets luLVe been furnished on a rent-free basis for at lea,st twenty years. CnstOlilers owning their own cabinets receive a lO-cent a gallon discount. Neither of the compe6tor witnesses had any critici:-m of the practice of supplying cabinets or that of furnishing signs or claimed that they were being used as competitive wmtpons. Tho Sac City witness indicated that the furnishing of signs was of advantage to both the ice cream manufacturer and the dealer to the former because it advertised its prod uct and to the latter because it called attention to his store. The ,vitness could not recall a single account which had requested a sign under circumstanc.es where he felt the sign "as not justified and ,,-here a competitor had supplied one. 0 \Vhile at first cstinlating the cost of supplying sibins as approximately three cents per gallon (computed The )lanning Creamery witness testified at the hearing in Omaha, Nebraska, rather than in Des !\loines.

1:0 The witness referred to one account where he had agreed to contribute onc-half of the cost of n sign, but which decided to purchase its Ice cream from respondent National. The witness indicated that lie bad no knowledge of .what, if anything, ::.rational had done for the account.

CARKATJON COMPA.'I ET AL. 1587 1274 Appendix by dividing the company s anmml gallonage by its anual expcnditure \\"RS too highfor signs), the witness later conceded that this estilnate only one year. 0 refer-since it assumed that the life of H, sign was ence to the furnishing of signs as a. competitive problem.m was made by the ::Ianning witness.

The principal complaint of the two western lmva witnesses was directed at their alleged inability to acquire chain store accounts through which an increasing proportion of the ice cream sales in the area are being made. However, these complaints \were not directed at the respondents nor at the complaint practices. The Sac City witness' explanation for not being able to acquire chain store accounts was that "we just don t know the right people." The witness referred to respondent Borden as serving one chain and respondent Beatrice another, but did not kl101Y whether respondents National or Fairmont served any chains in the area. At least one of the chains referred to by the Sac City witness is being served on t split basis in SOlTIC areas by a number of local competitors, as "\vell a.s by respondent Borden. Particuhtr stress was placed by the witness upon the practice of supplying some chain stores with ice cream under a private label. The witness indicated that if this practice continued to grolV it would increase the costs of the smaller manufacturer for cartons and refrigeration space. 1-:Iowev81', this practice is beyond the scope of the complaint, except possibly insofar as it may involve qmlntity discounts, as to which no evidence WtLS offered with respect to the western Iowa area. The :Manning witness likewise stressed his C011panis inability to obtain chain store business. 1-Ie attributed this to the fact that such chains operated oyer a wider area than that in which his company distributed its products, and that therefore he was unable to submit a bid in response to invitations which provided for service on an over-all area basis.

The Sac City witness made no reference to any account which the company had lost or had been unable to acquire by reason of the use of the complaint practices by any of the respondents. The :\Ianning witness could recall only three accounts as being involved in competitive situations, none involving the complaint practices. One was allegedly lost to respondent :National because, as reported by the store s manager, the accow1t had gotten "a better deal'\ the nature of which the witness did not know. The second account was lost to the local competitor, Sac City Creamery, for unknown reasons. The third account was a chain store w hieh was being served by respondent Borclenand which J\l uming s salesman solicited but was unable to acquire for l'e.asons not appea.ring in the record. 719-003-64--101 1588 FEDERAL TRADE COMMISSIOK DECISIOXS Appendix 60 F.

Xeither of the two competitor ,vitnesses claimed that his company was losing market position or was in a.ny serious diffculty. Sac City Crea.mery operates several plants in western Iowa. It has built up its gallonage from an estimated 1:JO 000-140 000 gallons in 1947 to approximately 200 000 gallons in 1955, and the number of its accounts has increased from about 200 to 300 during the same period. It now employs three full-time salesmen, compared to the earlier period when two members of the frLlnily operating the company did the selling. Counsel supporting the complaint conceded, in cired, at the Des nloines hearing that the company haclnot sustained any competitive injury, indicating that his purpose in calling the witness iyas to clCUlOJlstrate that the absence of any fmancing practices sneh as t.hose existing in Chicago makes .it possible for sma.ller manufacturers to prosper. Presumably this wouldmcan that the furnishing of cabinets and signs docs not prevent successful operation by smaller manufacturers. JHanning Creamery has been able to maintain at least. the same number of accounts over the past few years. l-Iowever, the witness in(licated that his company /s gallonage had declined gradua.lJy over a. five-year period from about. 115 000 gallons t.o approximately 100 000 gallons. This ,vas a.alleged to be due to a decline in the company s sales to cafes and a loss of several good accOlUlts. 1Vhile the :l\annillg ,vitness did not specify the reason for the company s decline in cafe sales which re.prosont a good proportion of its sales, the tcs6mony of the Sac City witness indicfltes that there has been a trend away from sales to ca.fes and restaurants toward the food stores. The good accounts Jost by lanning were (1) the Safeway account to whom the company had sold in Bxcess of 3 000 gallons a year and which began to ma.nufacture its own iee ereanl and (2) an unnamed " food account in Carroll", the reason for whose loss and the compe6tor to whom it was lost, jf any, do not appear in the record. There is a. complete failure of proof, insofar as establishing that respondents have bee.n responsible for any injury to eompctition in Iowa, whether due to the complaint practices or otherwise. The production share information which is in the record fails to indicate any significant improvement in market position on the part of respondents. Hesponclent Beatrice s share of production in the State of Iowa has declined from 15.6 percent in 1947 t.o 13.2 percent in 1955. Hespondent Borden s share has declined from 24.2 percent in 1947 to 20.9 percent in 1!-J55. Infonnation with respect to rBspandcnt. Kational's sha.re does not appear in the record since it a.apparently days not have a plant in Iowa. IIowBver, it does appear that its sale.s in the Des 2\foincs area. CARNATIOK CO:VIPA.,'Y ET AL. 1589 1274 Appendix which it entereel during 1951 , have declined from 19 000 gallons in 1952 to 13 000 in 1955.

20. 01lurha, Nebnl8ka Although a hearing was held in Omallf, no ,vitnesses were called from that area. Counsel suppOli,jng the complaint caned a competitor witness from Lincoln flncl another from Superior, Nebraska. Three dealer witnesses 'were also ca1Jed from the Lincoln a, rea. An offcial of respondent Fairmont testiiied in Omaha, but. his testimony involved the company s operat.ions generally and did not relate to any specific trade territory. The evidence with respect to the Lincoln and Superior areas is discussed separately below.

a. Lincoln ebnlska The respondents doing business in the Lincoln area are Beatrice Fainnont and National. Respondents Der.t.ric.e a,nel Fairmont have maIllfacturing plants in Lincoln, and respondent ational has a distribution plant ill the city. S,, ift &, Company also operates in Lincoln. The local compet.itors are Lincoln Dairy & Ice Cream Company, Smith' s Home Dairy and Roberts Dairy. The only competitor witness called from the area TIas the owner of Lincoln Dairy. A represent.ative of Sllith:s 1-Iome Dairy appeared, but was excused at the request of counsel sllpporting the conlplaint. The Lincoln Dairy witness: testimony involved mainly a reeital of the facts concerning approximately six accounts which his company had either lost or been unable to acquire as an alleged result of the competitive activity.ies of Bentriee or Fairmont, mainly in 1954 and 1955. No re.ference was mn,de to XationnJ as being responsible for any of his competitive diffculties. The witness: testimony \vas a maze of conjecture, surmise a.nd hearsay, and except for one account, there is no reliable evidence to support his testimony. Indicative of the lack of re.liflbiJity of the Lincoln 'wit.ness' testimony is rhat concerning all account operat.ing a restaUl'tlllt at the airport, which the witness claimed he was unable to obtain because of respondent Fairmont. Lincoln Dairy had previously served the owner at another location, and the witness claimed that the owner had requested a loan fl'OlH him be.fore opening the new restaurant ' but that he was unable to oblige. Fairmont lat.cr obtained the account. Not only is there no reliable evidence, in the record of any loan to the ac- COllnt by Fairmont, but the mvner of the restaurant, who wa.s also calJcll as a witness by counsel supporting the compla.int, denied that respondent Fail1110nt had not nlade him any loans and, in fact, ha,d no recollection of having request.eel Lincoln Dairy to render any financial , .

1590 FEDERAL TRADE COM.VIrSSION DECrSfOKS Appendix 60 P.

assistance. :Yo financing of equipment was required 31110B all of the furniture and equipment in the establishment were supplied to the account by the City of Lincoln. The only thing the 0'''1101' had rcceived from respondent Fairmont was an old storage cabinet, which was used for the storing of excess quantities of ice crcmn, and a sign on the highway, the value of which does not appear. Tho Lincoln Dairy ,..itn088 also claimed to have lost two other accounts to respondent Fairmont becauso of loans of money and equipment, but ,yftS unable to identify such accounts and there is not a scintilla of reliable evidence in the record to support the witness' testimony with respect to the h"\o unnamed accounts.

Of the five accounts involving respondent Be,atricc, only one involved an account \",which had been lost to that respondent, the remainder being accounts which Lincoln sought unsuccessfully to acquire. The Lincoln witness claimed that the making of loans or furnishing of equipment by respondent Beatrice were responsible for his lack of success in these instances. Inc1icn.tive of the lack of reliability.y of such testimony is that involving byo eating establishments owned by the same individual which the Lincoln witness claimed he had sought unsuccessfully to acquire during 1954 or 1955, because Beatrice had fianced the equipment in one establishment and mltde a loan to the other. A list of lOftls and equipment financed by respondent Beatrice to all customers in the Lincoln area during 1954- 1955, which was offered in evidence by counsel support.ing the complaint, fails to reveal any financial assistance to either of these accounts. The owner of both establishments, who had been subpoenaed as a witness by counsel supporting the complaint and could have shed light on these transactions, was excnsec1 frolll testifying at counsel's request. In the ease of another account, a cafe which had allegedly received some unnamed form of assistance from respondent Beatrice, not only does the exhibit above referred to fail to reveal any assistance to the account, but the owner who was caned as a witness by counsel supporting the complaint specifically denied that he had received any loans from respondent Beatrice or any other form of assistance in connection with his ice cream operations. The dealer had, however, purchased a milk dispenser from respondent Beatrice in connection with his milk business, but this had nothing to do with its choice of Beatrice as an ice cream supplier since he had been handling the latter s ice cream for six years. The dealer also denied havingasked the Lincoln witness for any assistance. The only account referred to by the witness where there is any evidence of a loan was a cafe, to which respondent Beatrice made a CARNATIO COMPANY ET AL. 1591 1274 Appendix loan of $1 500 in ::iarch 1954 and which had been fully repaid December 1954. There is no evidence, other tha,n the Lincoln witness' opinion, that the making of such loan induced the account to deal with rcspondcnt Beatrice. COlilsel supporting the complaint called as a witness, not the dealer who had received the loan front respondent Beatrice" but an individual who had since purchased the business. The present owner had received no loan or ice cream equipment from respondent Beatrice, but was nevertheless purchasing its 1ce cream.

Despite Lincoln Dairy s alleged competitive diffculties with respondents Beatrice a,nd Fairmont, it has managed to maintain its gallonage of approximately 50 000 to 60 000 gallons over the past fiveyear period. The company limits its sales primarily to restaurants. In view of the testimony by competitor witnesses in various sections of the cowltry of a trend away from bulk sales in restaurants and similar eating establishments in favor of food stores, this could readily account for Lincoln Dairy's static condition. In any event, there is no reliable evidence in the record to establish that the use of the complaint practices by respondents Fairmont or Beatrice has been responsible for l-,inc01n Dairy s inability to grow. There is no evidence in the re,cord that the Lincoln area is an expanding area, so as to justify any expectation of growth on the part of the oompany. The evidence discloses that respondent Beatrice, which was the respondent most frequently involved in the testimony of the Lincoln Dairy witness, likewise has not improved its position in the Lincoln market. In fact, Beatrice s sales in Lincoln have declined from 397 000 gallons in 1946 to 289 000 in 1955. The evidence wholly fails to sustrLin a charge of injury to competition by respondents through the use or the complaint practices in the Lincoln market. b. Superior Armt Superior is located on the Nebraska-Kansas state line. The only witness from the area ca.lied was a representative of Superior Ice Cream Company, 'which operates both in ICansas and in K ebraslm. The respondents competing with Superior in both Nebraska and ICansfls arc Fairmont and Beatrice. Competing in Kansas only respondent K ational. Local competitors in K ebraska arc Holc1redge (J\cbraska Dairy Products Association) and I-Iunt Ice, Cream Company. Additional local companies competing in ICansas are BeJJcville and Ideal. Hcsponclont Foremost enterccl the Kansas territmy a.approximately six months prior to t.he hearings by purchase of a local competitor, Decoursey Ice Cream Company. Outside of this 1592 FEDERAL TRADE COMMISSION DECISIQXS Appendix 60 F.

one situation no other companies have either gone out of business or entered business in the area since 1947.

The principal complaint of the Superior Ice Cream Company witness was directed at the fact that as an ice ere,am company selling only ice cream, it was diffcult to compete ,,-ith companies that sell both milk and ice cream because of the entree ,,'which the sale of milk gives to some companies to try to sell their ice cream. The fact that some of the respondents may have a competitive advantage by being in both milk and ice cream in some areas is not, of Course, charged as an unfair method of competition. The only account referred to by t,he witness as having beeninvolyed in any competitive situation with a respondent was n. food store to which Superior "as selling ice cream, and respondent Fairmont WflS selling milk and frozen foods (the latter being in the frozen foods business as well as ill milk and ice cream), and the owner allegedly advised Superior that, he ,yas going to switch to :Fairmont's ice cremn because the latter did not feel justified in coming into town unless it, got the accounfs i( e cream business as well. Assuming that the inc.cient reported by the wihle,ss did oceur it is entirely outside the scopp, of t.he complaint. The witness also expressed regret that lw ',",18 unable to chnTge a cn binet rental to defray the cost thereof. 1-Ie coll,:cdec1, however that it had ahnlYs been eustomflry in the area t,o furnish a c.cabinet without a rental charge. The ''fit.ness claimed that 8.:3 a result. of the lower prices of ice cream clue to pressure from ,yholesale grocers the profit. margin on ice ('Team had lx' come too small to jll .tify the snpplying of cabinets without a rental. Since there is no evidence that the respondents are responsible. lor this condition (in fad, the witness conceded that. they ,yerc not), this testinlony has no prol,lti ;G value. In response to the leading and suggestive question of counsel supporting the cOlnplaint as to whethcl' he ,yas "able to get your share oJ the chflin store business " in Ill€, territory, the \\it112sS answprec1 in the nep.:ative. 1-1o'Y8ve1' , there is no showing that respondents operating in the tel'litory have cquirec1 more than their share of the c.chain store business or, in fact, that they scrye anv chain ,stoJ'e accounts in the territory.

Superior Ice Cream Company has the same nUlnhc.r of accounts as it had five years ago. "\Yhile cbimil1f': that there hn(l been some decline in his companies gallonage, the witn(:ss was reluctant to roveal his gallonage and ',"ould merely state that it 'YflS presently below 100 000." There is no indication t.hnt the flrea is an expanding one. Xo finding of injury to cOlnpetition by reason of the \lse of any of the complaint practices by respondents in the Superior CARNATIO COMPANY ET AL. 1593 1274 Appendix area can be made, based on the largely desultory and irrelevant testimony of the Superior Ice Cream witness. The evidence with respect to the State of Nebraska wholly fails to establish any injury to competition within the state by reason of the use by the respondents of any of the complaint practices. There is nothing in the production shDxe information pert.o.ining to the respondent companies to indicate any signi6.cr.nt improvement in their position. Thus, it a.appears that respondent Beatrice s production share has remained almost const.ant bebveen 19-17 and 1955, being 9 per cent in the former and 8. 8 per cent in the bttcr year. Respondent K atianal's share has increased slightly from 13. 9 per cent in 1947 to 15. 6 per cent in 1935.

21. C'Z.ncinnati hio The hearing in Cincinnati, Ohio, involved competitor witllcsses fronl Cincinnati, Ohio; Tolec1o Ohio; Louisville, ICcntueky; and Lfl\yrenCCburg, Indiana. A single witness was calleel fr01n each area. These areas appear to be sepaTnte market areas and the evidence concerning each is discussed sepa,rately helmv.

a. The Cincinnati Area The respondents operating in the Cincinnati area include X ationnI Beatrice and Borden, the latter selling in the suburban area and the balance of Hamilton County, but not ",within the city itself. Local companies engaged in the ice cream business in t.he area. include French BRuer, NiseI' , Equity, 'Vashington Courthouse, I\Jayfair, J. J. Sclunidt Cupid, Schmeising, 'VilJson, and itlacGregor. One of the local companies which had previously operated in the area, Lindner, was purchased by respondent Beatrice approximately one month prior to the hearing. Other regional or national companies selling- in the area. are Swift & COlnpany and Cudahy Packing Company. A recent entrant into the market is W ayne Co-op of Richmond, Indiana. Another competitor, United Dairy Farmers, OpCl'ltes a number of retail estab Jishments which it supplies itself. There are. also a eonsic1ernble number of soft ice cream establishments in the area. The only witness to testify fronl the CinciulJnti area was an lndiyidual ",yho is active in the manage.nwllt of both Vil1son Dairy ancll\InrGreg"ol' lee Cream Company. A representative of 1\is81' was subpoemled to testify but was excused at the request. of cOllnsel supporting the complaint. 'Vinson Dairy has been in the milk business for a great many years but did not enter the ice cream business until October.r 1952. It does business mainly with hote.ls and institutions in dmvntown Cincinnati. 1594 FEDERAL TRADE CQ:MMISSION DECISIOXS Appendix 60 F.

The company entered the ice cream busines to enable it to make better use of its plant facilities and because it was felt it would be more advant 1geous 1:0 its milk business to be able to offer its customers ice cream. The individual who testified for the company is a partner and general manager, who had bought into the company several years previously. Prior to his joining forces with Wilson he had purchased two defunct ice cream companies and, after building up their voluml he joiued 'Willson as a partner. The same individual is the general manager and a majority stockholder in MacGregor Ice Cream Company of Hamilton, Ohio, which is located in Butler County directly north of Hamilton County in which Cincinnati is located. 'Wilson confines its operation to Hamilton County and M:""Gregor to Butler County. :Most competitors operate in both counties, except for Cudahy and Equity (which operate only in Hamilton County). The testimony of the wilson-M:acGregor witness concerning competitive conditions in the area was of a loose and general nature, can. sisting of broad conclusions and hearsay informatjon reported to him by salesmen. He comphtined generally about such practices as loans the furnishing of extra equipment and the granting of low prices. In the case of loans he at first made the gcneml charge that hc couldn acquire drug stores and similar accounts due to large loans of money. However, the only account he could cite, which he had been unable to acquire due to the making of a loan, involved the nonrespondent, Swift & Company. He was unable to recall any other accounts which he had lost or been lmable to acquire because of loans and conceded that the account referred to was a "more or less" isolated instance. ",With respect to his charge of furnishing too much equipment, sonlO of which was allegedly used for the storing of frozen foods, he claimed this was a general situation but was unable to name a single account where this practice had presented a competitive problem. He conceded that no one company was different froln any other company in the market in the respect of furnishing such equipment.

The principal compla.int of the ,,-itness appeared to be directed to the matter of price, particularly low prices and off-list prices. ",Vhile making the general charge that "mmlY brge accounts " Vi'ere purclHlsing bulk ice cream air-list, the witness conceded that he could not "mune anyone "where they are cheap, because I don t know the price. Since the witness' charge involved the sale of bulk ice. Cleal1 it seems apparent that his primary complaint did not involve the largest users of ice cream, the food chains and supermarkets who handle only pac.knge ice cream, as to which the witness indicated there was "hardly any ice cream sold at other t.han list, less the schedule disc.count.': Even CARKATION COMPANY ET AL. 1595 1274 Appcndix with respect to bulk sales, the witness did not refer to any particular supplier or group of suppliers as being involved in off-list selling, but indicated that everyone was involved including his own company. Combined with the witness' claim regarding ou- list pricing, was the assertion that, following a general price cut in the area which had occurred the year previously, prices generally WCTe too low to per mit the making of a profit. "While at first attributing the Icadership in the price cut to respondent National, the witness later acknowledged that the latter had acted to meet the competition of "Wayne Co-op ,which had come into I-Iamilton County from Richmond, Tnc1iana, selling ice cream at 69 cents a half gallon, which resulted in the Co-op s achieving a "tremendous volmne" before other competitors met i is price.

The testimony of the Wi11son-1IacGregor witness ,,-holly fails to establish that respondents' engagement in the complaint practices in Cincinnati has resulted in any substantial injury to his companies let alone to competition in the area. The practices about which the witness testified are operative generally in the area. There is no Teliable evidence that respondents are the leaders in the practices or have used them, tD any substantial extent, to injure 'Vinson or fac- Gregor or to injure competition in the area. The only evidence in the re,cord concerning the extent of respondents' use of any of the complaint practices in the Cincinnati area invoh"88 respondent Beatrice. From this it appears that Beatrice s assistance to customers jn the form of Imtns or financing of equipment involved only 1.28 per cent of its cllstomers in 1954 and 1.11 per cent in 1955. In connection with the matter of off-list pricing and Jow prices, to which the bulk of the witness' eompJaints were directed, there was no showing that exclusive dealing arrangements were involved in connection \,il:h such prlCIng.

In any cvent, despite the problems referrcc1 to, both ,Vinson and :\facGre.gor appeared to have fared ,yell in t.their respective areas. The witness represent.ing those companies had entered the ice cream business five years previously with 14 or 15 accounts which he had purchased from two defunct companies. "\Vhen he joined forces with ,Yillson two years later, he had some 200 accounts. Since that time at least one hundred additional accounts have been acquired. No claim \vas made that 1Vil1son s gallonage had declined, the witness COllceding that the company had had a '; very good increase continrwusJy in volume and that his gallonage was at least t\yclve tinw.s that of the concerns he had purchased. lie agre-ed that in the 3IacGregor operation they were "holding their own, 1Vhi1e he asserted that it was , Appendix 60 F.

diffcult to make a profit in 1IIaeGregor, this was attributed mainly to the p-rice. decrease ,,,hieh had been precipitated by ",Vayne Co-op when it came into the market.

There is no indication that a,ny of the. other competitors have been experiencing competitive diffculties clue to any of the complaint practices. The witness conceded that the Jocal competitor, French Bauer a farmer co-op, "as aile of the hu'gest, if not t,he largest competitor in the area. The United Dairy Farmcrs which sens through its own stores was described by the witness as a significant factor in the market. The position of respondents has not notably improved in the Cineinnati area. In the Cincinnati market., which covers two ICentucky counties in which ,Yillson and J\facGregor do not operate respondent )rational's share of the Ilarket has increased only slightly from 14.6 per cent in 1951 to 15.1 per cent in 1955. Respondent Beatrice, s share has declined from 5. 3 per cent in 1950 to 4.2 per cent in 10;'')5. Borc1ell s share of the same market is almost infmitesi11a1, being only 1/10 of one per cent in 1955. In the a.ren, which conforms more closely to ,Yi11son s and J\IacGregor s trading areas, respondent National's sales dropped 14.7 pcr cent from 1947 to 1955 and respondent 13orclen\:; sales have dropped 4. 1 per cent behveen 1946 and 1955.

b. Southeastern Indiana Area.

The only \Vi1:11088 to testify from the southeastern India,lift area \Vas a representative of R.itzmnnn Ice Cream Company of Lawrenceburg, ITldinnn which operates in 17 COHllt-ics in southeastern lndia.na. A l'eprcsentatin of Dallm Dairy of ConnorsYille Wits nh:o subpoenaed but. was exc.used by counsel supporting the complaint. The respondents cOlnpeting 'iyith Hichmond a.re NatioJHd Beatrice a.nd Borden, the latter only competing in a fringe of ihe territory around Greensburg IndinJ1n. Also operating in the area are. French Baner and other unnamed Cincinnat.i eompfllies, and Blue Ribbon Ice Cream Company of Indianapolis.

The Ritzmann wit.ness, testifying without the aid of records, at first claimed that his company s sales had declined from about 60 000 gallons at the end of 1Vorld1Var II to 40 000 gallons, and he c1evotcd Inost of his testinlony to explaining how this "decline" had come about. IIowever on cross-examination, it developed that t.he 60 000 gallo11 peak volume had been achieved prior to 1932 in the prohibition era. ': The witness did not know what his company's gallonage was in 1D46 or 1047 but "presumefdJ it was somewhat more than what we have got now, although he conceded that if it was more than 40 000 gallons it was not very much more. CARNATIO:.T COl\PA Y ET AI. 1597 1274 Appendix The R.itzmann witness conceded that his company had as many accounts as it ever had, but claimed that its sales per account had declined. Iris explanation for this decline was that it was "somewhat due to competitive conditions on price." This was explained to mean that one of the ice cream distributors in the area, which is supplied by the nonresponclent Blue Ribbon Ice Cream Company of Indianapolis, was marketing ice cream at so Iowa. price as to have taken away business from R.itzmann s accounts. Another factor to which the decline was H tt.ributed was the increase in the sale of novelties to youngsters, which had resulted in a "rapid decline in the sale of bulk ice cre. , the htter having therefore been a large factor in Hitzmillll sales.

The Ritzmann witness referred to the JOSE of a single account. to each of the three respondents operating in the area. One was aIlegeclly lost to respondent, :Kational after t.he Jatter had pnt in a di play- t:ype cabinet which Ritzmann hlld declined to furnish; another \\'as lost to respondent Borden which allegedly prtid off some debt in the amount. of S100.00 oT,ing hy the dealer to Ritzmann; and the third was lost to respondent. Beatrice which had alle.gedly furnished the account with a display-type, cabinet. ).TO claim was made thrli-, RitzmGun hac1lJecn requested and refused to supply the lasi-Iullned account "\..ith the cabinet. Aside from the fact that there. is no reliable evidence in the record to establish the reason -for the alleged switching of these acconnts. the Ritzmann \\" itness eoneeded that the. basic cause of his difficulties as n. smallmfl.Ill1facturer was Jlot the supplying of cabinets but the national advert.ising of the larger companies on televisi01) radio and in magazines, which built np consumer demand for advertised prod uets.

Viewing the Ritzmann testimony as a ,whole, it seems apparent that his main competitive. diffculty is his company s inability.y to compete on price, ,which condition has resulted from the activity of a nonrespondent competitor, III a(lditioll, the 2d ,'crtising program of his larger competitors has apparently created a consumer demand which is lacking in the. case of his product. The lnatter of en binets, if it is a problem, is not one of major significance. Even here it was not the furnishing of cabinets, as such, ,,,hieh was the heart of the problem but the demand of dealers for the more modern display-Lype ('abinets to replace older equipment, ba:"ed on the reputn! ioll of :-uch cabinets for increasing sales. Ritzmann hill1seh concedcll that 11106t companies were replae-ing the older calJinets with more modeJ'i) equipment because "it. helps the sale of ice cream. :: In fact he admitted that his 1598 FEDERAL TRADE COMMISSION DECISIOKS Appendix 60 F.

company had replaced two old cabinets in a former Kational account which he had acquired, with a more modern type fountainette. There is no basis in the record for attributing Hitzmann s diffculties primarily or in any significant degree to the complaint practices. Certainly there is no evidence of injury to competition in the area as a result of the engagement by any of the respondents in any of the complaint practices.

c. Louisville Area The respondents doing business in the Louisville area are K atianaI Borden, and Beatrice. The Louisville companies in dude Cream Top Creamery, Shively Dairy, and Blue Grass Ice Crearll Company. Directly across the Ohio River in New Albany, Indiana, is Purity laicl Ice Cream Company, which is very active in the Louisville ma.rket. A recent entrant into the market is Dean Hilk Company of Chicagn. Another large competitor in the area is Swift & Company. The only witness from the area, was a partner of Cream Top Creamery. Although Cream Top ha,s been in the milk business for many ye,ars it did not enter the ice cream business until arOlmd1950. Its sales increased gradually from $173 000 in 1951 to $lD OOO il1 1953. In 195 its sales declined to $173 000 and in 1955 to 8165 000 m The witness attributed the decline in 1954 and 1955 to a loss 01 customers which, in turn, he attributed to his companies inability "to meet the competition, including such alleged practices as "the loaning of cabinets equipment, mortgaging, black-topping dl'ivewf1Ys " The witness enumerat-Bd 12 accounts ,which he had lost to competitors, allegedly because the latter had supplied cabinets to these accounts. Of these, five involved respondent ational, four involved respondent Beatrice, two involved respondent Borden, and one involved the nol respondet Swift. Reference \Vas also made to four accounts which Cream Top sought to acquire, but was allegedly unsuccessful becR.rse of competilors, one account involving Purity l\faid, another involving respondent Darden and two invoh-ing respondent Nfltional.

,With one exception, the witness' lestilIlOny ",vas not based on personal contact with the dealers in question, but on discussions ,,,ith his company s drivcr-sa.lesman about a wcek prior to the hearing concerning eompetitin situations which had occurred a year or two earher. It aoes not even appear ,,' whether the information received from the driver \1;as based on conversations ,Yit,h the dealers concerning their re,asons for changing or retaining suppliers, or WflS based on the 11 Unlike many of tbe figures of competitor witnesses appearing in, the record, these figures appear to be reasonably accurate, having been taken from tile compa!I;V S profit and loss statements by the witness.

CARNATIO COMPA1'I ET AL. 1509 1274 Appendix driver s own opillion or sur111ise of as to w"hy he hac1lost 01' been unable to acquire the (Lccount. The single account where the witness had actually talked to the dealer personally involved the overhearing of a conversation in "\which the dealer allegedly advised the ational Dairy driver that he was going to use one of that respondent:s cabinet.s to sWre meat. ,With this one except.oll: no finding can be made with respect to any of the accounts involved in the Crerun Top "\vitness: testilTIOny, which was uased at Lest on tlouble hearst.y, and at worst on the opinion and surmise of a third person. The unre1iability of such testimony is pointed up by the fact that other evic1ence ollered by counsel supporting the complaint, concerning one of the accounts which the Cream Top "\vitness claimed his company could not acquire because of the furnishing of a display cabinet by respondent :N ational establishes that the dealer had in fact received no cabinet from that respondent since he had his own equipment in the store. 112 Aside frolll the llnreliability of most of testimony concerning the loss of accounts, it may be noted that in almost all instances t.he allegec1 reason for the loss of the account \\Tas solely the supplying of the cabinet by 11 competitor. Xo reference was 1Twde to tho supplying of such cabinets on a.n exclusive basis, but simply to the supplying of the cabinets as such. In fact, one of the accounts about which the witness complained "\,as one \which was split between his company and Borden. 1Jnlike nlost competitors in the Louisville area and in most sections of the country, where the supplying of cabinets by ice cream manufacturers is standa.rd operating procedure, Cre,am Top has refused to supply its customers jth cabinets. "'1'he.n it first e.ntered the business six years previously it supplied about 15 or 16 cabinets t.o customers in accordance wit.h the prevailing practice, but thereafter changed its policy and decided to sell cabinets to customers. Its policy in this respect was "dmittedly ont of step with most of the industry, including Cream Top s local competitor, Purity 11aicl, which in one of the instances referred to by the witness had supplied the account not only with a cabinet but with a fountain. The Cream Top \vitness conceded that his loca.l competitor, Purity )laid, was a substantial factor in the Louisville market: having about twice his o"\vn company's volume.

Despite the fact that it had only reccntly entered the ice cream business, Cream Top \"as able within a year to build up a sales volume of $173 000 and to augment that for several years. The evidence in the record does not support a finding tha.t the. company s lleeline to )l ex 398, pp. 33 and 36, in the National Dairy record Indicates that the account, Hale s !I'Iarket, rcccIved no cabinet.

, .

1600 FEDERAL TRADE COMMISSIQX DECISIONS Appendix 60 P.

$165 000 in sales during the past two years has been clue in any substantial degree to the. engagement by respondents in the complaint practices. 1\10rcover, the evidence aoes not support a finding that there has been any injury to competition in the Louisville area. \VhiJe two local companies sold out to Bordoll (for reasons not appearing in the record), two local companies ha"c entered the ice cream business in recent years.

Of the three respondents doing business in the Louisville market only National has had a substant.ial increase illlnarket. share in recent years: its market share having illereasec1 1'rom 24. 2 percent in 1D50 30.5 percent in 1955. Hmvever, for the State of Kentucky as a whole its production share actually declined, from 22. 1 percent in 1D47 to 17.4 percent in 195:5. Borden s share of the Louisville market has increased rnodcstly from 15.4 percent in 19;)0 to 15. 8 pc.recent in 1955 while Beatrice s share has increased from 3.2 percent to .1.0 percent in the same period. For t.he state as fl. "\whole, Borden s production share has remained constant at 7.1 percent between 19,)0 (when it entered the stat.e by acquisition of several other coll1pa.nies) anc119,55. d. ort.hwest.ern Ohio, Northeastern Indiana and Southern l\1:ichigan Areas The only competitor witness called from these areas "\yo.s the president of Page Dairy, which has it.s main manufadl1ring plant in Toledo, Ohio, and has four distributing uranches in the territory. The company operates in a radius of approximately 50 000 square mDes and its territory includes it number of diif'el'ent marketing areas with difierent groups of eompetit.ol's. Hesponuents National and Borden c.ompete with Page throughout most of its territory. Respondent Beatrice competes in the Ohio and Indiana areas. Competition with respondent Fairmont is limited to the suburban Detroit area and a,reh, outside of Cleveland. Among Page s competi tors in various portions of the Ohio territory ate Driggs Dairy, Swift & Company, Esmond Dairy, San-a-Pure, Tiffn Pure )\1:11k, Superior Dairy, IIubach Ice Crean1 Company, Dairymen s Ohio Farmers, :Mil- IeI' Goldscal Dairy (which has recently been purchased by HawthornlIellod)' of Chicago), and Franklin Ice Cream Company. Competitors in the )Iichigan area include Ira '\Vilson & Sons H. A. ::IcDonald . Creamery, Swift & Company, and Driggs. Among the Indiana C0111petitors are Swift and Puritan Ice Cream Company. Page Dairies is one of the largest companies represented at the hearings, outside of the respondent companjes, h lViI1g a gallonage of approximately two million gallons a year. The Page witness cla.imed CARXATIOK COMPANY ET AL. 1601 1274 Appendix that his company had been losing between 35 to 50 accounts 11 year during the four-year period prior to the hearings in July 1956, allegedly due to his company s unwillingness to engage in such competitive practices as the making of loans, financing of soda fountains and furnishing excess equipment. He clairned that the nlost troublesome practice in recent years had been the supplying of cabinets which '\"e1'e permitted to be used, entirely or in part., for the storing of frozen foods other than ice cream.

The witness testimony, in large part, involved an enumeration of 16 accounts which had allegedly been lost to the respondents, nine to respondent National, five to respondent Borden, and one each to respondents Beatrice and Fairmont. Except for two insbl1ces, the witness' testimony as to why he thought his company had lost these accounts was based on infornlation received from his salesmen, rather than on personal contact with the dealer. It. docs not appear whether the salesmen s in10rmation "as based on advice received from the deniers lS to their reasonf. fol' changing uppliel's. 01' wus based on their OW11 conclusions and opinions as to why the accounts had s,vitcheel. None of the salesmen or dealers ,vas calleel to testify. most instances, the witness attributed the loss of these accounts to the furnishing of a cabinet which could be used wholly or in pa.rt for the storing of frozen foods. The ,,-it.ness' testimony with rega.rd t.o these accounts is a. combination of llll'clinble hearsay and uncorroborated sunnise and opinion, both as to the fact of whether the respondents ha.d furnished the nJleged equipment for the alleged purpose, and as to the fact of whether the furnishing of the alleged e(plipment wa. the reason for the change of suppliers. The witness himself, in some instances, was admittedly uncertain as to \vhat the equipment had been supplied for or ,vhat assistance had been rendered by a respondent. The two accounts as to which the wit.ness had any personal know ledge both appeared to involve fa.ctors outside the scope of the com. plaint. One involved the operat.or of cafeterias in two industria.1 plants 'who had allegedly s"itched to respondent Borden because of a lower price and a promise not to raise prices for one year. There JS no relioble evidence ill the record os to \\ hat price Borden gave the account, nor anything t.o indicate that nny exclusive cle;lling arrangement ,,,as involYecl. So far as appears from the record, this account involved a simple matter of price competition. It may be noted, in this connection, that the loss of the account occurred a month after Page had raised its price.

The second, and apparently the major aeconnt lost. by Page, was the A. & P chain, of which Page had served 58 stores. This loss occurred 1602 FE-DERAL TRADE COMMISSION DECISIONS Appendix 60 F.

because Page had decided not to submit a bid for the manufacture of A & P' s ice ere,am under a private label, after that account decided to have its ice cream put up under a private label. 'iVhile Page had no objection to making an older based on the supplying of its own brand in It special package, it was not wining to make a private label ice cre.nJl1 in accordance with the A & P specifications, because the A & P requisites were "quite stringent" and Page did not think that a capital outlay of approximately $30 000 would be justified from its own point of view. According to the witness, respondent National was the successful bidder, receiving an award on approximately 200 to 250 A & P stores in the Ohio, Michigan and Indiana areas. Wllile Page claimed that his company could not make a bid covering all these stores because it did not have distribution throughout the whole area, he conceded that the invitation did not require it bid for the entire group or stores and that he could have submitted a bid on the 58 stores which he had been serving. This loss, while lUlfortunate from the point or view or l age, hus nothing to do with the complaint. There is no evidence that the ational Dairy price to A & P represented a deviation from its price schedule. Assuming, arguendo, that price deviations were involved in the loss of the two accounts above discussed, such matters are not covered by the present complaints, although conceivably they might fall within the proscription of Section 2 (a) of the Clayton Act as amended by the Robinson- Patman Act.

1Vhile at first complaining that his company had been losing 35 to 50 accounts a year during the past four years, the Page witness conceded on cross-examination that his company had actually gained more accounts than it had lost each year. The company increased the 59G in 194G or 1947 tonumber or its accounts fr01TI approximately approximately 1 600 accounts in 1956, of which about 200 were split with other manuracturers. I-Iowever, the witness claimed that his companies gal1ona,ge had not increased in the same proportion and, in s gallonage in 1947 was approxi-fact, had declined recently. Page 000nmtcly 1 200 000 gallons and by 1950 had allegedly declined to 960 gallons. At that time the company started an aggressive selling and merchandising program which involved a lowering or the price its popular half-gallon package by 20 cents a g,tllon and a plan for featuring various flavors each month, with an even lower price for the flavor or the month. As a result or this aggressive program Page g-a,llonage increased in four years to 2 815 000 gallons. :However, at the end of 1955 Page s gallonage had dropped down to 2 065 000 gallons, and in 1956 its gallonage was running at the rate or 1 700 000. CARNATION COMPA1\TY ET AL. 1603 1274 Appendix There is no reliable evidence in the record upon which a finding can he based that the more recent. aec1ine was (lue ' in any substantial degree, t.o the complaint practices. The evidence suggests t.hat the decline in 1955 resulted largely from the fact that Page s compet.itors had met its lower prices and that the campaig11 begun in 1951 had lost some of its steam. The continuing decline, in 1956 ,yas attributed by the witness himself largely to the 10,ss of the 58 A & P stores. Despite this decline, tho witness conceded that the company W LS ma.king a greater profit thnn it had during the previous year. Page has shown its frlith in the future and in its ability to survive and grow by developing n. newer and more expensive type of package. Despite the downward trend of prices it has recently ra,isec1 its O\1'n price by 15 cents a gallon. Despite the f lct that most competitors supply refrigeration equipment without charge, Page has undertaken during the month prior to the hearing to induce his dealers to own t.their own equipment by paying the dealer n. rental for the use of space in the defller s cabinet. ",Vitllin fl 15-clay period, approximately 46 dealers were induced to join the new plan. In an article published in a trade paper, the company claimed that the newer methods lmc1 increased sales sllbstantially during February 1956 over the comparable period in 1955. Despite some alleged competitive diffculties, Page ranks first or very close to first in the Toledo market. It has gradually expanded its trade territory, having entered the Detroit market most recently. There is no reliable evide.nce to establish that it has sustained competitive injury as a result of the use of the complaint practices by the respondents, or that competition in the areas where it operates has been injured.

",Vhile no evidence is available as to respondents' over-all position in the entire area where Page operates, such evidence as is available for representative sections of the territory fails to indicate any unusual improvement in the position of respondents in recent years. Respondent National's s1mre of the Toledo market hoes increased only slightly from 11,9 per cent in 1950 to 12,8 per cent in 1955. In Canton, Ohio, its market share has declined from 15. 1 pel' cent to 8,0 per cent in the same period. In the Y onngstown area its share of the market has declined from 15.6 per cent to 13,6 per cent. Respondent Borden 81mre of the Toledo market has increased from 9. 8 per cent to 13.4 per cent, but its share of the Canton market has declined from 28.1 per cent to 2. 3 per cent. In the Youngstown area Borden s share has incrc"scd slightly from 10, 1 per cent to 11,7 per cent. Respondent Beatrice, which was referred to in connection with only one of the 719-603--64--102 . , 1604 FE DE HAL TRADE CO:'L\IISSION DgCISIOKS Appendix 60 F.

accounts lost by Page, has increased its share of the Toledo market from 1. 1 per cent in 1950 to 2. 0 per cent in 1955. There is no evidence that the three respondents involved in the testimony of the Toledo witness are about to dominate the markets in the three states in which the witness operates. Except for a modest increase in the share of respondent National in Indiana, the production share of ea.ch of respondents in the three states has generally declined between 1947 and 1955, as shown by the following table: ""ion.' d'" ""'deo 1947 1 Ohio- __n_____ _n__- 17. 10. 9 " 17. 5 ' 13. 3 . 1.8MicbigalL______-- 20. 2 15. 02, 0.Indiana___ 1 ,0.10. 6 I 7. 7 I 8. 1 10. 0 21.6 22. !(ansas City, iiii/isoul'i The hearings in KnnsHs City involved testimony by competitor witnesses from three difl'ercllt areas: ..'-ehison, Kansas: Columbia Iissollri; and severtll overlapping areas in central Kansas. dealers ,were c.rllled. Each tLrea is discussed separately below.. It may be noted in passing that although the hearings were held in Kansas City and some of the respondents ,were noticed for the hearings because they did Imsincss in the Kansas City area and several produced statistical information covering their operations in the area not a single witness from Kansas City ,YflS called. The record does disclose, however, that there are a number of nonrespondcnt ice cream manufacturers operating in I\:ansflS City, some of which appear be sizeable operations. Thus it appears that Southern Ice Cream Company (not. to be eonfusec1 with Southern Dairies), which entered the Kansas City market in 1950, had grown by 1955 to an estimated volume of over a half million gallons. Several, at least, of the Kansas City manufacturers sen-e the major grocery chains, including Arctic Ice Cream Company which serves the A &. P c.chain, and Adams Ice Crea.m Compa.ny which serves the Sa.fe"~LY stores. a. Atc.hison, I\"ansa \n:tl Ucllison is located ill 1l0ltheJsterll Kansas about 50 miles from Kansas City. A single \fitness from the area testified, the mnnagcr of Velvet Ice Cream COlnpany. The respondents operating- jn the area are Kational (Franklin Division), Beatrice, Borden and Fairmont. Respondent Foremost had ent.ered the area shortly prior to , , CARNATION COMPANY ET AL. 1605 1274 Appendix the hearing by the acquisition of a local company. Other competitors in the area are Adams Ice Cream Company and Arctic Ice Cream Company, both of Kansas City, and \Vestern Dairy Company and Beatty Dairy, both of St. J oseph, Missouri. The Velvet witness claimed that his company s sales had not increaiJed sil ce 1947 and had possibly decreased. Testifying without the aid of any records, he estimated his 1846 or 1947 gallonage as approximately 75 000 gallons, ~Lld his more recent gallonage variously around 50 000;' " between 50 000 and 75 000" 000", and " 000 to 55 000 ganons. 'Vhile at first claiming that the companies recent decline in gallonage 'vas due both to a loss of accounts and to a decline in sales pel' account, he later conceded that it hacl gained at least as many accounts as it had Jost and that the principal reason for the decline in gallonage was a clecline in sales per account. No eJIort. was made, however, to attribute this decline to any competitor 01' group of competitors or to any competitive practices. The witness indicated that it was customary for manufacturers in the area to supply cabinets \vithout a rental charge. ,Vhile he claimed that it had been the pract.ice up to HJ50 to make a rental charge and that this practice had gradually ceased, he made no effort to attribute the cessation of the charging of rentals to any competitor, indicating that it was simply an industry-wide development. The Ye1vet witness referred to the fact that his company had ceased serving chain ston aeconnts during the past few years. IIo',ever, there is no evidence that the responc1cnis or the complaint practices are responsible for this. One of the accounts which his company had lost \yas Safew lY. Safeway is now manufacturing its own ice cream ~Llcl also purchases some of its requirements from the nonrespondent, Adams Ice Cream Company of Kansas City. The A & P chain, which the Velvet witness dairned his company had lost, is being served by the nonrespondent Arctic Ice Cream Company of Kansa.s City. Another account refelted to was a single I. A. store, which was allegedly lost to respondent :! ational. In no instance did the Velvet witness attribute the loss of any of the chain store accounts to the complaint practices. 'Vhile testifying that some retail stores were selling ice cream as low as 891 a half gallon, he did not claim that he had lost any of the chain aec0l1lts because of this. Furthermore, he did not attribute the low prices to any of the respondents. The only attempt to assign responsibility for such prices was to a nonrespondent, Beatty Dairy of 8t. Joseph. "'Vhilo claiming to have lost all its chain store accounts, the ,vitness conceded that tho company was still serving the ' oolwort.h store in Atchison.

1606 FEDERAL TRADE COMMISSIO:\ DECISI01\ Appendix: 60 F.

Population in the Atchison area haSl'Clmtincd static, which may well account for Velvet's Jack of growth, The fact that 1946 and 1947 were admittedly the best yea.rs for all compa,nics in the area. suggests that Velvet' s position is no different from that of jts other competitors. is still the number one company ill Atchison. "'Vhile it is possible that it has lost some business because of its inability to compete with the low prices of competitors, there is nothing in the record to suggest that the respondents have had any significant responsibility for this a.nd, more importantly, there is no evidence that such low prices involved exclusive dealing-quantity discount arrangements of the type covered by the complaint.

The market share information in the record with respect to the Kansas City market area discloses that respondent N ationaFs sales have been almost static behyecn 1951 and 1955, and that its market share has declined from 13.4 per cent to 11.7 per ce,nt during this period. Respondent Borden s sales have declined by about 100 000 gallons bet,,' een 1946 and 1955. Its market share has declined from 8. per cent in 1950 to 5. 0 per cent in 1955.

b. Columbia, Missouri, Area The principal Columbja companies are Central Dairy Company and State Dairy Products Company. The former operates within a radius of approximately fifty miles of Columbia. The latter is a Jargcr company and operates in a broader area ill central and northeastern Missouri and ill part of western Illinois. The respondents oporating generally in this area are National and Beatrice. There is also some slight competition in parts of State Dairy's territory with respondents Borden and Foremost. Other competitors in various parts of the area are Adams of Kansas City, Peve1y Dairy of St. Louis wift & Company, and a number of smaller local companies. Of the two Columbia companies called, only Central Dajr:y appears to have sustained any serious loss of business. After experifencing a peak gallonage of approximately 100 000 gallons in 194G the company declined to 80 000 g,1l10ns in 1948 ,md by 1955 had reaehed a low of 40 000 gallons. Even allowing for the fact that 1946 was not a typical year, since it was admittedly one of the best in the industry, Central's continued substantial decline after 19-18 suggests th,l,t factors other than a "return to nonn,l,lcy " have been responsible for the company s present predicament. It has also sustained a loss in the number of its aCCOlDlts from approximately 100 to between 50 and 75. ,Vhile the loss of volllne and accounts are not facts to be controyertec1, the reason the-refor is a horse of anot,her color. The CAR:',TATION COMPA)I ET AL. 1607 1274 Appendix witness himself conceded that he didn t "know for sure" why his company had lost. accounts, and attributed its decline in volume to an increase in the number of competitors which had 8altered the market. Ie referred to the fact that the company had lost some of its chain store accounts and that ice cream was being sold in the market at prices below his. However, the record fails to afford any basis for attribnting Centrars diffculty to the respondents and, nlore particularly, to responclents engagement in any of the complaint practices. Kroger, the main chain store account which Central had served was lost to the nonrespondent 10caJ competitor, State Dairy Products for reasons not a appearing in the record, except that such loss occurred at or about the time when Kroger had moved to a neVl loca tion. "'Vhile I\:roger was later split between State Dairy and respondent K ational, there is no evidence that such ex post facto splitting had anything to do with Centrars loss of the aCcOlmt or that it was due to any of the complaint practices. On the contrary, thc splitting of the account is the direct oppositc of the exclusivity anegation of the complaint. The other chain account lost by Central 'vas A & P, which is now being served by respondent Beatrice. The record fails to establish when Beatrice acquired the account or that Central lost the account to Beatrice or that such loss was due to any of the complaint practices. Central also lost the State University account with a volume of approximately 5 000 g,tllons a year, but this was lost to the n01lespondent local company, State Dairy, allegedly Oil the basis of a lower price bid.

In addition to a loss of accounts, the Central witness also complained about his companies inability to obtain several chain accounts which it solicited, including 'Woolworth and Newberry, both of which 'were being served by respondent Beatrice. No reason was suggested by t.he witness for his comp Lny s inability to acquire these accounts except t.hat possibly his price was not low enough. There ,vas no evidence presented as to Beatrice s price or as to any exclusive dealing arrangement with these stores. K 0 clailn was even made that the matter of price was referred to by a representative of any of the aeconnts, the witness merely testifying in connection with the "'i\Toolworth account that the manager had informed him that the decision as to a choice of supplier wa,s made by the companies headquarters. The Central witness also referred to his company s inability to obtain the l. A. account beca,use the account wanted a brand name and wanted distribution throughout the State of :\Iissonri, neither of ,yhieh Central could supply and neither-r of which involves the complaint practices.

Appendix GO F, In connection with the witness' reference to low prices in the territory, not only was there no effort made to connect this with the complaint practices (in fact it appears that a number of the accounts are actually being split), but the witness pointed the finger of accusation not at the respondents but at the nonrespondent company, Adams of I(ansas City, which he claimed had brought lo,y-pricecl ice cream into the territory when it began selling to Safmvay and "broke the ice cream market in town." The only reference made by the witness to the price of a respondent' s ice cream was to the fact that respondent N ationa,Fs ice cream was being sold in the ICroger chain for the same price as his 'Own company s brand was selling. The major reason for Central's decline would appenT to lie in a decline in sales through its existing accounts, plus its loss of, or inability to ac.quire, chain store accounts. The witness himself can. firmed the trend away from the drug stores and other bulk accounts \vllich he had f.ormerly served, and st.ated that three food markets in town had 75 to 80 per cont of the food business, including ice cre Ul1. These stores 'were not further ident.ified, but assuming that they include Kroger (-which is split between respondent K ational and State Dairy), the A & P account served by respondent Beatrice, ancl the I.G..A. account served by S,vift, there is no evidence that the complaint practices were involved in any of these accounts. The record ,,-l1011y fails to establish that Central Dairy s diffculties are due to respondents' use of any of the complaint practices. The other competitor ,vitness from Columbia, State Dairy Products has also sustained a decline ill gallonage between JD47 nncl1955, from 460 000 gallons to 302 000. J-Ioweyer, most. of this occurred around 1948, during which year a loss of about 30 per cent was experienced due to a. return of the market to a more normal eonditioll than t.hat which hnd prevailed during the immediate postwar years, 1946 and 1\)47. The witness attributed most of his company s decline since 1948 to t.he entry into the market of a number of new companies many of which were sma.ll dairies that had formerly not handled ice cream. State Dairy, unlike its local c' competitor Central, serves a number of chain accounts, mostly on a split basis, including Kroger Safeway and J.G.A. The company maintains a graduated scale of qua,entity discounts, except to the Kroger store to which it sells at a flat negotiated price.

'Vhile the State Dairy witness indicated that his company s profit ratio was not as large as it had been formerly, he attributed this largely to the change from bulk ice cream to package ice cream. The latter involves additional packaging costs not present in the case of CAR ATIO:\ CO:YIPA 'Y ET AL. 1609 1274 Appendix the former. Another factor referred to by the TIitness as affecting his company s profits was the relatively low price of package ice cream. lie did not attribute t.his to the respondents, hut to the smaH dairies which had entered the ice cream bW:3ines8 in recent years and were selling lesser-knoTIn brands of ice cream. This has caused State too put out a cheaper brand of ice cream to compete with the lesserknown brands of the smaller da.irics.

The evidence concerning the Columbia. areas is wholly deficient insofar as establishing that the, use of the compbint, practices by the respondents has been responsilJlc for any injury to any competitor or to competition in the area. The record fails to estnbJish any decline in the number of competitors. On the contrary, the n11mber has increased. There is no information in the record with respect to respondents' market shares in the Columbia area.. However, for the State of l\Iisso11ri as a whole it appears that t.hey ha ye not substantially imprm'ed their position. Respondent Xational's share of stat.e production htls rleclillcd from 16.4 per cellt in 1 H7 to 11.8 pel' cent in 1955. Hespolldent. Borden s share has rlec1ined from 8.6 per cent. to 7.7 per cent during the same period. Hesponde lt BcnJricc has had a modest increase of ;3. 1 per cent from S.D pcr cent. in 10.,1 to 12. 0 per cent in 195;).

c. Central Kansas \.Te Counsel supporting the complaint calletl four competitor ,yitncs:-,es operating in central 1(a115a8: .Jo- lhr Dairies of Salinfl, Jackson lee Cream Company of Hlltchinson, Sterhng Ice Cream Company 01' Sterling, and Armstrong Creamery of ,Yicllita. The territories of these companies are not precisely coextensive" but they operate in an overlapping are,a of about 200 miles in the central part of the State. The respondents operating ill various portions of the, area, inc.nde Kntional, Borden, Be.atrice, Fairmont. and Foremost. 1iespondcnt Carnation operates in Oldahmnil, ,,,here it competes to a small extent. in the northern cOllnties wi th Armstrong Creamery ,Vichita. Swift &, Company also sells in the cpntral Kansas telTitory. There arc a considerable nllmuer of loc,li companies operating in the area, inelnding SteiIen Dairy, Stl'ahan, Bognart's, Artesian Valley, IIycle Park Gardner, HU55ell, Bennett, and Selllue.r. The only one of the four competitor witnesses to have sustained any substantial decline in gallonage was .To-:Mar Dairies of Salina. That company s gallonage has declined from approximately 300 000 gallons in 1947 to 200 000 gallons, as of the time of the Kansas City Ilea rings in July 1956. This decline. ha not been due to any loss of 1610 FEDERAL TRADE COMMISSlOX DECISIOXS Appendix 60 F, accounts since the company has a greater number of accounts than it ever had, but rather to a, decline in sales through the cOlnpany's existing accounts. According to the ,J o-:Jlnl' witness, G;1 to 70 per cent of the company s sales had been to drug stores, eOllfectionery stores, restaurants and institutions whose pUl'clmses consisted1argely of bulk ice cream, and the sales to some of these accounts had declined in recent years by as much as 75 per cent as a result of the shift in ice cream distribution to the food stores and particularly to the large supermarkets.

The .To-Mar witness complained that his company had not been able to get into the supermarkets. His testimony suggestecl that 10\\ prices or off-list prices by his competitors were preventing him from selling to these accounts. lie referred particularly to a reduction ill price by respondent National, '1'hieh was later restored, and to rumor" thflt respondent Kational was gr,l1t1ng certain discounts or rebates, as to which he admittedly had no c1efmite knOlylec1ge. Despite the insinuations in the witness' testimony, which was largely based on 11earsay and surmise, as to respondent N ationars possible leadership in the charging of lower prices, he conceded on cross-examination that it was a local company, Bogaart, which had actually been the leader ill low prices in the Salina market and that it had been follm,ec1 by another local company in this practice, Strahan. Irrespective of who was the leader or ,whether respondent Kational participat.ed in the lowering of prices, there is not a scintilla of evidence that this price competition involved any exclusive dealing type of arrangement, such as is challenged by the complaints. On the contrary, according to the .Jo-i\1ar witness' own testimony and that of other competitor witnesses in the area, most of the large supermarket accolU1ts are being served on a split basis. Thus the Dillon stores to which the witness claimed he ,1'H,S unsuccessful in so1ling ice cream, handles not only respondent J\'ational's ice cream but as many as three and four other,r brands in some of thc stores, includ ing respondent Fairmont and the local competitors, Jackson and Sterling. Tho fal1mel chain to which ,J o- Iar does sell (despite the wit, ness ' assertion that he could not sell to chains) 113 is split with respondcnt Fairmont and with the local competitor Strahan. Of the chains which are not split, 1Iinimax (having about eighty stores) is served by the nonrespondent local company, Bogaart, and Safewa,y is served by the nonrespondent, Swift.

11 In addition to sellng to the Mamme1 chain, Jo.Mar also sells to some of the I.G. stores and to a regional chain of 5 and 10 stores. CAR?\ ATION COMPA.'\ ET AL. 1611 1274 Appendix The .Jo-l\lar witness also ,vas somewhat critical of thc pr Lctice of supplying eabinets to customers, cla.timing that the dealers could afford to purchase their own cabinet.s. However, he later conceded that the larger accounts, which atc actually the ones able to Pllrehase their own cabinets, do in fact, Om1 their o\"n equipment in order to take advantage of the 10-cent a gallon equipment discount, and that the supplying of cabinets was limitpd mainly to the smnJler accounts which, in ma.ny instances, are not able t.o afford a cabinet. The.J o Iar witness had no criticism of the practice of allowing customers to put frozen foods in ice cream cabinets since his company sells frozen foods and permits its customers to do this. He conceded that the supplying of signs \\"as not a factor in his company s loss of or inability to acquire business. The witness spoke vnguely of loans and of the sale of equipment, but did not refer to any account where this had been a competitive problem or identify any competitor as being active in these practices. The witness also eritized the pract.ice of granting price concessions to grocery chains affliated in a cooperative buying group, but identified no ftccounts or any respondent as being involved in this problem. The apparent root of .To-Mar s diffeult.y appears to be the matter of price competition, and there is no evidence in the record that this is based on flny exclusive dealing arrangement such as is at.tacked by the compbints.

The smallest of the four competitor witnesses, Sterling, has apparently fared better than Jo-J\far in making the transition from bulk t.o package sales and fronl the drug and confectionery account to the food stores. In 1946 Sterling had a. gfLnonage of only 86 000 and was serving mainly fountain accounts. \Vhen the change in the channcl of distribution to the food stores began, Sterling acquired a number of trucks and began to sell to the food stores. It was able to get into the Di10n chain, to which Jo-l\ar claimed it could not sell because of respondent National. It also was able to serve the ffLmllel chain on a split basis with respondent Beatrice and later with respondent Fairmont. 'Yhile there is evidence of price competition in Sterling area, the record does not establish that it involves the quantity discount-exclusive dealing type of arrangements to which the complaints arb directed. Despite.e such price competition Sterling appears to have made reasonably good progress. It is selling to approximately 150 it has ever served.accounts, \"which is the largest number of accounts Its ga110nagc graduaUy increased from 86,000 in 1946 to 100 000 gallons in 1954. 'While it experienced a slight decline in 1955 to 96 000 gallons, this trend was reversed during the first six months of 1956 when it ,vas running at a rate in cxeess of 100 000 gallons. So far as. 1612 FEDERAL TRADE CO:\lMISSI01' DECISIOXS Appendix 60 F.

appears from the record, Sterling is prospering and is holding its own in tho c0111petitive struggle in its area.

An even better record of performance is that of Jackson Ice Crean1 Company of I-Iut.chinson. That cOlllpany has increased it.s gallonage from 100 000 in 1050 to between 250 000 and 275 000 gallons in 1956, The company sells to the Dillon chain, some of whose stores it splits wit.h respondent Kational, some with respondent Fairmont and some ,with respondent Beat.rice. III cert,a.in of the stores it splits with both respondents, National and Beatrice., but admittedly gets the bigger end 01' the space, Despite the claim that the company lowered its price t.o the Dillon stores ill order to meet respondent N ationars price and the fa.ct that its profit ratio per gn lion is aJlegeclly lmver than it 'Was formerly, the company s o\ erall profits ate greater be,cause of the increase in total sales. The only thing that is preventing Jackson f1'onl expanding further is the fact that the age of its mYller has disinclined him from increasing his capacity. There is not a scintilla of evidence of injllry to competit,ion in . lckson 'S area due to any of the complaint. pmctices.

The, largest of the competitor witnesses called '\"as \.rmstrong C:' eamcry of ,Yichit.n, Yl"which seDs not only in central and southern Kansas, but al o in the .Toplin, :Missouri, area and in northern OklahOlna (where it competes with respondent Carnation). Armstrong sells t.o a number of chain stores in its area, including Safeway, Kroger Farha Brothers, l\Iamme.1, Food TmYll, and a, lllU11ber of the LG. stores. Its sales increased from 553 000 gallons in 1947 (,,,11ich the witness agreed '''ils one. of the best years in the ice crea1n indust.ry) to 8:?O OOO gallons in 1D54. Its ID55 gallonage had declined by approximately two pel' cent, ,\"hich the ,,,itness attributed to the widespl' cad sale of " undergrade ice Cream at 101H:T prices than the regular grades. 1-10\\over, he made no e:effort to att.ribute this to any competitor or group of competitors, but ineJjcatec1 that. practically all of the companies were selling a ecollc1 grade of ice cream, including his m-VTl company a.nd other local competitors sllch as Schluer, Jackson IIyde Park and Steffen. No evidence was offered to indicate that any of such sales by rmy of i-he respondents involve exe1usive dealingquantity discount type of arrnngcmcnts, such as those challenged by tho cOluplaints. The sale of such "undergrade ice crea, , of presumably Jmyer butterfat content, appears to involve simply a matter of price competition, which the present complaints do not cover. In .any event, despite an alleged small decline of 2 per cent in gallonage in 1955, Armstrong s sales for the first six months of 1956 were running at a rate above that of the previous year. CAR ATION COMPANY ET AL. 1613 1274 Appendix Viewing t.he evidence of the ICansas area as a whole, it wholly fails to sustain any of the allegations of the complaint. The competition primarily involved in the area, \Vas price competition, not falling within any of the allegations of the complaint. 1\loroovc1', there is no evidonce of any injury to c01npetition in the area or the reasonable likelihood thereof. 'Vhile one of the competitors h~ts experienced a snbstnntial loss in gallonage, the ot.her three have improved their position (two of them quite substantially). In contrast to this, respondent Kational, which was the only respondent referred to to any substantial extent, has actually experienced a marked decline in its sales in the lCansas area covered by the testimony of the witnesses who appeared. The gallonage of its Franklin Division has declined from 2 100 000 in 1947 to 1 500 000 in 1955. The only respondent for which the record contains production share data is respondent Beatrice it apparently being the only one "ith a phmt in Kansas. Such data reveal that its share of state production has deelinecl from 18.2 per cent in 1947 to 15. 3 per cent in 1955.

23. New England Ana I-Tearings were held ill two New England cities, J ortlanc1, J\laiue and IIartfol'd, Connecticut. X 0 competitor ,vitnesses were called from either of the hearing c.itics. At the Portland hearing a 'single competitor Iyitness 'was c.alled, respectively, from Barre, Vermont and Ellsworth, :Mainc. At the IIartford hearing a single compet.itor 'itnf'ss 1\",15 caller) from Danbury, Connecticut. Ko dcaler witnesses testified. The evidence Iyith respect to each of the above areas, which appeal' t.o be a separate market area, is c1iscnssed below. a. Barre-J\fontpelier Area The re.spondents doillg business in the area are National (Genel' lco Cream Djvj ioll), Borden Hnd I-Iooc1. The, largest local competitor is Granite City Coopera,t.ive Creamery Association of Barre. There ate also t-.yO 01' three other competitors who sell in portions of the territory. A representati\-e of Granite City Co-op testified at the hearing. Granite City Co-op has the largest. sales of any of the, competitors ill the area, lun-ing approximately .:17;"5 emitomers and a gallonage of approximately 216 000. rIhe company s ,witness had no criticism of the practice of furnishing cabinets, e,xpressing the, opinion that it is desirable for the ice cream supplier to furnish a cabinet LeCHllse it is the only proper way to insure the product's reaching t.he c.onSllmer in good condition. lie indicated that the cost of t.hc cabinet. was figured into the price of the ice crea.n. Appendix 60 F.

The Granite City witness claimed that he had lost to respondent Hood several retail grocery accounts, ,,,which were affliated ''with voluntary buying group known as the Reel and v\Thite Stores. The witness' testimony was s omewhat confused as to whether the loss of the stores -was clue to price or to the furnishing of equipment. 1-lis testimony with respect to onc of the accounts suggests that the reason for the switch was "pressure" from the buying group itself which of course, is outside the issues in these proceedings. In any event theTc is no reliable evidence in the record to support the witness' hearsa.y testimony with respect to what assistance, jf any, these accounts received from IIoodY4 The witness a.lo referred to two accounts which had been lost to respondents National and Hood, respectively, because of the alleged financing of soda fountain equipment. There is no reliable evidence ill the record to support the witness' hearsay t(' stimony concerning the assistance of these two accounts by the t,1'O respondents in question.

The record fails to establish that Granite City Cooperative is experiencing any serious competitive diffculties or that sllch problems as it is encountering are due to the complaint practices. The company s gallonage as of August 31, 1955 , was 216 000 gallons, which w' 000 gallons higher than its gallonage in 1953. ""Vhile it has lost some accounts, it has also gained at least as ma,ny, including some from the two respondents to which it a11egecl1y had lost seveml accounts. Its representative s ma.in complaint was that the company was not expanding as fast as it thought it should. However, there is no in dication that the respondents arc expanding in the area. The sales of National' s plant ill nearby Hurlington and in its other branches in t.he state have declined from 800 700 g,1110ns in 1047 to 642 700 gallons in 1955. While it is still a dominant factor in the State of Vermont :National's share of state production has declined from 53. 8 per cent in 1947 to 46. 3 per cent in 1955,'" The sales of Borden s Bnrlington Vermont branch declined from 103 000 ga1lans in 1946 to 77 000 gallons in 1955. The record contains no separate figures for I-Ioorrs V E',l'mont operation. I-Iowever, the figures for its northern region, which includes J\iaille and Vermont, show a decline in sales of 13. 150 gallons between 1950 and 1955, 111 The witness conceded that he did not have any firsthand knowledge of tbe actmd prices being charged by competitors.

rn It may be noted that National' s 1947 production share was onl;r two per cent above its 193-2 production share.

CARj\TATIO:l IPA:-TY ET AL. 1615 1274 Appendix b. Ellsworth, Maine Although hearings were held in Portland, l\1aine, no witnesses from that area were called. A competitor \vitness from Fairfield, :;1:aine \vas subpoenaed, but was excused at the request of counsel supporting the complaint. Tho only witness called from tho State of Maine was a represenbttive of Hancock Creamery of E11sworth. Another local competitor in the area is Edwards of Hocldrmd, 1.1o.1ne. The only l'e spondents operating -in the area are I-Iood and ational. Borden does not sell in the territory.

The Hancock witness claimed that his company had lost several grocory stores, affliated with the IGA and Associated Grocers groups to respondent IIood. The witness thought these accounts h td received a better price due to some sort of special arrangement between I-Iood and the groups, However, the witness, who had only been with the company for about five months at the timo of the hearing, conceded that hc lutd no personal knowledge as to what prices his competitors were charging. In fact, 110St of his testimony related to accounts which had been lost prior to his coming with the company. No find ing ,ylih respect to the loss of these accounts or the reason therefor can be based on the unsatisfactory testimony of the witness. The record discloses that IIancock' s sales increased steadily from approximately $165 000 in 1947 to $189 000 in 1953. During 195'1 the company expericnced a decline to approximately $150 000 but the following year its sales incrcfLsec1 to $172 000 and this improvement continued into 1956. Thero is no evidence that either of the two respondents has experienced any improvement in its sales in the arefL. The sales of Kational's branches in nearby Bangor and :.1achias have de clined by approximately 50 000 gallons between 1947 and 1955. indicated above, the sales of Hood's northern region, which includes 2Ifaine, have also declined substantially between 1950 and 1955. c. Danbury, Connecticut, Area Although hearings were hem in Hartford, the only witness called from Connecticut was a representative of Rider Dairy Company of Danbury, which operates in portions of southern Connecticut and several counties in the fLdjacent sections of eastern Kew York. The respondents operating in the area include National, Borden, Hood and Foremost. There are also a number of other local and regional com panies sellng in the territory.

The Rider witness indicated that the supplying of cabinets and signs was a general practice of almost all companies in the area. He had very little criticism of the furnishing of this type of equipment, except 1616 FEDERAL TRADE COM:vISSIOX DECISIONS Appendix GO 1 for one inst.anec ,,'here Kational had furnished a sign, valued at about $100, , to an account on a U. S. highway which the witness did not reel was \varranted by the Lccoullfs gallonage. :Most of his criticism was directed at the alleged loaning of money or financing or equipment for dealers. The Rider witness' testimony regarding the alleged financial assistance or scyeral dealers by Borden and National was largely based on unreliable hearsay. He conceded that his own company also assisted customers in the purchase of soda fountain equipment and that t.he loaning of money in the territ.0l1' by compeJ.it.ors went back as far as the 1920' s. ,Vhile somewhat critical of the, fiancing of dealers, the Rider witness conceded that the smaller independent stores needed financial assistance in order to obtain necessary equipment. In addition to the mattet of financing, the ,witness also alluded to the granting of off-list prices and of price cutting in the territory. I-Io,ycver, he conceded that he had no personal knowledge of this nncl was unable. to identify any responc1pnt as :be,ing im-olvecl ill this practice.

Rider s gll1lO1mge in 1955 ",os approximately 130 000 and its donar sales about $250 000. The witness claimed that his company s volume had relTIained static during most of the posbvar period. He conceded hmyever, that this was due large.ly to a, shift in business away from the, old-line soda f01Ultain and restaurant bulk-type estnhlishment (which his company had tra,ditionally served) to the supermarket. food outlets. The witness indicated that eompctition for the lattex type of establishment centered mainly about price. K 0 evidence \'i' as offered to shmy that pricing pra,ctices of the type. alleged in the complaint were involved in the acquisition of these accounts. In fact, no evidence of any kind was offered as to who served the supermarket accounts jn the area or as to what. prices were being charged.

The record fails to e-stablish that respondents have significantly improved their position in the area in which Hider operates. The sales of respondent Borden s branch in Stamford, Connecticut, \vhieh serves it considerable part of the area, have declined by 115 000 gallons hebyeen HUG and 1955. The sales of its Ponghkee,psie, X C\v York hraneh, which serves areas of eastern Kew York State adjacpnt to Connecticut, have declined by 90 000 gallons during the same period. share of production in the State of Connecticut has declined from 16. per cent in 19 i7 to 10. 7 per cent in ID55. Responde.nt NationnTs shRTe of the state production in Connecticut. has declined from 3;).7 per cent in 1947 to 22.5 per cent in 1D55."" The sales of respondent Hood' 1)6 It may be Doted that respondent atJonal's share of production In tbe Stat.. of Connecticut in 193!2 was 52.4 per cent.

CAR ATION COMPAL'rY ET AL. 1617 1274 Appendix southern region, ,which includes Connectic.ut, have declined by approximately 286 000 gallons bet\veen 1950 and 19;'"),L For New England as it 'ld101e, respondent lInoers shftl'c of the "\yholesale produc tion of ice cremn has c1e,clined from ;-10.2 per cent to 2J.03 pe,r cent bet,veen 194-7 and 105-1. Its share of production of an frozen dairy products for Ncw England has declined from 26.5 per coni, in 1947 to 19. 9 percent in 1955.

2';. Rapid Oity, South Daleo!"

The only respoIlllent doing business in Rapid Cit.y and the, Bla.ck I-Ens arCi1 is Fairmant. Hesponclents N national and Beatric.c hn,ve sold in the territory for brief periods in the postwa.r era, but have withdra"\vn frolll the area for re.asons not appearing in the record. The same is true of the large nonrespondent company S,\yift. The local companies operat.ing in various portions of the territory include LaBelle Creamery, Gate City Sunshine Coopenttive, LangenfeJc1lce Cream Compa,ny, :Mitchell Dairy, and 1-Iot. Springs Iilk Company. R.representatives of LaBelle, Gate City Sunshine and I-lot Springs Milk testified at the hearing held in En pid City in July 1066, Fairmont, LfLBellc and Gat.e City arc j- he three largest cOJnpanies in the, Rrea, ,,,itll FairmollL having a volume oJ npproximately 121 000 gallon:: while LaBelle s gallonage is approxiulfte!y 12G OOO gallons and Gate City Sunshine s is approximately 100 000 gallons, The testimony of the LaBelle witness centered about t.he alleged supplying of better cabinets than he thought "\arranteel and the manufacture of private label ice cream at reduced prices. The LaBelle witness indicated that it had been customary to charge a rental on cabinets un61 about six or seven years previously. lie made no e1Tort to attribute the cessA,tion of the c.charging of rentals to an particular competitor, testifying that he had stopped when "o,' e.ryone eJse stoppeeV 1-Ie also indicated that it had been cllstomary to sell cabinets to customers until six or seyen years a.go, but t.hat this practice had also declined, so that only three per cent of his company accounts now owned their own cabinets, as compared to 20 to 25 perce:\nt in former years.

The criticism of the LaBelle witness with respect to the supplying of cabinets revolved about the supplying of larger or better cabinets than he thought justified, and permitting the stora,gc o:i' other frozen foods in the cabinets. No claim was made that. his company had lost any accounts or had been prevented from acquiring any hy competitot. :\t least two of reason of the supplying of cahinets by it 1618 :FEDERAL TRADE COivl:MISSION DECISIONS Appendix GO !".

tho three accounts which the ,vitness mentioned as having received bigger cabinets from Fairmont than he thought. prop8!' \"Vcre being served on a split basis by both LaBelle and Fainnont. Fairmont sells other frozen foods ill the area, as well as ice cream, which may \vell account for it permitting the storage of such food ill its cabinets. The witness also conceded that it is sometimes "hard" for an ice cream manufacturer to prevent a dealer from storing frozen food ill the cabinet. Insofar as the size and type of cn-binet is concerned there is 110 shmving of any abuse or discretion by Fairmont in supplying cabinets which were not appropriate to the volume and ,,,itlless ;,c1mined thattype of establishment involved. The LaBelle his own company had supplied cabinets to de~del's \vhere Fairmont had refused to do so.

.Most of the witness' testimony was directed to the fact that his company had lost several stores of a chain, which it had previously served, when Fairmont began manufacturing ice cream for the chain under a private label. According to the witness, the Fainnont manager had told him that the private label brand '''as being sold at a g,,lion less than the regular brand. "\Vhile both bmnds have the same butterfat content, the private label brand has a higher overrun (i.e. more air), which may account lor its allegedly lower price. The LaBelle witness indicated that his company also made a second brand which at times sold below Fairmonfs private :label brand. As heretofore indicated, there is nothing in the complaint which challenges the right of a manufacturer to manufacture private label ice cream at a lower price than its regular brand.

his C011 According to the figures given by the Label1c witness, pany s present gallonage of approximately 126 000 gallons is about lci OOO gallons below its 1952 peak of 142 000 gallons. However about three-forths of this decline is represented by the loss of the nearby U.S. air base account (which went to Fairmont on the basis of a lower bid) and by the loss of the Safeway account (which is now manufacturing its own ice cream). There is no reliable evidence in the record to establish that any substantial portion of the Labe11e decline is due to Fairmont' s use of any of the complaint practices. There was no evidence introduced of the use of any exclusive dCiding arrangements in the area. In fact, the testimony indicates t.hat there is it wide splitting of aCcolmts in the area, with some of the stores serving two or three different manufacturers. ice cream. Gate City Sunshine Cooperative is a consolidation of byo companies one of which was formerly only in the milk business. Unlike the experience of Labe11e Creamery, Gate City Sunshine s sales have been CAR ATIOX COMP fuYY ET AL. 1619 1274 Dissenting Opinion on the increase. Starting with a volume of about 65 000 gallons in 1953, the companies sales increased to 75 000 gallons in 1954, then to 000 gallons in 1955, and in 1956 the company s sales were runnino' at the rate of 100 000 gallons a yep.

represent.ative of Gate City complained that Fairmont was selling below list, but conceded that he had no )ersonnl kl1O\vlec1O'e of this. No evidence of off-list prices charged in the area was offered by counsel supporting the complaint. Another witness from the Gate City Company conceded that the dropping of prices in the market was started by Swift, rather than Fairmont, when the ion-ner came into the market area for a brief period and later ,yithc1rew. Gate City has had no apparent diffculties in meeting price competition in the area. It lowered its Qlvn prices when other competitors did, and it now serves a number of the larger stores in the area, some on ::, split basis with Fairmont and LaBelle.

The third company to be represented at the hearing, IIot Springs lilk Company, sells in only a portion of the territory around IIot Springs. It did not enter the ice cream business until 1949. Its gallonage in 195G '"as around 10 000 gallons, which represented an increase over its gallonage in previous years. The principal COlnplaint of the witness from the company was that 11 airmont had advertised on TV and given away premiums to customers who received a certain number of coupons in the purchase of F,lirmont products. This, of course, involves matters not cm' erec1 by the corn plaint. The Nitness also referred to another local competitor who ",vas ~dlegeclJy worse than Fairmont .when it comes to giving stuff away, The record fails to establish any injury to competition in the Black Rids area due to the use of the complaint practices. The l'c.core1 does not establish any substantial JllOltalit.y among competitors. 'Vhile one small company has gone out of business clue to the retirement of its owner. a nmv company, Langenfeld, has come in from J\1itc11011 South Dakota to do business in the market. There is no indication ill the record that respondent Fairmont has experienced any increase in sales in the area during the postwar period, lHSSl;:?\TTSG OF1XlO:' , DOC.KET G425 By JL\cINTYRE C O1nm 88ioneJ':

illv consideration of this ease has been and is based upon evidence in tl e record relating to this respondent. Scrupulously I ha\ c l llden voreel to keep my rights on th,it l'cco:;'cl relating to this respondrnt to the exclusion of ,,,hat it; IJl\'olvecl 111 the l'f'col'l or otherwise, l'ebtllg to other cases. DuriJlo' tll', COllrse of the 11eUl'iJl2,' before the Commis- 710-603--64--103 1620 FEDERAL TRADE COJMVfrSSION DECISIO \,T Order 60 F.

sian (Transcript pages 32-33) it appeared that counsel for the respondent ,yftS injecting matters from the record relating to other respondents into his presentation of this case. To this I objected, and have been hopeful that we would not become confused thereby, The decision or the majority to dismiss the complaint in this case is based upon its finding that the record ill the case rela,ting to practices used by the respondent in connection with its frozen dairy products "will not support a finding that these practices have produced the requisite dCbrree of competitive injury to support an order to cease and desist.

,With the conclusion of the majority I disagree, and from its action dismissing the complaint, I dissent.

ORDERS DISlIIISSIXG CQMPLAIXTS * These matters having been heard by the Comlllission upon the appeal of counsel supporting the complaints from the hearing examiner s initial decision dismissing the compla.ints and the Commission ha;ving considered sa,id appeal and the opposition thereto presented by respondents; and It appearing that the complaints charge respondents have engaged in unfair methods or competition and unfair acts and practices in commerce in that they granted or offered certain material considerations to customers and prospective customers to induce them to purchase or continue purchasing frozen dairy products from respondents with the result and effect of lessening, hindering and eliminating competition and of creating a tendency toward monopoly in the sale and distribution of frozen dairy products; and The Commission, upon review of an evidence adduced ill support of sa.id complaints, having conc.uded that the record ,,,ill not support a finding that the complaints practices shown to have been engaged in by respondents have resulted in substantial injury to competitjon or arc likely to e:1Ieet a monopoly in the sale and distribution of frozen dairy products, and that, therefore, insofar as the initi Ll decision of the hearing examiner is based upon this failure of proof, it must be affrmed and adopted as the decision of the Commission; and 'It further appearing that respondents Carnation Company, The Borclen Company, Beatrice Foods Comprl1Y (Dela,ware), Xational Dairy Products Corpora.tion, Arden Farms Co., Foremost Dairies .\13 to all nine re pondcIJts named in the combined amenrJcd complaints. 1 It !Joulc1 be noted that while respondents cited in all nine dockets are subject to the dismissal oreler, Pet Mii, Comlmny et al. and Fairmont Foods Company et al. arc omitted from t e following paragraph as explained in the initial decision. CAREY SURGICAL APPLIANCE CO. J ETC. 1621 1274 Complaint Inc., H. P. Hood & Sons, Inc., directly or through their subsidiaries have engaged in the pra,ctice of granting loans or sums of money to frozen dairy products retailers upon the condition that the recipients will deal exclusively with said respondents, or their subsidiaries, and while, as aforesaid, this record wi1 not support a finding that these practices have produced the requisito degree of competitive injury to support an order to cease and desist, nevertheless, the Commission under such circumstances, should safeguard the public interest by continuing close scrutiny of respondents' operations '\with a view toward reopening or taking such other action as may be warranted. It is o1 de1' That the appeal of counsel supporting the compla,ints , and it hereby is, denied.

It is further ordered That the complaints be, and they hereby are dismissed.

Commissioner Kern not participating Hnd Commissioner )Iaclntyre dissenting" in H. p, Hood & Sons, Inc., docket 6425, not participating in the other cases.