American Metal Products Company et al.

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Ix THE MATTER OF ANlEmCAN NIETAL P1WDlTCTS CmIPANY ET AL.

ORDER, ETC., lK REGARD TO THE ALLEGED VIOLATION OF SEGS. 2 (a) AND 2 (f) OF THE CLAYTON ACT Docket "/365. Complaint, Jan. lE59-Decision, June 8, 1962 Order vacating initial decision and dismissing for mootness, complaint chargig manufacturers of plumbing supplies with, respectively, granting and receiving discriminatory prices in the sale of porcelain-on-steel sanitary ,yare since the grantor no longer manufactured the product and the recipient no longer purchased it from any source, having purchased the assets of the former manufacturing subsidiary of the grantor which was then dissolved. COl\PLAINT The Federal Trade Commission, having reason to beheve .American )Ietal Products Company, a corporation, and Al1iancevVare, Inc. , a corporation, have violated and are now violating the provisions of subsection (a) of Section 2 of the Clayton Act as amended by the Robinson-Patman Act, approved June 19, 1936 (G.S. , Title 15, Sec. J3), and that Crane Co., a corporation, has violated and is now violating the provisions of subsection (f) of Section 2 of said amended Clayton Aet, hereby jssues its complaint, stating its charges with respect thereto as follows:

COU: T I PARAGRAPH 1. American Metal Products Company is a corporation organized, existing and doing business under and by virtue of the laws of the State of Jlichigan with its principal o/!ee located at 5959 Linsdale Avenue, Detroit 4, Jfich. American :Metal Products Cornp'my s total sales in 1957 exceeded $65 000 000. On or about April 30 , 1955, American :Metal Products Company acquired complete ownership and control of Alliance\Vare, Inc., an Ohio corporation, and without changing its name reincorporated it lmder the hnvs of the State or Delaware. Said Deb,ware corporation respondent AllianceWare, Inc., herein, has since its formation been under the dornination, direction and control of respondent American Metal Products Company. The acts, policies ,md practices in which respondent Alliance \1' are, Inc., has engaged as hereinafter alleged were pursued with the knowledge, approval and at the behest of respondent American .Metal Products Company.

PAR. 2. Respondent Alliance'Vare, Inc., is a corporation organized existing and doing business under and by virtue of the laws of the 719-6oa (j4- 106 Complaint 60 F. T.

State of Delaware with its p"'incipal offce, and place of business located at Alliance, Ohio. It is the wholly-owned subsidiary of respondent American Metal Products Comp,my. Alliance 1Vare, Inc.., is principally engaged in the manufacture, distribut.ion and sale of poreelain-on.st.eeJ sanitary ware, including bathtubs, lavatories and sinks. Alliance IV are s total sales for the year ending December 31 , 1957, exceeded $7 000 000. Alliance 1Y are, Inc., manufactures its products ill sevcfalpJants located throughout the United States and sells and ships said products to approximately 850 plumbing supplies wholesalers located in each of the States of the United St.ates. Included among Allance- 1Vare s 850 plumbing supplies wbolesaler customers is the respondent Crane Co. Alliance\Vale, Inc. , in tlle sale of said products as described has been and is now in commerce, cts "commerce" is defined ill the amended Clayton Act.

PAR. 3. Respondent Crane Co. is a corporation organized, exist.ing and doing business under and by virtue of the laws of the State of 111inois with its principal offce located at 836 South fichigan Avenue Chieago 5, 111. Crane Co. s total sales in 1957 exceeded $378 000 000. Crane Co. is a mflllufacturer of plumbing" supplies, including porcelain coated cast iron sanitary \Iare, and a wholesale distributor of poreelain- steel sanitary ware which it purchases from respondent Alliance Ware, Inc. Crane Co. owns and operates approximately 150 branches t.through which it distributes and seBs at the wholesale level both the plumbing supplies manufactured by Crane and those purchased from respondent A11ianee IVare, Inc. Crane CO. s purchases from ABiance'Yare Inc., are purchases in commerce, as "commerce" is defined in the Clayton Act. The products purchased are shipped between and among the several States of the united States from the respective states wherein t.he Alliance- 'Vare, Inc., factories arc located to the respective different states wherein the approximately 150 Crane bra-nehes are located. PAR. 4, In the sale and distribution of porcelain-on-steel sanitary ware, respondent Alliance'V are, Inc. , is ill substant.ial competition with other sellers of similar products.

In many trade areas respondent Alliance'Yare s plumbing suppEes wholesaler customers, including the Crane Co., are in substantial and direct competition with each other and with the plumbing supplies wholesaler customers of other manufacturers of similar products. \R. 5. In the course and conduct of its business in commerce, the respondent Alliance"'V are, Inc' has been and is now discriminating jn price in the sale of its products of like grade and quality by selling A;IIERICAN METAL PRODUCTS CO. ET AL. 1669 166i Complaint tJ,em to the Crane Co. at substi'lltiaJIy. lq",cr prices th n. it sells them to its other plumbing supplies wholesaler customers who compete with the Crane Co. in the resale of said products. Among the methods which respondent A1lianceIVare, Inc., has utilized in effecting said discrimination in price is the method hereinafter described.

(1) During the period commencing on or about March 1, 1947, and ending on orabout1iarch 1, 1957, the Crane Co. was granted net prices which were 5 percent less_t:h.a .the'net prices chRl'ged to all other customers. This discrimination 'vas effected pursuant to a formal contract entered into on April 24, 1947, which provided inter alia: " ,; '" the prices for the various items of steel sanitary ,yare sold by Allance to Crane under the terms of this agreement shall be the lowest prices then current for the article to other purchasers in effect at the time Crane s order is recei-ved by Allance, less disevunts as follows: (a) As to all deliveries malle by Allance to Crane. . . the discount shall be 5%, . . . (2) During the period commencing on or about 1Iarch 1, 1957, and ending on or about i\Iarch 1 , 1!J58, the Crane Co. "vas granted net prjces which were first 12V2 percent and subsequently 15 percent less than the net prices charged to all other customers. This discrimination was etfccted pursuant to a formal contract dated :March 1 , 1957, which provided 'tntei' alia:

Allance agrees to manufacture and sell and Crane agrees to buy for the duration of this agreement "Crane steel ware " as hereinbefore defined at the then generally prevailng current net price of Allance to wholesalers for the same or compal'ublesteel ware items less twelve and one- half percent (12 12%) until the first twenty thousand (20 000) bathtubs have been produced by Alliance and sold to Crane or unti the expiration of six (6) months, whichever first occurs, find thereafter less fifteen percent (15%) from said net price. (3) During thc period commencing on or about March 1, 1958, and continuing to the present time the Crane Co. has been granted net prices which are 12 percent on bathtubs ilDd 12 percent on sinks and lavatories less than the net pricpB charged to other customers. This discrimination is being etl'eeted pursuant to a formal contract dated rareh 1 , 1958, 11'which provide-s nfe1' alia: (a) Allance agrees to manufadure and sell and Crane agrees to buy for the duration of this agreement "Crane steel ware" as hereinbefore defined at the t.hen generally pre,ailing current net price of Alliance to wholesalers for the RaIne or comparable steel ware it.ems. With regard to bathtubs defined herein under Paragraphs 4(a) and 4(b), the current net price shall be less ten percent (10S"c) unti the first twenty-four thousand (24 000) hath tubs have been produced by Allance and sold to Crane; then less eleven and one-quarter percent (1l14 0/) until the next six thousand (6 000) bathtubs have bien produced by Allance and sold to Crane: then less twelve and one- half percent (12 -S0/) until the next 1670 FEDERAL TRADE Cml\HSSION DECISIONS Complaint 60 F. six thousand (6 000) bathtubs have been produced by Allance and sold to Crane. On all bathtubs over thirty-six thousand (36,000) produced by Allance and sold to Crane, the current net price shall be less twelve and one-half percent (12V20/) except that if thirty-six thousand (36 00) bathtubs or more are produced by Allance and sold to Crane during the twelve (12) months period. March 1 , 1958 to ).Iarch 1, 1959, such current net price as diminished above shall be less an il'additional two and one- half percent (2%%) on the first twenty-four thousand (24 000) bathtubs and in addition thereto less one and one-quarter per cent (1 4 %) on the next six thousand (6 00) bathtubs. (b) With regard to lavatories and sinks c1efined herein under Paragraph 4(e), the current net price shall be less seven and onc-half percent (7%%). PAR. 6. In the course and conduct of its business in commerce, the respondent, Alliance ware, Inc., has discrilninated in price in t.he sale of its products of like grade and quality by selling them to some of its wholesaler Cllstomers at higher net prices than are charged to other customers who compete with the wholesaler customers charged the higher net prices.

Among the methods ,which respondent Alliancc\Vare, Inc. , has utilized in effecting said discriminations is the Incthoc1 hereinafter described.

Since 1956, and continuing to the present time, AllirLlce ,V are has in several trading areas designated one or two of its wholesaler customers as "stocking jobbers. " Said designated customers are granted a 5 percent discount or rebate from list prices. The remainder of respondent Alliance \V are s customers within each such trading area are required to P lY list prices without the benefit of discount or rebate. Thus, the wholesaler customers not designated as "stocking jobbers are required to pay net prices which are approximately 5 percent higher than the Det prices afforded to the so-called "stocking jobbers with whom they compete.

Pc\R. 7. The effect. of respondent AllianceVVare s discriminations in price as above alleged, may besubstant.ia.lly to lessen, injure, destroy, or prevent competition between respondent Alliance "'Yare, Inc., and competing seDers of similar products; between respondent Crane Co. and all other Alliance\Vare wholesaler customers; and bet 'ien and among the Allinnee",Vale "stoeking jobber'" ",yJlOlesaler customers and an other wholesaler customers.

\R. 8. The nets and practices of respondent Aliancc\Vale, 1nc' as above alleged constitute violat.ions of the provisions of subsection (a) of Section '2 of the Clayton ct (U. , Title 15, Sec. 1:), as amended by the Robinson-Patman Act, approved June 19, 1936. AMERICAN METAL PRODUCTS CO. ET AL. 1671 1667 Initial Decision C01;T II PAR. 9. Paragraphs 1 through 5 of Count I are hereby incorporated by reference and made a part of t.his charge as fully and wit.h the same effect as though here again set forth verbatim. PAn. 10. Hespondellt Crane Co., in purchasing porcclain-on-steel sanit.ary ware from respondent Alliance \V are ill the manner and at t.he prices as above alleged, has knowingly induced and knowingly received unla"\vful discriminations in price. Respondent. Crane Co. knows, or has reason to know, that t.he prices it Ims induced and received are lower than the prices which respondent Alliance\Yare Inc., charges to its other wholesaler customers who compete with the Crane Co. in t.he resale of Alliance'Vare, Inc., manufact.ured products and knows, or has re,ason to know, that said favorable prices constitute discriminations in price prohibited by subsection (a) of Section 2 of the Clayton Act, as amp,nc1ecl by the Robinson-Patman Act. PAn. 11. The efiect of the knowing inducement and receipt by respondent Crane Co. of t.he discriminations in price, as above alleged has been and may be subst.antially t.o lessen, injure, destroy, or prevent competition between respondent Alliance\Yarc, Inc., and other mnnufactllrers of sa.nitary ware; and behyecn respondent. Crane Co. and the \\-wholesaler cllstomers of Alliance\Vare, Jnc. and other manufacturers of similar products.

PAR. 12. The foregoing alleged acts a,nd practices of respondent Crane Co. , in knowingly inducing 01' receiving discriminations in price pruhibited by subsection (a) of Section 2 of the amended Clayton Act, are in violation of subsection (f) of Section 2 of said Clayton Act, as amended by the R,obinsOll-Patman Aet approved June 19, 1936 (VB. Title 15, Sec. 13).

Air, William W. Rogal, Nr. S. Bmc!"nan Home and Nr. Stanley 111. Lipn-ick for the Commission.

Jlh. W. Robert Oha.ndler of Oook, Beake, Aliler, Wrack 01'088 of Detroit, Mich., for respondents .American Metal Products Company and Alliance 1Vare, Inc.

r. Edward R. J ohn,ton and Al r. Edward H. H aUon of Thompson Raymond, Mayer, Verner Blo01nstein of Chieago, n1., for respondent Crans Co.

INITIAL Dl':CTSION BY 'VALTER R.. JOHXSOX , IIEAHlXG EXA finer In the complaint issued by the Commission on .January 22 , 1959 -Alliance1Vare, Inc., and its corpora.te parent, American Metal Products Company, are charged ",, ith violation of subsection (a) of Sec- .., :

1672 FEDERAL TRADE COJ\IMISSJOJ\ DECISJO:\S Initial Ded1,iou 60 F, tion :2 of the Clayton Act. as amended ,and Crane Co. is charged with violation of subsection (f) of Section 2 of said amended Clayton Act, At times herein the said respondents win be referred to as A IV, ,DIP and Crane, respectively.

The complaint alleges in part:

PARAGRAPH FIVE:

Inc.,. has Among the methods "which respondent Allia,nce\Vare, ut.ilized in efi'acting said diesel'imillation in price is the method hereinafter described.

Iarch 1 , 1947, and (1) During the period commencing 011 or auont ending on or about:Mareh 1 1957, the Crane Co. was granted net prices which were 5 percent le,ss than t.he net. prices charged to all other CHSt.omers. This d1SCl'inlinat.ion was effected pnl':euant to n formal 1'-011tract entered -into on Apri124 1947 commencing on 01' about. JInl'ch 1 , HJ;j7, and (:2) During the pe.riod ending on or about l\lnreh 1 , 1958, the Crane Co. was granted llet prices which ,were first 121j2 percent and snusequent.y 15 percent. Jess than the net prices eharg('tl to all ot,her eust.mel's. This discriminac1atetl rarch 1 , 10!)7tion was efreeteel pursuant to a. formal eontrHct 'I' 1\Jarch 1 1958 01) During the pel'lod comme. neing on or about and continuing to the present time the Crane Co. has been granted net pric.es which are 121j2 percent on bathtubs and 71j2 percent on sinks and 1ayatories less than the net prices charged to other cnstomers. This lh3crimination is being effected pursuant, to a formal contract dated March 1, 1958 PARAGRAPH SIX:

Since 1956, and continuing to the present time AlliRnee",V are has in several trading areas designated one or two of its "wholesaler customers as "stocking jobbers." Said designated customers are granted a 5 percent discount or rebate from Est prices. The remainder of respondent Alliance",Vare s cust.omers "within each such trading area are required to pay list prices wit.hout the benefit of discount or rebate. Thus, the wholesaler customers not designated as "stocking jobbers arb required to pay net prices which are approximately 5 percent higher tha.n the net price,s afforc1ed t.o the so- ca.lled "stocking jobbers with whom they compete, were in the nature of a general The answers of AMP and A II denial and affrmatively advanced a. cost justification defense. They AMERICAN retail PRODUCTS CO. ET AL. 1673 1667 Initial Decision also alleged that the discOlmts to stocking jobbers were made in good faith to meet the equal11y low price of competitors. The answer of Crane was of like import but further denied that it had induced or received discounts which it kne\v or had reason to know to be illegal.l. The hearing examiner has given consideration to the proposcd findings filed by the partics hereto, and all findings of fa,ct and conclusions not hereinafter specially found or concluded are here\with rejected. Upon consideration of the entire record herein, which is contained in a t.ranscript of 2163 pages and approximately 1 000 exhibits, the hearing examiner makes the following findings of fact and conclu- SIOns :

American Metal Products Company, established in 1917, was inc.orporated under the laws of the State of :Michigan in 1928 and its principal offce and place of business is located at 5959 LinsdaJc A venue, Detroit, Michigan. The business of A fP is the manufacture and fabrication of formed, \velded steel, tubular parts, tubular and stamped assemblies; wire assemblies; and stampings w"which arb sold to the automotive and aircraft industries. In addition to respondent Al1iancc 'Yare, Inc., it, has the following \1'holly owned subsidiaries:

Burroughs 31manufacturing Co., Kalamazoo, J\lichigan, acquired Octobcr 28, 1950, produces metal offce furniture, map racks, stecl shelving, stecl storage equipment, and parts bins; Tube Reducing Corporation, \Vellington, Nov ,TersE',y, acquired February J , 1954, produces "Rockrite" tubing for use in ball and roller bea.rings, hydraulic and pneumatic cylinders, helicopter 1)pars and airplane propellers; and General Spring Products, Ltd., Kitchencr, Ontario, acquired Kovember 1 , 1954, produces tubular, stamped.d, and wire seat spring assemblies, and other parts for the Canadian automotive industry. Alliance'Vare, Inc" was incorporated on April 27, 1955 under laws of the State of Delaware and is a wholly-owned subsidiary of AMP. It is engaged in the manufacture of ste.el sanitary ware, washing machine tubs and other products and its principal offce and pla, of business is located at A1lance, Ohio. It also has plants at Colon California, Kilgore, Texas, and ETansvil1e, Indiana, and warehouse space is leased in Tampa, Florida, and l\limni, Florida. The steel sanitary ware products, which consist of porcelain enameled steel bathtubs, sinks and lavatories, are sold to plnmbing wholes,ders for resale to pJumbers and plumbing contractors and to national distributors of plumbing supplies such as Crane Co. These products account for approximately fifty percent of A W's total sales. Its net sales for Initial Decision 60 E' the calendar year of 1957 were $7 007 549. , it is among the top five producers of porcelain on steel plumbing fixtures and probably ranks ninth among al1 producers of pIlIbing fixtures. Crane Co. is an illinois corporation with its principal offce located ilt 836 South Michigan Avenue, Chicago, Illinois. It is a manufacturer and distributor of varied Jines of produts, as well as water heaters, pipe and other related industrial products. Crane is now and for many years has been a manufacturer of cast iron enamel ware such as bathtubs and other plumbing fixtures. The distribution system of Crane consists of branch houses engaged in the sale and distribution of a wide variety of products either manufactured by Crane or products manufactured by others, and a. large number of Crane appointed independent wholesale distributors. Crane at the time of filing of the complaint in this proceeding, and for a period of at least 12 years prior thereto, had as many as 140 branches Ioeabed throughout the country. During this period of time it also distributed products Inanufaetl1red by it or produced for it by others through Crane designated plumbing wholesalers, which in numbers amolmted to more than the number of Crane branches. However since that time, up to September 28, 1960, Crane has disposed of the vast. majority of its branch houses, leaving the company as of the foregoing date with 58 branch houses. The company, during the foregoing period of time, has increased substantially the number or its designated wholesalers to the extent that there are now between 300 to 400 such wholesalers. Although Crane is a substantial producer of cast iron enamelware, it has never manufactured steel enamelware.

The stationary, permanently installed, bathtub 'vas first iniroduced . into this country about 1870 and was manufactured from wood, metal cern,mjc ware, tile, cement. soapstone and in fact n,lrnost anyt.hing that. would hold w"ler. The various types of bathtubs "-ere later followed by tlle manufacture of heavy cast iron tubs. In 182. , The St.eel Sanitary Company, an Ohjo corporation, was organized and began engineering development ,york on Lhe use of dnt,vn and stamped steel shapes for bathtubs flnc1 other sanitary \Vare. C. .r. Rodman was one of the organizers of that. company and its president. It long had been recognized that, because of its physical quahties, steel offered advantages over cast iron and other competing materials. The cleyplopment work of said company extended OYer a period of five years during which.h time it leased and equipped a plant; secured a number of design and process patents and carried the development of fabricating steel sanitary ware to fi poiIlt where AMERICfu'l METAL Prodccts CO. ET AL. 1675 166"1 Initial Decision it ,vas believed actual manufacture could be placed on a practical basis in the relatively near future. In 1032 how"ever, owing to the generally depressed financial condition of the country and the accompanying inactivity in the building and plumbing trades, the company ceased a,ctive operations.

The Alliance Porcelain Products Company was incorporated under the Jaws of the State of Ohio on April 24, 1934. In September, 1944 its corporate name \Y,lS clumgecl to "Al1iaIlce\" ale, Inc." At times herein said corporation ,,,ill he referred to as Alliance- Ohio. In 1934: certain properties owned and leased by the Steel Sanitary Company were acquired by Alliance-Ohio. Steel Sanitary continued as ,1 patent holding company ,, ith Alliance-Ohio as its only licensee. This nyrangement continued until the patents and remaining assets of Steel Sanitary 'yen purchased by C. IT. H.ochnall jn tTannary 1947. All of such pat.cnts, patents pending, and all other patents owned by :NIl'. Rodman, were acquired by Alliance-Ohio.

On April 30, 1955, a11 of the property 'l1d assets of Alliance, Ohio inelnding its business and good will, and the right to the use of t.he trade name "Alliance ,Yare" in the Pnited States, \yore sold to Ameri ea,n :M:etal Products Company. To facilitate the use of the trade name by the purchaser. Alliance-Ohio, just, prior to the transaction, changed its name to Alliance Ste,encare Co. ..-\after sale of its propert.ies and the distribution of its assets to its shareholders, ..:Jliance-Ohio was clis- 1:olved. Approximately 75 percent of the purchased assets were transferred by AMP to its newly formed subsi(1iary, A11iaJlce\Vare, Inc. the Dela ware corporation.

After the end of -World IVaI' II in 1915, A11iancc-Ohio was in a position to manufacture and distribute a line of steel ware which might be marketed competitively to cast iron. It was ncw to t.he p1Jlmbing Held and ,, as faced with the lack of acceptability of stceJ sfLnita.ry 'yare. The company, during the time it first sought to enter the plumbing market a,nd in the succeeding years, maintained a very limited sales force. Alliance-Ohio and Aiv since it came into existence, in selling steel sanitary ware to plumbing wholesalers, used the!" s8rvjces of 20 to 25 independent manufacturers' representatives or sales agents who operate,d under contnH:ts wherein each were assigned specific exc.usive territories throughout the country. Such represen- Ltive8 were not employees of the seller Hnd generally acted as sales agents for others. They 'were com pensat.ec1 by pnynlCnt of 5 % of the net sales made to plumbing ,vh01es ders in their assigned areas. The representatives: contract had ~l provision " that the IanufactureT hereby reserves the right to sell and ship * * * t.o any national die- 1676 FEDERAL TRADE CO IMISSIOX DECISIOXS Initial De('isioll 60 F.

triblltor any l'aiJl'ofttl or governmental agency * at a.ny location in the -United States without obligfttion on the. part of the J\lanufacturer to pay to t.heSales Agency any compensation whatsoever, and such sales are hereby specifically exempted fI' om this Agreement." Crane was it national distributor arconnt and nIlder the agreement Alliance-Ohio and A ,y Vi-ere, withOllt obligaiioll to pay its sales agents on sales made to Crane. Xo cOllunissiollS were paid to the sales agents on Crane sales for the period from :\Iarch 1, 1947 to .January 1 ID5:2. However, from January 1 , 1952 to approximately :March 1 , 19;")7 the. Alliance corporations paid sales agents on an sales within their assigned territory, inc.11ding Crane, at a reduced rate of 3%. After :\larch 1, 1957, no commi siolls ,were paid on Crane ales flnd the rate of commission reve.rted back to :')%.

Although Crane had been engaged ill the production and sale of east iron plumbing fixtures for many years, it "was not until 1047 when it began selling steel sanitary \Yare and beclllle the first old-line cast iron manufacturer to distribute steel plumbing fixtures. On April 24, 1947, Crane and Allia,nec- Ohio entered into agreement whereby the former wasapPolnted' a distl'iblltorof steel slHlltary ware manufactured by the latter, without any restriction as to territory. The agreement re,lds in part:

In view of benefits to Alliance, including those flowing from Crane s policies and facilities for advertising, warehousing and distribution, Crane s credit standing, the contemplated sales volume, Hnd the forward buyin procedure lwrein described. the prices for the various items of steel sanitary \vare sold by Alliance to Crane under the tl'l'llo; of this agreement shall be the lowest prices then ('un-pnt for the ankle to other purchasers in effect at the time Crnne s order is rpcE'ived by Alliance. less discounts ,as follows: (a);.a8 to all delh;eries made by Allance to Crane prior to the date the additional production facilities are put into operation, as hereinbefore set forth, the discount shall be 5 percent, (b) as to all deliveries made by Allance after the additional production facilities have been put into operation, as hereinbefore set forth, the amount of such discount shall be 10 percent. The agreement recited that Alliance was providing additional manufacturing facilities intended to increase its productive capacity for steel sanitary ware by approximately 100% and it. was anticipated that such faei1ities would be completed and placed in operation by September 1 , 1947, Shortly after the April 2!1, 1947 agreement was entered into, Crane invested $600 000 in certain authorized but unissued stock of Alliance- Ohio and the proceeds were used for the enlargement of the facilities of Alliance-Ohio.

AMERICAN :'ETAL PRODUCTS CO. ET AL. 1677 lG67 Initial Decision The 10% rebate provision of contract became operative .Tuly 1 1949 and rebates were made at this rate from that date to December 12, 1950. By mutual consent of the parties, the rebates reverted back to 5 % on the latter date.

The contract of Apri124, 1947 was in effect on April 30 , 1955 when the respondent American iVIetal Products Company acquired the assets and business of Alliance-Ohio and the respondent Alliance"lV are Inc., the Delaware corporation came into existence. A'V continued to do business with Crane on the basis of the agreement (as modi.fied- 5% rebate) until :l\arch 1, 1957 when a new agreement was entered .into.

From 1hrch 1, 1947 to :\hrch 1, 1957 the steel sanitary ware ,,-which was sold to Crane was, with one exception, identical with that sold by the Alliance corporation to plumbing wholesa.lcrs and were identified and sold as Alliance"lV are brand products. The exception was the Ohio hathtub which was introduced in 1948 and was especially designed for Crane by Henry Dreyfuss, a wen-known industrial designer who had been employed by Crane for this purpose, and which \vas,manufacturedfor ands01d. exclu:siegel' to Crane. After taking on the steel Jine, Crane did a considerable amount of advertising. It undertok an aggreive sales campaign with its own sales organization and thell with its dealers. A sales team out of the main oflce held meetings with every salesman and every branch manager ill the United States. The branches were provided with sales literature, bunetins and other types of advertising material and meetings with plumbing dealers and contractors were helel in some 140 to 150 places in the United States. This was not done only once but was done periodically.

At the inception of the contract of April 24, 1947, and at al1 times thereafter, the Crane branches we.re biled by the Alliance corporations at the prevailing price to plumbing wholesalers. The discounts paid pursuant to the agreement of April 24, 1947 (as wen as the subsequent contracts) were accumulated monthly and the aggregate amount was transmitted directly to the general offce of Crane at Chicago. The branches of Crane were not informed of the discount arrangell1mt and this information was rc.strictcd to a fe,,, in the main offce, The discounts. allowed, to Crane by Alliance and other manufa,etul'ers were credited to the branches monthly in a manner that the source of the discOlmt could not be determined. At the same time branches were debited in one lump sum for overhead, advertising and other related debits. The debits charged to the various branches at a11 times exceeded the credits. 1678 FEDERAL TRADE CO:YIMlSSJON DECISJOXS Initial Decision 60 If At the annual meeting of the stockholders of Alliance-Ohio, held on September 19, 1950, the board of directors was increased from seven members to nine, and Catter Pollock and Earl 'Wyatt, both offcials of Crane, were elected to t.he board. Their election was at the request of Mr. C, J. I odman who was not only tho predominant shareholder of Alliance-Ohio but was president of that company from the time of its organization until it wa,s dissolved. AIr. Rodman continued as president of the respondent A W until August 6, 1956 when he was replaced by Mr. Paul Corp. In .T annary 1956 Crane initiated negotiations for a program whereby A \V would produce a new Crane exc.1usive steel ware line. Crane' made studies of the expenditures which it would be required to bear hI connection wit.h such a program, arrived at tentative cost estimates and was of the opinion, on the basis of the figures, that a. discount of 17% would be reasonable. From time to time discussions were had by respresentatives of the t.wo companies and at n, meetinghc1d at Chieago on August 28, 194Gthe parties adopted a proposal made by the President of A ,y whereby A ,y ,,'ould manufacture for Crane a line of steel ware all to be identified by the Crane name or mark. as understood that t.he . discounts being extended Crane were to be for the home offcc only and must not be extended to fic1c1out1ets. The matters agreed upon are contained in a formal agreement dat.ed March 1, 1957 whereby the stec1 ware was to be sold to Crane at a discount of 12%% off the published base price for a period of 6 months or 20 000 bat.htubs, \"hichever may occur first and thereafter Jess 15%. A. s an incident, tothis- agreement, the commission theretofore paid to Alliance1Vare manufacturer agents on sales to Crane was discontinued, and the agent's commission was returned to the previouslyexisting 5%.

The new Crane line of steel tubs was designed by tho Henry Dreyfuss organization. New tooling was required to produce the distinctively designed models. Crane undertook the preparation of the elaborate, extensive, a,nel intensive promotional campaign to market promot.e, advertise" and sell the Cra-ne "Crestmont" line of steel ware. Elaborate and detailed brochures and pamphlets were prepared and distributed to Crane branches, plumbing whole nleTs, plumbing contractors, and architects. Fo example, a 24-page brochure in coJo!" entitled "New Crane Crestmont Fixtllres:' was distributed to in excess of 25 000 plumbing contractors. Consumer a.advertisements appeared in the April Issues of "American Home" and "I-Iouse and Garden Illustrated eatalogs were prepared and disseminated to Crane branch Tsonnel, plumbing wholesa.lers plumbing contractors, and builders. AMERICA METAL PRODUCTS CO. ET AL. 1679 1667 Initial Decision Sales meetings were held, not only of Crane branch and sales personne1, but plumbing contractors and Crane full line wholesalers. Between hrch 1, 1957, and September 4 1957, figures compiled reflected that Crane had expended directly $68 438 in advertising steel ware whereas the Crane s total discount credited a.nd returned to it during the same period amounted to $57 167. Included in the advertising expenses were the direct cost for individual ads appearing in national consumer magazines such as "House and Garden " anu direct cost of ads in trade publications, cooperative advertising in local newspapers the production of catalogs on steel ware, the production of mailing pieces on steel ware, and the production of brochures on the Crane Elle of steel warc known as Crane "Crestmont" line. During the period larch 1, 1957 through FebTlUtry 28, 1958, Crane purchased $1 150 507 ,,"orth of steel ware from A vI' on which Crano received rehates totaling $155 759 or 13.54% of its purchases. The volume antieipated under the 1957 contract was not realized during the first year 'Of operation and A 1V initiated negotiations with Crano which rcsulted in a new agreement dated March 1 , 1958. Thereunder the discount on sinks and lavatories was fied at and OIl bathtubs as follows: On the first 24 000, 10%; on the next 000, 11'1%; on the Ilext 6 000, 12%%. If Crane purchased 36 000 bathtubs or more during the 12-month period, a discount of 12'1% was to bo allowed 'on al1 bathtubs purchased during such period. During the first year of the 1958 contract, Crane made purchases from A vI' totaling $1 291 979 on which it received rebates totaling $118 860. , or 9.22%.

Since 1\iarch 1, 1957, the branch house cost of the Crane line continued to be tho same as the wholesale price list published by A ,V for sales 'Of comparable Alliance\Vare brands of sanitary steel ware to plumbing wholesalers. The accounting, billing and rebate procedures which had been employed under the 1947 contra t remained the same. The 1958 contract was in effect at the time of the filing of the complaint herein, a.nc1 currently is in effect. ,With the exception of one bathtub model-the "Ohio" tul:a11 items sold to Cra.ne during the ten yearsprlor to JTa.rch 1 , 1957, were identical in aU debils to the fixtures so1c by both A11iancc ,V are corporations to wholesalers competing with Crane. Since March 1 1937, all the items purchased by Cra.ne, with the exception of six Cl'Bstmoni.': bathtubs. were identical to those sold by A ,V to independent wholesalers. " rhe six "Crestmont" bathtubs, including the Ohio" tub, woro similar and comparable to like models sold under the brand name of AIIiance"\Vare, dill'ering only in the design of Initial Decision 60 F.

apron affxed to them. A 1V in biling Crane all the "Crestmont" tubs eJnployerl its ,vholesale price list of complLrable Alliancc\Vare brands of sanita.ry steel \'-are to plumbing wholesalers. The record heroin establishes that the Crane "Crestmont" line of fixtures is of like grade and quality with the line of fixtures marketed by A 1V under its own trade and brand names.

Plumbing wholesalers and contractors from Cleveland, Toledo Cincinnati, Louisville, a,nd Detroit were called and used as witnesses by counsel in support of the complaint. Their test.imony reflects that competition at the plumbing wholcsaJe, Jcyel is ye.ry keen: that the customers to whom they sold ,,,ere price conscious and a small reduction of price by a competit.or may shift business to the competitor; that a lower buying price afforded t.o one of their competitors may Jmn an injurious effect upon their business or a favored competitor may have an advanLlge; that the percentage of llet profit realtzed by , that is: 3V2a phunbing wholesaler on a year s operation is very 10\\- 2 to 3%, 3%, 5. 6170, 570, less than 1%, 1% to 1%%, a fraction over 1% ; that. it \ya.s important. to the, successful openltion of their lmsilles to take advantage of 2% cash discounts when offered by 11 supplier. 'H'l'E'The general ellfrac.t.eristics of the plumbing supply indtU3try ltlSO covered by the testimony of the witnesses. Large resident.ial housing jobs represent the major market for steel ware products. Steel ware is in diroot compet.ition with cast iron. Although cast iron has been norma.lly associated with custom design housing, it has al- W~LYS retained a strong acceptance, by consumers and builders even for low to medium price housing developments. ,Vithill the ste-e lines, thmllselves, there are many producers of acceptable tubs and related product lines. These many producers se.ll at prices approximately similar for comparable Jines. In . addition, ma HtfactUl'ers as a m,Ltter of compet.itive cust.om, grant price, concessions to wholesalers in order to meet local competitive conditions. Necessarily, the amount of such concessions will vary from job to job, depending upon the competitive situation. Also, there is relative e,ase of access by ny established "wholesaler to the product lines of any manufacturer. The testimony and doeume.ntary evidence relating to bidrling by plumbing wholesalers discloses that customarily wholesalers bid on bathroom unit, not on separate components. Thus, it is generally aee-epted practice for plumbing contractors, ill seeking bids from plumbing \vholesalel's, to request that the bid include ;111 elements of jnellHle pipe', fittings, closets.a complete bathroom unit. This would tub, andlayutories. Additionally, of course direct labor costs, ove1'- AMERICAN 3dETAL PRODUCTS CO. ET AL. 1681 166i Inion 1 Decision head burden, and a margin for profit would be determined by the plmnbing wholesaler.

There is no evidence in the record shmying or te.nding to show that Crane used the discounts which it received to sell at a lower price than a competitor, nor is there eviclenc.e iJl the record to establish that there has been an actual, substant.ial lessening of competitioJl, injury, or that a degree of monopoly has been created oy the a.cts of the respondents. It is recognized that the, statute does not require that the discriminations must in f,wt have harmed competition, but only that there is a reasonable probability that they may have such efleet. Under the facts in the instant case, it CfUU10t be inferred that the discounts allowed Cnlle had the requisite. effect on competition to establish a \riolation of the statutes in'Tolved. The obligations assumed and performed by Crane in considerat.ion of the elisc-ounts granted it undt'r the three contracts did not give, Crane all advantage ill price as against its competit.ors. The cost to Crane branches of stt'el sanitary "ware purchased from the Alliance\Vare corporations ''\as at all times no less than the price charged to competing vdlOlesalers for the same or like products. The t.testimony that monthly debits charged to each of the branches for oyerhend, a.advertising and other related debits at aU times exceeded the lump SllJ1 credits for quantity discounts is without eontradiction.

There is'also the charge in the complaint that A IV granted unlawful discriminatory discounts of 5% to certain wholesnJe customers designated as "stocking jobbers . Some time in 1957 A \V initiated a prognun of appointing stocking jobbers which is explained by the testimony of one of its offcials:

A stocking jobber, a sales procedure that is initiated initially on advice from a 'varticular city- or. territory iu\vbich our prevailing price is not competitive. 'I' hat starts it. The procedure, how eyer, has an additional concept; that is that it is a selection by the size, the eredit responsibility, the competitive reputation and normal factors that ou \vould take into consideration in determining a good wholesale customer. in which an effort is made on the part of the company to sornewl1at throw in its lut with a customer whom they believe wil do the best job of representing the company in their particular area and one who, b consequence of maintaining an inventory, wil pick up smaller sales in the area that we, the company, would likely miss if a stock w::sn t maintained in that area by one of our customers.

The stocking jobbers were allowed a. 5% discount ou some of their,' purchases from A ,Ybut the record is nut clear as on ,,,hat items the discount. is allowed. The e, jclellce does llot give a picture that would support a finding that. there ',"HS competitive injur:.v resulting from t.he gnlntillg of stocking jobber discount!:. 1682 FEDERAL TRADE COldMISSION DECISIONS Initial Decision 60 F. T, The failure to establish the necessary competitive injury required to constitute an illegal price discrimination within the meaning of Section 2(a) of the Robinson-Patman Act is suffcicnt to cause a dismissal of charges of the complaint against the respondents American Metal Products Company and Crane Co" as well as Alliance.Vare Inc. However, phases of the record pertaining to other defenses of the respondents wi1 be discussed and findings made thereon. There was received in evidence a study offered by A VV which was prepared by Ernst & Ernst, a reputable certified accounting firm entitled " Cost Factors In Support of Selling Price Differentials Between Independent Jobbers Sales and Crane Company Contract Sales for the year ended February 28, 1959 (the first year under the 1958 contrilct), together with various working papers used in its preparation. The year involved in the study is representative of the cost savings for the period subsequent to March 1, 1957. The cost study was prepared from books and records of A VV by Mr. .J erry Dice, a certified public accountant and an audit staff supervisor of Ernst & Ernst. Mr. Dice was familiar "ith the methods employed by A VV iu keeping its books and records in that he had been responsible for the performance of its annual audit and various tax returns prepared by his firm during the three or four years before the study was made. The work papers and report were revimved in the Canton offce of Ernst & Ernst by the manager thereof and were subsequently reviewed by the dist.rict supervisor in the management services division and by a partner in that division. The report reflects that during the year ended February 28, 1959, A .V's advertising, selling and distribution costs were 12.74% per dollar of sales Jess with respect to Crane sales than with respect to sale to plumbing wholesalers. An arithmetical error made in one of the supporting work sheets reduces the differential by 0.05% to 12.69%. The report indicates additional areas of cost such as manufacturing, storage, order and billing, shipping, and executive salaries, not included ill the study, on further investigation and analysis, would possibly show further sa.vings on Crane sales. Professor I-Ierbert F. Taggert, Professor or Accounting at the School of Business Administration of the 1Jnivcrsity of l\iichigan and a recognized authority and expert in the field of cost justification, testified that he was retitined by Alliancc'\Vare and he consulted with 1\11'. Heacock and others in the Alliance VV are offce with respect to the preparation of east justification study. After Ernst & Ernst were called in to make the study, he discussed the matter with Mr. Dice and made recommendations in regard to the methods of allocation and other matters relating to the preparation of the study. Professor Taggert AMERICAN METAL PRODUCTS CO. ET AL. 1683 1667 Initial Decision further testified that he was familiar with the report and he was of the opinion that the methods of allocation and distribution of costs were proper. A copy of the report was furnished to counsel supporting the complaint about four months before it was introduced in evidence and an accountant of the Commission was given full access to the books and records of A W at the offces of A VV. The Commission s accountant. testified that as a result of his review and the investigation he had conducted into the baekground of the exhibit, he had fonned an opinion that certain items in the study were not properly a110eated and the price differences on the bathtnbs and sinks and lavatories should have been calculated separately rather than averaged as was done in the study. In the year cnc1ec1.June 30 1958, sinlrs and lavatories constituted 20,87% of A vV's sales to plumbing wholesalers and 21.00% of its sales to Crane. The record shows that steclware is primarily used in tract or project homes and a plumbing wholesaler in making bids and sales for such purpose usually prices his wares for entire bathroom units including bathtubs, lavatories, valves, pipe fittings and other plumbing components used in a, residence. Under these circumstances, it wou1c1 seem proper to use an average discount for comparison. The Commission s accountant expressed the opinion that the items of $21 016 for advertising in trade publications a, 827 367 for displays and exhibits cannot be allocated in their entirety to the independent jobbers and he based such a conclusion on the assumption that. there was general knowledge in the trade that Crane products are produced by Alliance VV are and some of this advertising would benefit products sold to Crane. The record indicates that plumbing wholesalers gencraJly had lmowledge that Crane s steel ware line "lvas manufactured by A \V, but there is nothing to indicate that Crane would benefit from such advertising. If it should be inferred that the advertising did rub off on Crane, it ,vonld also have to be inferred that Crane s advertising, which was more extensive, would benefit A ,V. An objection by counsel supporting the complaint which would materially affect the result is to the inc1nsion of commissions paid to manufacturers' representatives as a cost of selling to plumbing law the com-wholesalers. It is counsel's position that as a matter of missions paid to manufacturers' agents cannot be utilized in a cost justification. No cases arising under Section 2(a) of the Act are cited but cases invoking violations of Section 2(0) of the, Act are relied upon. Reasoning of counsel seems to be that every reduction in price coupled with a failure to PflY brokerage, flutoilfltically compels the conclusion that an allo\\ance in lieu of brokerage has been granted. The Supreme Court in FTC v. Hen-ry BToch dO Co. 363 U,S. 166 stated:

719-603--64--107 1684 FEDERAL TRADE COMMISSIO DECISIONS Initial Decision 60 F, This is not to say that every reduction in price, coupled \"il:h a reduction in brokerage, automatically compels the conclusion that an allowance " in lieu " of brokerage bas been granted. As the Commission itself has made clear, \vbether such a reduction is tantamount to a discriminatory payment of ul'okel'age depends on the circumstances of each case. .Main Fish Co. , Inc., 58 F, C. 88. Nor does this "fuse" provisions of Section 2(a), ,,-bleh pel'lists the clefensc of cost justification, "ith thoi'e of Section 2(c) which does not; it hut realistically interprets the prohibitons of Section 2(c) as including an indepeu(lcut broker allo\yance of a reduced brokerage to obtain a 1JU'ticular order. (363 U. 175-176) None of the respondents have been charged with a violation of 2 (C) sO it is not necessary to answer the question whether such section has been dolated. As has been pointed out heretofore, A ,V in its contracts with its manufacturers' agents is not required to pay commissions on certain accounts. Under the circumstances of the instant case ,,,here the services of such agents is not required, there is no logical reason why such savings in cost may not be passed on to Crane. It is the opinion of the hearing examiner that proper methods of allocation and distribution of costs were followed in the preparation of the cost study and it reasonably reflects the difference between A 1V' s costs in seHing to Crane and its costs in selling to plumbing wholesalers. The percentage cost differential (12.69%) exceeds the average discount granted to Crane during the year ending February , 1959 (9.22%) by 8.'17%. The discounts granted to Crane the previous year of I:.54% were justified within 0.85%. Under the holdings of thc Commission in s. Rubber Oompany, 46 F. C. 998, an unjustified price differe.nce in such amount would not ,,,warrant the issuance of a cease and desist order.

It is contendcd that the respondent American Metal Products Company is responsible for the acts of its subsidiary, Alliance l,Yare, Inc., the Delaware corporation. The evidence shows that A IP owns all tho stock of A 1V and thc A 1V's board of directors is electcd by the board of directors of A IP. Xine of the eleven members of the A 'V' board in 1955 were likewise members of the A:,IP board. Counsel supporting complaint dwells upon one incident to establish A1vip' s re. sponsibility. In .June of 195G, Mr, F. C. Mattmei, Chairman of AMP's board of directors, Mr. Kent Ch,mdler, member of the AMP board of directors, and Mr. .J. D. Judge, President of the A:VIP subsidiary, Tube Reducing Corporation, and a member of the A;,IP board, personally called upon the A ,V customer, Crane Co., at Chicago, to discuss contract negotintions then under WRY. 1\1:1'. :.1:atthaei was also chairman and Mr. Clmndler a member of the A VV board. Mr. Rodman, President of A in a prior meeting with Crane people had indi- AMERICfu" METAL PRODUCTS CO. ET AL. 1685 1667 Initial Decision cated a lack of interest in supplying Crane with a complete line of steel ware as it desired. It may be inferred that this information reached AMP offcials and, Crane being A vV's most important cus. tomer, promptcd the visit to Crane by the three named gentlemen. the meeting they said they, owning A1Jiancc\Vare, were interested in doing everything they couldia retain the relationship and more firmly to establish the relationship they had with Crane Co. They further stated that they ,were interested in further studying the Crane Co. needs for 11 line of steel ware and on departing indicated there would be further contact on the part of Al1ance ,Vare rcpresentatives to discuss the situation with Crane. Thereafter Crane was contacted by Mr. Paul Corp who succeeded Mr. Rodman as President of A ,V in August 1956, which resulted in the 1957 contract. A document offered by Commission counsel and received in evidence, which sets forth a description and function of the boards and offcers of the A11P corporation organization, recites in part: Article VIII-PRESIDEN'l' OF SUBSIDl.tries The Presidents of A1\P' s subsidiaries are responsible for the operation of their companies within the framewol' of the objecth- , policies, plans and budgets established by their own Board of Directors. Within this framework the President of an A?dP subsidiary has the same unties and responsiblities as the president of a separate c01l1Jany. It is his responsibilty to make the decisions relating to the development, manufacture, and marketing of tile products of his company. As each subsidiary has its O\Vl1 budgets, controls and quotas, the prcsident is both responsible and accountable for tbe successful operation of its business.

The record indicates that A ,V and its Presidents functioned as requircd by the provisions of the cited article and there is no evidence to estahJish AMP' s responsibility for the acts of its subsidiary A vI'. The factual situation here is similar to the case of Press 00. 118 F. 2d g37, where the D,S. Court of Appmds for the District of Columbia held that a parent corporation s ownership of stock of subsidiary, a,nd identity of offcers of parent rlnd subsidiary, do not create agency relations so as to make parent responsible for act of subsidiary, but there must be such control by parent as to show that subsidiary is being used as the instrument of the parent. The Press 00, case was followed by "C.S. Court of Appeals for the Seventh Circuit, October term, 1955 , in the case of the LVational Lead Oompany, et al. v. Federal Trade 001nnl'ission 227 F. 2d 825, wherein the opinion of the Court states: ,.'* * * To come within the applicable rule, there must be evidence of such complctc control of the subsidiary by the parent as to render the former a mere tool of the latter, and to compel 1686 FEDERAL TRADE CO:\l:1nSSIO?\ DECISIOl\T Initial Decision 60 F.

the conelusion that the corporate identity of the subsidiary is a mere fiction." The hearing examiner is not unm111chul of the findings of the Commission In the Ll1atter of The American News Com,pany, Docket 7396 annary 10, 1961, but in that case there is an entirely different fa.actual situation from the instant case and in the opinion it is stated: "We feel tlmt these facts are more than adequate to satisfy even the criterion of complete control app1icd in the LV ational Lead case and conclude that American is responsible for and does control the activities of its subsidiary, UJiion.

It is contended by counsel in support of the complaint that Crane has always known or had reason to know that the priecs it paid for A11anceWare products -were not cost justified. To support such a conclusion reference is made to the fact that certain employees of Crane served on the Alliance'Vare Board of Directors and thus gained knowledge of the affairs of A11ance ware. There was nothing that took place at the board meetings that would in any way indicate that the discounts allmvec1 (CnLne) under the contra,ct might be illegal under the Robinson-Patman Act. In proposed findings in support of complaint it is stated: "Crane Co. was directly notified by the Alliance- 'Yare Vice Presi,Jent Butt that thc 10% rebate paid in 1949 and 1950 was not cost justified.:' Such a conclusion is a distortion of the record. j\lr. Butt in a memorandum dated October 16, 1950, wherein he urged some change in the existing Crane- Alliance,Vare setup, stated: "* * our net recovery profit-\vise is actually over 6% of our dollar sales less on sales to Crane than to our own distribution." In the same memorandum he added: "'While I do not question that the 10% rebate can be maintained legally, * * * Additionally Mr. Butt when called as a witness by counsel in support of complaint testified that he never had expressed a.n opinion that the discounts were not legal. There was received in evidence a copy of a four-page letter dat.ed January 27 , 195-1, addressed to Alliance-\Vare, Inc., att.ention-Mr. C. .J. Rodman, from the hvw offces of Blnmenstcil, Strong & BJurnenstei1 , sign cd by :III'. J, B, BJumcnstci1. Alliance-Ohio s local corporate attorney. The Jetter gives consic1enltion to the ntlic1ity of 1947 agreement as mollified in 1050 (rPllllcing the clisrollnt to 5%) a,nc1 ueals generally -with t.he, provisions of the TIobinson-Patman Act insofar as cloc.ument is of no import to theit relates to price c1ifferentiflls. The respondents AMP a11'! A'V (AJlIP did not acquire the assets of Al- Jiancp, Ohio unt.il1D35) and is only rele\'ant to the extent that it bears upon kno\dec1ge by Crane of the alleged illegality of the 194:7 contract. 1\11'. Hodman, ".-10 ,vas used as a \\-itness in support of the complaint. "as visibly hostjJe to the respondents and his te.st.imony herein c.cannot iL\1ERICiL'\ METAL PRODLCTS CO. ET AL. 1687 1667 Initial Decision be regarded as credible. He stated that he requested the opinion with reference to the 1947 contnwt in 1954 because he was very lTIuch concerned about the leg,tlity of the live percent discount. He testified that the latter "",s discussed at Allianee"lV are board meeting on March , 1954, but in the detailed minutes of such meeting there is no melltion of the letter. :Messrs. "lVyatt, Pollack, and Butt, who were directors and ill attendance at the mentioned meeting of the board, testified that they had never seen the letter nor had heard it discussed at any time. Furthermore, the letter deals with facts not disclosed, discusses generally the provisions of the Robinson-Patman Act insofar as it relates to price differentials and does not contain an absolute opinion that the contract involved was illegal. The concluding paragraph of the lever reads: "'Ve, of course, are only in possession of the facts as presented by you and for that reason we have quoted the statute at length in this opinion as perhaps you will find some other justification for continuation of your discount arrangement with the Crane Company, under the permissive cost and accounting references contained in the statute. If you fail to do so, however, it would be our recommendation that you consider negotiations with the Crane Company for an early termination of this discount arrangement. fr. Hodman in his testimony speaks of another opinion obtained in 1950 from the same j;,w firm which he says was destroyed at the request of then Prcsident of Crane. The record does not reveal the contents of the opinion and it will serve no purpose to djscuss the same. Thc record shows th lt Crane, as well as Alliance-Ohio and the responde.nt A\17, in entering into the contracts ,,,which are the subject of this controversy, ,yas always concerned in any pricing structure La within a11 regulatory laws. A letter (EX 2A-D) written on April 17, 1947 to Mr. C. J. ltodman, President, Alliance"lVare, Inc., by ;'Ir, J. L. Holloway, President of Crane, is iJJnstrative of the situation. The letter reveals that in connec.iw1 with the negotiations of the 19-47 contract Crn,ne had employed outside counsel to discllss the Robinson- Patman phase of the contract \with its home counsel, and such outside counsel ,vas of thc opinion that there should be little or no trouble under the Robinson-PaimaJl Act with n. 10% discount. The Jetter sets forth a cost study made by Crane based upon its experience and using its records for the years 1936- 1940 as a base, indicating an 1170 cost saving to Alliance-Ohio. It further suggested and offered the assistance of a senior accountant of Crane to collaborate with Alliance- Ware s Mr. Heacock in the matter. Attached to the Jetter was a detailed table which was prepared at tbe direction of Mr. Ho1Joway by a Mr. E, E. 'Wyatt who at that time ,;-s AssisUmt Comptroller of % Inital Dccision 60 F.

Crane, sho\\-rng the manner in which the 11 % figure was arrived at. Mr. 'Wyatt testified that only the very direct and easy of measuring costs were employed and the percentage did not include many indirect costs nor did it give consideration to the 5% commission paid by Alliance- Ohio to its sales representatives. fr. 'Wyatt discussed wit.h Mr. I-leacock the results of his estimates of Alliance-Ohio savings and was advised by Nfl'. Hcaeock that the Crane estimate of 11 was low compared to theirs, in relation to sales." Mr, Rodman testified that :Ml'. Kreger, the general counsel of Alliance-Ohio, was in on the making Qud formulating of the 1947 contract a.nd he gave an opinion t.hat it was legal1.

In J anual') of 1956 discussions started between Crane and A W in connection with the proposed complete line of Cra,ne steelwa.re. Crane had made studies of the situation a.nc1 on the bases of cost estimates respecting expenditures it would be required to make" it submitted to Mr. Rodman a preliminary figure of 17 percent as a discount to profitably accompljsh what it \Tas seeking to do. Ir. Paul Corp, \\ho succeedcd Mr, Rodman as Presi,lent of A"\V on August 6, 1956, carried on the negotiations on bcha1f of A 1V which resulted in the 1957 contract. T,\"o meetings were held between 1\11'. Corp and representatives of Crano and the schedule of discounts proposed by :Mr. Corp at the second meeting for the production of the Crane stecl ware line was accepted by Crane. The discounts granted to Crane under the 1957 contract had been predic::ted on an assumed volume of sales .which did not materialize and Mr. Corp thereafter on behalf of his company initiated negotiations for a reduction of the discounts which resulted in the 11:58 agreement. The evidence of record leads to the conclusion that the patties to the t.three agreements at all t.times considered the discount provisions the.reof to be lavdul and that Crano neither Imew nor had reason to 1.-now that the differencc in price accorded to it was not or could not be cost justified.

Although it is pleaded ;n the complaint that the alleged discriminations in price may be substantially to lessen, injure, destroy or prevent competition between respondent Al1iance1Vare, Inc., and competing sellers of similar products, there was no attempt t.o establish injury in the primary line.

For the re8.sons l1creinbefore statcrl, the he::.ring examiner finds that the record hils to establish a violation of the Robinson-Patman Act; Therefore, It i8 ordered That the complaint herein be, and the same hereby is dismissed.

SUE BRETT, IKC. , ET AL. 1689 1667 Complaint GlilER VACATIXG INITIAL DECISION AND DIS fISSIXG COMPLANT Counsel supportiug the complaint, by their motion filed May 23 1962, request the COllmission to vacate the initial ,Jecision of the examiner in this proceeding and to dismiss the complaint on the ground of llootness. This motion, and the responses and ,dfidavits filed in answer thereto by all respondents, 8hmv that on or about August 3 1961, respondent American Metal Products Company sold substantially all of the assets of respondent Alliance IV are, Inc., to respondent Crane Company; that AJIiancc \V are, Inc., has since been dissolved; that Crane Company no longer purchases porcelain-an-steel sanitary ware from any source; and that American 1\1etal Products Company does not now manufacture or sell porcelnin-on steel sanitary ware and does not own the entire or majority interest in any company whjch does manufacture or sell such products. On the basis of these facts it appears that the issues raised by the allegations of the comphlint in this proceeding, fuiz. that respondents Alliancc\Vare, Inc., and American l\letal Products Company granted discriminatory prices in the sale of porcelain-an-steel sanita.ry wa.re to respondent Crane Company in violation of Section 2 (a) of the Clayton Act, and that respondent Crane Company induced llnd received such discriminatory prices in violation of Section 2 (f) of said Act, nre now moot, and that for this reason any further action by the Commission ill this proceeding "Would not be in the public intere.st. Accordingly, It is ordered That the initial decision of the hearing examiner be and it hereby is, vacated and the complajnt be, and it hereby is, dismissed for mootness and not on the merits.

IN TI-IE 1\iA TI'ER OF SUE BRETT, INC., ET AL.

CONSENT ORDER, ETC. , IX REGARD TO THE ALI"EGED VIOLATION OF THE FE- ERAL TRADE COllBrTSSION AND Tile FLA?lnrABLE l"ABRICS ACTS Docket C-1.J,"/. Complaint, J1M 1962-Decision, June, 1962 Consent order requiring New York City manufacturers to cease violating the Flammable l. abric:s Act by sellng dresses so highly flammable as to be dangerous when word.

Co::rrLAINT Pursuant to the provisions of the Federal Trade Commission Act and the Flammable Fabrics Act, and by virtue of the authority vested 1690 FEDERAL TRADE CO:MISSION DECISIO Complaint 60 F, in it by said Acts, the Federal Trade Commission, having reason to believe that Sue Brett, Inc., a corporation, and Jack Baker and Florence Baker, individually and as offcers of sajd corporation, hereinafter referred to as respondents, have violated the provisions of said Acts and the Rules and Regulations promulgated under the Flammable Fabrics Act, and it appearing to the Commission that a proceeding by it in respect thereor would be in the public interest, hereby issues its eomplaint, stating its charges in that respect as ro11ows: P ARAGRAPII 1. Respondent Sue Brett, Inc., is a corporation duly organized, existing, and doing business under and by virtue of the laws or the State of New York. Respondents Jack Baker and Florence Baker are President and Secretary-Treasurer, respectively, of the corpol' ate respondent. The individual respondents formulate, direct and control the policies, acts and practices of the said corporate respondent. The business address of a11 respondents is 1400 Broadway, New York PAR. 2. Respondents, subsequent to July 1, 1954, the effective date of the Flammable Fabrics Act, have manuractured ror sale, sold and offered for sale, in commerce; have imported into the United States; and have introduced, delivered for introduction, transported and caused to be transported, in commerce; and have transported and caused to be transported for the purpose of sale or delivery after sale in commerce; as "C0l111nerce" is defined in the Flammable Fabrics Act articles of wearing apparel, as the tenll "article of wearing apparel" is defined therein, which articles of wearing apparel ,ycre, under Section 4 or (he Flammable Fabrics Act, as amended, so highly flammable as to be dangerous when worn by individuals. Among the articles of wearing appa.rel mentioned above were dresses.

PAR. :1. Respondents, subsequent to July 1, 1954, the effective date of the Flmll11able Fabrics Act, hayc manufactured for sale, sold and offered for sale, a.articles of wearing apparel made of fabric which was, under Section 4, of the Act, as amended, so highly flammable as to be dangerous .-dlen 'Yorn by individuals, and which fabric had been shipped and received in commerce, as the terms "article of 'wearing a,pparel fabric" and "commerce" are defined in the FJammable Fabrics Act.

Among the articles of wearing apparel mentioned above were dresses.

PAIl. 4. The acts and practices of respondents herein alleged ",-ere and are in violation of the Flammable Fabrics Act and thc Rules and H,cgulations promulgated thereunder and as sllch constitute unfair SUE BRETT, IXC. , ET AL. 1691 1689 Order and deceptive acts and practices and unfair methods of competition in commerce within the intent and meaning of the :Federal Trade Commission Act.

DECISION AXD ORDER The C01nmission having heretofore determined to issue its complaint charging the respondents named ill the caption hereof with violation of the Federal Trade Commission Act and the Flammable abrics Act, and the respondents having been served \with notice of said determination ami with a copy of the complaint the Commission intended to issue, together with a proposed form oforc1er; and The respondents and counsel for the Commission having thereafter executed an agreement containing a consent order, an admission by the respondents of all the jurisdictional facts set forth in the complaint toissllc herein, a statement that thc signing of said Lgreement is for settlement purpose.s only and does not constitute an a,admission by respondents that the law has been violated as set forth in such complaint, and waivers and provisions as required by tlle Commssion s rules; and The Commission, having considered the agreement, hereby accepts same, issues its complaint in the form contemplated by said agreement, makes the following jurisdictional findings, and enters the following order:

1. Hesponclent Sue Brett., Inc., is a corporation duly organized existing and doing business under' and by virtue of the laws of the State of K ew York.

Respondents ,Tack Baker and Florence Baker are President and Secretary-Treasurer, respectively, of said corporation. The business address of an respondents is 1400 Broadway, ew York, N. 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 is ordered That respondent Sue Brett, Inc., a corporation, and its offcers, a,nd respondents Jack Ea.ker and Florence Baker, individually and as ,officers of said corporation, and respondents' representatives, agents and employees, directly or through any corporate or other device, do forthwith cease and desist from: (1) (a) ImportingintotheG"nitedStates;or (b) :Manufacturing for sale, selling, offering for sale, introducing, delivering for introduction, transporting or causing to be transported, in COlmnCl'Ce, as "commerce" is defined in the Flammable Fabrics Act; or Complaint 60 F.

(c) Transporting or causing to be transported, for the purpose of sale or delivery after sale in commerce;

any article of wearing apparel which, under the provisions of Sec tion 4 of the Flammable Fabrics Act, as amended, is so highly flammable as to be dangerous when worn by individuals. 2. :i1manufacturing for sale, selling, or offering for sale any article of wearing apparel made of fabric, which fabric has been shipped or received in commerce, and which, under Section 4 of the Flammable Fabrics Act, as amended, is so highly flammable as to be dangerous when worn by individuals.

It iB further ordered That the respondents herein shan, within sixty (60) days after service upon them of this order, file with the Commission a report in writing setting forth in detail the manner and form in which they have complied with this order.