Arrow Food Products, Inc.

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

IN THE J\fatter OF ARROW FOOD PRODUCTS, INC., ET AL.

COKSE:!TT onder ETC. IX REGARD TO THE ALLEGED VIOLATION OF THE FEDERAL TRADE CO:LBflSSION ACT A D SEDS. 2 (a), 2 ( d), AXD 2 (e) OF' THE CLAYTON ACT Docket 82,12. Complain-t, Dec. 1.9GO-Decision, June, 1962 Consent order requiring Dallas, Tex., wholesalers of dried beans and peas and: other food products which they purchased and packaged under the trade nalles "Arrow" and "Rose" and private brands and sold to distributorcustomers ,principally in the southwest and southeast to cease discriminating among such purchasers in violation of the Clayton Act by: 1. Such practices as giving to certain large retail chains and wholesalers (1) one case free with each 10 purchased, (2) so-called "advertising" and promotional" allowances for which no services were rendered, and (3) special ,sellng terms and conditions of sale such as trucking allowances, cash discounts. and advance notice of price changes of as much as 30 days, in violation of Sec. 2(a) ;

II. .Making to a limited number 'Of large purchasers allowances for advertising their products in catalogs, price lists, and on radio; paying "push money " to customers' salesmen; and making allowances for promotions of their products at new retail store openings and for other special promotions, in violation of Sec. 2 (d) ; and III. Furnishing only to certain large purchasers special packaging in connection with aforesaid promotions, and prizes in the form of their products for special promotional contests, in violation of Sec. 2(e); and With regard to the alleged violation of Sec. 5, of the Federal Trade Commission Act covered b;y Count IV of the complaint, to cease representing falsely that their food products conformed to standards established by the u.s. Department of Agriculture.

COl\fPLAIKT The Federal Trade Commission, having reason to believe that the respondents named in the caption l1ereof and herein Lfter more particularly designated and described have violated the provisions of subsections (a), (d) and (e) of Section 2 of the Clayton Act as amended by the Robinson-Patman Act, approved June 1D , 1936 (U. C Title 15, Sec. 13), and Section 5 of the Federal Trade Commission Aet (D. C. Tjtle 15, Sec. 45), and it appearing that a proceeding by it in respect t.hereof would be in the public interest hereby issues its complaint stating its charges as foHows: COUNT I P ARAGRAPII 1. Respondent Arrow Food Products, Inc. , is a corporation organized, existing and doing business under and by virt.ue 1772 FEDERAL TRADE. COl\l1\-HSSION DECISIO:",TS Complaint 60 F. T.

of the laws of the State of Texas with its principal offce and place of business located at 5051 Sharp Street, Danas, Tex. Hesponclents :Markus Hosenberg, Emanuel Rohan and David Rosenberg arc brothers and are President, 'hce President and Secretary Treasurer, respectively, of the corporate respondent, with their addresses the same as that of the corporate respondent. These individual respondents formulate, direct and control the policies, acts and practices of the corporate respondent.

The individual respondents first started business as a partnership in Dnl1as, Texas, jn 1950. On ,June 5 1956 they inco1poratec1 under Texas law and the name Arrow Spice and Food Company, Inc. , WftS adoptcd. On December IG , 1938, a charter amendment was made chang-iug the corporate name to Arrow Food Products, Inc. PAR. 2. Respondents are now, and for some years last past have been, engaged in the wholesale distribution of spices, dried fruits candies, dried beans and peas and other food products. Respondents sales for 1958 were approximately $-1 600 000, most of which were in the saJe of various types of dried benns and peas (hereinafter l'eJerrec1 to as "dried benns Respondents buy dried beans from growers and shippers located iu various States, principally California, Colorado, and l\:fichigan. Respondents process and package these dried beans and sen them under the trade lHllnes "Arrow:' and "Rose, and under priya.te brands to food distributors located in several States vl within the United States principally in the Sonth\Test and Southeast sections of the country, including Texas Arkansas, Tennessee, :Mississippi, Abbama and Louisiana, :ll10ng others. These food distributor-customers include principally ",yJlOlesaJers, ",yho1esaJer-retailers and retail grocery chains among ot.hers.

. 3. In the course and conduct, of their business, respondents are now, and at all times mentioned herein have been, engaged in commerce, as "commerce" is defined in the Clayton Act, as amended and in the Fecleral Trade Commission Act, by virtue of purchasing their products in various States of the -Cnited States and, after processing and packaging them, transporting said products, or can sing them to be transported, from their place of business in the State of Texas to customers "With places of business located in the Stat.e of Texas and other States ofthc United States. PAR. 4. In the course and conduct of their business, respondents are no\\' , and at all times mentioned herein have been, in substantial competition ",with other corporations, partnerships, individuals and firms engaged in the packaging and processing of comparable products ARROW FOOD PRODUCTS INC. ET AL. 1773 1771 Complaint for resale and distribution to the wholesale and retail food products trade.

l\Jany of the wholesale purchasers of respondents' products are competitively engaged with each other in the resale of said products; many of the retail purchasers of respondents' products are competitively engaged with each other in the resale of said products; and many of respondents' wholesale purchasers resell to retail outlets who are competitively engaged with one another and with respondents' direct buying retail customers.

PAR. 5. Hespondents, in the course and conduct of their business as aforesaid, have been, and now are, discriminating in price, directly or indirectly, between different purchasers of dried beans by selling such products of like grade and quality to some of their purchasers at snbstantiaJly higher prices than to other of their purchasers. PAR. 6. Hespondents have been, and now are, effecting said discriminations in price in the sale of dried beans between and among their customers by many methods and ll1cans, some, but not an, of ,which are more particularly described as fonows: (a) Allowances in the form of free goods generally, bnt not al ways consisting of 0118 case free with ea,ch ten purchased. (b) So- called "advertising allowances'1 in varying amounts, such as six or ten cents per case, for which services are neither required by respondents nor rendered by the purchaser.

(c.) So-called "promotional al1owanees" in varying amounts, such as fifteen, tvi-cllt.y, tYrcnty-five or fifty cents per ease, for which services are neither required by respondents 1101' rendered by the purchaser.

(d) Special terms and condit.ions of sale, including, but not limited , drayage 01' trucking allowances in varying amounts; cash discounts in varying mnonnts and -nith varying payment terms, and advance not.ice of price changes to some customers, of as much as thirty days, with either shorter or no advance notice to other customers. 1-\..lllong customers receiving some or all of such price reductions are: (1) ilfeTclwnts Oornpany, Jachson ilfississippi. wholesale grocery company selling to retailers ;dthin a sixty.y mile radius of Jackson, :JIississippi.

(2) il1cOaTty-Iron7Iwn Oompany, .lachson, Nississippi. A wholesale grocery company 'which owns fourteen retail outlets locat.ed in 11ississippi, known as Jitney Jungle Stores. This company also sells at wholesale to many independent retail customers operating under tho Jitney Jungle Stores franchise, as well as to other retail customers all located principally in Mississippi.

1774 FEDERAL TRADE COMMISSION DECISIO:\S Complaint 60 F.

(3) Liberty Ca.h GroCM'?! Company, Memphis, Tennessee. wholesale grocery company selling to ret.ailers located principally in Arkansas, Tennessee, Louisiana and ::lississippi. (4) National Tea Company. A national chain of retail food stareo. Respondents sell their products thereto for distribution to National Tea retail outlets located principally in Tennessee, Alabama and Mississippi.

(5) The KrogM' Company. A national chain of retail food store', Respondents sell their products thereto for distribution through the Child' s Big Chain Division to Kroger retail stores located principally in Arkansas, Louisiana and Texas.

(6) Operator TV a1'ehouse, Inc. A wholesale grocery company)' located in Shreveport, Louisiana, selling principally to independenr franchised Piggly- ,Viggly retail stores located principally in Arkansas, Mississippi, Texas and Louisiana.

(7) TV. B. Mallor,! il Sons, MemplL"i- , Tennessee. A wholesale grocery company selling to independent retail outlets located principally in Arkansas, Tenne.ssce and J\lississippi. (8) Le1.(),is Grocer C01) pany, lndianola, llIississ/jJpi. A whole8 l(' grocery company which owns twelve retail outlets, known ns 8m:- Hower Food Stores, located in :.Iississippi andl-\.rkftnsn . This company also sells at wholesale to approximately twenty-three franchisf'! Sunflower Food Stores in various States, ""which are independentl owned retail outlets, a,nel to about 475 other independent retail outJet locate,c1 principally in l\1ississippi, Tennessee, Arka-nsas and Louisiann. Ilespondents' discriminations in price vary in nmonnt or terms and conditions of sale among and between the above-named customers. In addition, the great majority of respondents' more than 300 customers are smaller wholesale grocery companies than those whole.sale grocery companies designated above and they receive no such price' reductions at alj or, if so, receive them in lesser amounts or on lcs favorable terms and conditions of sale than the above-name.d C1EtomeI's.

PAR. 7. The effects of such discriminations in price as alleged herein may be substantially to lessen competition or tend to create a monopoly in the lines of commerce in which respondents and the.ir customers are respectively engaged, or to injure, dest.roy or prevent competition ,with respondents or with purchasers therefrom who receive the bpnefits of such discriminations, or with ellstomers of either of them. PAR. 8. The aforesaid acts and practices of respondents constitute violations of the provisions of subsection (a) of Section 2 of the ARROW FOOD PRODUCTS , 11\ ET AL. 1775 1771 Complaint Clayton Act, as amended by the Robinson-Patman Act, approved June 19, 1936 (D. C. Title 15, See. 13) . COUNT II PAll. 9. The a,llegations of paragraphs 1 through 4 of this complaint are hereby adopted and incorporated herein by reference and made a part of Count II as if they were repeated herein verbatim. PAR. 10. In the course and conduct of their business in commerce and at an times mentioned herein: respondents have paid, or contracted for the payment of, something of value to or for the benefit of some of their customer2 as compensation or in consideration for serdces or facilities furnished by or through such customers in connection with their offering for sale or sale of products sold t.o them by said respondents, and sllch payments were not made available on pl'opol'tionally eqnaJ terms to all customers competing in the resale and distribution of respondents' products.

PAR. 11. The payments as alleged in paragraph 10 are made \.arious methods and means including, but not limited to, the followmg:

(a) Allowances for adverUsement.s of respondents' products in cat.alogs, price Ests, and on radio.

(b) "Push money" paid directly to customers' salesmen for services performed by the latter in promoting the sale of respondents' products. (c) Allowances for the promotion of respondents' products at new retail store openings, either in the form of money or free goods. (d) Payments for special promotions of respondents' products such as the 1959-1960 Sugar Bowl contest whereby the winner was awarded a free trip to New Orleans, Louisiana, for the annual Sugar Bowl events.

Compensation or allowances for the foregoing illustrative services or facilities were made to a limited number of large purchasers, including Lewis Grocer Company, Indianola, Mississippi, a wholesaleretail customer, and Liberty Cash Grocery Company, Memphis Tennessee, and "IV. B. Mallory & Sons Co., Memphis, Tennessee wholesale customers, among others. Such compensation or allowance were not oil'ered or otherwise made available on proportionally equal terms to other customers competing with the favored customers in the resale and distribution of respondents' products. PAR. 12. The acts and practices of respondents as alleged in paragraphs 10 and 11 above in Count II violate subsection (d) of Section 2 of the Clayton Act, as amended by the Robinson- Patman Act . (D. C. Title 15, Sec. 13).

1776 EDERAL TRADE COMMISSION DECISIONS Complaint 60 F.

COUNT III Paint. 13. The allegations of paragraphs 1 through 4 of this complaint are hereby adopted and incorporated herein by reference and made a part of Count III as if they were repeated herein verbatim. PAR. 1"1. In the course and conduct of their business in commerce and at all times mentioned herein, respondents have discriminated in favor of SOlTIe purchasers and against other purchasers of their products brought for resale by contracting to furnish or furnishing services or fac.lities connected with the handling, resale, or offer for resale of 8u oh products so purchased upon terms not accorded La all competing purchasers on proportionally equal terms. PAR. 15. The services or facilitjes accorded in a discriminatory manller as alleged in paragraph 14 include, but are not-limited to, the following:

(n) Special pa,ckaging in connection with the promotion of respondents' products, such as the 1959-1960 Sugar Bowl promotioll contest.

(b) Prizes, in the form of respondents' products, for special promotional contests.

The foregoing illustrat.ive services or facilities were accorded t.o a limited number of large purchasers, including Lewis Grocer Company, Indiano1a, J\1ississippi, a wholesale-retail customer, and 'V. B. 1I1:allory & Sons Co., Memphis, Tennessee, a wholesale customer. Such services or facilities were not offered or otherwise made available or' furnished all proportionally equal terms to other purchasers competing with the favored purcluu::rs in the resale and distribution of respondents' products.

PAI'- 16. The acts and practices of respondents as alleged in paragraphs 14 and 15 above in Count III violate subsection (e) of Section 2 of the Clayton Act, as amended hy the Robinson-Patman Act (U. Title 15 , Sec. 13).

COUNT IV PAR. 17. The allegation of paragraphs 1 through 4 of Count I of this complaint are hereby adopted and incorporated herein by reference and made a part of this Count IV as if they were rcpcated herein verbatim.

PAll. 18. In the course and conduct of their business in commerce and at all times mentioned herein, respondents have pursued a course of conduct by which they represent, through labels and otherwise, that their food products conform in quality or type to standards established for the industry hy the United States Department of Agricul- ARROW FOOD PRODUCTS , IKC. , ET AL. 1777 1771 Initial Decision ture, when in fact respondents' products do not at all times conform to such quality or type standards.

Such misrepresentations in the offering for saJe, sale and distribution of respondents' products are ilustrated by the fonowing examples among others:

(a) In 1959, the State of Texas issued an invitation to hid on dried beans of united States Department of Agriculture Grade 1\0. 1 (U. A. Grade No. 1) quality. Respondents were awarded the contract on U. A. Grade No. Blackeye Peas, having submitted the lowest bid thereon. Dcliveries were subsequently made pursuant to such contract, at which tilue, or times, re,spondents certified that the products were of U. D.A. Grade 1\0. 1 quality. Subsequent tests by the united States Department of Agriculture at the request of the State of Texas disclosed that such products were actually U. Grade No. an inferior quality to U. A. Grade No. (b) In 1956, respondents sold dried beans known in the trade as j)Ijchiga,n Peas" under labels designating them as California small white bcans, a type of dried bean which rcsells at a higher price than the aforesaid Michigan type.

PAn. 19. The acts and practices of respondents, as alleged in paragraph 18 of Count IV, were and are all to the prejudice and injury of the public and of respondents' competitors and constitute unfair and deceptive acts and practices and unfair met.hods of competition in commerce within the intent and meaning of the Federal Trade Commission Act.

Mr. J arnes P. Tirnony supporting the compla.int. .'iT. Wiliam L. Keller of Clad" Reed Clark of Dallas, Tex., for respondents.

INITIAL DECISION BY WALTER I\:. BENNETT, HF..RIXG EXAMINER The Federal Trade Commission issued its complaint against. the above-named respondents on December 7, 1960, charging jn four separate counts, violations respectively of subsections (a), (d) and (e) of Section 2 of the Clayton Act as amended by the Robinson- Patman Act (15 U. C. Sec. 13), and of Section 5 of the Federal Trade Commission Act (15 U. C. Sec. 45).

On August 14, 1961, the parties filed with the Secretary of the Federal Trade Commission a notice advising him that they wished to avail themselves of the privilege of disposing of this proceeding by a consent order.

An agreement dated April 24, 1962 and duly executed by respondents, their counsel, and counsel supporting the complaint was on 1778 FEDERAL TRADE COYTMISSION DECISIONS Initial Dedsion GO F. May 11, 1962 sublnitted to the lmdersigned because of proceedings in the matter heretofore had before him.

The agreement provides for the entry without further notice of a consent order and was duly approved by the Directors of the Bureaus of Restraint of Trade and Deceptive Practices and by the Chief of the Division of Discriminatory Practices.

The hearing examiner finds that said agreement includes all of the provisions required by Section 3.25 (b) of the Rules of the Commission that is:

A. An admission by respondents of all jurisdictional facts alleged in the complaint.

B. Provisions that:

1. The complaint may be used in construing the terms of the order; 2. The order shall have the same force and effect as if entered after a full hearing;

3. The agreement shall not become a part of the offcial record of the proceeding unless and until it becomes a part of the decision of the Commission;

4. The entire record on which any cease and desist order may be based shall consist solely of the complaint and the agreement; 5. The order may be altered, modified, or set aside in the manner provided by statute for other orders.

c. ,y ai vels of 1 The requirement that the decision Inust conbLin a statement of findings of fact and conclusions of law;

2 Further procedural steps before the hearing examiller and the Commission;

3 Any right to challenge or contest the validity of the order entered in accordance with the agreement.

In addition the agreement contains the following provisions: A. A statement that the signing of said agree,ment is for settlement purposes only and does not constitute an admission by respondents tha, they lmve violated the law as aHeged in the complaint. B. This agreement disposes of aD of this proceeding as to all parties. All parties agree that the allegations of discriminations in price insofar as they relate to primary Ene injury, as set forth in paragraphs 5 and 6, Count I, of the complaint, and the alleged eHeels thereof insofar Its they relate to primary line injury\ as set forth in paragraph 7 Count I, of the complaint, be dismissed. From the information in the files and the investigational report, and :fads discovereel subsequent to the issuance of the complaint, t.here can be gleaned no eviaence that respondents engaged in systematic price differenees through territorial ARROW FOOD PRODUCTS , IKC. , ET AL. 1779 1771 Inital Decision price discrimination. Furthermore, the facts in this case show that if thers was injury to the primary line it was caused by discriminations between competing purchasers in the secondary line of commerce. Therefore, any injury to the primary line which has resulted from respondents' price discriminations will be effectively remedied by an order which prohibits discriminations between competing purchasers. Having considered said agreement, including the proposed order and being of the opinion that it provides an appropriate basis for settlement and disposition of this proceeding; the 11caring examiner hereby accepts the agreement but orders that it shall not become a part of the offcial record unless and until it becomes a part of the decision of the Commission.

The following jurisdictional findings are made and the following order issued:

1. Respondent Arrow Food Products, Inc., is a corporation organized, existing and doing business under and by virtue of the laws of the State of Texas with its principal offce and place of business located at 5051 Sharp Street, in the city of l),tlJas, State of Texas. 2. Respondents Iareus Hosenburg (erroneously named in the complaint as Markus Rosenberg) and David Rosenberg are President and Secretary-treasurer, respectively, of the corporate respondent, with their addresses the same as that of the corporate respondent. Respondent Emanuel Rohan is Vice President and an employee of said corporate respondent, with his address the same as tha.t of the corporate respondent.

3. The Federal Trade Commission has jurisdiction of the subject matter of this proceeding and of the respondents. ORDER It is ordered That respondent Arrow Food Products, Inc. , a eorporation, and its offcers, representatives, agents and employees, and respondents yIarcus Rosenberg, Emanuel Rohall and David Rosenberg, individually and as offcers or said corporation, a,nel their representatives, agents and employees, directly or through any corporate or other device, in or in connection with t.he sale or food products in commerce, as "commerce" is defined in t.he Clayton Act, as amended do forthwith cease and desist from:

1. Discrim,inating, directly or indirectly, in the price or sllch products of like grade and quality by selling to any on8 purchaser at net prices higher than the net prices charged to any other purchaser who in fact competes in the resale anel distribution of the respondents' product.s with the purchaser, or the customer or t118 purchaser, paying the 71 g-603--64--113 Decision and Order 60 F.

higher price. "K et" price as used in this order shall mean the ultimate net cost to the purchaser.

2. Paying or contracting for the payment of anything of value to, or for the benefit of, any customer or respondents as compensation or in consideration ror advertising, promotional, or any other services or racilities furnished by or through sneh customer in connection with the processing, handling, sale or offering ror sale or food products processed, manufactured, sold or ouered for sale by respondents, unless such payment or consideration is made avn,ilable on proportionally equal t.terms to all other customers competing with such favored customer in the distribution or such product.s.

3. Furnishing, contracting to furnish, or contributing to the furnishing of, services or filcilities in connection with the handling, processing, sale or offering for sale of respondents' food products to any purchaser from respondents of SHch products bought for resale, ,vhen such services or facilities arc not accorded, affrmatively offered or otherwise made available on proportionally equal t.terms to all other purchasers from respondents who resell such products in competition with such purchasers who receive such services or facilities. It is further ordered That the allegations of discriminations in price insofuT as they relate to primary line injury, as set forth in paragraphs 5 and 6, COWlt I , of the complaint, and the alleged effects thereof insofar as they relate to primary line injury, as set forth in pamgraph 7, Cmmt I, of the complaint, be dismissed. It i8 flt1ther onlered That respondent Arrow Food Products, Inc. a corporation, and its offcers, representatives, agents and employees and respondents farcus Rosenberg, Emanuel Rohan, and David Rosenberg, individually and as offcers of said corporation, and their representatives, agents and employees, directly or through any corpol' ate or otller device, in or in connection "ith the sale of food prodnets 1n commerce, as "commerce" is defined in the Federal Trade- Commission Act, do fortlnyith cease and desist froln: Representing that their food pro(lncts conform in quality or type to standards established for such products by thc United States Department of Agrieu1tnre, Iyhen such is not a fact, or in any other manner misrepresenting the quality, type, origin, or other cha.racteristics of such food products.

DECISIQS OP THE COr,onSSION A D ORDER TO FILE REPORT OF COllPLIAXCE Pursuant to Section 3.21 of the Commission s Hules of Practice published lay 6 , 19;')5, as amended, the initial decision of the hearing GORDON OF CALIFORNIA ET AL. 1781 1771 Complaint examiner shall, on the 26th day of J Ule 1962, become the decision of the Commission; and, accordingly:

It is ordered That respondents Arrow J' ood Products, Inc., a corporatioll and :Marcus R.osenberg (erroneously named in the complaint as :Markus Hosenberg), Emanuel Rohan and David Rosenberg indi vidually and as offcers of said corporation, shall, within sixty (60) lys after service upon them of this order file with the Conm1ission a report in ,writing setting forth in detail the manner and form in which they Jmve complied ,with the order to cease and desist.