Exchange Distributing Company

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IN Tl-UJ 1.A TTER OF EXCHANGE DlSTRIBUTL'G COMPANY ORDER, ETC. , IN REGAJil TO THE ALLEGED VJOL\TION OF SEC. 2 (C) OF TUE CLAYTDX ACT Docket 8061. Compl(l, July 2D, 1960-DecisfoJl July, 1962 Order l'Cfluiring a Birmingham, Ala.. ,Yholesale distributor of citrns fruit. vegetables, anel produce, to cease receiving unlawful brokerage on jJurchases of eitrus fruit from Florida packers for resale, .'1Ieb as allowance" of 10 per box of 1% bushels and 5\,' pci' carton of % bushels, equal to the standard brokerage fee on sales malic through brokers. CO:!IPLAIXT The Federa.l Tra.de Commission, ha"ving reason to believe that the pa.rty respondent llamed in the caption hereof, and hereinafter-r more particuhtrly described, has been and is noiV violating the provisions of subsectiou (cJ of Section 2 of tbe Clayton Act, as amended (IT. Title 15, Sec. 13), hereby issues its complaint, stating its charges with respect thereto as Jollmys:

PAIL\GRAPH 1. Respondent Exchfmge Distributing Company is a corporation organized, existing and doing business under ancl by virtue of the laws of the State of Alabama, with its offce and principal place of business located at 101D .First Avenue, North.h, Binl1ingham: Alabalna with mailing address as Post Offce Box IG8 , Birmingham, Ala.

PAn. 2. Respondent is nmv, and for the past several years has been engaged in business primarily as a wholesale distributor, buying, selling a-nd distributing citrns fruit nncl produce, and other Jood prollucts, all of which are hereinafter sometimes referred to as food products. Respondent purchases its food products from a large number of suppliers located in many sections of the United States. The Complaint 61 F.

annual volume of business done by respondent in the purchase ttnd sale of food products is substanti,ll.

PAR. 3. In the course and conduct of its business for the past several years, respondent has purchased and distributed, and is now purchasing and distributing, food products in commerce, as "commerce " is defined in the aforesaid Clayton Act, as amended, from suppliers or sellers located in several States of the United SUltes other than the State of Alabama, in which respondent is located. R.esponclent transports or causes such food products, when purchased. to be transported from the places of business or packing plants of it suppliers located in yitrious other States of the United States to respondent "who is located in the State of Alabama, or to respondent' s customers located in said State, or elsewhere. Thus, there has been at all times mentioned herein a continuous course of trade in comrncrce in the purchase of said food products across state lines between respondent and its respective suppliers of such products, PAR. 4. In the COllrse and conduct of its business :101' t.he past several years, but more particularly since January 1 , 1959, respondent has been and is 1101Y making substantial purchases of food products for its own account for resale from some, but not nil, of its suppliers and on a large number of these purchase.s respondent has received and accepted, and is now receiving a,nd accepting, from said suppliers a c011mission, brokerage, or other compensation, or an allmnlnce or discount in Eon thereof, in connection there"\Ylth, For example, respondent makes substantial purchases of citrus fruit from a number of packers or suppEers located in the State brokera,ge orof Florida, a.nd receivcs on said purchases, a commission, or a. discount in lieu thereof, l1slmDy at the rate of 10 cents per 10/6 bushel box, or equivalent. In many insUmees respondreflects saident rcc.eives n lower price from t.he supplier which commission or brokerage.

PAR. 5. The acts and practices 01' respondent in rcceivjng and accepting a brokerage or a., commission, or an allowance or discount in lieu thereof, on its own purchases, as above alleged and described are in violation of subsection (0) of Section :2 of the Clayton Act, as ame1HJec1 eG. C. Tit)e 15, Sec. J 3).

:117' . Cecil G. Jfiles and ill'/. Basil J. Jli ezines for t.he Commission. 111'1. Erl1.ourd 31. Friend, Jr. a.nd Sirote: Penn1.ltt, F'iiend Fried- 7)2.(111 of Birmingham, Ala., f01' respondent. , EXCHANGE DISTRIB Ruling CO.

Initial Decision INITIAL DECISION BY LEON R. GROSS, HEARING EXA::iDIER The complaint in this proceeding charges respondent with violating subsection 2(c) of the Clayton Act, as arncnded (D. C. Title , Sec. 13),I by receiving and accepting from its suppliers of food products, especially citrus fruits, a commission, brokera.ge, or other compensation, or an allOlyance or discount in heu thereof. It also cha.rges that more particularly since J nuary 1, 195!\ respondent has been and is now making subst.antial purchas( s of food products for jts U'Y11 account for resale frolll some, but not all, of its suppliers and on a large 11um1)8r of these purchases respolHlent ha.s received and accepted, from said suppliers a commission, brokerage, or other compensr tion or allowance or discount in lieu thereof." Respondent' s answer donied the charges of the complaint and stat.ed that it purchases, as a rule, from the shipper who gives Respondent the lowest price on the quality of merclmndise they desire to purchase a.nd thereafter sells sllch merchandise at nmrket price. At hearings in Birmingham, Alabama, and Lakeland, Florida counsel supporting the complaint cOlnpleted their case-in-chief and at a. hearing in Birmingham on October 23 , 1961J respondent completed presentation of its evideIlce, the record ,vas closed, and an order fixed December 8, J061, as the date for the parties to file proposed findings, conclusions and suggested order. Such proposed findings conclusions, and suggested order ha.ve been filed. Respondent has maint.ained throughout this proceeding that, if a commission in lieu of brokera.ge were paid to it by its suppliers during the relevant period, such payments were made without its having requested them, and without its knowledge.

Based upon the entire record in this proceeding, including the exhibits which have been received in evidence, the examiner makes the findings of fact and conclusions hereinafter set forth. Findings pro posed by the parties which are not made in the form in 1"which they have been proposed, or in substantially that form, hereby are rejected. The fact that no finding in this opinion summarizes the evidence jn the ma.nner in which the parties have requested it to be sunnnarized does not mean that the l1caring examiner has not C011- 1 "That it shall be unlawful for any pel' son engaged in commerce, in the C01Jr e of such commerce to payor grant, or to rel:ei,e 01' ucl:ept, un vtbing of yalue ::f! a commission, brokerage, or other compensation, or an:" allowance or discount in lieu thereof, c):cept for services rendered in connection with the sale or purchase of goods, ,yares, or merchandise -either to the other part:\' to SUl: l unnsactio)J or to an agent, l'eprcsentatiYe, or other intermcdiary therein where sllch inte,.mediary i acting in fact for or in behalf or is subject to the direct or indirect control, of any party to such transaction other than the per on by wllOm such compensation WIlS so granted or paid. FEDERAL TRADE COMMISSIOK DECISIONS Initial Decision 61 F.

sidered such evidence. It means merely that the examiner deems the mridence which is summarized in his fmc1ings to be suffciently probative, substantial, and lnaterial to (lispose, of the issues. AI! motions made by the parties which have not previously been ndccl upon, or which are not herein specifically ruled upon, hereby are onTr111ed and denied.

Based upon the entire record, the evidence, the exhibits, and the pleadings, the examiner nmkes the following: FIXDHWS OF :FACT 1. Tho complaint states a good cause of action against t.he respondent. The Federal Trade Commission has jurisdiction over the respondent and the subject matter ()f this proceeding; and this proceeding is in the public interest.

2. Exchange Distributing Company, respondent, is a Dcb \yare corporation ,with its principal and sole place of business located at 1019 First Avenne Korth, Birmingham, A.Jn. Respondent is now, and for several years bst past, including the y( nr 1959, hns been engaged primarily as a wholesale distributor of food proclncis, inelllding citrus fruits, vegetables, and procluec. Respondent was and is buying, seJIing and distributing the aforesaid citrus fruit and food products which move to it across state lines. Respondent purchases its citrus fruit and ot.her food products from a large number of suppliers located in many states of the united States other than the State of Alabama in which respondent. is located and in diiJerent states thereof. H.e, spondent transports or causes such food products, \\"hen purchased to be tnmsported from its suppliers' places of business or packing plants to respondent in the State of Alab:una. or to its cllstomers located in said state or else'\,here.

3. Respondent is engaged in "C0l11neree " as that ternl is defined in the Cln.yton Act, as a.mended.

4. The business transacted by respondent for the year 1959 to the present time \yas substantial, being between $3 000 000 and $4 000 000 per annum. Respondent was one of four business concerns conducting similar business in the Birmingham an a. \vhieh had substantially the same sales YOIU111e. Tom Pippen is president of the respondent corporation LId has been with the company since June 1946. lie has general supervision over the buying, selling, accounting, warehousing, receiving, shipping, and credit." lr. Pippen purchased nil the citrus fruit for respondent, commencing in ,January 1959 and continuing to the dates of tllc hearing. Ilis purelwses were negotiated in long distance telephone conversations with the suppliers located EXCHANGE DISTRIBUTING CO.

Initial Decision in Florida, and averaged approximately 150 to 175 truckloads or rruit annually.

5. During the relevant period the price of citrus fruit was quoted to respondent by the growers all the basis or a "Bruce box" containing 1% bushels. The price was generally quoted, especially in trade journals, in increments of 25 cents, i. , $2. , $2. , or $3.00 a Bruce box. In the citrus fruit industry, a "carton" is half or a Bruce box and contents, and its price would be half the price of fl Bruce box. Some suppliers made separate cha.rges or 5 cents for a carton and 10 cents for a Bruce box, over and above the cost of the citrus, while other suppliers absorbed' this cost. The wholesale citrus fruit industry is highly competitive and a difference of a few cents, i. , 5 cents per carton or 10 cents per Bruce box constitutes a material price differential to the purchasers. 1Vhen sales of citrus fruit were made through brokers, the standard brokerage fee was 10 cents per Bruce box of 10/5 bushels, or 5 cents per carton, 01' one- half box of % bushel. G. Although Mr. Pippen testified that he did not at any time make any request upon any supplier for any allmvance in lieu or brokerage nor was he offered a.ny, and that all or the negotiations between respondent and its supphers ",were carried on at iln11S' lcngth in which the respondent was attempting to pureha,se citrus products at the very lowest possible price, :\11'. Pippen knew that the citrus fruit growers who supplied respondent also employed brokers and that these brokers were paid a 'Comnlission for their services. 7. During the relevant period respondent received and accepted " commission, or brokerage, or other compensat.ion or an allo"\ance or discount in lieu thereof," on pllrc hases of citrus fruit from, among others Newbern Groves, Inc., of Tampa, Florida, lCecn Fruit Corporat.ion of Frostproof, Florida, and Orange Fruit Company of laitland, Florida. The discount or allowances received from these packers was equal to the fee paid to hrokers.

Packing house m.anifests of Orange Fruit Company, in which Exchange Distxibuting Company or Birmingham, Alabama, is the consignee, show a,n allowance of brokerage on the face of such manifests. 'Vhen an allowance "".as made to compensate for "decay loss:' the words "decay loss" appeal'. On these manifests the fruit was priced in 25-cent increments. On the manifests where the brokerage is dedueted from the quoted price the net is shc)'wn, i. , CX-152, where the fruit is prjced at E)5 net or $2. 90 net. Keen Fruit Corporation reported transactions in which it paid an allowance in lien of brokerage.

2R-122 65-- FEDERAL '!'HADE COMMISSION DE-CISIOXS Initial Decision Gl F.

N e\vbern Groves made an aDowance in lieu of brokerage of 5 cents per carton and 10 cents per Bruce box to respondent on all its citrus fruit purchases during the relevant period. This allmvance did not have to be and was not specifically negotiated because over the years such allowance had become a general practice and gradually became the "custOl1 ' in the industry. ewbern discontinued the aJ10wances in July or August 1960 but did not inform the respondent that the practice was being discontinued, "beea-use it was not necessary " (Tr. 101). 8. During the relevant period respondent purchased lnost of ils citrus fruit requirements from Orange Fruit Company, Keen Fruit Corporation and Newbern Groves, Inc. Although ::\11'. Pippen contacteel other suppliers of citrus fruit, he pllrchftsed most of respondent' s requirements from these suppliers becftuse they quoted him the Jorvest prices.

9. The allowances in lieu of brokerage to respondent were at times paid by deduction frmll the market price stated on invoices, and at other times prices \Were guoted to respondent and negotiated on net basi, i. the price quoted to respondent -was the price "i"which respondent would pay net: after the allowance in lieu of brokerage had first been deducted.

10. In the course and conduct of its businoss for the past several years, but more particularly since Ja1luary 1 , 1850, respondent has been and is now making substantial purchases of food products for its orvn account for resale to its customers. On a large number of these purchases respondent has received and Rccepted from its suppliers a commission, brokerage, or other compensation, 01' an allorvance or discount in lieu thereof, in connection therewith. The practice of the Florida citrus producers of ma,king an allowa.nce in lieu of brokerage to their customers, including this respondent, T\HS an accepted custom in the industry. The practice was generally known and fol- Jowed. If the allowance were not made, the purchaser would take his business to a supplier who would make the allowance. Hespondent either knew, or because of its ma.ny years of experience in the produce industry should have knorvn that it ,vas receiving' such brokerage or commission or a discolUlt in lieu thereof. A applying the accepted court and commission decisions 1 to these facts, the examiner makes the following 1 BirlrUc Purchasing Co. v. FTC 96 F. 2d 687; Great Atlantic Pacific Tea Co. v. FTC, 106 F. 2d CC7; FTC v. Broch Co. 363 e.S. 166 (1960) ; Thomasvile Chair Company, Doc!;et Ko. 7273 (Commission opinion dated :March 13, 19(1) ; Daines City Citrus Growers ASSD' ., et a1., Docket No. 7144 (Commission opinion dated lay 19, 19(1) ; find Wiliam Bllf'bl EidsolJ, et al., Docket Xo. S06iJ (Commission opinion dated January 3 , 1962). EXCHANGE DISTRIBUTING CO.

Decision and Order CQXCLU"SIONS OF LA'V 1. The compla.int filed herein states a good callse of action against tho respondent; the Federal Trade 001111ni88ion has jurisdiction over the respondent and over the subject matter of this proceeding. This proceeding is in ihe public interest. Respondent is engaged in C011merce as "commerce" is defuled in the Clayton Act as amended. 2. COW1sel supporting the complaint have proved the material and essential allegations thereof by reliable, substantial, probative and material evidence in this record.

3. During the time covered by this complaint, respondent received and accepted from its suppJicrs of food products, especially citrus fruits, a comn11ssio11, brokerage, or other compensation, or an allowance or discount in lieu thereof in connection with said purchases. Said acts by said respondent were and are in violat.on of, and arc proscribed by, Section 2( cJ of the Clayton Act, as amended (15 D. Sec. 13 J . Therefore It is o1'dered That respondent, Exchange Distributing Company, a corporation, and its offcers, agents, representatives, and employees directly or through any corporate or other device, in connection with the purchase of citrus fruit or any other food products, in commerce as "commerce" is defined in the amended Clayton Act, do forthwith cease and desist from:

Receiving or aeee.pting, directly or indirectly, from any seller anything of value as a. cOlllmission, brokerage, or other compensation, or any allowance or discount in )jeu thereof, upon or in connection with any purchase of cit.rus fruit or any other food products for respondent':: own account, or where respondents are the agents, representatives, or other intermediaries acting for or in behalf, or are subject to the direct or indirect control, of any buyer.

DECISION OF THE CO U)I1SSTON AXD OW)EU ' 1' FILE IlEPORT OF CO:\IPLIANCE This ila.tter lutving- been heard by the Commission upon respondcnt:s exceptions to the hearing exa.miner s initial decision; and The Commission having considered the entire record, including the briefs of counsel for respondent and c011nsel in support of the complaint, and having determined that the hearing examiner s findings and conclusions are fully substantiated on the record and that except for an inadvertent error to be corrected herein, the order contained in , , , FEDERAL TRADE CQM.\HSSION DECISIONS Complaint 61 F.

the initial decision is appropriate in all respects to dispose or this matter:

It i& ordered That the initial decision be modified by striking rrom the order that part thereor beginning on the iifth Jine or indented paragraph on page 7 wit.h t.he ,vards "or where respondents" and ending on the last .lne of indented paragraph with the word "buyer" and substit.uting therefor the following:

or where respondent is the agent, representative, or other intermediary acting for Or in behalf, or is subject to the direct or indirect control, of any buyer.

It ,is further onle1'ecl That respondent's exceptions to the initial decision be, and they hereby are, denied.

1 t is ht/ithe1' ordered That the hearing examiner s initial decision filed January 18, 1962, as modified herein, be, and it hereby is, adopted as the decision of the Commission.

It is j'w,thcr onlered That the respondent Exclmnge Distributing CompfUlY, a corporation, shall, within sixty (60) days after service upon it of this decision, file with the Commission a report, in writing, setting forth in detail the ma,nncr and form in which it has complied with the order to cease and desist contained in the aforesaid initial decision, as 111oclifiecl.

Ix THE rATTEH OF JOHNSON PUBLISHING COMPANY, INC.

TSK\TT ORDER ETC. , IN REGARD TO THE ALLEGED VIOLA'ION OF SEC. 2 ( cl) O_F THE CLl\ YTON ACT Docket 0-.157. Com.plrJ,int, July 10, 1962-Decision, July 10 , 1962 Consent order reqlliring the Chicago publisher of "Ebony Jet" Tan Hue and "Negro Digest" Inagazines to cease discriminating in price in dolation of Sec. 2(cl) of the Clayton Act by paying promotional allowances to certain retail Cllstomen;; some of whom operated chain retail outlets in railroad, airport, and DUs 'terminals, tind outlets in hotels and offce buildings, and otl1el's of whom furnished services in connection ,ith tlle handling of respondent s publications such as taking purchase orders and distl'ibutiDg, biling, and collecting- while not making su('h payments available all proportionally equal terms to their competitors, including drug cbains, grocery chains, nnd other newsstands.

COMYL..4.INT The Federal Traile Commission having reason to believe that the party respondent na,med in t.he caption hereof and hereinafter lTIOre. particular.rly designated a,nd described, has violated and is now violat , JOHNSON:.T PUBLISHL\TG CO., I Complaint ing the provisions of subsection (d) of Section 2 of the Clayton Act (D. C. Title 15, Sec. 13), as amended by the Robinson-Patman Act hereby issues its complaint stating its charges with respect thereto as follows:

PARAGRAPH 1. Respondent .Johnson Publishing Company, Inc. , is a corporation organized and doing business under the laws of the State of Illinois, with its offce and principal place of business located at 1820 mnong otherSouth :Michigan Avenue, Chicago, Ill. Said respondent, things, has been engaged and is presently engaged in the business of publishing and distributing various publications, including maga Jet'\ "Tanzines under copyrighted titles including "Ebony sales of publications Irue a.nc1 "Negro Digese' . Hesponde,nes during the calendar year 1960 exceeded four million dollars. '1rC sold and distrib- PAR. 2. Publications published by respomlent uted throughout various States and the District of Columbia respondent through local wholesalers to retail outlets. Each local wholesaler whose services are used by respondent has acted and is now acting as wholesaler for the publications of several independent publishers, including respondent publisher. These wholesalers, in dealing "With the retail customers of respondent, have served dis-and a.re now serving as conduits or intermediaries for the sale, tribution and promotion of publications published by respondent. Ebony" and " Jet" are the two most popular and widely c.irculated Negro magazines in the United States and are sold and distributed throughout various States by respondent tl1Tough local "Wholesalers to retail customers, the \IL -). Respondent, through its conduits or interme.c1iaries, local ,vholesalers, 1U1S sold and distributed and now sells and distributes its publications in substantial qwwtities in commerce, as "commerce" is denned in the Clayton _Aet, as amended, to competing customers located throughout various States of the United States and in tile District of Columbia.

PAR. 4. In the course and conduct of its business in commerce, respondent. has paid or eont.ractecl for the payment of something of value to or for t.he benefit of some of its cllstomers as c.compensation or in consideration for services Dr facilities furnished, or contracted to be furnished, by or through such customers in connection -with the handling, sale, or oiJering for sale of publications sold to them by respondent. Such payments 0'1' allowances were not made available on proportionally equal terms to all other cust,OI1WTS of respondent comper.ng in the distribution of such publications. FEDERAL TRADE COMMISSIO DECTSIO).TS Decision and Order 61 F.

PAR. 5. As an example of the practices al1egec1 herein, respondent has made payments or allowances to certain retail customers "Who operate chain retail outlets in railroad: airport and bus terminals, as ,\'ell as outlets located in hot.els and offce buildings. Such payments at' a.allowances were not offered or othcnvise made available on proportiol1ally equal terms to all other customers (including drug chains grocery chains and other llClysstanc1s) competing with the favored customers in the sale and distribution of the publications of respondent publisher. Among the favored customers receiving payments in 1960, and during the first six months of 1061 , which were not offered to other competing cllstomers in connection with the purchase and sale of respondent' s puhlications were:

Approximate Amou.nt Received Customer: Ja,n. 1, 1960-- hlle so, 1961 ABC Vending Corp., Long Island City, N.Y-- -- $3. 5uD. 92 Garfield Kews Co. , .Kew York, N. ------- 4R4. Greyhound Post Houses, Forest Park, Ill_ ------- 1 , 29; . 57 Jan. 1, 1960-llay, 1961 Union News Co., .Kew Yorl(, K,Y---------- --- 6, G72. 16 Respondent made said payments to its favored customers on the basis or individual negot.iations. Among sa.id ravored customers such payments 'sere not made Dn proportionally equal terms. PAR. 6. The acts and practices or respondent as alleged above are in violation of the provisions or subsection (d) of Section 2, or the Clayton Act, as amended.

DECISION AXD ORDER The Commission having heretofore determined to issue its eornplaint charging the respondent named in the caption hereof with violation of subsection (d) of Section 2 of the Clayton Act, as amended, and the respondent having been served with notice or said determination and with a copy or the complaint the Commission intended to issue, together with L proposed rorm of order; and The respondent and counsel for the Commission having thereaftel executed an agreement containing H, consent order, an admission by the respondent of all the jurisdictional facts set fOJ'th in the complaint to issue here.in, H, statement that the signing of said agreement is for settlement purposes only and does not constitute an admission by respondent that the law ha.s been violated as set forth in such complaint and waivers and provisions as required by the Commission s rules; and JOFLT\SO T PUBLISHING CO. ,I::C.

Decision and Order The Commission, having considered the agreement, hereby accepts same, issues its complaint in the form contemplated by said agreement, makes the follm"ing jurisdictional findings, and enters the following order:

1. Respondent Johnson Publishing Company, Inc., is a corporation organized, existing and doing business under and by virtue of the laws of the State of Illinois, with its office and principal place of business located at 1820 South Michigan A venue, in the city of Chicago State of Illinois.

2. The Federal Trade Commission has jurisdiction of the subject matter of this proceeding and of the respondent. ORDER It is ordered That respondent Johnson Publishing Company, Inc. a corporation, its offcers, employees, agents and representatives, directly or through any corporate or other device, in cormection with the distribution, sale or offering for sale of publications including magazines in commerce, as "commerce" is defined in the amended Cla.yton Act, do forthwith cease and desist from:

Paying or contracting for the payment of an allowance or anything of value to, or for the benefit of, any customer a.s compensation or in consideration for any services or facilities furnished by or through such customer.r in connection with the handling, oflering for sale, sale or distribution of publications including maga.zines published, sold or onered for sale by respondent, unless sneh payment or consideration is affrmatively o:Hered and otherwise made available on proportiona.lly equal terms to all of its other customer.rs competing with such favored customer in the distribution of such publications including magazines. The word "customer:' as used above shall be deemed to mean anyone who purchases from J olllson Publishing Company, Inc., acting either as principal or agent, or from a distributor or wholesaler where such transaction with such purchaser is essential1:.y a. sale by such respondent, acting either a,s principal or agent.

It is further ordel'ed That the respondent he.rein shall, within sixty (60) days after service upon it of this order, file with the Commission a report in writing setting forth in detail the manner a,nd form in which it has complied with this order.

, FEDERAL TRADE COMl\HSSION DECISIONS Complaint 61 ,'