Swift & Company

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complied with the order to cease and c1esjst contained herejn. IN TUE 1L.lTTER OF SWIFT & Camp ANY ORDER, ETC., IN REGARD TO THE ALLEGED VIOLATlO:- OF THE FEDER. TR.UJE COliIlfISSlON ACT Docket 8.'01. Complaint, Mal'. l.9I-Decisiun, July 20 , 1962 Order dismissing-following the dismissal of a gTOUp of related cases by orders issued May 23, 1062 , and determination tlwt it \vonld be equitable and in the SWIFT & CO. 173 172 Complaint public interest to conduct further proceedings on an industry-wide basiscomplaint charging a large manufacturer 'with offering costly and unfair inducements to retailers to handle its ice cream and other frozen products. COl\fPLAINT Pursuant to the provisions of the Federal Trade Commission Act and by virtue of the authority vested in it by said Act, the Federal Trade Commission, having reason to believe that the corporation listed above in the caption hereof and more particularly described and referred to hereinafter as respondent, has violated the provisions of Section 5 of the said Act (U.S. Title 15, Sec. 45) and it appearing to the Commission that a proceeding by it in respect thereof would he in the public int.erest, hereby issues its cOlnplaint, stating its charges in that respect as follows:

PAltGHAPH 1. Respondent Swift & Company is an Illinois Corporation with its principal offce and place of business at 4115 S. Packers Street, Chicago Ill. Respondent is one of the Nation s large corporations. Its sales for the year IU5S totaled $2 647 U25 OOO and its working capital for that year was $212 316 000. PAR. 2. Respondent is engaged in several lines of conuercc including that of producing, purchasing, processing, manufacturing, selling and distributing, at wholesale, dairy ami related food products among which ate ice cream, ice milk, mellorine, sherbets and other similar frozen products hereinafter colle,ctively referred to as frozen products. Respondent maintains and opemtes approximately 40 frozen products processing plants in various states of the United States. It sells and distributes it.s frozen products to retailers and dealers who sell frozen products at retail such as drug, grocery and confectionery stores, restaurants, hotels, fining st.ations, ice cream parlors and institutions and, is in competition with other firms, partnerships, corporations and individuals in this manufacturer-wholesaler line of commerce. \R. 3. Respondent in connection with its frozen products business is engaged in commerce wit,hin the meaning of the -Federal Trade Commission Act (15 use 41, et seq. ) in that it purehascs and produces ingre,clirmts which are used in the manufacture of frozen products and causes some of such ingredients to be shipped across state lines to the states of nmnufacture of such frozen products; it sens and distributes frozen products across state lines and, in connection thereyrith, supplies facilities and sells, Ie,ases, and loans ffLcilities, sends and receives orders, information, signs, advertising material, and other material and equipment., relating to rcspondenes frozen products business. Respondent s frozen products lmsiness is conducted as an 174 FEDERAL TRADE COJHMISSIOY DECISIONS Complaint 61 l'. entity or whole on an interstate basis. Essential elements of the business such as financing and management are centralized in corporate offcials at company headquarters, only a limited control over local operational matters being delegated to plant managers within particular states.

PAR. 4. Since 'World War II the united States has consumed upwards of 500 million gallons of frozen products per year. The great bulk of this whole is produced and sold by manufacturer-wholesalers who sell to retail outlets. Over 50% of this wholesale market volume is done by 10 manufacturer-wholesalers of which the respondent herein is one. These ten operate on a nation-wide basis. In addition to these ten manufacturer-wholesalers, who operate on a "nationwide" basis, there are a number of intermediate size manufacturerwholesalers in interstate commerce in frozen products who operate upon what may be termed as a "regional" basis. This group varies in number in accordance with the definition given to the word "regional". A third group of manufacturer-wholesalers exists which consists of those who might be termed local" or "home-town" manufacturer'wholesalers. In 1947 this latter group consisted of some 3000 to 3500 companies. By 1959 there were less than 1500 such enterprises. In 1947 the combined market share of this latter group and intermediate or "regional" group was between 55% and 60% of the total wholesale market. The first group, of lich the respondent is one, did t.he remainder or from 40% to 45% of the whole. By 1959 the respondent group were doing from 55% to 60%and others in the "nation-widen of tho total volume in the manufactllrer wholesa1crs line of commerce and the other two groups had the remainder. This increase in concentration in the hands of the respondent and other large manufacturer-wholesalers has resulted in part from the impact of the use of the methods of competition and acts and practices by respondent as described hereinafter in paragraph 6. Small business entities in this industry have been and are forced to attempt to meet respondent' methods, acts and practices, but because of lack of capital, many have had to sell out to larger corporations including respondent Swift & Company, \vhile others have been forced to discontinue operations. PAR. 5. TIeeause of the nature of frozen products, it is necessary for retailers and dealers to have a cabinet or refrigeration unit of some sort designed and manufactured for use in connection with the storage, display, and sale of frozen products to the purchasing public. Such equipment is hereinafter referred to as facilities. The cost of facilities needed by retailers and other handlers ranges from approximately $500 to $5 000.

, , SWIFT & CO. 175 Complaint )lost retailers and other handlers have limited floor space for facilities in their places of business. Accordingly, by placing its 'equipment in dealers ' places or business, respondent monopolizes .outlets or markets. The placement by a frozen products manufacturer or facilities on the premises of a retailer or handler with or without n agreement, condition, or lmderstandillg that only the frozen products or said manufacturer shan be stored therein or sold therefrom is tantamount to an exclusive requirements contract. PAR. 6. For more than two years last past and continuing up to the present time, Hcspondent, in carrying on its business or manufacturing, selling and attempting to sell frozen products, has attempted to induce and has induced retail dealers and prospective retail dealers and other handlers of frozen products to handle, store and sell Respondeut' s products by doing, engaging in, and carrying out various acts methods and practices including the following: I. Respondent supplies deltlers with facilities at its expense. 2. Respondent finltnces dealers in seveml ways, (a) by loans of money, (b) by financing and assisting in the financing or the purchase of facilities, (c) by advancing sums of money to be earned later as discounts ror quantity purchases, (d) by transferring cash 1,0 dea.lers directly or under one guise or another such as in t.he form of an advertising allowance, and (e) by investing capital in dealers' pltces of business or prospective places or business. 3. Respondent offers deltlers miscellaneous inducements, (It) in the form of sen' ices of value and gratuities, e. , it services dcaler owned 'equipment-soda fountains and refrigerated cases-used for other products, (b) moves Rnd armnges store equipment, (c) ltssists dealers to obtain equipment at reduced prices, (d) supplies signs or pltrts of signs not in the normal range or standard advertising practice, and (e) makes gifts to deltlers of things of vltlue, e.g., clocks, bltck bars bn.ins-marie and other it.ems.

4. Respondent sells "off list " i. , it seDs to some purchasers at prices below its current published prices which arc in efj'ect at the time as to other purchasers.

5. Respondent sells and delivers some of its frozen products lts fighting traffc" or "competitive" brands, or as private label produets, at prices below the cost to the respondent or manufacturing, selling, shipping and delivering said products. PAR. 7. The effect ltnd result of the use of the aforesaid acts, pmctices and methods by respondent have been and now are to unduly and substantially injure, restrain ancl suppress competition between respondent and its competitors. The use or these acts, practices and 176 FEDERAL 'trade CQ:YE\lISSIOK DECISIOjXS Dissenting Opinion 61 F.'I. methods by respondent contributes to the monopolization of the frozen products industry in the hands of a few. It is prejudicial to small business concerns with limited resources. It tends to destroy the freedom of retailers and other handlers of frozen products to select frozen products pursuant to customer demands or by their own free will. It is prejudicial to the growth and development of the frozen products industry from the standpoint of competition and from the standpoint of the public interest in products of high quality at fair prices. The use by respondent of the aforesaid acts, practices and methods tends to put a premium upon the availability of capital in the competitive race in the frozen products industry and to detract. Irom the importance of the ability to compete on price, quality and service. It focuses competition on cabinets and other gifts and gratuities and reduces the competitive importance of price, quality and service. Said acts, practices a,nd methods are an to the prejudice and injury of the public. They arc adversc to the puhlic interest and constitute unfair methods of competition and unfair ads and practices within the intent and meaning of the Federal Trade Commission Act. DISSENTING OPLNION By "lacIntyre Commissioner:

The Commission issued its complaint in this matter on 11arch 6, 1961. In that complaint it was alleged that respondent is engaging in certain acts and practires in connection with its sale 01 ice cream in interstate commerce. In paragraph 7 of the complaint it was alleged that: The effect and result of the use of the a1oresaic1 acts, practices antl methods by respondent have been and now are to Ullduly and substantially injure, restrain and suppress competition between respondent and its competitors. The use of these acts, practices and methods by respondent contributes to the monopolization of the frozen products industry in the hands of a fcw. It is prejudicial to small business concerns withlimitec1 resources. It tends to destroy the freedom of retailers and other handlers of frozen products to select frozen products pursuant to customer demands or by their own free will. It prejudicial to the growth and development of the frozen products industry from the standpoint of competition and from the standpoint of the public interest in products of high quality at fair prices. The use by respondent of the aforesaid acts, practices and methods tends to put a premium upon the avnilabi1ity of capital in the competitive race in the frozen products industry and to detract from the ilnportance of the n.bihty to compete on price, qun.lity and service. SWIFT & CO. 177 172 Dissenting Opinion On June 2, 1962 respondent filed a motion seeking postponement of hearings previously postponed to June 11, 1962. It is clear that one of the purposes for the requested postponement was to permit respondent to appeal to the Commission to dismiss the complaint herein. Also, it is clear that respondent would be seeking dismissal of the complaint herein because the Commission, on May 23, 1962, had dismissed complaints in other cases (Federal Trade Commission Dockets 6172- , 6424) in which respondents in those cases allegedly were using nets and practices in connection with the interstate sale of ice cream in violation of Section 5 of the Federal Trade Commission Act. Although the Commission dismissed the complaints in Federal Trade Commission Dockets 6172-79 and 6424, it does not appear that the Commission absolved the practices challenged in those complaints. Instead, the dismissals were for the stated reason that the records in those cases lacked proof of injury.

In this case the action of the majority in dismissing the complaint at this time precludes counsel representing the public interest from presenting evidence from which it could be determined ,,,hethel' the injury alleged in paragraph 7 of the complaint and heretofore quoted in this Opinion actually occurred. It should be emphasized that the majority in dismissing the compla.int in this case did so without a record of evidence before the Commission. Instead, the majority in its order of dismissal has stated that this matter was "examined * * * in the light of its disposition of a group of related cases." That was in accordance with the request of the respondent. It had stated that , h1 effect, was tried when the Commission tried the other cases. Such contention perplexes me. It is certain that if the Commission had found parties in the other cases guilty it could not have, by virtue of that fact, found respondent guilty in this case. 1\'101'eovo1' , according t.o the information before 11S this proceeding was allthorizedby the Commission subsequent to the initial decision or the hearing examiner in Federal Trade Commission Dockets 6172- , 6424. Th refore, the Commission in a,uthorizing the complaint in this case was on notice that the, hearing examiner in the other cases had determined that there vms lack of proof of injury in those cases. Also, \\'hen the majority n.cted to dismiss t11c complaint in this case it was on notice that counsel representing the public interest vms contending that the evide,nc.e to be offered in this proceeding would be sllbSbl1 tially different from that offered and received in the records of the Federal Tracie Commission Dockets 6172-79, 6424. The Administrative Procedure Act provi(h s the public interest with no remedy when the Commission nets 1..0 dismiss a, complaint with no 178 FEDERAL TRADE COMMISSION DECISIO::S Order 61 F.

record of evidence before it. Appropriately that Act does precludethe Commission from issuing an order to cease and desist. against respondent without a record of evidence.

The order of the majority dismissing the complaint in this ca.sepoints to its action of May 23, 1962 in dismissing the complaints in other cases and the direction for continuing close scrutiny of acts and practices in the Frozen Dairy Products InrIustry which may lessen competition or tend towards monopoly. In that connection it was stated that it had been determined it would be in the public interest that any further proceedings by the Commission i" regard to such acts and practices should, so far as practicable, be. conducted on an industry-wide basis. Pe-rhaps ant.i-compet.tive unlawful and unfair acts and practices ate so widespread in the saleand distribution of ice cream in interstate coml1eree that. industrywide proceedings by this Commission would be in t.he public interest. Requests from representat1ycs of the industry have been filed and are continuing to be filed with the COlmnission for such industry-wide proceedings, but they have not been initiated. In view of the foregoing the majority, with its dismissal of the: proceedings in this case, ha.s wiped its slate clean of all proceedings undertaken by it directed against acts and practices in connection with the interstate sale and dist.ribution of jce cream whjc.h t.he Commission has alleged to be to the prejudice of the public. In this latest action it did so in a formal proceeding without e' dence on the record supporting or disproving allegations made by tl1G Commission on )1 11rc11 6, H)(H t.hat the acts and practices of the. respondent are to the prejudice and injury of the public. From L11e action of the majority, I dissent. ORDER Drs:-'ISSING CO::IPLAIXT This matter having been considered by the Commission upon the appeal by the respondent from t.he hearing examine.r s dr.ninl of its motion to dismiss the cOlnplaillt; and The Commission having examined the matter in the ligl1t of its disposition of 11 group of related cases by orders issued iay 23, 1962 dismissing the comp1paints in those cases and directing that continuing dose scrutiny be JTftintained of acts and practices in the frozen c1airy products industry yvhich may lessen competition or tend towards monopoly; a.nd Tho Commission having determined that it would be equitable and in the public interest t.hat. any further proce.edings by the Commission GIAXT PLASTICS CORP. ET AL. 179 172 Complaint in regard to such acts and practices should, so far as practicable, be conducted on an industry-wide basis:

It is ordered That the appeal of respondent be, and it hereby is, granted.

It is fwrth red ordered That the complaint be, and it hereby is dismissed.

Commissioner MacIntyre dissenting.