The Nuarc Company

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IN THE MATTER OF THE NUARC COMPANY""

ORDF..R, ETC., IN REGARD TO THE ALLEGED VIOLATION OF SEC. 2 ( d) OF THE CLA YTON ACT Docket 7848. Oornplaint, ~lalf'. 1960-Decision, Aug. 7, 1%2 Order requiring a Chicago manufacturer of equipment used in printing, offset printing, and lithography, to cease discriminating among customers in "'Erroneously named in the complaint as Nu Arc Company, Inc. Complaint 61 F.

viola tion of Sec. 2 (d) of the Clayton Act by paying advertising .!\l1owances such as payments of approximately $3 000 for advertisements of its products in "Printing Impressions-National Edition, a newspaper owned by a customer.

CO:l\IPLAINT The Federal Trade Commission, having reason to believe that the party respondent named in the caption hereof, and hereinafter more particularly deseribecl, has violated the provisions of subsection (cl) of Section :2 of the Clayton Aet (D. C. Title 15, Sec. 13), as amended by the Robinson-Patman Act, hereby issues its complaint, stating its charges 'idth respect thereto as follows:

PARAGRAPH 1. Respondent, Nu Arc Company, Ine., is a corporation organized, existing and doing business under and by virtue of the la ",YS of the State of Illinois, with its affice and priileipal place of business located at 4110 ",Yest Grand A venue, in the city of Chicago, State of Illinois.

PAR. 2. Respondent is now and has been engaged in the manufacture allcl sale of arc lamps, vacuum frames, light tables and dark roo.m lights. Respondent markets these products throughout the United States through approximately 400 dealers who are sold on a non-exclusive basis and who resell these products in competition with each other. Total sales by respondent for its fiscal year ended August 31 , 1959 were in excess of $1 200 000.

PAR. 3. In the course and conduct of its business, respondent. has engaged, and is now engaging in cO111merce, as "commerce" is defined in the Clay tan Act, as amended. Respondent causes its products to. be transported to. the customers of its distributors in various states throughout the United States and the District of Columbia. PAll. 4. In the course and eonduet of its business in commerce, respondent paid, or eantraeted for the payment of, something of value to or for the benefit of some of its customers as compensation or in consideration for services or facilities furnished by or through such customers in connection .with their offering for sale or sale of products said to them by said respondent and such payments were not made available 011 proportionally equal terms to all customers competing in the sale and distribution of respondent' s products. PAR. 5. For example, during the period between January 1 , 1959 through February 1, 1960, respondent contracted to pay and did pay to Faster Type and Equipment Company, Inc., Philadelphia, Pennsylvania, in excess of $3 000 as compensation or as an allowance for advertising or other serviee or facilities furnished by or through Foster Type and Equipment Company, Inc., in connection with its offering THE NUARC CO. 377 375 Initial Decision for sale or sale of products sold to it by respondent. Such compensation or allowance was not offered or otherwise made available on proportionally equal terms to all other customers competing with Foster Type and Equipment Company, Inc., in the sale and distribution of respondent' s products.

PAR. 6. The acts and practices of respondent, as alleged above, violate subsection (d) of Seetion 2 of the Clayton Act, as amended by the Robinson - Patman Act.

1111.. Lynn O. Paulson for the Commission. 3fT. Eli E. Fink of Chicago, Ill., for respondent. INITIAL DECISION BY EDGAR A. BUTTLE, HEARING EXAMINER The Federal Trade Con1Juission issued its complaint against the above-named respondent on :Mareh 28, 1960, charging that said resection 2spondent has violated the provisions of subsection (d) of of the Clayton Act (U. C. Title 15, Sec. 13), as amended by the Robinson-Patman Act. The erux of the charges set forth in paragraphs 4 and 5 of the complaint, which are as follo' ws: In the course and conduct of its business in commerce respondent paid, or contracted for the payment of something of value to or for the benefit of some of its customers as compensation or in consideration for services or facilities furnished by or through such customers in connection with their offering for sale or sale of products sold to them by said respondent and such payments were not made available on proportionally equal terms to all customers competing in the sale and distribution of respondent' s products. For example, during the period between January 1, 1959, through February 1, 1960, respondent contracted to pay and did pay to Foster Type and Equipment Company, Inc.., Philadelphia, Pennsylvania, in excess of $3 000 as compensation or as an allowance for advertising or other service or facilities furnished by or through Foster Type and.Equipment COlnpany, Inc., in connection with its offering for sale or sale of products sold to it by respondent. Such compensation or allowance was not offered or otherwise made available on proportionally equal terms to all other customers competing with Foster Type and Equipment Company, Inc., in the sale and distribution of respondent' s products.

In substance the respondent's defense to such charges is as follows: of the Clayton 1. The respondent has not violated Section 2 ( d) Act, as amended by the Robinson-Patman Act, inasmuch as respondent did not Inake payments to or for the benefit of its customers with- Initial Decision 61 F.

out making such payments available on proportionately equal terms to ent'sall otherproducts.customers competing in the sale and distribution of respond- 2. Payments by respondent to Foster Publishing Company, Inc. and/or its successor in name, North American Publishing Co., in consideration of advertisements of NUARC products placed in Printing Impressions was not a payment to or for the benefit of Foster Type and Equipment Company, Inc., for a service or facility furnished by or through Foster Type and Equipment Company, Inc. Proposed findings of fact and conclusions of law were filed by counsel in support of the complaint and counsel for the respondent. The hearing examiner has earefully reviewed and considered same. Proposed findings and conclusions which are not herein adopted, either in the form proposed or in substance, are rejected as not supported by the record or as involving immaterial matters. Upon the entire record in the case, the hearing examiner makes the following:

FINDINGS OF FACT 1. Respondent, THE NUARC COA1PANY/ 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 4110 'Vest Grand A venue, in the city of Chicago, State of Illinois.

2. Respondent is now, and has been, engaged in the manufacture and sale of arc lamps, vacuum frames, light tables and darkroom lights. Respondent markets these products throughout the United States through approximately four hundred dealers who are sold on a nonexclusive basis and who resell these products in competition with each other. Total sales for the respondent for its fiscal year ended August 31, 1959, were in excess of $1 200 000. 3. Respondent causes its products to be transported to the customers of its distributors in various states throughout the United States and the District of Columbia.

4. Foster Type and Equipment Company, Ine. (hereinafter referred to as "Foster Type ), is a c.orporation organized, existing and doing business under and by virtue of the laws of the State of Pennsylvania with its principal office located in Philadelphia, Pennsylvania. Fos- 1 The name of the corporaton in the complaint is erroneously stated to be NU ARC COl\1~ANY, INC. Its correct name as set forth in respondent's answer is THE NUARC COMPANY.

. , , THE NUARC CO. 379 375 Initial Decision ter Type was incorporated in August 1955, and is, and has been, engaged since then in the purchase and sale of printing equipment and supplies to newspapers, printers and other members of the graphie arts industry, and was from January 1, 1959, through February 1, 1960 a dealer of respondent, reselling respondent' s products on a nonexclusive basis in the Pennsylvania and New Jersey area. 5. Foster Type was a dealer of respondent purchasing $11 037.46 of respondent' s products in 1958, and $8 876.10 in 1959, from respondent and respondent sold a total of $79 587.28 in 1958, and $219 550.89 ill 1959, of its products to its dealers located in Pennsylvania and New Jersey.

6. Foster Publishing Company, Ine., and/or its suecessor in name North American Publishing Co. (hereinafter referred to as "North American ), is a corporation organized, existing and doing business under and by virtue of the laws of the State of Pennsylvania, with its principal offices in Philadelphia, Pennsylvania. Foster Publishing Company, Inc., was organized in April 1958, and on or ~about August 1959, changed its corporate name to North American Publishing Co. 7. North American is now, and has, since 1958, been engaged primarily in the business of publishing two monthly newspapers designed for distribution to the graphic arts industry. One is a newspaper for distribution to the graphie arts industry in the Delaware Valley area of the United States and is called "Printing Impressions-Delaware Valley Edition . The other is a newspaper distributed to the national graphic arts industry and is called "Printing Impressions-National Edition 8. During the years 1957, 1958, lU1til May 1 , 1059, the officers of Foster Type and Equipment Company, Ine., were Irvin J. Borowsky, President; Alex Borowsky (brother of Irvin), Vice President; Beverly Borowsky (wife of Irvin), Secretary. In the spring of 1959 Hans vVeiss became vice president and secretary (replacing Alex and Beverly Borowsky), and Stephen l\tlucha became vice president, while Irvin J. Borowsky continued as president, owning 100% of the out standing shares of stock of the company at all times until August 1 1959, when he transferred 10% of the stock to Hans vVeiss, and 10% of the stock to Stephen Mucha, retaining 80 9. Since the date of their incorporation, all of the outstanding shares of stock of Foster Publishing Company, Ine., and/or its successor in name, North American Publishing Co., have been owned entirely by Irvin J. Borowsky, president and treasurer of the publishing company. His wife, Beverly Borowsky, is secretary. 10. Irvin J. Borowsky, as president, has at all times exercised control of, supervision of and responsibility for the day to day, week to Initial Decision 61 F.

week, and month to month operation of Foster Publishing Company, Inc., and/or its successor in name, North American Publishing Co. He has also formulated, directed, controlled and, as president, assumed responsibility for the acts and practices of Foster Type and Equipment Company, Inc., at least until February 1 , 1960. 11. On or about J\1:ay 19, 1958, respondent received a letter dated :J\lay 19, 1958, from Printing Impressions, published by the Foster Publishing Company, Inc. , signed by I. J. Borowsky, its president which.h letter contained the following statements: Printing Impressions was started for the purpose of diversifying our present operation and as a cooperative means of furthering our printing equipment business and the manufacturers we represent. Advertising will not be accepted from anyone competitive to our equipment company, or from manufacturers we do not represent~ and are in competition to the line we sell in our Foster Type and Equipment Co. Furthermore, every dollar you spend in our publication, we will have our Foster Type & Equipment Co. buy back in your products as a Nuarc display. 12. During the period from January 1, 1959, through February 1 1960, respondent placed fourteen monthly advertisements of its products in Printing Impressions-National Edition and paid to Foster Publishingand/ or its successor North American, for said monthly advertisements a total of $3 290.

13. THE NUARC COJ\lP ANY did not offer or otherwise make available such payments to its customers who 'were in competition ,with 2 This is the date on which In-in J. Borowsky and the two corporations filed their answers with the Commission and in substance made this admission re Foster, Docket 7698. In Lifetime Cutlery Corp., Docket 7292, it was stated by the hearing examiner in taking official notice of certain facts: Official notice * * * allows many facts to be recognized and adopted as true which are beyond the realm of common knowledge, and may well be disputed. Moreover, official notice comes to us not from the common law, but by sanction of the Administrative Procedure Act, and is specifically intended to meet the complex and widely-varying needs of the administrative agencies. Official notice is the act of a Governmental agency, 0/' its hearing official, in recognizing facts which have been proved to be true in precedent proceedings, as presumptively' true in a pending proceeding. The use of official notice is desirable because it avoids the necessity of re-proving that which had already been shown to be true and brings to bear upon the issue all the accumulated knowledge and expertise relating thereto. No undue abrogation of traditional rights results from the taking of official notice, because opportunity is given for the affected party to show the contrary of the facts officially noticed.

In the NUARC case there can be no prejudice in the taking of official notice since Borowsky testified fully in this case as well as in the Foster case OIl the subject of his supervision and control over these corporations. He now claims he delegated extensive authority to others, and that the independent identity and operation of both companies evolved. This evidence, however, must be probatively. weighed with what appears to be his prior inconsistent admissions in answering the complaint in the Foster case, Docket 7698. (See answer of Foster and Borowsky to paragraph one of the complaint. 3 Commission s Exhibit 17 (A-D). See also Commission s exhibit 16 (A-B) a follow-up letter of ~lay 26, 1958.

THE NUARC CO. 381 375 lni tial Decision Foster Type and Equipment Company, Ine. Customers of THE NUARC CO~IPANY who competed 'with Foster Type and Equipment Company, Inc., when the payments of $3 290 were made, were T. J. :Thfurphy Company; Roberts &. Porter, Ine.; Penn Dell &. Co. R. 'V. Hartnett Co. ; Phillips &. Jacobs Co. ; and Eastman n::odak Stores, Ine.

14. Respondent knew, or should have known, that the Foster Type and Equipment Company, Inc., the Foster Publishing Company, Inc. and/or its successor in name, North American Publishing Co., all continued to be under the management and control of Irvin J. Borowsky, as president, as well as under his proprietary control because of his 100% or majority interest in the capital stock of the foregoing corporations as hereinbefore set forth.

15. Respondent kne,y, or should have knmyn, that there ,,-as no change in the mutually beneficial cooperative corporate relationship between the Foster Type and Equipment Company, Inc., and the Foster Publishing Company, Inc.., or its successor in name, North American Publishing Co. , following respondent~s receipt of a letter dated ~fay 19, 1958, heretofore quoted (in part), since the cooperative policy enuneiated therein ,vas never revoked formally in writing in evidenced practice.

16. Respondent kne" , or should have known, that placing advertising with the Foster Publishing Company, Inc. , and lor its successor in name, North Americ.an Publishing Co. was tantamount to the granting of advertising allmyanc.es to the Foster Type and Equipment Company, Inc., as evidenced in the ~fay 19, 1958, letter received by respondent from "Printing Impressions DISCUSSION OF EVIDENCE AND APPLICABLE LAW In the ease of Foster Publishing Company, Inc., et aI., Doeket 7698 the examiner found that illegal payments ,,-ere induced by the Foster c.companies or successors and, in addition, that the respondent herein made some of the illegal payments for advertising. Unless the evidence herein varies, the Foster case is substantially dispositive of the issues herein.

It was stipulated by counsel that the respondent sold its products to six companies in the Philadelphia area who were competitors of its 4 The only evidence of change is a claimed oral revocation and uncorroborated general !':ta tel11ent that the publishing company and type and equipment company were operating: independently although Borowsky continued his managerial control of both companies ns president after" the employment of a general manager for Foster T~'pe and Equipment Company, Inc. See also footnote 2 re Lifetime Cutlery, Docket 7292. Initial Decision 61 F.

c.customer, the Foster Type and Equipment Company, Inc., and that respondent did not make payments to these companies similar to those made to the Foster Type and Equipment Company, Inc. However, in substance, respondent argues the evidence indicates it refused to purchase advertising from Foster Publishing Company, Inc., predecessor of North American Publishing Co., for the benefit of Foster Type and Equipment Company, Inc., its customer, when it was apprised by the written proposal of Foster Publishing Company, Inc., publisher of Printing Impressions, on or about l\1:ay 19, 1958 that both companies 'were part of a joint venture, exclusively o\vned by Irvin J. Borowsky, and ,managed by him as president. Respondent concedes it did purchase advertising from North American Publishing Co., successor to Foster Publishing Company, Inc.., when it was orally advised that the cooperative arrangement between the publishing c.ompany and type and equipment company was terminated, and that after June 1958, North American and Foster Type have operated as separate and independent corporate enterprises. Respondent therefore appears to claim, that having been assured its customer Foster Type would not be a benefactor, it advertised in "Printing Impressions, published by North American.

Respondent correctly asserts the general rule in regard to piercing the corporate veil as stated in N atio17.fJl Lead GO'lnpany v. G. 227 F. 2d 825 (7th Cir. 1955), cert. den. 351 U.S. 964 (1956) : To come within the applicable rule, there must be evidence of such complete control of the subsidiary by the parent as to render the former a mere tool of the latter, ' and to compel the conclusion that the corporate identity of the subsidiary is a mere fiction.

Respondent, hmyever, overlooks the fact that, as evidenced, Borowsky not only continued in control of both companies to the extent of owning 100% of the capital stock of one corporation and 80% of the other, but also continued to assume responsibility for the management control of these corporations by actively retaining his position as president of both. In the light of these facts, the previously conceded joint venture of these corporations makes their separate identities a mere fiction. Furthermore, there is no evidence having probative weight which would indicate the conceded cooperative relationship between the two companies had changed after :May 19, 1958.5 Boro\ysky, as president and sole owner of the publishing company, had a very vital continuing interest in advertising for the benefit of the type and equipment company, which he also managed as president and controlled as 100% owner and then as 80% o\yner of the capital stock: 5 See Finding Xo. 11 herein.

THE NUARC CO. 383 375 Initial Decision Borowsky s original appraisal of the mutual interest of both eompanies in issuing the letter of l\lay 19, 1958, is undoubtedly the correct one. Respondent knew, or should have known, that in the absence of facts indicative of a change of mutual interest, it could not assume that there was a complete severance of the dependence of the type and equipment company on the advertising devices of the publishing company lmder the same proprietorship and management unless there was in good faith a formal abrogation of the formally announced cooperative arrangement or joint venture set forth in the May 19 letter as distinguished from the casual and uncorroborated conversations claimed.

The recent cases of P. L01,illctrd 00. v. 267 F. 2d 439 (3rd Cir. 1959), cert den. 361 U.S. 927, and S1.()anee Pape1' 001npany 291 F. 2d 833 (2d Cir. 1961) involve situations where a supplier made payments to a third party, and it was held that under the facts of each ease such payments were actually to the benefit of a favored customer for facilities furnished by the favored customei' An examination of these opinions further substantiates the Commission s theory that if a benefit accrues to a favored customer a violation of Seetion 2 (d) is apparent.

In the S1.()anee case the respondent paid money to the owner of an animated display sign under an arrangement whereby Grand Union the favored customer, would receive a cash rebate and also valuable advertising space at a nominal cost. The court found that Swanee knew, or should have kno,yn, that it was, in fact, conferring a benefit upon its favored customer, and that facilities were furnished by the favored customer because Grand Union had leased the entire sign had the right to select its participants and also gave in-store prOlnotions of Swanee products in Grand Union Stores. Inp. Lorillarcl 00. case, the court upheld a violation of Section 2(d) where grocery chains signed contracts with broadcast networks to give the chains "free" broadeast time in consideration for the right of the networks to designate in-store promotional displays of the chains. The suppliers ,were induced to purchase broadcast time and the networks offered them the right to display their products in the in-store promotional displays granted to the networks by the groc.ery chains. The court held that the crucial question involved was whether the suppliers made payments to someone which actually were of benefit to their favored customers, and the court sustained the Commission findings that the entire arrangement was a plan whereby the suppliers' payments to the networks benefited the chains with free adver' Initial Decision 61 F.

tising, and were partially made in consideration of the furnishing of the in -store promotions by the chain.

As correctly urged by respondent's counsel, the P. LO1'illa'lyl and Swanee cases also established the law with respect to the relevancy of a supplier s intention and knowledge in eonneetion with the proof of a violation of Seetion 2 (d). They held that the intention, purpose or motive of a supplier in nlaking its payment for advertising is not relevant to a consideration of whether an advertising payment aetually benefits a favored customer, but the fact that a supplier knew, or should have known, that an advertising payment in fact inured to the benefit of its favored customer is relevant to the proof of a violation of Section 2 (d). Thus, even though a supplier intends to benefit a favored customer by the payment of advertising allowance.es, no violation of Section 2 ( d) can exist unless the allowance is in fact paid to or benefits the favored customer. In accord with this precedent the evidence in the within proceeding does establish a conceded benefit acc.ruling to Foster Type and Equipment Company, Inc., because of the announced joint venture with the publishing company which.h advertised respondent's products that Foster Type and Equipment Company, Inc.., had for sale. In fact, the Foster Publishing Company, Inc.., sought the advertising on the basis of assuring purchases Foster Type and Equipment Company, Inc., to meet the cost of advertising, as a guarantee of the cooperative arrangement. It is difficult to believe respondent in good faith relied on the general statements of the disassoeiation of the two companies without corroborative factual details they knew they should acquire because of previous and continued dealings with Borowsky, as president of both companies.

On the question of Section 2 (d) violations of the suppliers, there are State lV hole-striking parallels in the evidence herein and the facts in 8((1e G1'oce7's, et ell. v. The G')'eat Atlantic cD Pacific Tea 00. , et cd. 258 F. 2d 831 (7th Cir. 1958) ceTt. denied 358 U.S. 947 (1959). In that case, The Great Atlantic &, Pacific Tea Co. a jJfa')'yland COTpo1Yttion wholly owned and controlled the defendant The Great Atlantie Pacific Tea Co. a Nell) J e1'8ey corpol'ation and owned as well all of the capital stock of defendant ,V oman s Day, Inc. Thus, under this complaint it was held that grocery suppliers who placed advertising in a magazine o,vned by corporate subsidiary of the national grocery company and distributed exclusively through such company stores thereby violated Section 2 (d) of the Clayton Aet proscribing payment for services or facilities for processing or sale unless they made similar 6 See Tr 249-250 THE NUARC CO. 385 375 Initial Decision payments available on proportionately equal terms to other grocery companies even though such companies did not publish Inagazines and that the evidence failed to show that they so made payments available.

Respondent contends that the Atlantic & Pacifie case surra is not jn point. In this connection, jt is reasoned in part that Printing Impressions was not a promotional operation of Foster Type and that it did not exist even partially for the benefit of Foster Type. To the contrary, the l\lay 19, 1958, letter frolll Printing Impressions received by respondent, received in evidence, asserts "Advertising will not be accepted from anyone competitive to our equipment company :I,: *~' That Foster Type and Equipment Company, Inc.., was a benefactor of Printing Impressions must be unequivoeally concluded. CONCLUSIONS In the course and conduct of its business in commerce, respondent paid or contracted for the payment of something of value to or for the benefit of one of its customers as compensation or in consideration for services or facilities furnished by or through such customer in connection with its offering for sale or sale of products sold to it by respondent, and such payments were not made available on proportionally equal terms to all other customers competing in the sale and distribution of respondent's products, and respondent has therefore violated Section 2 (d) of the Clayton Act, as alleged. The acts and praetiees of respondent, as proved, are in violation of subsection (cl) of Section 2 of the Clayton Aet, as amended by the Robinson-Patman Act. It is further conelucled that this proceeding is in the public interest, and that the follo\ving order shall issue:

ORDER It is O1ode1o That the complaint be amended by changing the name of the corporate respondent from NU ARC COl\IP ANY, INC. , to THE NUARC COl\IPANY as set forth in the respondent~s answer. It is f1~rther ordered That the respondent THE NUARC COl\1- P ANY, a corporation, and its officers, representatives, agents and employees acting for or in behalf of respondent corporation, directly or through any corporate or other device, in or in connection ",.ith the sale, in eommeree, as "e0111merce" is defined in the Clayton Act, of arc lamps, vacuum frames, light tables, da.rkroom lights and other products of respondent do forthwith cease and desist from paying or eontracting for the pa.yment of anything of value to or for the benefit of a customer as compensation or in consideration for any services or facilities furnished by or through such customer in c.onneetion with ,, Opinion 61 F.

the processing, handling, selling or offering for sale of any products or commodities manufactured, sold, or offered for sale by such person unless such payment or consideration is available on proportionally equal terms to all other customers competing in the distribution such products or commodities.

OPINION OF THE CO~DIISSION By I\:ern Oo171/mission1w' This lnatter is before the Commission on the appeal of respondent from the inital decision sustaining the allegations of the complaint charging that respondents payments to customers for services were violati ve of Seetion 2 (d) of the Clayton Act, as amended. Respondent, The Nuarc Company, erroneously named as Nu Arc Company, Inc., in the complaint, is engaged in the manufacture and sale of equipment used in printing, offset printing and lithography. The evidence in this proceeding relates to Nuare s payments of approximately $3 000 for advertising services allegedly made to its customer, the Foster Type and Equipment Company, Ine.,I in the period January 1959 to February 1960.

Respondent on appeal contends, in effect, that the payments in issue 2 ahere were, in fact, made to the Foster Publishing Company, Inc. third party insofar as the supplier-customer relationship is concerned although the same individual was president of Foster Type and of Foster Publishing and held 100 per cent of the stock of eaell corporation at the time the payments challenged by this proceeding comlneneed. It is respondent's position that the payments challenged herein were made to an independent trade publication and not to customer. On the basis of the foregoing contentions, respondent argues that its payments were not to or for the benefit of a customer for services or facilities furnished by the customer and, therefore, not within the ambit of Section 2 ( d) .

The crucial issue here presented, therefore, is ,vhether N uarc s payments for advertisements placed in Foster Publishing Company HPrinting Impressions ere tantamount to payments to, or for the benefit of, its customer for services or facilities furnished. The resolution of this question requires an analysis of the relationship of the two corporations to each other as well as the relationship of both to Irvin J. Borowsky, their president and sole stockholder. 1 Hereinafter referred to as Foster Type. 2 Foster Publishing Companr, which was renamed Xorth American Publishing Company on August 3, 1959, is hereinafter referred to as Foster Publishing. 3 Borowsky held 100 per cent of the stock in Foster Type till Ma:v of 1959 and thereafter 90 per cent of the stock in that corporation in the remainder of the period relevant to this proceeding.

... ... ... ... ... ... ..

THE NUARC CO. 387 375 Opinion vVe are persuaded that the record herein supports a finding that Foster Type and Foster Publishing, despite their separate incorporation, did in fact constitute one enterprise and that their separate corporate identity was fictitious. vVe further hold that this state of affairs was in effect during the period in which the payments challenged herein were made.

The record establishes beyond a doubt that Borowsky by two letters in lVIay of 1958 , soliciting a.advertisements for Foster Publishing "Printing Impressions, documented the relationship between Foster Type and Foster Publishing and thereby in effect expressly informed respondent that the two corporations were to be considered as one for practical business purposes. Clearly, the proposals that competitors of Foster Type and its suppliers would not be permitted to advertise in "Printing Impressions" and that Foster Type would reciprocate the supplier s expenditures for advertising with purchases of equipment 4 compel the infer-equivalent to the amount of such advertisements ence that Borowsky so dominated the two corporations that he was in a position to manipulate the operations of each so that either could be maneuvered into a position vd1ere it would be forced to conduct its affairs in a manner not necessarily to its own best interest but rather to further Borowsky s business as a whole. The record herein, therefore, goes beyond the mere documentation of the fact that the same individual held office in both corporations or that these corporations were jointly owned by him. On the basis of this evidence, we hold that both corporations operated as an integrated enterprise or as the alter egos of Borowsky and that neither had an existence independent of him. Accordingly, on receipt of these letters, respondent could be under no illusion but that payment to one corporation was inevitably a payment to Borowsky or to his enterprise as a whole. Respondent argues that in any case the separate corporate identity of Foster Type and Foster Publishing should h~ve been recognized at least in the period when the payments challenged herein were made, on , Borowsky s letter of May 19, 1958, states in part: PRINTING IMPRESSIONS was started for the purpose of diversifying our present operation and as a cooperative means of furthering our printing equipment business and the manufacturers we represent. Advertising will not be accepted from anyone competitive to our equipment company, or from manufacturers we do not represent and are in competition to the line we sell in our Foster Type & Equipment Co.

Furthermore, every dollar you spend in our publication, we will ha,e our Foster Type & Equipment Co. buy back in your products as a Nuarc display. And his letter of May 26, 1958, states in pertinent part as follows: In these ' tight money' times our proposal to buy back every dollar you spend in advertising should be most beneficial to yoll. We will certainly have to sell your products, otherwise we will not be able to meet our $5 000.00 per month publishing costs.

Opinion 61 F.

the ground that the proposals el'nbodied in the :May 1958 correspondence had not been put into effect and that each c.company, in all respects operated as a separate and independent concern. The eon tent ion is without merit for at best the evidence shows that the announced program had not been put into effect because it did not acc.omplish "hat it was supposed to do, namely, attract supplier advertisilig. The admission of Lou Page, general manager of Foster Publishing, that a demand by a supplier for reciprocal purchases by Foster Type on the basis of the offers made in Borowsky s letters would be honored despite the decision that this represented the wrong approach, compens the conclusion that the two corporations had not regained a viable identity of their own, which would, in the ease of each eoncern permit it to formulate policy in its own best interest. It is inconceivable that Foster Publishing c.ould c.compel suc.h performance by Foster Type if the two concerns were, in fact, independent of eac.h other. In short, although the record does not disclose that the proposals overtly manifesting the subservience of the two corporations to Borowsky were the direct cause for the payments by N uare, the evidence does justify the conclusion that at the time of the payments, Borowsky's domination of the two concerns continued uninterrupted, depriving each of the opportunity to formulate its business policies independently.

It may be true that the two concerns did preserve some of the external indicia of separate corporate existence such as separate payrolls, tax returns, etc. However, if the separate exercise of certain c.corporate functions is to be the determining factor in a decision as whether two corporations in fact exist independently so as to precl ude the application of Section 2 d), even in those cases where the erueial element of decision-making does not repose separately in such corporations, the effectiveness of the statute in preventing discriminatory practices may well be largely eroded. V,T e do not think the Congressional intent can be so readily subverted. ",Vhere, as here the outward manifestations are not a true reflection of internal business operations and policies, the Commission may, and indeed is required to, disregard external a ppearanc.es. ",Ve now turn to consider in detail the respondents effort to establish with the testimony of its president, and secretary, as ,,;ell as that of Irvin Borowsky and Lou Page, the general manager of Foster Publishing, that the joint venture between Foster Type and Foster Publishing manifested in Borowsky s letters of l\lay 19 and l\lay 26 1958, had been abrogated, that the b,o conc.erns were, in fact, independent of each other, and that Nuarc s officials had reason to believe , ,, THE NUARC CO. 389 375 Opinion in good faith that the two corporations were transacting their business separately and independently before the payments ehallenged herein commeneed.

Respondent claims on appeal that the hearing examiner disregarded the testimony of its witnesses on this point. The contention is without merit for it is clear from the initial dec.ision that the hearing examiner considered but found the evidence ,yanting in credibility. The Commission, as a general nile, accepts the hearing examiner s evaluation of the credibility of witnesses whose demeanor he has had the opportunity of observing during the course of the hearings. In this instance from our review of the testimony in question e are persuaded by certain ineonsisteneies and the manner in which c.certain of the testimony was presented, that the hearing examiner correctly evaluated the probative worth of the evidence.

The testimony of Borowsky and Page does not support respondent's position despite their assertion in general terms that "Printing Impressions" was independent of Foster Type, for on the crucial issue of this case their testimony does not support a finding that Borowsky had abandoned the commanding position through which he exerc.ised the control permitting hin1 to disregard the corporate entities and treat the two corporations as one. On the contrary, certain admissions by the witnesses permit only the opposite conclusion. In conerete terms their testimony reveals little more than that the unfavorable reaetion of potential advertisers to the offers to exclude competitors from the publication and to buy back an amount of merehandise equal to the amount of advertising placed decided them not to continue such offers. The admission of Page cited above that requests for reeiproeal purchasing on the basis of Borowsky s letters would be honored is inconsistent with the contention of these witnesses that the two corporations 'were, in fact, independent of each other. As to the position of Borowsky, the record is clear that in the period with which we are primarily concerned, i. , January 1959 to February 1960, Borowsky was ultimately responsible for the policies and practices followed by Foster Publishing, and it is equally clear on Borowsky s express statement in this proceeding that he "as responsible for the affairs of Foster Type until at least :May of 1959 5 ,,'hen two individuals, \Veiss and :Muc.ha, were brought into the latter corporation on the agreement, according to Boro,,' sky, that they would take responsibility for operating the business. It is to be noted that the hearing examiner erred in finding that 10 per cent of Foster Type 5 The payments challenged herein, it may be Doted, commenced well before that date. 728-122-65'-- Opinion 61 F.

stock was transferred to :Mucha. The stock was never transferred on the company s books, and he subsequently recovered the partial payment he had made therefor. Borowsky testified that after May 1959 Foster Type s operations were controlled by vVeiss and :Mucha despite his retention of that concern s presidency and 90 per cent of its stock. IIowever, this contention of the witness is vitiated by his admission that after disagreement between vVeiss and ~lucha, he determined which of the two was to stay with the corporation. Finally, Borowsky s disclaimer of responsibility for the operations of Foster Type is not worthy of belief, as the hearing examiner found, in the light of his prior inconsistent statement in his answer to the Commission complaint in Foster P1lblishing Oornpany, Inc. , et al. Docket 7968 filed February 1, 1960, of which official notice ,vas taken in the initial decision. In that answer, Borowsky admitted that he formulated, controlled and directed the acts and praetiees of both Foster Type and Foster Publishing.

The hearing examiner in this instance correctly refused to deliberate in a vaccum when relevant facts concerning the witnesses' testimony were available to him in a related proceeding of which he properly might take official cognizance. Respondent does not on appeal except to the official notice taken in the initial decision in this eonneetion and, considering all the circumstances surrounding this procedure, we find that respondent was not prejudiced thereby. Although, in general, it is preferable for the examiner to announce his intention of taking official notice prior to closing the record, the procedure followed herein complies with the requirement of Section 7 (d) of the Administrative Procedure Act that opportunity be afforded on timely request to show the contrary of the facts officially noted. Such requests may be made on appeal to the Commission from the hearing examiner s initial dec.ision which, of course, does not finally dispose of the proceeding in any ease prior to action by the Commission. In this instance, on oral argument, respondent's counsel expressly informed the Commission that he failed to raise the point because he felt it unnecessary. Counsel is undoubtedly correct in this position for the record shows that respondent was aware of the pleadings in the F oste1' case prior to putting Borowsky on the stand to testify precisely on the issue of which official notice was taken, i. , the relationship of the two corporations to each other and to Borowsky. Respondent also contends that it only placed advertisements in Printing Impressions" on assuranc.e to its president given to him at a trade show in October 1958, by Lou Page, general manager of the publication, that the two companies were absolutely divorced, that ... ... THE NUARC CO. 391 375 Opinion each was operated as a free and independent business venture and that he, Page, was in charge of the publication. However, N uarc president, Weisman, during his first appearance on the stand, and its secretary, Shultheis, merely testified vaguely that Page had assured them that the "policy" had changed.6 At this point the testimony of the two witnesses who had apparently both conferred with Page on this subject at the trade show was not inconsistent.7 This evidence, however, throws no light on the critical question of whether the business of Foster Type had in actuality been divorced from that of Foster Publishing prior to the payments which are the subject of this proceeding. On the contrary, despite rather leading questions by Nuarc s counsel, the witness Shultheis stated that Page had said nothing concerning the connection between Foster Type and "Prints This testimony, therefore, flatly contradicts theing Impressions claim made on appeal that Page had given assurances that the two corporations were divorced. It should be noted that upon completion of Shultheis' testimony and a recess, ",V eisman, who had preceded Shultheis on the stand, was recalled by respondent's counsel and at that time proceeded to testimony that Page had assured him the two companies were absolutely divorced and there was no conneetioll between them. At this juncture, apparently in an attempt to drive his point further home, respondent' s counsel asked the witness: Q. Just to confirm the character of this testimony, do you recall, Mr. Weisman that we walked over here this morning from my office on Jackson Boulevard and on the way over I asked J'OU- 6 E. , Shultheistestified:

"* * * he (Page). advised us of the fact that the policy had changed completely, that he was running the publication, and what had gone on in the past was no longer in vogue.

HEARING EXAMINER BUTTLE : Did he explain what he meant by that? THE WITNESS: No, he didn t. He just said, 'From here on in,' he said ' I am running the publication, and this is what we have to offer. This is our circulation and the rates, and we would like to have you as an advertiser.' " 7 It may be noted that Weisman stated that Shultheis could corroborate him as to the nature of the assurances given by Page on this point. s "Q. Did he say anything about Foster Type and Equipment Company Incorporated? A. No.

Q. You don t recall whether or not he indicated that Foster Type and Equipment Company was no longer a part of Printing Impressions that was indicated in the letter which you examined, which ;rou state was ra ther foolish in substance? A. As I recall, I don t believe it was mentioned at all. He just intimated to us that he was running the publication. But as far as I recall, offhand I don t recall that. By Mr. Fink:

Q. He didn t say anything about thl'. ~connection between Foster T:.pe and Equipment Company and Prin ting ImpreHHioll"

A. No, as I recall, he did not.

Opinion 61 F.

(Continuing)-I asked you if Mr. Page told you or didn t tell you at the Show in New York in 1958 that there was or was no connection between Printing Impressions and Foster Type and Equipment Company. Do you remember that I asked you- Q. Do you recall that? A. Yes, he guaranteed me there would be no connection whatever. Q. Isn t that what you told me this morning coming over here, on Jackson Boulevard? A. Those very words.

The examiner, after that response, stated, as well he might, that if in fact, the witness had made such statements to counsel previously that 1110rning, he did not understand how the witness could have failed to make this response his first time on the stand. \Ve share the examiner s ineredulity.

The hearing examiner found that respondent did not offer or otherwise lnake available payments such as those challenged herein to its customers competing with Foster Type and that finding is not in dispute here. The evidence fails to show that respondent's other customers competing with Foster Type operated publications such as "Printing Impressions" as part or their over-all business or that any alternative form of promotional allowance was made available to them. However, another issue requiring consideration on this appeal is the question of whether or not the advertising furnished by Foster Publishing is a service coming within the scope of the statute. In view of the fad that we have round that the two corporations must be considered as one enterprise, it is immaterial that the publication entire operations did not redound to the benefit of Foster Type its resale of respondent's equipment. Furthermore, although "Printing Impressions" may have acquired some of the characteristics of an independent trade paper by v-1rtue of the fact that it accepted advertising from and ran features about Foster Type s and its supplier s competitors, the fact remains that "Printing Impressions" did run advertising of respondent's equipment sold by Foster Type. The statute does not require that either the advertisement or the publication in which it is run specify the customer by whom the service is furnished. The language of the Act pertinent to the fads of this case states:

lie '" it shall be unlawful for any person * * '" to payor contract for the payment of anything of value to '" * * a customer of such person '" * for any services or facilities furnished by or through such customer in connection with the * '" * sale '" * * of any products '" * * sold '" * * by such person, unless such payment or consideration is available on proportionally equal terms to all other customers competing in the distrjbution of such products (j) THE NUARC CO. 393 375 Opinion ",Ve accordingly hold that the requirements of the Act have been met and that the advertising furnished here was a service within the scope of the statute.

The ruling herein, of course, is not to be construed as holding that a supplier s payments for advertising come within the statutory scope of Section 2(d) in any and all cases where such advertising is placed in media connected by corporate or other relationship to the seller customer. The question of whether the corporate entity is to be respeeted or whether the service performed is one coming within the scope of the statute must be decided on the facts of each case. Respondent finally contends that, in the event the Commission concludes the allegations of the complaint have been sustained, it should nevertheless vacate the order entered in the initial decision as too broad and substitute therefor an order limited to the particular practices found to have violated the Act.

The contentiOll is without merit for contrary to respondent's argument, Nuarc s payments involved herein, unlike those in S1.oanee Paper Corporation v. Federal Trade 001n1ni8sion 291 F. 2d 833 (2nd Cir. 1961), cert. denied 368 U.S. 987 (1962), do not involve an lU1certain area of the law insofar as enforcement of Section 2 ( d) is concerned. The instant case laeks the distinguishing feature of S1.oanee viz., payments to a third party not related to the seller s customer. N uarc payments, as we have found, were made to the Borowsky enterprises as a whole and not to an isolated segment thereof, despite respondent' assertion of separate corporate identity for its component parts. These payments, therefore, were necessarily made to the respondent's customer and the more complex considerations governing a determination as to whether payments were for the benefit of the customer are not relevant here. The proposition that the trier of fact may go beyond the corporate entity where the circumstances of the case so warrant , of course, not a novel proposition either in the law generally, the antitrust field or specifically in the area of the Robinson-Patman Act. 'Vhere, as in this instance, the practice found to have violated Section 2 (d) is clearly unlawful and where that statute itself constitutes a very narrow definition of the illegal practices prohibited, ineorporating the applicable statutory language in the order will not shift to the courts the burden of deeiding issues whose resolution has been entrusted to the Commission.

Doeket No. The views expressed in Vanity Fair Paper Al ills, Inc. No. 7721 (1961), rev'd on other 7720 (1962), and Shulton, Inc. Docket m(;nds 305 F. 2d36 (7th Cir. 1962), as to the proper framing of See- ..:. ), Dissenting Opinion 61 F.

tion 2 ( d) orders in light of the Clayton Act Finality Act (P .L. 86-107 86th~ Cong., July 23, 1959) apply here.

Respondent, despite its plea that the order be revised to limit the prohibitions to the precise practice found to have violated the law, has not submitted a proposed order for our consideration, and we cannot envisage an effective order in this instance prohibiting only the exact method by which respondent violated the statute. However, in order to clarify respondent's obligations under the order to the greatest extent possible consistent with an effective remedy, we will limit the scope of its prohibitions to arc lamps, vacuum frames, light tables and dark room lights as well as to other equipment used for printing, offset printing, and lithography, and further limit its application to advertising services or facilities furnished by its customers. The appeal of respondent is denied and the initial decision as modified in accordance with the views expressed in this opinion is adopted as the decision of the Commission. the result of the decision Commissioner Anderson concurred in this matter, and Commissioner Elman dissented. DISSENTING OPINION By Elman 001n1nissioner:

An understanding of the issues in this proceeding requires description of the relationships of the corporations and individuals involved. The Commission and the respondent differ in their interpretations of of agreement.some of the facts, but there is also a substantial area L\1nong the facts not in dispute ate these. The respondent is The Nuarc Company (hereina,after "Nuare ), a firm engaged in the manufacture and sale of arc lamps, vacuum frames, light tables, and darkroom lights. Among Nuarc s customers is a firm called Foster Type and Equipment Company (hereinafter "Foster Type which is a dealer in the products Nuarc makes. The third corporate entity involved is the Foster Publishing Company (renamed North American Publishing Company and hereinafter called "Foster Publishing arts which publishes trade newspapers for distribution to the graphie industry. The nexus between Foster Type and Foster Publishing is provided by 1\11'. Irvin J. Borowsky ,-rho, during the period here releof the stock of vant, was president of both firms and m-rnecl 100% stock of Foster Foster Publishing and never less than 80% of the Type.

THE NUARC CO. 395 375 Dissenting Opinion This case arises out of the placing of advertising by respondent Nuarc in the National Edition of Foster Publishing s newspaper Printing Impressions . The context and significance of this action are in controversy. Respondent contends that it was an ordinary advertising transaction whereby it simply placed advertisements in a trade paper catering to ultimate users of its products, and paid the: standard rate for the advertising service rendered. The Commission has determined, however, that the relationship between N uarc and Foster Publishing constituted a violation of Seetion 2 (d) of the Clayton Act, as amended by the Robinson-Patman Act (38 Stat. 730, as amended, 15 U. C. 13(d)), which makes it unlawful for any person engaged in commerce to payor contract for the payment of anything of value to or for the benefit of a customer of such person in the course of such commerce as compensation or in consideration for any services or facilities furnished by or through such customer in connection with the processing, handling, sale, or offering for sale of any products or commodities manufactured, sold, or offered for sale by such person, unless such payment or consideration is available on proportionally equal terms to all other customers competing in the distribution of such products or commodities. Admittedly, Foster Publishing is not a customer of Nuarc, but Foster Type is. The Commission concludes that, because Borowsky is the principal shareholder, president and controlling figure in both N uare s payments for advertising in "Printing Impressions" are payments "to or for the benefit of a customer, and that the advertising obtained for these payments was a service "furnished by or through such customer . Respondent disputes these conclusions, arguing that despite Borowsky s control of both Foster Type and Foster Publishing, they are operated as unrelated entities. The Commission supports its position primarily by reference to a proposal made by Borowsky to N uare in May of 1958. Borowsky there explained that "Printing Impressions as started as a means of promoting Foster Type s printing equipment business; that "Printing Impressions" would not accept advertising from eompetitors of Foster Type or from manufacturers whose lines Foster Type did not carry; and that Foster Type would buy enough equipment from N uarc to reimburse it for advertising in "Printing Impressions . Respondent replies that it refused to advertise in "Printing Impressions" on this basis. It asserts that it began advertising in January 1959 only after securing assurances that "Printing Impressions" would accept advertising from anyone in the industry, and that it would be operated independently of Foster Type. The hearing examiner and the Comlnission find respondent' s evidence on this alleged policy revision on the part of Foster Publishing unconvincing. Dissenting Opinion 61 F.

Thus, as the Commission views the facts: Borowsky has at all times pertinent to this proceeding been the owner and guiding spirit of both Foster Publishing and Foster Type; Foster Publishing Printing Impressions" was c.onceived as a promotional satellite of Foster Type; and respondent's evidence offered to prove that Foster Publishing and Foster Type were independently operated and that respondent had reason so to believe in good faith is not credible. II.

The Commission s finding of a violation of Section 2 ( d) rests squarely on its determination that Foster Publishing and Foster Type \were "operated as an integrated enterprise or as the alter egos of " 1Borowsky and that neither had an existence independent of him. (Opinion, p. 387. In the Commission s view this is "the erucial issue of this case . (Opinion, p. would suggest, however, that 389.) I the Commission is altogether too occupied with the role of ~lr. Borowsky in these enterprises. Of course, his influence over Foster Type and Foster Publishing is important in appraising the relationship of the companies, but it is hardly a sufficient basis for issuance of an order. There remain the questions-but briefly and sketchily mentioned by the Commission-whether respondent paid anything "to or for the benefit of a customer" in return for a "service" "furnished by or through such customer Certainly the mere fad that Borowsky derives the ultimate profit from both businesses is no basis for a determination that the statute has been violated. This may be illustrated \with a hypothetical situation. Let us 'Suppose that Nuarc manufadures not only printing equipment but also bakery equipment, and that Borowsky sells printing equipment through his company, Foster Type, and also publishes a trade paper for the bakery equipment industry through his other company, Foster Publishing. If Nuare \,ere to place ads in his bakery trade paper Borowsky would reap the profit, but Section 2 (d) would not be violated because Nuarc s bakery equipment ads would have no "connection ,,"ith" (to use the language of Section 2(d)) Borowsky s sale of Nuarc s printing equipment. In this eontext, it would make no legal difference if the Commission were to find that Borowsky operated both businesses as "an integrated enterprise in which "neither had an existencp independent of him . (Opinion 387) 1 The Commission elsewhere characterizes the "separate corporate identity" of each firmas "fictitious . (Opinion, p. 387.) I take it that no more is meant than that both corporations were, as indicated in the quotation from page 388 of the Commission s opinion larger;r controlled by a single person in matters of policy. ,, , THE NUAHC CO. 397 375 Dissenting Opinion The difference between that hypothetical case and the one before , of course, is that the bakery publication can never be operated to further the sale of printing equipment. But the point of the example is that it also applies in instances in which the necessary connection could be proved but has not. That is to say, the Commission is no nearer to showing a violation in this case than it is in the hypothetical if it does not show how N uarc paid something "for the benefit of a custOl11er of its printing equipment in return for a service "furnished by or through~' that customer "in connection with" the sale of Nuarc equipment. Cf.~ General Foods CO'i' 52 F. C. 798 , 828. The Commission s evidence on these central questions consists of Boro' wsky's proposal in ~lay of 1958 to operate "Printing Impressions" solely for the benefit of Foster Type and its suppliers. I agre that proof of an illegal motive is a good beginning. I agree also that the examiner and the Commission have a right to disbelieve witnesses ho say that this motive changed. But there is tangible evidence , that this purpose was never carried into effect, whether or not it was subjeetively abandoned. The Col11lnission specifically finds (opinion p. 389) that the unfavorable reaction of potential advertisers c.aused discontinuance of the plan to exclude competitive advertisers and to tie advertising to equipment sales. And this is the entire content of Borm\sky's ~1ay 1958 proposal.

On this state of proof e have a standofl'. Commission eounseFs evidence shows that Borowsky intended to obtain a "benefit" :for Foster Type in return for a servic.e "furnished by" Foster Type to Nuarc "in connection with" the sale of Nuards equipment. But respondents evidence shows, as the CQlnmission finds, that this intention could not be brought to realization. Proof of an illegal objective is one thing; proof of an illegal objective that failed is quite another. At this point the burden shifts back to Commission counsel to show evidence of some other illegal aim, or, better yet, of some illegal conduct.

Everything the Commission has to say on this subject is summed up in its observation "that 'Printing Impressions' did run advertising of respondents equipment sold by Foster Type." (Opinion, p. 392. From this single fact, coupled with Borowsky s control of both businesses, the Commission concludes "that the requirements of the Act have been met and that the advertising furnished here was a service within the scope of the statute. (Ibid. Thus, mere publication in Bormyskis trade paper of advertising placed by a supplier of Borowsky s printing equipment business constitutes a violation of the statute. I cannot believe either that this is so, or that the Commission believes Dissenting Opinion 61 F.

it to be so. If it really so believed, it surely would have omitted from the opinion its extended discussion of Borowsky s ~:fay 1958 proposal since that proposal is totally unnecessary to a decision needing no more support than the objective facts of central control of the two businesses by Borowsky plus publication of respondent's advertising. The sparseness of the evidence relied on here is illustrated by eontrasting it with the evidence present in the leading eases in pointcases cited by the hearing examiner in support of the order against respondent but conspicuously absent from the Commission s discussion of this problem. In the first of these State wholesale 0'/'ooer8 01' eat Atlcmtio ill Pacifio Tea Omnpamy, 258 F. 2d 831 (C.A. 7), the court determined that Section 2( d) was violated when certain suppliers of " &, P" grocery stores ran advertisements in "\Voman Day, a magazine published and distributed by A & P at a price far below that of comparable publications. In reaching this cone1usion the court found that: (1) "\Voman s Day" was obtainable only at &, P stores; (2) since its inception "\Voman s Day" was identified as the A &, P magazine; (3) for a tilne it earried the words "The &, P ~lagazine" on its cover; (4) all of its food advertising was of products sold by A &, P stores; (5) it was an effective medium for advertising A & P stores themselves and for ereating good will for &; P; (6) it existed "solely for competitive benefit of A &, P's retail stores. (258 F. 2d, at 834) In other words, the tie between A &, P and "\Voman s Day" was patent and complete. It thus directly benefited A &, P and indirectly benefited its suppliers, who were enabled by A &; P's eut-price, mass distribution of "\tVoman s Day" to reach millions in the very stores where their products were sold. In P. LO1'illard 00. v. Federal Trade Oowrrl/ifSsi.on 267 F. 2d 439 (C.A. 3), commonly known as the "Chain Lightning" cases, the violation arose out of an advertising scheme concocted by certain national radio and television broadcasting companies. The broadcasting companies contracted to give certain grocery chains free advertising time in return for the promise of in-store promotional displays for products to be agreed upon. Then the broadeasting companies solieited manufacturers .and sellers of grocery products to purchase radio and television time, offering as an inducement the in-store promotional clisplays arranged under the contracts with the grocery chains. Thus the food manufacturers in effect purchased advertising time for the grocery c.chains and in return received promotional displays of their products in the stores operated by the chains. A similar exchange of benefits is apparent in Swanee Paper Corp. v. Federal T1' ade Omn17~ission 291 F. 2d 833 (C.A. 2). There the THE NUARC CO. 399 375 Dissenting Opinion Grand Union Co., a grocery ' chain, arranged with an advertising agency to take space on a "spectacular" advertising sign at a very low rate on condition that it find other paying customers who would also use the sign. Swanee Paper Corp., a supplier of Grand Union was among those solieited. The court found that the advertising outlay by Swanee was for the benefit of Grand Union since the latter thereby obtained valuable space on the sign at a nominal cost, plus valuable advertising elsewhere and cash fees from the agency that operated the sign. That the advertising service was provided to Swanee by Grand Union was shown, first, by the fact that Grand Union leased the entire sign, parceling out a portion of it to Swanee and, second, that as part of the arrangement, Grand Union provided in-store displays for Swanee s products.

These cases illumine the area of necessary proof in a Section 2 (d) case involving a supplier-advertising medium-customer arrangement of the sort here in question. Unless the facts of this case show a similar flow of benefit from supplier to customer, and of service from customer to supplier, in connection with the sale of the supplier s goods it is not governed by these other cases. The Commission s case is incomplete without a showing that the "benefit" conferred by Nuarc s advertising somehow passed through Foster Publishing to Foster Type and that the advertising service provided to Nuare by Foster Publishing was somehow "furnished by or through" Foster Type.

As I read the record, the evidence is all to the contrary. Certainly no tangible benefits could have moved from Nuarc through Foster Publishing to Foster Type, because the latter two firms had virtually no business dealings with one another. The companies filed separate tax returns, maintained separate payrolls, books, and reeords, and leased separate office space. They did not loan funds to each other. They did not borrow employees from each other. Foster Type advertised in "Printing Impressions, but only on payment of a standard rate, equally available to its competitors and others. Thus, the advertising advantage so signifieant in P. Lorilla1'd and S1.oanee Pape1' is not present here.

N or is this a ease, like A&P in which the merchandiser obtained good will through assoeiation with the publication. "Printing Impressions" was not distributed from Foster Type s premises and it was not billed as Foster Type s newspaper. Indeed, the paper never bore Foster Type s name and its mast-head proclaimed: "Printing Impressions is a completely independent monthly newspaper dedicated to helping the vast industry of the graphic arts-its progress and development-by the factual reporting of all news, trends and events Dissenting Opinion 61 F.

of national and international interest to the trade." If anything, ill will rather than good will for Foster Type was generated by Bormvsky's initial solicitation letter to N uarc and a few other companies. The reaction was uniformly unfavorable, and some of the firms approached were so displeased that they never did place advertising in Printing Impressions . Further, to correct any Inistaken impressions as to Foster Publishing s dependence upon Foster Type, the name of the former was changed to North American Publishing Co. It is equally difficult to see what service ,vas provided to N uarc by Foster Type. Nuarc paid the standard fee for its advertising in "Printing Impressions . Unlike the advertisers in P. Lm'illarrd and Swanee Pape1' N uarc received no special promotion in connectionwith Foster Type s sales of its equipment.2 It obtained no special advantage in its dealings with Foster Type by advertising in "Printing Impressions . Conversely, N uarc obtained no favors from "'Printing Impressions" by reason of its role as a supplier of Foster Type. Advertising of, and stories about, its competitors were published by Printing Impressions, from its first issue forward, whether or not they were suppliers of Foster Type.

The con elusion is inescapable that this case has none of the essential features of the leading cases in point or of the practice prohibited by the statute. The only service provided to N uarc was the creation of the newspaper in ,,-which to place its advertising. The only benefit conferred by Nuarc ,vas that by advertising its own products it promoted their sale through all its outlets, of ,which Foster Type happened to be one. In other words, Foster Publishing-or, if the Commission prefers, Borowsky-did no more for Nuare than if Foster Type had not existed at all, ,yhile N narc did no more for Foster Type-Le., for Borowsky s printing equipment sales business-than if it had advertised not in "Printing Impressions" but in some trade paper having no connection whatever with Borm\"sky or Foster Type. The advertising expenditures by N uarc that eventually made their way into Borowsky's poeket were paid to him solely in his role as a publisher. It is fair to say here, as the Commission held in Genel' al Foods OO'7'p. 52 F. C. 798, 828, that "These payments do not violate Section 2 (d) for the reason that they are not payments made to (Borowsky J as a customer and are not made in eonneetion with the resale of goods bought by him from respondent.

Thus, neither the supplier of the goods (Nuare) nor its customer (Foster Type, or, in the Commission s eyes, Borowsky d/b/a Foster 2 It seems fair to conclude that this special promotion factor was present ill the &. P case as well, since the adyertisers in "Woman s Day " got the benefit of the sale of the lowpriced magazine in the same store where their products were sold. THE NUARC CO. 401 375 Dissenting Opinion Type) rec.eived any special advantage over competitors of the sort that the statute was designed to prevent. For, as the Rouse Judiciary Committee Report on Section 2, ( d) explained, an allowance for advertising services "beeomes unjust when the service is not rendered as agreed and paid for, or when, if rendered, the payment is grossly in excess of its value, or 'when in any case the customer is deriving from it equal benefit to his myn business and is thus enabled to shift to his vendor substantial portions of his own advertising cost, while his smaller competitor, unable to command such allowances, cannot do so." R. R.. Rep. No. 2287, 74th Cong., 2nd Sess. 7 (1936). No one has suggested that Nuare s advertising involves the first two evils mentioned in the Report, and, as I have shown, the facts of record in this proceeding disprove the presence of the third. It appears therefore, that respondent's conduct is not among the practices which Section 2 ( d) was intended to forbid.

For the Commission to draw the opposite conelusion is particularly puzzling in light of its disposition of United Olga?'- lVhelan Sto1' Om' 53 F. C. 102. There the complaint charged that a firm which operated a large chain of retail drug stores and tobaeco shops had knowingly induced or received unlawful advertising allowances from many of its suppliers in that it had accepted compensation from those suppliers for placing television advertising for them through an advertising agency which it also owned. The order of the hearing examiner, adopted by the Commission, prohibited knmving receipt or inducement by the store chain and its advertising subsidiary of unlawful allowance.es from the chain s suppliers in connection with television or radio programs which were either sponsored by the store chain or which advertised or promoted the store chain. The order specifically exempted from its coverage advertising placed with the advertising agency subsidiary of the store chain by the chain s suppliers which was not sponsored by the chain and did not advertise or promote it. In United Oigap therefore, the Commission recognized and even preserved by order precisely the distinction between arrangements having a special discriminatory mutuality of benefit to supplier and customer (as in A& P, P. Lo1illa1'd and S1.oanee Paper, sup1' and the straightforward, harmless use by a supplier of a customerowned advertising medium such as we have in this ease. The distinction was a sound one at the time of the United Oigm' case and nothing has happened since to impair its validity.

3 The UnUed CIgar case was disposed of by consent agreement, but that does not detract from its precedent value for purposes of this proceeding. In the first place, it still represents assent by the Commission to the proposition that the distinction here rejected by the Commission is appropriate. Further, it goes beyond the simple expedient, common in . .

Dissenting Opinion 61 F.

III.

In finding a violation on the state of facts, or lack of facts, before us in this proceeding, the Commission establishes a rule that cannot help but have sweeping consequences of a highly disruptive nature for American advertising and journalism. Even in the limited sphere of trade papers, the reverberations are bound to be considerable, but there is nothing in this case that restricts its effect to such publications. The principle adopted here cannot help but apply in every case in which a newspaper, magazine, radio station, television station, or other medium of advertising is owned and controlled by a person who also owns and controls some other enterprise engaged in selling goods. Those who supply such enterprise with products that it markets will be unable to advertise those products in the newspaper, magazine, or other medium without violating Section 2 (d), except in the highly unlikely event that they can work out advertising arrangements with competing customers "on proportionally equal terms . This interference with general advertising appears to run contrary to an express congressional desire not to inhibit advertising activity that did not bring about disguised customer favoritism. H. R. Rep. No. 2287 74th Cong., 2nd Sess. 16 (1936), states that "there is nothing in this section or elsewhere in the bill . to limit the freedom of newspaper or periodical advertising generally, so long as not employed in ways calculated to defeat the purposes of this bill. The Commission s caveat that each case must turn on its facts (opinion, p. 393) is small consolation. On the one hand, it creates confusing uncertainty as to the reach of the Commission s ruling, and on the other it detracts not one whit from the principle established by the case that a medium of communication cannot carry advertising by an advertiser who is also a supplier of goods for resale by a firm owned and controlled by the owner and operator of the advertising medium.

I can only hope that no owner of a newspaper, magazine, radio or television station, etc., also ha ppens to own a department store! Since a supplier of any item sold in his department store would violate the law by advertising in his newspaper, magazine, or other medium, the Commission s decision here-in what might seem to be an unimportant, teehnical Section 2( d) case-will have upon him an effect equivalent to a divestiture decree. Certainly that is the effect it must consent settlements, of simply omitting to cover certain aspects of the practices alleged in the complaint to be unlawful. Instead, it affirmatively permits them to continue. The Commission would have been without authority to take such action unless it had considered the practices condoned to be lawful.

THE NUARC CO. 403 375 Final Order have upon ~lr. Borowsky, even though he is not a party to the proceeding. If no supplier of Foster Type can advertise in "Printing Impressions" while Borowsky's hand is on both tillers, he has no recourse but to loosen his grasp on one of them. One feels reasonably sure that such a strange and disturbing result "' as not within the contemplation of Congress when it enacted the Robinson-Patman Act. FIN AL ORDER This matter having been heard by the Commission upon respondent' s appeal fronl the hearing examiner s initial decision, and upon briefs and oral argument in support thereof and in opposition thereto; and The Commission, for the reasons stated in the accompanying opinion having denied the appeal of respondent and modified the initial decision to the extent necessary to conform to the views expressed in the said opinion:

It is ordered That the initial decision be modified by striking from paragraph number 8 on page 379 thereof the phrase "anc110% of the stock to Stephen l\lueha, retaining 80%" and adding the sentence: l\lucha made partial payment for 10% of the stock, which.h, however was not transferred on the company s books to him and he subsequently recovered such part payment.

It is fwrther ordered That the initial decision be modified by striking paragraphs 14, 15, and 16 of the Findings of Fact on page. 381 and substituting therefor the following:

14. Their president and sole or majority stockholder, Irvin J. Borowsky, dominated Foster Type and Equipment Company, Inc. and Foster Publishing Company, Ine., to the extent that they were unable to formulate policy indepe,ndently and their separate corporate identity was no more than a sham. 15. Respondent was put on notice that the two corporations in fact constituted one enterprise by Borowsky s letters or May 1958 (heretofore referred to in paragraph 11 of the Findings). The two corporations had not attained a true separate corporate identity at the time respondent' s payments for advertising in Printing Impressions commenced, and respondent must have been aware of that fact since it could not in good faith rely on the vague and uncorroborated statements documented by this record to the effect that the two corporations were independent of each other. 16. Since the corporate identities of Foster Publishing Company, Inc.., and Foster Type and Equipment Company, Inc., were fictitious, a payment to the former was a payment to Borm\sky Final Order 61 F.

business as a whole, including that segment thereof, Foster Type and Equipment Company, Inc., which purchased and resold respondent' s goods.

It is f'llorth-ep O'r-deped That the initial decision be modified by striking therefrom that portion entitled "DISCUSSION OF EVIDENCE AND APPLICABLE LA,V"

It is f'll/J'the'J' 0 rde'i'e d That the order contained in the initial decision be, and it hereby is, modified to read as follows: It is o'J'de'i'ed That responde.nt The Nuarc Company, a corporation, erroneously named as NU ARC CO~fP ANY INC., in the complaint, and its officers, employees, agents and representatives directly or throllgh any corporate or other device in or in connection with the offering for sale, sale or distribution of arc lamps, vacuum frames, light tables, dark room lights, and other of respondent' s products manufactured for printing, offset printing or lithography, in commerce, as "commerce" is defined in the Clayton Act, as amended, do forthwith cease and desist from: Paying or eontracting for the payment of anything of value to or for the benefit of a customer of respondent as compensation for or in consideration of any advertising services or facilities furnished by or through such customer in c.onnection with the handling, offering for sale, sale or distribution of said products, unless such payment or consideration is affirmatively made available on proportionally equal terms to all other customers competing in the distribution of such prod ucts.

It 18 f'll/J'the'i' onle'J'ed That the hearing examiner s initial decision, as modified by this order and supplemented by the ac.companying opinion, be, and it hereby is, adopted as the decision of the Commission. It is f1/;'J,thej' onlered That respondent, The Nuarc Company, a corporation, 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 and form in which it has complied with the order to cease and desist contained in the initial decision as modified. Commissioner Anderson concurring in the result, and Commissioner Elman dissenting.

GOLF' DIGEST , INC. 405 Complaint