Rabiner & Jontow, Inc.

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IN THE MATTER OF RABINER & JONTOW, INC.

ORDER, OPINIONS ETC. , IN REGARD TO THE ALLEGED VIOLATION OF SEC. 2 ( d) OF THE CLAYTON ACT Docket 8629. Complaint, June .'0, 1964-Decision, Sept. , 1966 Order requiring a New York City manufacturer of ladies' coats and suits to cease discriminating among its competing retail customers in paying promotional allowances in violation of Section 2(d) of the Clayton Act. RABINER & .JONTOW, INC. 639 638 Complaint COMPLAINT The Federal Trade Commission, having reason to believe that the party respondent named in the caption hereof, and hereinafter more particularly described, has violated and is now violating the provisions of subsection (d) of Section 2 of the Clayton Act as amended, (U. S. C., Title 15, Sec. 13), hereby issues its complaint, stating its charges with respect thereto as follows: PARAGRAPH 1. Respondent, Rabiner & J ontow, Inc., is a corporation organized, existing, and doing business under and by virtue of the Jaws of the State of New York, with its offce and principal place of business located at 512 Seventh Avenue, New York 18 New York. At various times prior to March 1963 , respondent traded under the corporate names of Finger, Rabiner & Jontow, Inc. , and Finger & Rabiner, Inc.

PAR. 2. Respondent is now and has been engaged in the manufacture, sale, and distribution of ladies' woolen suits and coats. Respondent sells its products to retail specialty and department stores located throughout the United States. Said products are sold under the trade name of "Eardley" and under private labels. Respondent' s sales of its products are substantial, having exceeded $4 100 000 for the fiscal year ending April 30, 1960. PAR. 3. In the course and conduct of its business, respondent has engaged and is now engaging in commerce, as "commerce " is defined in the Clayton Act, as amended, in that respondent sells and causes its products to be transported from its factory located in the State of New Jersey, to customers located in other States of the United States and in the District of Columbia. There has been at aii times mentioned herein a continuous course of trade in commerce in said products across State lines between said respondent and its customers.

PAR. 4. 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 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.

PAR. 5. Included among the payments aJ1eged in Paragraph Four were credits, or sums of money, sometimes hereinafter referred Complaint 70 F.

as promotional allowances, paid either directly or indirectly by way of discounts, allowances, rebates or deductions, as compensation or in consideration for promotional services or facilities furnished by customers in connection with the offering for sale or sale of respondent's products, including advertising in various forms such as newspapers, fashion maganizes, catalogs, bil endosures and other types of advertising.

Ilustrative of such practices, respondent, during the period 1960 through 1962, made payments and allowances to various customers in various cities, including Boston, Massachusetts; Washington, D.C. and New York, New York, for advertising its products in newspapers, fashion magazines, catalogs, bil endosures and direct mailers, as follows:

Boston, Massachusetts Amount of AIIowance Customer 1960 1961 R. H. Stearns Company $549. $ 500. Jay 400. 600. Jordan Marsh Company 200. Washington, D.

Amount of Allowance Customer 1960 1961 Woodward & Lothrop 520. 419. New York, New York Amount of Allowance Customer 1960 1961 1962 Best & Co. $28 722. $23 833. $35,351.82 Lord & Taylor 762. 350. 053. During these years, Best & Co. operated a number of branch outlets including those located in Boston, Massachusetts and Wasbington C. Similarly, Lord & Taylor operated a branch store in Washington, D.

Respondent did not make, or offer to make, or otherwise make available such promotional allowances on proportionaUy equal, or any, terms to aU other customers in Boston, Washington, D. and New York competing with those who received such allowances.

PAR. 6. The acts and practices of respondent as alleged above . .

RABINER & JONTOW, INC. 641 638 Initial Decision are in violation of subsection (d) of Section 2 of the Clayton Act as amended by the Robinson-Patman Act (D. , Tite 15, Section 13).

Mr. Peter J. Dias, Mr. Myer S. Tulkoff, and Mr. Thomas W. Smith for the Commission.

Mr. Erwin Feldman New York, N.Y., and Mr. Alexander Kushner Jersey City, K. , for respondent. INITIAL DECISION BY LEON R. GROSS, HEARING EXAMINER JULY 16 , 1965 INDEX Pag6 INTRODUCTORY STATEMENT 642 Respondent' s Business 642 Issues - 642 The Garment Manufacturer s Cooperative Advertising 643 Meeting Competition " Criteria for 2( d) Violations 644 Flatil Products, Inc. Docket No. 7226 645 Ace Books, Inc. Docket No. 8557 647 Exquisite Form Brassiere, Inc. , et al. v. C. (July 2, 1965, C. C. No. 18524) 647 FINDINGS OF FACT -- -- -- -- 649 Respondent' s Organization and its Method of Doing Business - - 649 Respondent' s Discriminatory Cooperative Advertising Payments - 650 Respondent' s Cooperative Advertising Procedures 653 Pricing Zones " as Evidence of Competition 657 Payments by " Competitors 660 Competitors'" Evidence 666 Glenhaven, Ltd. 666 Barberini, Ltd. - - 667 Buddy Bates Corp. - - - 668 Suitmaster Classics, Inc. - 668 Lumay Coat Company, Inc. 669 Modelia, Inc. - . 670 Towncliffe, Inc. - - 671 Zelinka-Matlick, Inc. - - 672 Handmacher- Vogel, Incorporated 672 Briarbrook, Inc. - - - 673 David Crystal, Incorporated 674 Davidow Suits - - - 675 Linker & Company, Inc. 676 Cuddle Coat, Inc. 677 Devonbrook, Inc. - - - 678 Country Tweeds, Inc. 680 Jack Feit, Inc. - - - 681 CONCLUSIONS OF LAW 682 ORDER 683 Initial Decision 70 F.

In this proceeding under Section 2 (d) of the Clayton Act, as amended ' respondent, Rabiner & Jontown, Inc., a New York corporation organized in 1942, which manufactures and sells in interstate commerce women s coats and suits which retail from $70 to $90, defends its admittedly non-proportionalized cooperative advertising payments to favored customers in New York, Boston and Washington, D. , in 1960, 1961, and 1962, by asserting that (1) this proceeding is not in the public interest because the entry of a S 2 (d) order against respondent would retard, rather than promote, the legislative purposes of the statute; and (2) that its non-proportionalized cooperative advertising allowances were paid in order to meet competition.

Throughout the prehearing conferences and during the hearings, the hearing examiner has reiterated to respondent' s counsel that the defense that this proceeding is contrary to the public interest is not of a sort which the hearing examiner is empowered , or would, within the framework of this particular record, adjudicate. If such defense may be asserted and adjudicated, it can properly be passed upon only by the Federal Trade Commission itself.

Respondent' s answer admitted the material allegations of the complaint, but denied that its advertising payments or allowances to its customers violated Section 2 Cd) of the Clayton Act. In its answer, the respondent asserts "that in a1l instances referred to in the complaint, in whicb it is aJ1eged that respondent made payments or granted allowances to customers for promotion of products of the respondent by means of advertising, in each and every instance, respondent made such allowances in good faith, to meet competition, and in accordance with the provisions" of the Clayton Act (Answer, p. 2), Respondent further asserts "that in every instance where such payments or allowances were made. . . that said payments or allowances were granted for the purpose of defending the respondent' s position with its customers" and that respondent "did not engage in such practice for aggressive sellng purposes" (Answer, par. 8).

Respondent alleged further that advertising allowances "were so firmly rooted and established that companies similar to respon- 2(d) That it shall be unlawful for Rny person engaged in commerce to payor contract for the payment of anything- of value to ur for the benefit of a customer of such person in the course of such commerce.c as compensation or in consideration for any services or facilities furnished by 01' through such customer in com-,ection with the processing, handling, sale, or offering for sale of any prorlurts or commodities manufactured, sold, or offered for sale by such person, unless such payment or cOllsideration is available on proportionally equal terms to all other customers competing in the distribution of such products 01' eommodities. RABINER & JONTOW, INC. 643 638 Initial Decision dent were compelled, in order to protect their position as a resource, to grant allowances and payments to their customers to meet such competition" (Answer, par. 9). It is well established now by judicial authority that a respondent charged with violating Section 2 (d) of the Robinson-Patman Act may defend such charge by asserting a 2 (b)' or "meeting competition defense. Exquisite Form Brassiere, Inc. , et al. v. Federal Trade Commission 301 F. 2d 499 (C.A. D. C. 1961). The discussion in this initial decision wil focus principal1ly on the effectiveness with which respondent has presented and proven its meeting competition defense.

Several years ago the Federal Trade Commission conducted an investigation into the garment manufacturing industry in general, and, on the basis of the results of that investigation, concluded that a substantial number of firms engaged in the manufacture and sale in interstate commerce of garments were in violation of Section 2(d) of the Clayton Act (RX 23A-23M). Opportunity has been afforded the various persons, firms, and corporations in the garment industry to avail themselves of the consent procedure provided for in Sections 2. 1 through 2.4 of the Commission s Rules of Practice for Adjudicative Proceedings. As a result of the industry-wide investigation and subsequent proceedings, 242 business firms have, as of the time of writing this initial decision, availed themselves of the consent procedure and have signed agreements containing orders to cease and desist which wil be made effective by the Federal Trade Commission at a time and under circumstances which the Commission shall, in its discretion, determine to be appropriate.' As of the date of the writing of this initial decision, only two of the firms mentioned in the Press Releases have elected to proceed to formal hearing, the House of Lord' , Inc. Docket No. 8631 (69 F. C. 44J, and the instant proceeding. In the House of L01.d' proceeding, the hear- 2 (b) Upon proof being made, at any hearing on a complaint under this section, that there has been discrimination in price or services or facilities furnished, the burden of rebutting the prima facie case thus made by showing justify1cation shall be upon the person charg-ed with a violation of this section, and unless justification shall he affrmative shown, the Commission is authorized to issue an ordcr tcrminating the discrimination: Provided, how. ever That nothing herein contained shall prevent a seller rebutting the prima facie case thus made by showing that his lower price or the furnishing of services or facilities to any purchaser or j)\Jrchasers was made in g-ood faith to meet an eq;;mJly low IJrice of a competitor, or the services or facilities furnished by a competitor. See FTC Kews Releases of May 1 , 1963 , August 12, 1963 , January 3 , 1964, ::arch 13 , 1964, July 16, 1964 , July 29, 1964, August 18 , 196,j, September 25, 1964, November 18, 1964, January 26, 1965, February 27 , 1965, and April 14 , 1965. (See RX 23A through RX Z6D, inclusive: RX - , RX 39, and RX 40.

Initial Decision 70 F.

ing examiner found that the cooperative advertising offer was proportionalized made available on proportionally equal terms, and there had been no violation of Section 2 (d). The complaint was dismissed and oral argument on appeal before the Commission has taken place.

In the instant proceeding, respondent admits and has stipulated that its cooperative advertising payments were not proportionaJized made available to aJ1 its customers on proportionally equal terms, but asserts that such cooperative advertising payments were made in good faith to meet similar practices by its competitors in the industry.

Respondent represents a specialized segment of the garment industry, women s coats and suits which retail from $70 to $90.' Respondent subpoenaed 17 manufacturers whose competition, it asserted, it was meeting when it made its non-proportionalized cooperative advertising payments in Boston, N ew York and Washington, D. , in 1960 through 1962, inclusive. This record involves for 1960 through 1962 six favored customers in three cities: In New York City, Lord & Taylor, and Best & Co., Inc. ; in Boston, Jordan Marsh, Jay, Inc., and R. H. Stearns Co. ; in Washington, D. , Woodward & Lothrop, Inc. Although seventeen alleged competitors of respondent were subpoenaed, it is interesting to observe that, as to Jay, Inc., none of the competitors testified to making advertising payments, and, as to R. H. Stearns Co., only one competitor out of seventeen testified as to making advertising payments; only two competitors testified to payments to Jordan Marsh Co. ; and possibly three competitors testified to advertising allowances to Woodward & Lothrop, Inc. Such evidence hardly sustains respondent's assertion that its non-proportionalized advertising payments were responsive to industry-wide non-proportionalized payments to its favored customers.

As part of its meeting competition defense, respondent asserts that non-proportionalized cooperative advertising payments are rampant in, and an integral part of, the modus operandi of the garment industry. Complaint counsel did not contest this assertion. The Federal Trade Commission s investigation alluded to above (see RX 24) found such to be the fact. The fact that the garment industry, as such, is engaged in making non-proportionanized cooperative advertising payments does not exculpate or excuse unlawful payments. The criteria used for evaluating meeting 4 Some testimony places this :price range at $60-$110. . . . , RABINER & JONTOW, INC. 645 638 Initial Decision competition as a defense to a 2 (a) violation include the caveat that price discrimination is not excused on the grounds that it is necessary to combat a general discriminatory pricing system. Moreover, the Federal Trade Commission in Flotil Products Inc. Docket No. 7226, in its opinion of June 26, 1964 (65 F. 1099, 1144), has held:

But a seller is under an obligation to affrmatively offer or otherwise make available promotional allowances on proportionally equal terms to all customers who compete in the resale of its goods. This obligation entails whatever inquiry is necessary to establish whether customers in fact compete. If it were otherwise, sellers could avoid their obligations under the statute simply by closing their eyes to the obvious. A violation of Section 2(d) is determined by objective rather than subjective considerations. If the favored and nonfavored customers actually compete in the resale of the seller s goods, the Act may be violated without regard to the seller s knowledge of the lawfulness or unlawfulness of a disproportionate promotional allowance. To hold otherwise would recognize the right of a seller to discriminate in favor of or against any customer who conducts his resale operations in more than one trade area. The Supreme Court has held, in passing upon a meeting competition defense to a 2 (a) violation . . . The sener has the burden of bringing himself within the exculpating provision of 2 (b), Federal TrCLde Commission v. Sun Oil Co. 371 U. S. 505 514.

Respondent' s meeting competition defense wi1 exculpate its non-proportionalized advertising payments only if such discriminatory payments were made in good faith to meet individual competitive situations. Good faith is not present if a sener adopts the unlawful discriminatory practices of a competitor; good faith is not proven in the record if the sener acts entirely on unsupported unverified verbal statements, nor is good faith established if the sener knew or should have known that bis competitor s system was unlawful or inherently i1ega!. (See cases cited in footnote 5 suprCL.

Once the threshold applicability of the meeting competition proviso is resolved, the same criteria governing its use in Section 2(a) price discrimination proceedings \vould apply to Section 2(d) and 2(e) cases. Rowe, Price Discrimination Under the Robinson-Patmrm Act (1962), page 420. In addition to the testimony of Abbe Rabiner, its president, and representatives of its seventeen aneged competitors, respondent See C. v. A. E. Staley klfg. Co. 324 U. S. 746 (1945): C. v. Standard Oil Co., 355 U. S. 396 (1958) : C. v. Ce1Jent Institute, 333 U. S. 683 (1948) : C. v. tli ationa Lead Co. 3,,2 L. S. 419 (1957): C. v. Strmdard Brands. Inc. 189 F. 2d 510 (2nd Cir. 1951); StnHdard 01'1 Co. v. Brown 238 F. 2d 54 (5th Gir. 1956); Standard Oil Co. v. 340 U. 231 (1951) ; Corn Products Ref. Co. v. C., 324 U,S. 726 (1945). Initial Decision 70 F.

produced as an expert witness Bernard W. Smith, Associate Professor of Retail Merchandising at the Institute of Retail Merchandising, New York University, New York, New York. Among other things, Professor Smith testified to the universality of cooperative advertising payments in the garment business; that students in his classes are taught to demand cooperative advertising payments from manufacturers if they become buyers; that the average life of a coat and suit manufacturer is less than twentyfive years; that in 1960, 623 firms manufactured women s coats and suits; that by 1963 this number had shrunk to 552 , or that 71 firms went out of business between 1960 and 1963; and that the coat and suit business had lost some $18 000 000 in volume, from $698 963 000 in 1960 to $681 000,000 in 1963 (Tr. 948 et Beg. the Apparel Manufacturing Industry s Market PJanning Service of the National Credit Offce issued by Dun and Bradstreet (RX 28 29 in evidence) ).

Mr. Rabiner testified to the unusual vigor and keenness of the competition in bis business, and to the necessity of permitting him to continue his advertising payments so that he may stay in business. Mr. Rabiner asserts that he cannot afford to prop ortionalize his cooperative advertising payments so as to make them available on proportionally equal terms to a1l of his customers; and that, if the women s coat and suit business generally were required to proportionalize their cooperative advertising payments only tbe "giants" in the industry would be able to survive. It is Mr. Rabiner s contention that the order sought in this proceeding, if made applicable on an industry-wide basis, would encourage an oligopolistic industry pattern contrary to the intent of the Robinson-Patman Act. He asserts that only the "giants " who do a very large dollar volume of business and manufacture many different lines of garments, can afford to proportionalize their cooperative advertising payments.

Although the ladies' coat and suit manufacturing business has, in the aggregate, a substantial dollar volume per annum, other than the "giants" alluded to, it is composed chiefly of small businesses whose individual annual dollar volume is not large. Respondent is considered a substantial concern. Its annual dollar volume exceeds $4 000 000, even though its annual sales volume has not increased to any noticeable extent over the last few years. Professor Smith sought to define competition in the women coat and suit business in terms of "price lines, " The exact nature of competition for the retail customer s dollar spent for $60 to RABINER & JONTOW, INC. 647 638 Initial Decision $90 coats and suits is not precisely delineated nor specifically described in the record. A representative of one of the competitor manufacturers, Mode1ia, Inc. , testified that Modelia uses an avant garde styling, and therefore does not compete with the more conventionally styled lines. Several of the firms, who were subpoenaed as "competitors" by respondent, denied that they were competitors in fact.

Where, as here, respondent defends on the grounds that it is meeting competition, the burden of proving the competition, as well as proving the "meeting" of such competition, is upon the party asserting such defense.

Two decisions important to resolving the issues presented in this proceeding were rendered since the record was closed in this proceeding on April 28, 1965. On June 18, 1965, the Federal Trade Commission in Ace Books, Inc. , et rll. Docket o. 8557, affirmed as 2 (d) cease and desist order (Opinion, page 18) (67 C. 1073, 1129), and ,:nter alia held:

It has been recognized that the burden of establishing the Section 2(b) defense is upon the proponent. Federal Trade Commiss/:on Sun Oil Co" 371 S. 505 (1963). Since the defense has the effect of exculpating a discrimination which \vould otherwise be forbidden, the evidence upon which the defense is predicated must be of suffcient preciseness o permit an informed determination. See Callaway Mills Co. Docket No. 7634, 64 F. C. 732 (February 10 1964); Cabin Crafts, Inc. Docket No. 7639, 64 F, C. 799 (February 10 1964); ct. ConMnental Baking Co. Docket No. 7630, 63 F. C. 2071 (December 31, 1963); Ponca Wholesale Mercantile Co. Docket No. 7864 64 F. 937 (February 24, 1964). \Ve think the evidence presented here does not permit such a determination. The evidence does not show when respondents' competitors began granting allowances . . . or when respondents themselves initiated the practice. The record fails to establish the rates used by respondents' competitors to compute their allowances or the amounts of such allowances. . . . Respondents failed to show any of the circumstances surrounding the initiation of their allowances to these retailers and made no effort to establish that their allowances did not in fact exceed those of competitors, by reference either to the rates or the total amounts of these allowances. Without evidence of a more specific nature, the Commission is unable to make an informed determination on the various questions which must be resolved and, as a result, is compelled to reject respondents' contention that they have met their burden in establishing the defense. On July 2, 1965, the United States Court of Appeals for the District of Columbia Circuit in Exquisite Form Bmssiere, Inc. , et al v. Fedeml Tmde Commission No. 18524, 360 F. 2d 492, in an appeal from an opinion of the Federal Trade Commission upon remand (see supra 301 F. 2d 499 (1961), affrmed the opinion of Initial Decision 70 F.

the Commission finding that Exquisite had, upon remand, failed to prove its meeting competition defense. Inter alia the Court of Appeals held (7 S.&D. 1293) :

Exquisite Fonn in the present case essentially premises its position upon the proposition that in a Section 2(d) case, if the accused company estab lishes that its competitors have plans or systems whereby they make advertising allowances to their customers, any company in the industry can combat such systems by inventing and operating a system or plan of its own. Exquisite Form states a number of points, but all of them arise from or are enveloped in the proposition just stated. This, as it phrases the matter, is the crux of the case. Admittedly the Supreme Court has held that in a price discrimination case (a Section 2(a) case) it is not an effective protection for an accused company to show that it operated a plan or system in order to combat its competitors ' plans or systems; in other words, that in those cases a plan to combat other plans is not an effective defense under the proviso in Section 2(b). The Court held that in such cases the combative act had to be a specific act aimed at a lower price on the part of a competitor in individual competitive situations, rather than " * * (inj a general system of competition." Exquisite Form argues that that rule cannot apply to the advertising allowance practices in the brassiere industry, because of the factual characteristics of that industry and the practices in it. We think the doctrine of Staley must be applied here. There are differences, of course, between a price discrimination (Section 2(a)) case and a case involving advertising allowances. But we are not shown that any such difference goes to the basic thesis involved in the statute or to the rationale of Staley. We arc not shown any compellng reason for different treatment. Exquisite Form also contends that, even if the doctrine of Staley applies its proof satisfied the requirements of that case. The only evidence which related to individual competitive situations consisted of a table which set forth the date of retailers' advertisements of Exquisite Form products and competitors' products. There was no testimony which explained how this table l'Clated to company policy. The Commission found that Exquisite Form s evidence was jnsuffcient to support its contention. We agree with the Commission.

FTC v. A. E. Stalr;y Co.. 324 U.S. 746 (1945). In view of this recent decision by the Court of Appeals, it is only necessary to apply "tbe rationale of Staley" to the record in this proceeding.

Prehearing conferences in this matter were held in New York, New York, on September 21 , 22 and 25, 1964; in Washington , on Xovember 4 and December 8 , 1964, and on January 21 1965. Evidentiary hearings were held in New York, New York , 26 on February 15- , and :varch 16- , 30, 1965; April 1- 1965; and were concluded on April 27, 1965, Proposed findings, conclusions, and briefs have been filed. The RABI!'ER & JON TOW , INC. 649 638 Initial Decision hearing examiner heard and observed the witnesses in the hearing room and on the witness stand. He observed their demeanor and their manner of answering questions. He has considered the reliabiliy, credibility and probative value of the witnesses' tes t!mony in making his findings of fact, as well as their respective interest in the outcome of this proceeding. Proposed findings not made herein in the form proposed, or in substantially that form are rej ected. Any motions heretofore made and not previously ruled upon are denied. The undersigned hearing examiner has carefully considered the entire record, including tbe exhibits pleadings, and the testimony of the witnesses. Based upon the entire record in this proceeding, the hearing examiner makes the foJ1owing:

FINDINGS OF FACT Respondent, Rabiner & Jontow, Inc., a New York corporation since 1942, with its offce and principal place of business at 5J2 Seventh Avenue, 1\ew York, New York, has, since its incorporation, traded under the names of Finger, Rabiner & Jontow, Inc., Finger & Rabiner, Inc., and presently as Rabiner & Jantow Inc. , (Answer; Tr. 26, 29, 39). Respondent is now, and has been since its incorporation, engaged in manufacturing and selling, in interstate commerce, ladies' suits and coats to retail speciality and department stores throughout the United States under the trade names of "Eardley, Rardley, Jr. " and under private labels. Respondent' s sales exceeded $4,000 000 annually during the period involved in this proceeding (Tr. 30-31). Respondent has been under the same management, basically, since it commenced business, and its policy with reference to payment of cooperative advertising allowances has been unchanged (Tr. 50). Respondent' garments retail at a price range from $70 to $90" (Tr. 30), and are designed primarily for spring and fall sale, Its coats are not fur trimmed.

Respondent' s garments may be described as updated classic tailored clotbes, and not a high style line (Tr. 31-32). (See also the advertisements in CX JO, CX 11 , CX 12 (p. 7J, CXJ3, CX 14B. It sells its products only to retailers, primarily through its showroom at 512 Seventh A venue, 1\ ew York City, which is visited by buyers representing these retailers, Traveling salesmen are not a At Tr. 909, respondent's expert, Professor Bernard \V. Smith, testified that he had been advised that respondent's )'etail prices nenge from 60 to S110. These are the figures in polldent' !! proposed nnding-s (p. par. 4). Initial Decision 70 F. T. generally utilzed by respondent (Tr. 31 , 62-63). Abbe Rabiner respondent' s president since its incorporation, has general responsibility for sales, and :\1'. Jontow has responsibility for general internal management. Respondent usually has four sales persons in addition to Mr. Rabiner, in its showroom. Mr. Rabiner has had primary responsibility for respondent' policies relating to its advertising and promotion policies. The granting of advertising allowances, has been a company policy since the company was organized (Tr. 50). Respondent causes its products, when sold, to be shipped from its factory in New Jersey to customers located in other States of the United States and in the District of Columbia. Respondent has, at all relevant times, maintained a course of trade in its products in commerce, as "commerce " is defined in the Clayton Act, as amended.

The Federal Trade Commission had jurisdiction over the parties to, and the subject matter of, this proceeding. This proceeding is in the public interest.

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 for or in consideration of services or facilities furnished by or through such customers in connection with the offering for sale or sale of respondent' s products (Tr. 36-37; CX 4A-CX 7; Prehearing Stipulation and Order dated November 4 1964 1', , par. 2). By agreement, the evidence in this proceeding has been limited to the years 1960 through 1962, inclusive, and to the cities of Boston, Massachusetts ew York, New York, and Washington, D. During these years and in these cities, respondent paid promotional advertising allowances to some of its customers without making such advertising allowances available on proportionally equal terms to all of its customers competing in the sale, at retail of respondent's products of like grade and quality. Respondent' sales and advertising allowances paid to its favored (F) and nonfavored (N) customers were:

In New York, New York:

Advertising- Customer Sales Paid (F) Best & Co, $836 850. $28 722. (F) Lord & Taylor 192,915. 762, (N) B. Altman 259. None RABINER & JONTOW, INC. 651 638 Initial Decision Advertising Customer Sales Paid 1961 :

(F) Best & Co. $651 212. $23 833. (F) Lord & Taylor 184 392. 350. (N) B. Altman 572. None (N) Bonwit Teller 338. None 1962:

(F) Best & Co. 641 024. 351.82 (F) Lord & Taylor 104 141.00 053. (N) B. Altman 23,916. None (Complaint and Answer; ex 24 in camera) In Boston, Massachusetts:

1960 1961 Advertising- Advertising Sales Paid Sale" Paid (F) R. H. Stearns Co. 832,165. $549. $21 790. $500. (F) Jay 739. 400. 738, 600. (F) Jordan Marsh 16,323. None 718. 200. (N) Chas. Sumner, Inc. 586. None 216. None (N) House of Tweed, Inc. 728. None 209. None (N) Delano 200. :;one 272. None (N) Worth, Inc. 829. None 370. None (Worth' (N) Leeds, Inc. 541.52 None 456. None (N) C. Cra wfard 25,760. Kone 719. None HaUidge (N) Wm. Filene s Sons 937. None 661.00 None (Filene (Complaint and Answer; ex 24 in camera) In Washington, D.

1960 1961 Advertising Sales I AdvertisingPaid Sales Paid (F) Woodward & Lothrop $55 270. $3,520. $36.919. 419. (N) Raleigh Haberdasher 590. None 365. Kone (N) Dorothy Stead, Inc. 688. J\Tone 847. None (N) ),ary Elizabeth None None 460. None Gowns, Inc.

(N) Jane Dawson Smith 701.00 Xone 562. None (N) Jenny Shoppe 883. 00 i None 263, None (Complaint and Answer; ex 24 in camera) In New York City, respondent' s payments to Best & Co. Inc., in 1960 approximated 3.43 j(, of sales; whereas, its payments to Initial Decision 70 F.

Lord & Taylor were 1.43 % of sales. In 1961 , respondent's payments to Best & Co. , Inc., were 3.66 % of sales; and to Lord & Taylor 1.82;10 of sales, In 1962, the payments or allowances to Best & Co. , Inc., approximated 5. 51 % of sales; and to Lord Taylor, 2.93 % of sales.

In Boston, Massachusetts, the 1960 payments to R. H. Stearns Co. were approximately 1.71% of sales; and to Jay, Inc., 1.26% of sales. In 1961, the payments to R. H. Stearns Co. were 2.29 % of sales; to Jay, Inc. , 2, 57% of sales; and to Jordan Marsh Co. 72;10 of sales.

Abbe Rabiner, president of respondent, testified, and it is hereby found, that respondent's advertising payments were individu. ally negotiated on an ad hoc basis for each advertisement. Respondent promulgated no plan which set forth the procedure by which its customers might qualify for an advertising allowance Respondent' s payments were not made available on proportionally equal terms even to the favored customers (Tr. 46). Pursuant to Prehearing Stipulation and Order, dated November 4 1964 (1'. , par. 3), it is found that respondent' s nonfavored customers did not receive any advertising or promotional allowances during the relevant years in the cities in question. Respondent sold goods of like grade and quality to both its favored and nonfavored customers during the years in question in New York City, Boston, and Washington C, Respondent' s favored customers competed in the sale, at retail, of respondent' garments with respondent' s nonfavored customers. (Prehearing Stipulation of November 4, 1964 , p. 5 , par. 1. ) The favored customers competed with other favored customers. It was stipulated, and it is hereby found, that during the relevant years, and in the cities involved, if respondent' non favored customers were called as witnesses, they would testify that they were neither offered nor paid advertising or promotional allowances in connection with their purchases for resale of respondent' s garments. The Prehearing Stipulation and Order dated January 6, 1965, filed January 21 , 1965, names the following customers and witnesses who would so testify: WASHINGTON. D.

Customer Witness Raleigh Haberdasher - Arthur Levy, Huyer Dorothy Stead, Inc. - Robert Stead, Vice Pres. & Treasurer Dorothy Stead, President _ RABINER & JONTOW, INC. 653 638 Initial Decision Mary Elizabeth Gowns, Inc. - Georgia Hayes McClerkin President Isabelle Henry, Manager Jane Dawson Smith Carl Dawson Smith, Partner Jane Dawson Smith, Partner Jenny Shoppe - Cabot Feldman, Proprietor Lisa atusek, Buyer BOSTON, MASSACHUSETTS C1Utome1' Witness CharJes Sumner, Inc. - Sumner Goldman, Treasurer House of Tweed, Inc. - Helen Hunt, Manager Delano s - .. MerriI Delano, President Worth, Inc. - - Joseph Worth, Treasurer Leeds, Inc. - - Florence Rubenstein, Buyer C. Crawford Hollidge - -. Grace McXeeley, Buyer Wm. Filene s & Sons - F. B. Gummere, Asst. to President NEW YORK, NEW YORK Customer Witn(B8 B. Altman & Co. Rudolph Van Gytenbeek, Vice Pres. Barbara M lissett, Buyer Wendy Wardrop, Buyer Bonwit Teller, Inc. - George Baylis, Vice Pres. (Stipulation limited to years 1960 and 1961 only) Respondent' s procedure for selecting customers for cooperative advertising payments was described by Mr. Rabiner: Q. Mr. Rabiner, would you telJ me how you selected particular customers to whom advertising allowances wel' paid during those years? A. This was based purely on the competition that existed with those customers . . . from firms that manufactured similar goods and where these people offered similar offerings of advertising. . . we did the same thing as our competitors did.

Q. Why is it, Mr. Rabiner, that, as the record shows, aBowances were given to certain customers and not paid to others? A. WeJ1, when certain of these customers that you refer to came to me and I knew for a fact that they used the forms of media to advertise ready-towear-specifically, our product-and similar merchandise, I naturally worked along with them. Others who did not come to me, . . . so I didn t do anything with them (Tr. 79-80).

Q. Are you saying, then, that you gave allowances only to those customers who came to you? A. I would say so, pretty much (Tr. 80). Concerning the payment of allowances for mailing pieces, 1Tr. Rabiner testified:

, , , , Initial Decision 70 F.

Q. In other words, this was a practice which was limited to those stores who had achieved a certain important position with you that engaged in that practice? A. That is correct (Tr. 101).

Q. And those who didn t have that as a store policy never worked out any such plan for the use of such mailing pieces? A. To the best of my knowledge, no (Tr. 102). Q. In other .."lords, there is a distinction, therefore, that you are bringing out between certain kinds of retailers who engage in certain practices with whom you worked out programs and ihose who never engaged in those practices with whom you never worked out any program? A. That is correct (Tr. 102).

If I had to make the same offer to everybody, there isn t enough money not only in my business, but in the whole cloak and suit industry for me to do it. I cannot make the same offer to everybody (Tr, 1126). . , I try to be as prudent and as careful as I possibly can with the expenditurcs of my money. Consequently, it becomes very important to us to have the best exposure for our product throughout the country, and in that case it behooves us to choose the particular retailers with whom we feel we can get the best exposure (Tr. 1127-28). In addition to the testimony of :vr, Rabiner, respondent proffered the testimony of seventeen coat and suit manufacturers who, it asserted, uut did not prove ,,ere its competitors, It is the competition of these seventeen other manufacturers that respondent claimed, but failed to prove, it was meeting. Respondent also proffered the testimony of an expert witness, Bernard W. Smith (Tr. 897-1020), who was an associate professor of retail merchandising at New York University. Professor Smith testified as to the genel'aJ business conditions and practices in that segment of the garment industry of which respondent is a part-the manufacturers of women s coats and suits.

When pressed to name specifically the competitors, whose allowances it was meeting, respondent was unable to name any (Tr. 99-100) .

The practice of paying non-proportionalized, cooperative advertising allowances had been part of the pattern of doing business in the garment industry for years ; See RX 23A-23M: RX 24A-24H; RX 25A-25B: RX 2GA-2Im, al1 of whicn 8re FTC News ef\ , pjus FTC Kews Releases on the 8me Bubject issued on March 13 , 1064 July 16, 1964, August lR , 1064. )Jovember 18 , 196 , January 26 , 1965, FebruD.J'Y 27 , 1965 , and April 14 , 1965. . . . , RABINER & JON TOW, INC. 655 638 Initial Decision Respondent' s cooperative advertising allowances were part of its regular method of doing business and part of its selling techniques, and had been used by respondent ever since it started in business.

RX 32, RX 33, RX 34, RX 35 and RX 36 are copies of a publication entitled "Coatvertising Weekly, " and contain reproductions of nationwide coat and suit advertisements appearing in various publicity media. These are 1965 advertisements, but constitute specimens of cooperative advertising which is involved in this proceeding.

The record does not contain any evidence that respondent' cooperative advertising allowances were paid by respondent meet or match a similar payment by a specifically named competitor who, at the time, was selling competing merchandise to respondent' s favored customer. Mr. Rabiner s testimony negates a finding that respondent's cooperative advertising payments were made to meet or match a similar payment made by a competitor. Counsel for respondent has emphasized throughout this record that respondent's cooperative advertising payments were not made in conformity with a "plan " either oral or written. From its inception, in connection with the saJe of its products, at retail, under the trade name "Eardley" or "Eardley, Jr. " respondent paid a portion of the cost of advertisements of its products which its retail customers ran in newspapers, national fashion magazines, store catalogues, direct mailers, and bill enclosures (Tr. 52), " generally on a fifty-fifty basis, at times a little bit more or Jess on either side" (Tr . 49, 55). Mr. Rabiner and the particular retail customer (i. Best & Co. , Inc., Lord & Taylor R. H. Stearns Co., Jay, Inc., Jordan Marsh Co., or Woodward & Lothrop, Inc. ) jointly decided whether the advertisement would appear in a newspaper (Le. New York Times or New York Herald Tribune) or fashion Magazine (i. MADEMOISELLE, HARPER BAZAAR or GLAMOUR) (Tr. 49-50). There was no radio or television advertising (Tr. 51). Usually the retail establishment and the trade name Bardley," were named in the ad Tr. 51), There was no real formula or yardstick by which to determine how much of an allowance would be paid by respondent to a favored customer (Tr. 53). " (IJt was based primarily upon the competition that existed within the firms what we did business with" (Tr. 53). Likewise, there was no mathematical formula which related the advertising allowance to the amount of merchandise purchased (Tr. 54). Each time that Mr. Rabiner nego- , Initial Decision 70 F.

tiated an advertising allowance, al1 of the elements of the advertising promotion were individually negotiated between Mr. Rabiner and his customer, including the determination as to which one of respondent' s products would be advertised (Tr. 54). Respondent confined the sales of its products "to those quality stores that stand for the kind of product that we produce. . . (Tr. 56). Respondent considers that it makes a quality product and tries to sell to retail establisbments which, in the public mind, sell quality products (Tr. 57-58). In any given area, respondent has a few carefully selected customers which meet this requirement (Tl' 58). Respondent does not sell to other than retailers (Tr. 63).

The favored customers to whom respondent paid its advertising allowances were " For the most part, people I had been doing business with for years, . ' . for as many as twenty and twentyone years " (Tr. 1123). The advertising payments by respondent in the cities and dlling the years involved represented the continnation of a business practice that respondent had followed for years (Tr. 1123).

In his testimony, Mr. Rabiner emphasized that, if respondent were to make its advertising payments available on proportionally equal terms to all its customers there isn t enough money not only in my business, but in the whole cloak and suit industry for me to do it. I cannot make the same offer to everybody (su)JTa p. 654; Tr. 1126). He testified further that within the pl' esent framework of the women s coat and suit business only " Bobbie Brooks kind of organization, a Jonathan Logan. . . (i. firms with large sales volumes and broad product Jines) can afford to offer a proportionalized advertising allowance (Tr. 1127). Respondent' s evidence on this part of its defense is inconclusive. It may well be that manufacturers of ladies' coats and suits being for the most part small businessmen, cannot afford to make their cooperative advertising payments available to all their customers on proportionally equal terms. It is possible, although not herein found, that the advertising practices delineated in this record, even though unlawful within the caveat of Section 2 (d) of the Robinson-Patman Act, may not have had the effect, to date, of lessening competition; creating a monopoly; or injuring, destroying, or preventing competition. Complaint counsel arc not required in this 2 (d) proceeding to prove an anti-competitive effect in the same manner as would bc required if this were a 2 (a) proceeding. Complaint counsel have sustained their burden of ), RABINER & JON TOW, INC. 657 638 Initial Decision proof. Indeed, respondent admits that its advertising payments were not proportionalized-made available to al1 its competing customers on proportionally equal terms- and that respondent' favored and non favored customers did, and do, in fact, compete in the sale at retail of respondent's products of like grade and quality.

In the ladies' coat and suit industry, as in other apparel trades there is increasing concentration (Tr. 1096). ". . . In 1950 some 500 manufacturers sold $7 1/2 billion worth of apparel. By the end of 1963 the number of companies had shrunk by 2 000 or more -while dollar volume had passed the $11 bilion mark. . . . side by side with a sharp drop in the number of coat and suit firms there has been an increase in unit output and dollar volume of business. Together, these facts add up to one conclusion: more concentration of business. " 8 Respondent has failed to prove, in spite of its legal burden to do so, that its non-proportionalized advertising payments to its favored customers were made in order to meet specific, individual competitive situations. The Court of Appeals' recent decision in Exquisite Form Brassiere, Inc. , et (11. emphasizes the necessity for such proof (supra pp. 647-648). Respondent relied upon the generalized testimony of Abbe Rabiner (Tr. 50, 79, 82- , 85- 88), and its expert, Professor Bernard W. Smith (Tr. 897 seq. for proof of the competitive conditions witbin its industry. Respondent did not proffer the testimony of any of its customers favored or nonfavored, to prove which were considered by respondent' s customers to be respondent' competitors. Professor Smith' s testimony (Tr. 908 et seq. does not help respondent to demonstrate that its non-proportionalized advertising payments were "a specific act aimed at a. . competitor in 'individual competitive situations, rather than '" ( inj a general system of competition. '" (See Exquisite Form Brassiere, Inc. , et al., supra p. 648. ) Professor Smith inter ali(1 testified (Tr. 908-913) : A. (As a general rules-each store has a clientele which is based, to a large extent, on the income groupings of the people who shop in the store. Thus, we have some stores that cater to lower-middle income groups, some to upper income groups, and some to the wcaJthy people. The prices that the stores set win corrcspond with thc ability of each income group to pay. These prices are usually set in what we can price zones. In other words, we find that certain customers will shop in pricing areas, let us say, from forty to sixty dollars, or from sixty to eighty, or eighty to one hundred.

. RX 30. pp. 5-6, Cloak ,Joint Board, I.L. l,V Report of the General Manager. oatedMarch 21), 1966. Initial Decision 70 F.

In other words, a customer of a certain income group, coming into a store may buy something at sixty dollars, may intend to buy something at sixty, and actually go out with something at seventy dollars, or vice versa: she may go in thinking to buy something for seventy, and find something that she likes at sixty.

, therefore, stores usually price merchandise in what we call price zones, and then pick a particular price in the price zone on which they specialize for one reason or another. The special price is called the price line, while the zone is the range of prices in which they operate. Q. Would you have occasion to receive information concerning the retail prices at which goods of Rabiner and Jontow were sold during the years 1961 and 1962:

A. Yes. I made inquires about that. I have found, 01' I have been advised, that their prices ranged from sixty to $110 at retail Q. On the basis of your knowledge and experience, what type of stores would handle merchandise of that quality and price line: A. Well, actually, the better departments of Gimbel' , Macy, Lord and Taylor, Altman, Saks- HEARn, G EXAMINER GROSS: You mean Saks 34th or Saks Fifth? THE WITNESS: No, Saks Fifth-although even Saks 34th would handle the 10\.ver end of those prices; they would go in the sixty dollar price. In other words, the prices, the top prices of the popular stores, would over lap the low prices of the better stores. So that actually most of the big department stores in New York and specialty stores in New York would handle those price ranges.

By Mr, Feldman:

Q. Could you tell us what retail price Jines of merchandise would compete with the price lines of Rabiner and Jontow which you have just testified to'? A. Well, I would say that any merchandise from about $49 to $125 would be in competition with that range of merchandise. Q. These price zones are established practices and principles of retailng in this country which you have just testified to, the use of price zones'? A. I don t know whether the word "established is the right word. They are practices, because diffennt stores will have their own definitions of "price zones."

Q. But the princi:ple of pnce zones would vnry from different types of stores, wouldn t it? A. That's right. (Italics supplied.

Included in this initial decision are six charts which constitute a finding or resume, in abbreviated form, of the evidence elicited by respondent from its seventeen "competitor" witnesses concerning these competitors' sales and allowances on cooperative advertising payments to respondent's favored customers. Usually, the This contradicts Mr. Rabiner s testimony. (See footnote. supra p. 649. RABINER & JONTOW, INC. 659 638 Initial Decision testimony does not contain the exact dollar amount of such competitors' sales and advertising payments to respondent' s favored customers.

Respondent' s competitors were understandably noncooperative. They vigorously resisted revealing any more of their confidential business information than was absolutely essential. In some instances, such competitors had made a full report to the Federal Trade Commission concerning their advertising practices. Some had negotiated consent agreements with the Commission; others were in the process of doing so. None of respondent' competitors, individually, paid to respondent' s favored customers the large cooperative advertising allowances that respondent paid.

00' Tr.162 210 199 250 316- 437, 637 735, , , , 507lla 1159, 1199 20A, 218,106 249, 322, 355 1174 394 435 62413F 589,1272!J 657HI 71478621 References RX165-166, 'fr.'fr. Tr. Tr.:H8'fl'. Tr. 1'r.448 1'1'.RX 'fr-RX1'1'.743 Tr.RXIT'.Tr.RX1'r. RX IT,..1167, "fr.& 72 95 year 1962 238. NoneNoneNone202 700.3 S:H. None 7,,0. 207. None 828. NoneNune 632.!J8 014. 783.1061 1962 Aiiowances for for AmountRecord Sa!" 668. In 90,000.y,, $46 None Yo, Yes Yo, Ye!1 ExactNotYes Yo, None Yes Ye, I 735,1 637, Tr. 219 199 250 316 , 437 , 714'.86,21 507Ita 115U, 11!Jfi 20A, 218,H16, 240, 322 3,,5 3!J4DD435, 62413D, 58912729, 6571() 1174 References 'fr 1'1'.RX '11"Tr.RX Tr.RX 1'r.1167, Tr. 000. RXIG2 itr.Tr. Tr. Tr. '1r. Tr.RX Tr.44KTr.IRXTr.RX $15 & years 1961 a952. None: 317. None None :j;'8. NoneNone 715. 299.\19 783. 10611962 None NoneoneNoneNone 700. Allowances for for approximately was Record TAYLOR Amount & Sales 83. 000. In period $13 NoneYes Yes Yes Y''S Yes ExactNot Ye!1 Yes YesKone Yes Yes LORD Tr.

. 21D 250 199 637, 735, entire, :H6 437 I , , , , the 162 355 l: 1I59, 249 6,,7 322, 1168llj9 1% HB 624, 12 20A 729, 711 786, 111\ 3 21 ;)07 435 589, . References for II' Tr. RX 1'1'. RX Tr. RX Tr. RX 160 1'r.148 1'1".nx 'Ir. '1r.'fr. 1'r.1191 1'r. RX 1'1".'fl. RX 1'r. ITr. Tr.!713 Camera. I 68 Taylor "In I'I1 years :J5. NoneNoneNoneNone700.00915.203 None None 211.00 None 606. NoneNone HJ1.1D & 1960 1 Allow,mces I for Lord reeived II 1' to I AmountRecord were I, II. In Sales 65!U3 000. . Yes Yes Yes Yrs Exact NotYes Yes YesNone Yes Yes Ycs Company YesNone j.'H5 II & Inc underlined Inc. Inc. arc Inc. lAnker1960. Inc. Inc. Inc. byfor which, Inc. Corp. Inc. Inc. Ltd. C-Company, Inc. Inc. Ltd.Classics, Company Inc. Snits, & Tweeds, sales Bates Coat Crystal Coat, Feit, figures Manufacturer No Exhibits 'Total2 Glenhaven, BuddyBarberini,SuitmasterLumay Modelia, Townc1ifTe, Zelinka-Matlick, David Briarbrook, C\lddlc Davidow LinkerDevunbrook, IItu,dmacher-Vogel, Country .Jack 1:111:1 :n' 2 31 1168 1199 438 735. 800. , 145B 199 370 396 11 RX , , 1159, 1198 RX 62416A-Z 58912 729 GGg 71- 787,21 131,20A,218196 249321305, 394 437,504-505 References Tr.RX '11'. Tr. '11'. Tr. Tr. Tr.526 1'1'.RX 1'1'.RX Tr.71a 'fr. Tr. 'fr.HX Tr. Tr. 1'11'. 1'11'. I None NoneNoneNoneNoneNone950. NoneNone 409. None None NoneNone6:'0. NoneNone 1962 Allowances Yo,None Sales None NoneNoneNoneNone Yo, NoneNone Ye, None NoneNone 74,000.00:1 10 1168 1199 735. 800, , 145B 199 370396, 148505. Z , , 1198, 624l.'iA- !)fW 729 6:,)9 71178721 1159 131,20A,218196,249 :35, 394 437,504- References Tr. 'fr.'11'.52fi 1'r.RX 'fr.RX12 Tr.74:J Tr.1'1"RX Tr. RX1'11'. 1'11'.1'11'.'11'. '11'.'11'. '11'.RX!lC 1961 Nune NoneNoneNoncNoneNone847. NoneNone 184. None None NoneNone100.00' NoneNone Allowances CO.

& Yes NoneNone Yes None NoneNone000. YesNone BEST Sales None NoneNoneNoneNone altliatcs. its n 10 1168 11!J9 all 145, 199 370 3!J6, 148 RX31 800. , . ;J7 lim-SOIi 21 1159, lUJH, and RXll 14A-Z 12,58!! 72(J 65 711 787 13120A218 2:!21 3ii5, :194,gC . Inc. References RX '11'.HX '11''11"196'11'. '11'. '1,.RX 'fr. '11'526. ITr.RX ITr. !Tr.-743Tr.i Tr. Tr.RX Tr. 'fr. Camera. :J8 00' "In ';0. 'iO. NoneNone Devonbrook, None None NoneNone 1960 None NoneNoneNoneNone3,,0.200. NuneNone Allowances Co.only. by & received Inc. Co... 002 Best &were Yes NoneNune Ye, None Non..None000. YesNone to Sales None NoneNoneNoneNone Best to sales Devonbrook, Inc. to by underHned Inc. Inc. Inc. Co. are Inc. Inc. allowances rdating-& Inc. Inc. Company, which Vogcl, Ine C'--rp. Inc. Ltd. Ltd.('lassics, Inc. R"st , , Suits,Company Inc. Inc. Tweed:;, to Coat Coat, & Crystal. Manufacturer Bates Feit, evidence NoSales Exhihits 12 'Adverti:;ing.. Glenhaven Buddyllarbedni.SuitmasterLumayModelia,Towncliffe, Zelinka-Matlick,Handmachcl'- David Briarhrook Cuddle DavidowLinkerDevonhrook, CountryJack B lla 20A, RX 31 743 RX 322 448 52613A- F.X 1169 1199 , 258 250 319, 374 4:18, RX 735, References 157, 423437, 504-505,637. 588-589 729,659-660 71421 1159 IHJ8. 145, 218, 249,318- 372, 'fr. 'lr. 'fr.'fl'. Tr.Tr. Tr. 'fr. 'fr. Tr. 'fr. Tr. 'fr.RX Tr. 1'r. NoneNone NoneNoneNoneNoneNoneNone NoneNone NoneNoneNoneNoneNoneNone 1961 Allowances Salff NoneNone None000.None YffNone NoneYff Yff B I 20A, 448 1JAY' !i26, 13A- 74 RX 322 1169 IHI9 258 438, R'fmn'ff157, , 2!iO :\7-1 , RX 735,660 1 637, 5BH-589, 729,659- 71421 1159, 145, 218 249, 318-319, 372, 42343750-1-505 . 1198, Camera. 1'1'. Tr. Tr. 'fr. Tr. Tr.'fl'.'fr. 'fr. 1'r.Tr. 'fr.RX 'fr. I I In 1961. and received 1960 Allowances NoneNone NoneNoneNoneNoneNoneNone None None NoneNoneNoneNoneNoneNone 19,60 were during underlined Jay to are Sales NoneNone NoneNoneNone YffNone NoneYff YesYff business ! insales which Inc. notto Inc. Inc. was exhibits 1111111 Inc. Inc. J:elatinr; Corp. Inc. Inc.Inc. , Ltd. Inc. Company, Ltd. s Inc. , Inc. , Ltd.Classics, , Inc. Inc. Suits,Company evidence Coat, & Tweeds Manufacturer Bates Coat Crystal, Felt, Barberini,NoRespondent' III I2* GlenhavenBuddyBarberini,SuitmasterLumayModelia,1'ownclilfeZelinka-Mat.lick,Handmacher-Vog:eJ,David8riarbro01"CuddleDavidowLinkerDevonbrook CountyJack ;n' B 20A, 11A 31 17 743RX RX 321 RX 637-640RX , 526, 735, 662 721 1169 1199 References 157, 258 250 448 145, 218, 24!:, 318-:n9 372423 438, 504. 624-625, 588-589 729, 659, 714,21 1159, 1198, Tr. Tr. TI;. Tr.Tr.Tr. Tr. Tr. Tr. Tr. Tr. Tr. Tr.RX Tr. Tr. 1961 NoneNone NoneNoneNoneNoneNoneNone NoneNoneNone339. NoneNoneNoneNone A!lowances Sal NoneNone NoneNoneNone YesNone Ye,Yo, Yo, BCOMPANY 20A, 31 RX 321 637-640RX 743 , , 1169 1199 250 258 448 526 735,662 721 ,STEARNS References 157, , , 438,504, 624-625 588-589 729, 659 714,21 1159, 1198 record.H. 145, 218 249318-319372423 R. in Tr. Tr. Tr.'fl;.Tr.'fr. 'fr.Tr. Tr. Tr. Tr. Tr. 'fr.RX Tr. Tr. not 1961.any.

1960 andifCamera NoneNone NoneNoneNoneNoneNoneNoneNoneNoneNone559. NoneNoneNoneNon.. Allowances "In 1960 Stearns, duringH.R.received towere sales Sales NoneNone None800.None Ye,None Yo, Yo, Yes busines of in not amountunderHned Inc. Inc. was are , Inc. Inc. Inc. dollar Ltd. Inc. Company Corp. Inc. ,ofwhich Inc. Tnc. Ltd. Inc. , Inc. Ltd.Classics, Company Suits, Inc. & Tweeds, Coat, Manufacturer Bates Coat Crystal, Feit, BarberiniEvidenceExhibits 12" GJenhaven,BuddyBarberiniSnitmasterLumayModelia,Towncliffe,Zelinka-MaUip.k.Hanomacher-Vogel DavidBdarbrook, CuddJeDavidow LinkerDevonbrookCountl;yJack ;;.

B 31 20A, 11A RX 743 21 RX 7 RX 637-64012 1169 1199 735, RX , References 164, 2.18 RX 4.:8 504, 625,RX , 372 659-660 145, 256, 250, 318-320 423 448, 526, 624-589, 729. 714 787 1159,1198 Tr. Tr. Tr. Tr. 'fl'.Tr. Tr. Tr. 'fl'.Tr. Tr. 'fl'.Tr. Tr. Tr.'fl'. 1961 NoneNone 100.NoneNoneNoneNoneNone NoneNoneNoneNoneNoneNone700.None Allowances Sales 434.000. 000.None None $34 25, B COMPANY 20A, 11A RX 743 21 RX RX 637-640 MARSH 12, RX 1168 1199 Reerences 164. 258 438 504, RX 735, 145, 256, 787, 1159, 1198, 2,'O:H8-a20 37242aHR , 526, 624-625, 589, 729,659-660714 . . JORDAN Tr. Tr.'fl' Tr.'fl'.'fl'. Tr. Tr. Tr. Tr.Tr.'fl'. Tr. Tr. Tr. record. in 1961. 1960 not Camera I NoneNon.. NoneNoneNoneNone Non.. None None150. NoneNoneNoneNone None and Allowances "In . 1960 Marsh duringJordn received to were 541.94500. 000.None None None salesy,. Sales business 1:1: 17, $20, in of1960. Inc. not for underlined amount Inc. Inc. waa are . Inc. Inc. dollaravailabJe Inc. Inc. , Ltd, Inc. ('..rp. which Company. Inc, Ltd. Inc. Inc. Inc. of Lh1.Classics, Inc. Suits,Company Tweed Coat, & fir;ures Manufacturer Bates Coat Crystal, Feit, Harberini,EvidenceNo Exhibits 23 . G!enhaven,BuddyBarberini,SuitmasterLumayModelia,Towncliffc,Zelinka-MatlickHandmacher-Vor:eJDavidHriarbrook, CuddleDavidowLinkerDevonbrook,CoulltryJack 111 11 637-640 RX 31 , 20A 321 448526 RX 743 21 , 1168 1199 References RX 250 379 438, 624-625, 735. 722RX 164,257-258 249,318-319, 378,122 437,504-505. 612, 588-589 729, 659 714787, 1159, 1198, Tr. Tr. Tr. Tr. Tr.Tr. Tr. Tr. Tr. Tr. Tr. Tr.T,.'fr. Tr. Tr. 1961 AUowanceB NoneNone NoneNoneNoneNoneNoneNoneNoneNoneNoneNoneNoneNone190.None 2 Sales 700. YesNone YesNone None None NoneNone000.Yo, $44,010. 11A LOTHROP & RX 637-640 00. ,31 150.

526 20A 321 148, RX 743 21 , $45, 379 1199 References RX 250 438 624-625 735, 722RX was 257-258 249,318-319378 4.22 437, 504-505 612,588-589 729,659 714.787,1159 llHS, WOODWARD 164, Tr. Tr. Tr. 'ft.T,.Tr. Tr. Tr. Tr. Tr. Tr.Tr. Tr.Tr.'Ir. Tr. period Camet"a.'. In " entire 1961. 1960 the and AJlowances 100.None NoneNoneNoneNoneNoneNoneNoneNone NoneNoneNoneNone None forLothrop. received 1960 & Lothrop were during& 2 Woodward underlined Sales 500. None YesNone None None YesNoneNone000.Yo,Yes to business are $36,349 inWoodwardsales1960. which Inc. nottotofor Inc. Inc. WIUsales Inc. Inc. relating' exhibits, Inc. Inc. , Ltd.of available Corp. Inc. Inc. Ltd. Classics,Company, Inc. IDC. Ltd. , Inc. , Inc. Suits,Company Tweeds, volume Manufacturer Bates ('--at Crystal, Coat, & evidencefig1rcs Feit, Barberini,TotalNoNo ,234*Respondent's G!enhavenBuddyBarberini,Suii.maslcrLumayModelia,Townc\iffe,Zelinka-MatlckHandmacher-VogelDavidBriarbrook CuddleDavidowLinkerDevonbrookCountryJack ), ).

Initial Dccision 70 F. T. Respondent has failed to prove by a preponderance of reliable probative, and substantial evidence that garments manufactured by its seventeen "competitors " or any of them, did, in fact, compete with respondent's garments for the business of its favored customers, or for the retail customers' dollars. The burden of proving this competition was upon respondent. The price zones testimony of Professor Smith (Tr. 897 et seg. standing alone does not prove such competition. Representatives of most of the competitors who were subpoenaed denied competition with the Rabiner & J ontow lines. Not one of respondent' s customers was called to testify as to competition between respondent and other manufacturers.

Evidence of competition between respondent and the firms which it subpoenaed may be summarized:

Glenhaven, Ltd.

Bernard Gold, vice president and general sales manager for the past seven years, appeared on behalf of Glenhaven, Ltd., 512 Seventh Avenue, New York, New York (Tr, 122 et seg. This firm manufactures ladies' suits (no coats), which retail from $30 to $40. Occasionally, some of its items may retail for as much as $60. It sells to retail department stores and specialty shops (Tr. 130). There is litte price competition between the Glenhaven and Rabiner & Jontow lines (Tr. 125-126). Respondent' s garments retail at higber prices. Mr. Gold testified (Tr. 190): Q. Are you a competitor, is Glenhaven a competitor of Rabiner & Jontow? A. I don t believe so, no, sir.

Mr, Gold further testified that, although Glenhaven did make advertising allowances to some of its customers during 1960 1961, and 1962 (Tr. 145), it did not pay any such allowances to Best & Co. Inc" Jordan Marsh Co., Jay, Inc., and R. H. Stearns Co. It paid $100 to Woodward & Lothrop, Inc. in 1960; $35 to Lord & Taylor in 1960; and $238 to Lord & Taylor in 1962. On occasion Eastman Kodak would give Glenhaven money to promote the sale of garments made from Kodel, and the Wool Bureau would allocate funds to promote the sale of garments made from wool. These monies were given to Glenhaven, which, in turn, allocated them to the retail firms (Tr. 148). Glenhaven suggested that the fabric advertising be carried in local newspapers (Tr. 151). Glenhaven used its own advertising funds to promote a particular line (Tr. 153), and a particular fabric. RARINER & JONTOW, INC. 667 638 Initial Decision During 1960 , 1961 , and 1962, Glenhaven placed institutional advertising in the fashion magazines, such as MademoiseUe Glamour, Harper s Bazaar, and Vogue (Tr. 174). Such advertisements contained the names of the stores at which Glenhaven s advertised garments could be purchased. Glenhaven would notify these stores that their names would appear in the advertisements (Tr. 175). Mr. Gold, with his sales staff, selected the store whose name appeared in the institutional ads in the fashion magazines (Tr. 176). As many as five or six Glenhaven customers might be listed in a single ad (Tr. 180). The ad showed the garment, the name of the company, and the names of stores at which the garment was availble (Tr. 181).

When Glenhaven spent its own money for advertising, it was on a "promotional basis for a particular fabric group to a particular city. In some of the cases of the fiber money we would offer it to the whole country" (Tr. 183).

Respondent has failed to prove that Glenhaven suits compete for the retail consumers' doUars with suits manufactured by Rabiner & Jontow. Respondent has failed to prove that, at the level at which Glenhaven suits are purchased by retail firms for resale they compete in fact with "Bardley" (Rabiner & Jontow) garments.

Respondent has further failed to prove that the advertising allowances, which respondent paid to its favored customers, were granted to meet or match simiiar or identical advertising aU owances paid by Glenhaven to such favored customers. Barbe1' ini, Ltd.

Kermit Bass, president, appeared on behalf of Barberini, Ltd. et seq.512 Seventh Avenue, New York, New York (Tr. 192 This firm manufactures and seUs for resale ladies' coats and suits which retail from $80 to $150 (Tr. 193). Barberini, Ltd. was incorporated and first commenced to do business in May 1962. During the years involved in this proceeding, Barberini did not seu its products to any of respondent's favored customers in any of the relevant trading areas (Tr. 193, 196). Barbcrini granted no advertising aUowances to respondent's favored customers (Tr. 198-99, 204) , Respondent failed to establish for the years here involved any , Ltd.competition whatsoever between respondent and Barberini . .. ., ). . . . Initial Decision 70 F.

Buddy Bates Corp.

Buddy Bates, president, appeared on behalf of Buddy Bates Corp., 250 West 39th Street, New York, New York (Tr. 210 , et seq. ). This corporation manufactures ladies' coats and suits (Tr. 210), which ordinarily retail from $60 to $150, and during the years 1960 through 1962, retailed from $50 to $110 (Tr. 212 215). During these years, Buddy Bates' suits retailed principa11y at $50, $55, $59, and $69 (Tr. 302-303). Mr. Bates testified that there is a basic style difference between Buddy Bates' garments and those manufactured by respondent (Tr. 304). He was Eot too famijiar with the Rabiner & J ontow line, but he did not consider Rabiner & J ontow to be a competitor, nor has it been represented to him as a competitor by any of Buddy Bates' customers (Tr. 215- , 304). No advertising allowances were paid by Buddy Bates to respondent' s favored customers during the years involved (Tr. 219).

Respondent has failed to establish by reliable, probative, and substantial evidence in this record that the non-proportionalized cooperative advertising payments, which it made to its favored customers during the years in question, were made to meet or match similar payments by Buddy Bates, Inc. Suitmaster Classics, Inc.

Harry Snyder, president, appeared on behalf of Suitmaster Classics, Inc., 221 West 37th Street, New York, New York (Tr. 247 , et seq. This company manufactures ladies' suits retailng from $40 to $50 (Tr. 248, 254). During the years in question, it sold to Jordan Marsh Co. Woodward & Lothrop, Inc. , Best & Co. Inc., and Lord & Taylor (Tr. 249). It paid $100 to Jordan Marsh Co. in 1961. Suitmaster s volume item in its Jine was a man-tai- Jored, one-button suit which retailed at $39. 98 (Tr. 251-54). Suitmaster gave only one form of advertising allowance one dollar per suit to a11 persons who purchased and advertised the one-button suit. Mr. Snyder testified (Tr. 254-55) : Q. \\were you in competition with Rabiner and .Jontow during 1960 through I962? A. As far as Rabiner and ,Tontow, I believe they make higher priced suits.

I would say that my competition would be, in my eyes, the people who make suits at my price level.

Q. Would you therefore consider yourself in competition with a firm whose retail price range is from seventy dollars to ninety dollars? ).

RABINER & JONTOW, INC. 669 638 Initial Decision A. N at in my eyes, no, sir.

Respondent failed to prove by reliable, probative, and substantial evidence in this record that its advertising payments to its favored customers were made to meet or match similar payments by Suitmaster Classics, Inc.

Lumay Cout Company, Inc.

Sidney Malvin, secretary-treasurer, appeared on behalf of Lumay Coat Company, Inc., 230 West 38th Street, New York New York (Tr. 311 et seq. This company manufactures and sells ladies' coats and suits (Tr. 311), popular- priced fashion garments, retailing from $70 to $90 (Tr. 313). The company has made no attempt to promote the Lumay trade name (Tr. 313-14, 323-24). Of the respondent's six favored customers and during the years involved, Lumay paid only $202 to Lord & Taylor in 1962. Lumay s sales to Lord & Taylor for the tb' ee years involved were $29 000 in 1960; $42 000 in 1961 , and $90 000 in 1962 , a total of $161 000-with a $202 allowance on one job lot (Tr. 322). Mr. Malvin testified (Tr, 336-37) :

Q. Are you familiar with the product manufactured and sold by Rabiner & Jontow? A. Yes, sir.

Q. Is yours a competitive item from the point of view of style'? A. No.

Q. And they (respondent) make coats and suits? A. Yes, Q. Out of a typical fabric like you do, woolen fabrics A. Woolen fabrics. That is "\",here the similarity ends. In my opinion, they (respondent) make a classic coat, a classic suit. Ours (Lumay J is a little more fashion.

Q. Therefore, you don t consider that there is any competition at retail? A. I don t think so, no.

(Continuing) I would say our merchandise doesn t compete . I think the merchandise they make, the type of me)'chandise we make, complement one another.

Respondent has failed to prove by reliable, probative, and substantial evidence that its advertising payments to its favored customers during the years involved were made to meet or match ).

Initial Decision 70 F. T. similar payments by Lumay Coat Company, Inc., to the same favored customers.

Modelia, Inc.

Gunther Oppenheim, president, appeared on behalf of Modelia Inc., 205 West 39th Street, New York, New York (Tr. 346 seq. This company manufactures ladies' coats (Tr. 346), which retail the spring line from $60 to $165, and the winter line from $70 to $300 (Tr. 348-49). Some of the firm s winter coats are fur lined (Tr. 349), and Mr. Oppenheim characterized their styling as high-fashion, avant garde-a "gimmick operation" (Tr. 357). The firm specializes in novelty products. Mr. Oppenheim s opinion is that Modelia is a "trend-setter" of the industry with respect to introducing new fabrics (Tr. 357-58). He testified: In a sense, I don t believe there is one single company in the entire trade which I consider competition (Tr. 366-67). Q. Is it your position that. . . a coat which sells for the same price as the one which you sold to the store would not be in competition with you if it was on the racks? A. No, our styling conception is completely different. This is a well known fact (Tr. 357).

Q. You had no competition? A. I do not feel that I had any competition (Tr. 368). during 1960 Q. Mr. Oppenhejm, was Rabiner & Jontow your competitor 1961 and 1962? A. I do not consider them a competitor of ours (Tr. 390). The record shows that Modelia granted a total of $6700 advertising aHowances to Lord & Taylor for the years 1960, 1961 and 1962 (Tr. 355), and $350 to Best & Co. Inc., for the three years. After Mr, Oppenheim testified that the Modelia line does not compete with the Rabiner & J ontow line of garments, it was incumbent upon respondent to place in this record some reliable, probative, and substantia! evidence to prove that Mr. Oppenheim was in error. Respondent has failed to do this. The record does not support a finding that the non-proportionalized advertising allowances paid by respondent to its favored customers, and particularly to Best & Co. , Inc., and Lord & Taylor, were given to meet or match a similar or identical advertising payment by Modelia Inc.

.. , ). RABINER & JONTOW, INC. 671 638 Initial Decision Towneliffe, Inc.

Howard B. Herbert appeared on behalf of Towncliffe, Inc., 512 Seventh Avenue, New York, New York (Tr. 391 et seq. This company manufactures ladies' coats and suits (Tr. 391). Their suits retail at $70 to $125, and the coats retail from $90 to $125 (Tr. 392). The firm markets under the names Towncliffe" and Town tree" (Tr. 392). They manufacture conservative, well-made, tailor type garments (Tr. 393). Townc1iffe s suits are made of wool, cotton, and silk (Tr. 399), while respondent utilizes primarily wool (Tr. 1119, 1141-42). Towncliffe made the following advertising payments to two of respondent' s favored customers during the periods involved:

Lord Taylor 1960 $1945. 1961 - - $2952. 1962 - -- - - - $ 831.60 Best Co., Inc.

1960 - $1200. 1961 - -- $2847. 1962 - $1950. (Tr. 395.

However, the evidence does not support a finding that respondent's advertising payments to Lord & Taylor and Best & Co. Inc., during the years in question were made to meet or match advertising payments made by Towncliffe. Most of the time Towncliffe deferred to the decision of its customer who was going to run the ad (Tr. 399). Townc1iffe had no advertising budget as such (Tr. 400). During 1960 , 1961 , and 1962, if Towncliffe engaged in advertising, it was either cooperative or editorializing advertising (Tr. 401).

There is no evidence to show which of Towncliffe s products were promoted by Lord & Taylor and Best & Co. Inc. The Towncliffe representative testified: Q. The evidence in this case shows that Rabiner & Jontow s retail price range is from $70 to $90. Your CTownc1iffc sJ price range runs higher. Do you consider yourself in competition as to your entire price range? (Tr. tj 25-26.

. . . ). ). Initial Decision 70 F.

A. we wouldn t be in competition from $90 to $125. I would say are in competition from $70 to $90 (Tr. 426). Respondent has failed to prove that its non-proportionalized advertising allowances to its favored customers were granted to meet or match similar Towncliffe advertising allowances for products which competed at the retail level with respondent' products for the consumers' dollars, and competed for sales to the favored customers.

Zelinka-Matlick, Inc.

David Zelinka appeared on behalf of Zelinka-Matlick, Inc. 512 Seventh Avenue, New York, New York (Tr. 433, et seg. This firm manufactures ladies ' coats and suits (Tr. 433). Its spring coats retail from $80 to $110 and the spring suits from $80 to $130 (Tr. 433-34). Its winter coats retaij from $90 to $200, and winter suits from $90 to $200 (Tr. 434). The firm manufactures high-style fasbion garments (Tr. 435, 480). Mr. Zelinka testified that his firm does not compete with respondent. He testified that it makes "a higher priced line than Rabiner & Jontow" (Tr. 481). The two lines overlap price wise at the very lowest level. Even there, Mr. Zelinka denied that Rabiner & J on tow garments competed with Zelinka-Matlick garments. Mr. Zelinka opined that the same price range is only one of several elements which cause competition between different manufacturers of ladies' coats and suits (Tr. 480-82).

After Mr. Zelinka s denial that there was competition between the Rabiner & Jontow line and the Zelinka-Matlick line, the burden was then upon respondent .to prove by a preponderance of reliable, probative, and substantial evidence that such competition does and did exist. Such proof has not been made. Respondent' act of naming Zelinka-Matlick, Inc., as a competitor does not constitute proof of the fact. Respondent has not proven that its advertising allowances to its favored customers were granted to meet or match similar allowances by Zelinka-Matlck, Inc. to the same favored customers.

Handrrcher- Vogel, Incorporated Edward Halpert, vice president and treasurer, appeared on behalf of Handmacher-Vogel, Incorporated, 533 Seventh Avenue New York, New York (Tr. 493 et seg. It manufactures and sells in interstate commerce women s suits. Its uHandmacher ).

RABINER & JONTOW, INC. 673 638 InHial Decision suits retaij from $60 to $100. Its "Weathervane" unJined suits retail from $30 to $50 (Tr. 494). Its garments cover a "broad spectrum of suit styling" (Tr. 496) with emphasis on high style. The only one of respondent' s favored customers to whom Handmacher-Vogel granted advertising allowances during the years here involved was Lord & Taylor. The allowances were: for 1960 $2191.49; for 1961 , $745.58; and for 1962, $632. 98 (RX 11 camera).

Of the nine payments to Lord & Taylor by Handmacher-Vogel seven were used to advertise the spring and summer Jine which retaiJs from $30 to $50. (RX 11B, RX llg, RX 11H, RX 111, RX 11J and RX 11L, all in camera. This line does not compete price wise with the Rabiner & J ontow Jine which retails, as previously found, from $70 to $90.

Handmacher- Vogel's advertising payments were not made according to a plan, but were negotiated separately at the time they were made (Tr. 516). In some instances, Handmacher- V ogeJ paid the full cost of the ad. In other instances, it paid only a part of such cost (Tr. 517). Handmacher-Vogel's advertising payments were not based upon the volume of business done with a customer, nor the importance of the retailer in terms of prestige. It was negotiated at a particular instance in time (Tr. 519). The retailer took the initiative in attempting to secure Handmacher- Vogel' s advertising allowances (Tr. 520). Handmacher-Vogel refused some requests, and granted others (Tr. 520-21). Handmacher- Vogel advertises generally in Vogue, Harper and Mademoisel1e. These ads sometimes featured the names of the Handmacher-Vogel accounts in a particular city (Tr. 555). Respondent has failed to prove that its advertising payments to its favored customers were made to meet or match similar payments by Handmacher- Vogel, Incorporated to the same customers. Briarbrook, Inc.

Bertram Barber, president, appeared on behalf of Briarbrook Inc. , 512 Seventh Avenue New York, New York (Tr. 568 seq. This company is a manufacturer of ladies' suits (Tr. 570). Briarbrook' s spring suits retail from $60 to $110; summer suits from $40 to $55; and the fall suits from $70 to $125 (Tr. 570-71). The suits can be described as "fashion" or style garments (Tr. 571). Mr. Barber s testimony does not prove that Briarbrook is in fact in competition with Rabiner & Jontow (Tr. 580-599). Evi- ).

Initial Decision 70 F.

dence was elicited concerning Briarbrook advertising a1Jowances to Jordan Marsh Co. and Lord & Taylor (two of respondent' s favored customers (RX 12; Tr. 600-601)). Mr. Barber was unable to testify as a certainty that tbe payments were in fact advertising allowances (Tr. 599). His testimony does not prove that respondent' s advertising payments to its favored customers were made to meet or match similar or identical payments by Briarbrook to the same favored customers.

Respondent failed to establish the existence of competition between respondent and Briarbrook, Inc. , for sales to respondent' favored customers. Respondent, likewise, did not introduce any specific evidence that its garments and the Briarbrook garments did and do, in fact, compete for the retail purchasers' do1Jars. David Crystal, Incorporated Harold Cohen, comph-01Jer, appeared on behalf of David Crystal, Incorporated, 498 Seventh Avenue, New York, New York (TR. 606 et Beg. He has been its comptro1Jer since July 1, 1963 (Tr. 607). David Crystal is primarily a manufacturer of a classic line of ladies' suits that se1J under the trade name of "David Crystal" (Tr. 613) HEARING EXAMINER GROSS: Would you characterize the general styling of David Crystal, Inc. as pretty similar to the line of Rabiner & J ontow? THE WITNESS: Well, I don t propose to be a fashion man. But from my information with people in the industry and people in my company, it appears that Rabiner and Jontow and David Crystal' s styling is very similar. (Tr. 612.

Mr. Cohen had been comptro1Jer of David Crystal, Incorporated, only since July 1, 1963, and was not qualified to testify specifica1Jy to the competition, if any, between respondent and David Crystal for the coat and suit business of the respondent's favored customers. Mr. Cohen produced papers which are in evidence as RX 13A-13J, RX 14A-14Z10, RX 15A-15Z10, and RX 16A-16Z2 a1J in camera. The exhibits, plus Mr. Cohen s testimony, support a finding that David Crystal made cooperative advertising payments to some of respondent' s favored customers, as fo1Jows: 1960 1961 196!! Lord & Taylor I .1317. .750. (RX I3D-I3! (RX I3F in camera) camera) Best & Co. $8250, $6184. 87401.50 (RX I4A-I4ZIO (RX 15A-15Z10 (RX 16A-16Z2 in camera) in camera) in camera) ). :: ,. RABINER & JONTOW, INC. 675 638 Initial Decision Some of the David Crystal exhibits (RX 13A through RX 16Z2 in camera) indicate, and it is found, that many of the advertising allowances, which made up the five general totals given above, were paid to promote David Crystal's garments which were not competitive to respondent's garments. At the outset of Mr. Cohs testimony, he testified that Mr. Vincent Draddy, president of David Crystal, would be best qualified to testify concerning its competition, if any, with respondent within the framework of respondent' s "meeting competition defense." Mr. Draddy was not thereafter subpoenaed.

The record does not contain substantial and probative evidence that respondent's advertising payments to its favored customers were made in response to a specific, competitive situation to meet or match similar or identical advertising payments by David Crystal, Incorporated, to the same favored customers. The evidence also fails to establish that the garments manufactured by respondent competed with the garments manufactured by David Crystal, Incorporated, for sales to the favored customers, or for sales to retail customers.

Davidow Suits Archibald Davidow, one of its principal stockholders and offcers, appeared on behalf of Davidow Suits, 205 West 39th Street, New York, Kew York (Tr. 650 et seg. This company manufactures and sells women s suits for resale at retail under the label "Davidow" for a price of $125 and up (Tr. 652-53). Prior to 1960, Davidow Suits developed a cooperative advertising plan which was offered to aJl Davidow customers throughout the country (Tr, 657). Davidow has been very selective in its marketing and sells to very few marketing outlets in each marketing area (Tr. 657). Davidow may also give only one of these very few outlets the exclusive right to buy and resell a specified style in a particular area (Tr. 658). Davidow has many styles in its line, and it has marketed generally by giving exclusive styles where advertising "is put on it" (Tr. 659). Although many Davidow styles are carried by more than one retail outlet in a marketing area, if a style is advertised, it will usually be available only at the retail outlet which advertises it (Tr. 659). The Davidow cooperative advertising plan was made available to aJl Davidow customers throughout the country (Tr. 659). Davidow made no sales to Best & Co., Inc., in Kew York City in ).

Initial Decision 70 F. T. 1960, 1961 and 1962; nor to Woodward & Lotbrop, Inc. in Washington, D. , in 1960 and 1961; and it did not offer to sell its products to these establishments, and it did not pay nor offer to pay any advertising allowances to them (Tr. 659). In 1960 and 1961 , Davidow did not pay any advertising allowances to Jay Inc., nor to Jordan Marsh Co. in Boston (Tr. 660), Jay s and Jordan Marsh were offered Davidow s advertising plan, but refused it (Tr. 660). Pursuant to the plan, payments were made in 1960 and 1961 to R. H. Stearns Co. in Boston- 559. 10 in 1960 and $1 339. 60 in 1961 (RX 17 in camera) ; and to Lord & Taylor in C\ew York City, $5 606. 68 in 1960; $8 358 in 1961; and $7,828. 86 in 1962 (RX 19 in camera). Davidow s letter offering its cooperative advertising plan to its customers is in evidence as RX 18 in camera.

In 1960, Davidow Suits paid advertising allowances to the extent of 50;Yo of the cost of the advertising actually expended by Lord & Taylor, Payments were made based upon tear sheets of the advertisement, plus a stated sum for production costs (Tr. 663). Lord & Taylor s advertising department did the art work for the advertisement. Later Davidow changed its arrangement with Lord & Taylor from that of paying 50 % of the cost of the advertisement to a basis of paying 5;Yo of anticipated sales during tbe course of a year. Mr. Davidow testified that his firm has received more benefit from the 5%, of sales arrangement than from the former 50% of cost plan (Tr. 664-65). Davidow s 5% arrangement with Lord & Taylor was not duplicated with any other Davidow customer in Boston, New York City, or Washington, D.C. Davidow paid for al1 its advertising in fashion magazines (Tr. 669).

Davidow s cooperative advertising plan, exemplified by RX 18 in cameru was offered to al1 Davidow customers (Tr. 673). There is not any reliable, probative, and substantial evidence that respondent's non-proportionalized advertising payments to its favored customers in New York City, Boston, and Washington, D. , were made in good faith to meet or match identical or similar payments by Davidow Suits to the same customers. Linlce?' Company, Inc.

Maurice Linker, president, appeared on behalf of Linker & Company, Inc. , 512 Seventh Avenue J\ew York, New York (Tr. 706, et Beg. He has been in the ladies' garment business for ).

RABINER & JONTOW, INC. 677 638 Initial Decision twenty-five years (Tr. 707). From 1960 to 1963, its garments retained from $49 to $69 (Tr. 70S). During these years, the company did not use its funds to advertise its products (Tr. 710). Linker never received any money from any textie, fur or fiber company to be used in cooperative advertising (Tr. 713). During the three year period, Linker sold about $15 000 to Lord & Tay. lor, and $500 000 to Peck & Peck. One specialized $1 000 adver. tising allowance was paid to Peck & Peck over the three year period. Linker made garments to Peck & Peck specifications. It did not seek to build up its own label. The garments, which Linker made for Peck & Peck, were classic-basic (Tr. 71S). The styles of the merchandise manufactured by Linker for Peck & Peck were usually "confined" to Peck & Peck only, and not sold to other Linker customers (Tr. 721).

Linker sold R. H, Steams Co. in Boston, but gave them no advertising allowances (Tr. 721). Linker gave no advertising allowances to the stores it sold in Washington C. (Tr. 722). Respondent' s non-proportionalized advertising payments to its favored customers were not made to meet or match similar or identical advertising payments by Linker & Company, Inc. , to the same favored customers.

Cuddle Coat, Inc.

Justin Lipman, vice president, appeared on behalf of Cuddle Coat, Inc., 500 Seventh Avenue ew York, New York (Tr. 725 et seg. A Cuddle Coat advertisement in The New York Times magazine section of February 2S, 1962, in which the name of the manufacturer and retailer (Lord & Taylor) appeared, is in evidence as RX 37, Cuddle Coat, Inc. , a division of Petite Miss Co. manufactures and sells highly styled, untrimmed coats which retail from $50 to $75. It caters to smaller girls' and misses ' sizes (6 to 14 or 5 to 13)-the younger market (Tr. 731). During the years from 1960 to 1962, the firm sold Woodward & Lothrop, Inc. in Washington R. H. Steams Co. in Boston; and Lord & Taylor in J\ew York City (Tr. 729). Cuddle Coat mentioned the names of some of its retaij outlets in its ads (RX 37; Tr. 737). During the years 1960 to 1962, it did not make cooperative advertising payments to its retail store customers (Tr. 735). Mention of the retail establishments in its ads was for the purpose of giving Cuddle Coat prestige-not the retaij outlet (RX 37; Tr. 736).

). . Initial Decision 70 F. T. In addition to Lord & Taylor, Cuddle Coat sold in New York City to Franklin Simon, Macy, Gimbel Bros., and Bonwit Teller. It did not pay any advertising allowances to anyone (Tr. 743, 749). It was not Cuddle Coat's policy during the pertinent years to give money toward advertising (Tr. 747). The Cuddle Coat representative testified that The New York Times' magazine section requires 60 days lead time for the placement of fashion advertisements, and fashion magazines require 90 days lead time.

In the fashion magazines, Vogue, MademoiselJe, and Harper Cuddle Coat usually did not mention the retail establishments selling its merchandise.

A one page color advertisement in The New York Times' magazine section cost Cuddle Coat about $5 000. Cuddle Coat usual11y ran such advertisements in The New York Times' magazine section about twice a year (Tr. 737). Unlike respondent's procedures, Cuddle Coat advertisements were not worked out in consultation with its retail store customers; nor were its retail store customers asked to cooperate (Tr. 738-39). Cuddle Coat's advertising policy was totally different in purpose and execution from respondent' s advertising policy. A retail store was mentioned in the Cuddle Coat ad strictly as a matter of "convenience " so that the Cuddle Coat offce "wouldn t be badgered by telephone calls and letters in New York City" inquiring where the Cuddle Coat in the advertisement might be purchased (Tr. 740). At the time Cuddle Coat mentioned Lord & Taylor in its advertisements in The New York Times, it was also selling in New York City to Franklin Simon, Macy, Gimbel Bros. , and Bonwit Teller, as above found.

Since Cuddle Coat didn t give advertising allowances to any of its customers (Tr. 743), respondent's advertising allowances could not have been made to meet or match those of Cuddle Coat. Respondent's evidence faHs to prove that its non-proportionalized advertising payments to its favored customers were made in good faith to meet or match similar advertising payments made by Cuddle Coat, Inc., to the same favored customers. Devonbrook, Inc.

Morton Cytron, comptroller and assistant secretary, appeared on behalf of Devonbrook, Ide., 1400 Broadway, and 500 512 Seventh Avenue, New York, )Iew York (Tr. 769 et seq. This com- RABINER & JONTOW, INC. 679 638 Initial Decision pany has the following subsidiaries: Devonshire Junior, Inc. Brandshire, Inc. ; Devshire, Ltd. ; Heart Throb, Inc. ; Devonaire, Ltd. ; Devonknit, Inc. ; and Miss Devon, Inc. Devonbrook stock is publicly held, and traded over the counter (Tr. 770). The principals in the company are Sigfried Alper, Owen Alper, and William Alper- a father, brother and son" combination. The company manufactures and sells junior dresses and suits, which retail in the fall season from $23.75 to $42.75 (Tr. 770). In the spring season, the line retails at $17. 75 to $39.75 (Tr. 771). Devonbrook and its subsidiaries did not use traveling salesmen. They sold from their showrooms at the addresses stated above.

In 1960, 1961 , and 1962, the companies did not participate in national advertising, as such (Tr. 777). If one of the Devonbrook customers would feature a particular Devonbrook garment in an advertisement, Devonbrook would give the retail outlet an allowance equal to a dollar per garment, provided the retailer mentioned the Devonbrook name and submitted tear sheets as proof that the advertisement had been run. The average cost to Devonbrook of such advertisements would be about $200 to $300. Most of such advertisements were run in The N'ew York Times (Tr. 778-79). The Devonbrook customer usually submitted a debit memo with a tear sheet of the ad attached (Tr. 779). If a Devonbrook customer spent $2 000 on an advertisement and sold only ten Devonbrook garments, such customer would have been paid only $10. So the burden was on Devonbrook's retail outlets to be very astute in selecting the Devonbrook merchandise to be advertised (Tr. 780). The "Devon brook look. . . is accepted in the junior market as young, fashionable and popularly priced" (Tr. 781). During the years involved in this proceeding, Devonbrook did not engage in national advertising of any kind (Tr. 782). Devonbrook has learned that, when the customers advertise its products in the local newspapers, they get the best results (Tr. 783). Devonbrook did no business with Lord & Taylor during the years involved. Devonbrook's only advertising payments to any of respondent's favored customers for the relevant years were to Best & Co. , Inc., as follows: 1960- 750; 1961-$11 100; and 1962- 650 (RX 21 in cnmem).

Respondent' s non-proportionalized advertising payments to its favored customers were not made to meet or matcb specific or similar payments by Devonbrook to the same customers. The ev- ). _ Initial Decision 70 F.

idence wil not support a finding that respondent's garments and Devonbrook' s garments competed with each other for the patronage of retail establishments, or for retail customers ' dollars. Cou:atry Tweeds, Inc.

Harry Glassman, controller, appeared on behalf of Country Tweeds, Inc., 250 West 39th Street, Kew York, New York (Tr. 1158 , et seq. This company manufactures ladies ' coats which retail from $75 to $225, roughly (Tr. 1159). During the relevant years, Country Tweeds would cooperate with stores generally for newspaper advertising where Country Tweeds would pay 501'0 of their ads usually, and sometimes more, up to the amount of a commitment which it would make to such customers at the beginning of the season (Tr. 1160). After a particular retail establishment had spent the amount which Country Tweeds had allocated to it, all further advertising was at the retail establishment' s own expense (Tr. 1160), During the relevant years, Country Tweeds advertised in Life Vogue, Harper s Bazaar, and "maybe one or two others" (Tr. 1161). Some of Country Tweeds' retail stores may have been mentioned, but Country Tweeds "were then told" that they could not mention the names of some of their customers without mentioning all, so they stopped mentioning any names (Tr. 1161-62) .

During 1960, 1961 , and 1962, Country Tweeds never received any allowance from any textile fiber house or texWe company to be used in advertising their products (Tr. 1166). Country Tweeds paid Lord & Taylor a $4 299.99 advertising allowance in 1961 , and $4 014.72 in 1962 (Tr. 1167). They paid Woodward & Lothrop, Inc. , $1 190. 23 in 1961 (Tr. 1168), and 641.98 in 1962 (Tr. 1169) ; and paid $6 700 to Jordan Marsh Co. for cooperative advertising in 1961, and $2 979 in 1962 (Tr. 1169) .

During the years in question, Country Tweeds provided their customers mailing pieces, brochures, with the company name upon them without charge. Country Tweeds furnished such mailing pieces to those customers who requested them. All their customers did not request them (Tr. 1169). Their free mailing pieces were made known to their customers "by word of mouth" (Tr. 1170). Their 1961 advertising payment to Lord & Taylor of 299. 99 included a $1 350 figure for advertising in a Lord & Taylor catalogue (Tr. 1170).

). , RABINER & JON TOW, INC. 681 638 Initial Decision Mr. Glassman testified (Tr. 1173) :

Q. Do you know the company Rabiner & Jontow? A. I frankly never heard of them until I received this subpoena. Country Tweeds make a "prestige" garment which they seJl to prestige" retail establishments (Tr. 1174). They have a few customers in each retail market (Tr. 1175). In 1960 and 1961 Country Tweeds sold to Woodward & Lothrop, Inc. , exclusively, in Washington and to Jordan Marsh Co. , exclusively, in Boston (Tr. 1175-76).

The evidence fails to prove that during the years involved Rabiner & Jontow, Inc., competed with Country Tweeds, Inc., for sales to respondent' s six favored customers, or that Country Tweeds' garments competed with respondent's garments for the dollars of the ultimate consumer-the retail purchaser. Although Country Tweeds, Inc. , paid advertising allowances to some of respondent's favored customers during the years involved, the hearing examiner cannot find from the evidence that respondent' s non-proportionalized !1advertising allowances were paid to meet or match a similar payment by Country Tweeds Inc. rather in 'individual competitive situations than (inj a general system of competition.''' (See Exquisite Form Brassiere, Inc., et. "I., supra p. 648. J"ck Feit, Inc.

Due to the illness of its president, Lillian Hertzberg, its bookkeeper, appeared on behalf of Jack Feit, Inc. , 530 Seventh A venue, New York, New York (Tr. 1191 et seq. This company manufactures coats and suits, mostly suits, which retaij from $70 to $125 (Tr. 1202), She testified that the only advertising allowance paid by Jack Feit to any of respondent' s favored customers during the years 1961 and 1962 was $3 783.95 paid to Lord & Taylor (Tr. 1199, 1203). Jack Feit sold its garments to some of respondent' s other favored customers, but did not pay any advertising allowances to these others. It did not make its cooperative advertising payments pursuant to any published plan (Tr. 1204). The evidence in this record fails to establish that respondent's non-proportionalized advertising allowances paid to its favored customers were paid to meet or match a specific, similar payment by Jack Feit, Inc., to the same favored customers. Respondent failed to prove that Jack Feit, Inc., competes with it in the sale of coats and suits to respondent's favored custom- .

Initial Decision 70 F. T. ers. Respondent failed, likewise, to prove that Jack Felt' s garments compete with Rabiner & Jontow s garments for the dol- Jars of the ultimate consumer-the retail purchaser. CONCLUSIONS OF LAW Respondent, Rabiner & Jontow, Inc" 512 Seventh Avenue New York, New York, a :'ew York corporation, which has been doing business continuously since 1942, manufactures and sens in interstate commerce ladies' coats and suits under the trade names of "Eardley, Eardley, Jr. " and under private labels. Respondent' s products are sold for resale at retail. Respondent has beeri, at an relevant times, and now is, engaged in commerce as "commerce" is defined in the Clayton Act as amended.

Respondent has been, and now is, in competition with other persons, firms and corporations who manufacture and sen for resale at retail similar Jines of ladies' coats and suits. The Federal Trade Commission has jurisdiction over Rabiner & Jontow, Inc. , and the subject matter of this proceeding. This proceeding is in the public interest.

In the course and conduct of its business in commerce during the years 1960, 1961 , and 1962, in the cities of New York, Kew York, Boston, Massachussets, and Washington, D. , respondent paid non-proportionalized advertising anowances to its favored customers, as hereinabove found, without making such payments available to an of its other, nonfavored, customers who competed with its favored customers in the sale at retail of respondent' s products of like grade and quality. Respondent represents that segment of ladies' coat and suit manufacturers, whose garments usually sell at retail basicany in the price range between $70 and $90.

Respondent' s non-proportionalized advertising payments did and do, constitute a violation of Section 2 (d) of the Clayton Act as amended, and should be enjoined.

Respondent has failed to prove by reliable, probative, and substantial evidence that its garments compete with the garments of the "competitors " whom it subpoenaed, for sales to the retail establishments who purchase respondent' s garments, or for sales to the ultimate consumer-the retail buyer. Respondent has failed to prove by reliable, probative, and substantial evidence that its advertising payments were made in good faith to meet or match tbe same or similar advertising pay- RABINER & JON TOW, INC. 683 638 Opinion ments made by anyone or more of its competitors to the same customers to whom respondent made its advertising payments. Respondent' s evidence fails to bring its non-proportionalized advertising payments within the criteria established by the Federals Trade Commission in its opinion in Flotill Products, Inc. Docket No. 7226 (suprn p. 645); Ace Books Inc. , et al., Docket No. 8557 (supra p. 647); and Exquisite Form Brassiere, Inc. , et al. v. Fedeml Tmde Commission (C. No. 18524) 360 F. 2d 492 (supm pp. 647-648). Counsel supporting the complaint have proven the material allegations of the complaint by reliable, probative, and substantial evidence, and respondent has failed to prove that its unlawful, non-proportionalized advertising payments were made to meet a specific payment of a competitor in an individual competitive situation, rather than in a general system of competition. ORDER Now, the,'efore, it is ordered That respondent Rabiner & Jontow, Inc., a corporation, its offcers, directors, agents, representatives and employees, directly or through any corporate or other device, in the course of its business in commerce, as 'j commerce is defined in the Clayton Act, as ainended, do forthwith cease and desist from:

Paying or contracting for the payment of anything of value to, or for the benefit of, any customer of the respondent as compensation or in consideration for advertising or promotional services, or any other service or facilty furnished by or through such customer in connection with the handling, sale or offering for sale of wearing apparel products manufactured, sold or offered for sale by respondent unless such payment or consideration is made available on proportionally equal terms to al1 other customers competing with such favored customer in the distribution or resale of such products.

OPINION OF THE COMMISSION SEPTEMBER 19 1966 By REILLY Commissione,' This matter is before tbe Commission on the appeal of respondent, Rabiner & Jontow, Inc., from an initial decision of the hearing examiner holding that respondent had violated subsection (d) 684 FEDERAL TRADE CO:\MISSION DECISIONS Opinion 70 F.

of section 2 of the Clayton Act, as amended, and ordering respondent to cease and desist from the practices found to be unlawful. The complaint herein a1Jeged that respondent, a manufacturer of ladies' suits and coats, had granted promotional a1Jowances to certain of its customers without making such allowances available on proportiona1Jy equal terms to other customers competing in the sale of respondent's products. The respondent admitted many of the material allegations of the complaint in its answer but claimed as an affrmative defense that in every instance in which it granted promotional allowances it did so in good faith to meet competition. The hearing examiner found, primarily on the basis of respondent's admissions and stipulations of fact, that during the years 1960 through 1962 respondent had granted advertising allowances to certain favored customers located in the cities of Boston, Massachusetts, New York, Kew York, and Washing-ton ; that other customers competing in the sale, at retail, of respondent' s products did not receive any advertising or promotional allowances during this period; that a1Jowances granted by respondent were individually negotiated on an rld hoc basis for each advertisement; that respondent had no plan whereby competing customers might qualify for an advertising allowance; and that respondent' s payments were not made available on proportionally equal terms even among favored cllstomers. To establish tbe claim that its a1Jowances were justified under the 2 (b) proviso as good faith efforts to meet al10wanees furnished by competitors, respondent ca1Jed as witnesses the president of the corporation, Abbe Rabiner, representatives of 17 coat and suit manufacturers, and an associate professor of retail merchandising at New York University who testify,ed as an expert witness. The examiner rej ected this defense, holding that respondent had failed to prove through the testimony of these witnesses that its non-proportionalized advertising payments were made in der to meet comparable payments in specific, individual, competitive situations. The examiner found in this connection that the testimony of Rabiner and the expert witness related only to general competitive conditions in that segment of the garment industry of which respondent is part and not to the issue of whether respondent' s discriminatory payments were made defensively in good faith response to promotional payments offered to its customers by competing- garment manufacturers. The examiner also found that respondent had failed to prove through the testimony of the 17 manufacturers' representatives that it was in fact com- RABINER & JONTOW, INC. 685 638 Opinion peting with those particular manufacturers in the distribution of its products. He also found that none of these manufacturers, individually, paid to respondent' s favored customers the large cooperative advertising allowances that respondent paid. He concluded from his review of the record that there was no evidence that respondent's allowances were granted to meet or match a similar payment by a specifically named competitor who, at the time, was selling competing merchandise to respondent's favored customers.

In its appeal from the initial decision respondent does not contest the examiner s finding of a prima facie violation of 2(d). It contends, however, that the complaint should be dismissed on two grounds, the first being lack of public interest in the proceeding and the second, that its allowances were made in good faith to meet competition.

Respondent' s "public interest" argument is based primarily on the undisputed fact that violations of 2 (d) have been widespread in the wearing apparel industry. This argument, as we understand , is not that the Commission should have made no attempt to correct these ilegal practices but that the Commission has gone about it in the wrong way. The respondent is, of course, weJ1 aware of the Commission s efforts to secure industrywide compliance with section 2 (d). See In the Medter of Abby Kent Co., Inc. Docket No. 328 , et al. (68 F. C, 393J. An investigation undertaken by the Commission in 1961 disclosed that a large number of garment manufacturers were discriminating among competing customers in the granting of advertising and promotional allowances. The Commission thus having reason to believe that violations of section 2 (d) existed throughout the industry made the determination, after considering and rejecting other proposed remedial approaches, that a general correction of these practices could best be accomplished by affording members of the industry an opportunity to sign consent agreements containing orders to cease and desist from granting discriminatory allowances. Subsequent thereto, the Commission during a period of approximately two years accepted agreements and orders from 298 apparel producers including those significant sellers wbo were granting the largest amounts of aJ10wances to the greatest number of buyers. On August 9 , 1965, aJl outstanding orders were made effective the Commission having determined at that time that this particular phase of the wearing apparel inquiry was for the most part terminated and that "The few unresolved matters do not involve Opinion 70 F. T.

suppliers who constitute a force capable of competitively disadvantaging those industry members who wil be under order. Abby Kent, SU1Jm. The Commission further pointed out that its enforcement program in this industry would, when necessary, be supplemented by formal proceedings against selected buyers who knowingly induce or receive discriminatory allowances. Although cognizant of the foregoing facts, respondent now asks us to reconsider our enforcement policy in the light of the decision in the Max FrwtoJ' and Skulton cases. In these two cases complaints charging two cosmetic manufacturers with violating section 2 (d) were dismissed, the Commission having found that the respondents were only two among a very large number of suppliers participating in special promotional events sponsored by a single buyer. We held in our opinion that the entry of cease and desist orders against these particular respondents would not be an equitable and fully effective method of eliminating the discriminatory practices and that in the circumstances shown to exist the "enforcement jJolicy best calculated to achieve the ends contemplated by Congress" was one based on Section 5 of the Federal Trade Commission Act and directed at the recipient the discriminatory allowances.

Respondent contends that on the basis of our holding in Max Factor and Skulton we should dismiss the complaint against it and bring suit against its favored customers under Section 5 for inducing discriminatory allowances. This argument is rejected. Our disposition of the two cases relied upon by respondent cannot be interpreted as a policy decision to proceed only against buyers who induce 2(d) violations rather than against the seller who has violated 2 (d). The fact that in a given industry or market buyers may be largely responsible for inducing discriminatory practices is not suffcient reason for suing them to the exclusion of the supplier. It may be that more often than not large buyers are responsible for a seller s discriminations. And Congress was fully aware of this fact when it passed the Robinson-Patman Act. The Act nevertheless is directed against the seller as well as the buyer. In any event, our enforcement policy must be guided by the circumstances as we see them which will also take into account the respective effectiveness of tbe various remedies available to us. For example, proceeding against buyers under Section 5 would certainly be indicated where such a suit against one or two buyers would have the same remedial effect as a multitude of actions J Docket Nos. 7717 and 7721 , July 22 , 1964 (66 C. 184J. RABINER & JON TOW, INC. 687 638 Opinion against sellers under 2 (d). Grand Union v. 300 F. 2d 92 (2nd Cir. 1962), American News Co. v. F.T. C., 300 F. 2d 104 (2nd Cir. 1962), Giant Food Inc. v. 307 F. 2d 184 (D. C. Cir. 1962), R. H. Macy Co. , Inc. v. 326 F. 2d 445 (2nd Cir. 1964) .

Furthermore, we fail to detect any similarity in the circumstances under which this case was brought and those of the Max Factor and Shulton cases. Our investigation of the wearing apparel industry had disclosed the likelihood that in many instances department and specialty store chains had been responsible for the discriminatory allowances. In other instances it seemed likely that it was the suppliers themselves who had initiated the practice. Being fully aware of the existing situation, the Commission made the determination long before it brought suit against respondent that the elimination of the discriminatory practices could best be achieved by proceeding against the suppliers. It bas executed this policy by securing consent agreements from aJl but a few firms, which include the respondent, where the facts disclosed by the investigation gave it reason to believe that 2 (d) was being violated. Thus the factual situation here is diametricaJly opposite that shown to exist in the cosmetic cases. Here a decision not to dispose of the case on the merits would not only be unfair to suppliers already under order but would tend to weaken the Commission s entire enforcement program in this industry. Respondent also asserts that the proceeding is not in the public interest because small manufacturers cannot afford to make promotional payments on the same basis or in the same amount as their larger competitors. It states in this connection that some large apparel manufacturers have set up programs providing for proportionalized allowances of up to 50 percent and higher of the buyers' cost of advertising and further claims that it would be impossible for it to grant such large payments on proportionally equal terms to aJl of its competing customers. As found by the hearing examiner the evidence on this point is inconclusive. But even if respondent were able to prove its inability to duplicate the lawful promotional programs of the very large apparel manufacturers there is nothing in the record to indicate that respondent could not establish its own nondiscriminatory promotional plan and, when necessary to meet competition, deviate from that plan by paying to certain customers the same amount as the larger competitor whose allowance it is meeting. In its appeal from the examiner s holding that its discrimina- . .

Opinion 70 F.

tory promotional payments were not granted in good faith meet competitors' aHowances, respondent in effect concedes that it has failed to make out a meeting competition defense under established legal criteria. It contends in this connection that there is a difference between price discrimination and the granting of discriminatory aHowances and that the Commission, therefore should utilize different standards for determining the suffciency of the meeting competition defense in 2 (d) cases as distinguished from those involving prima facie violations of 2 (a). Respondent has failed to suggest any standards or tests for determining whether, and under what circumstances, an advertising aHowance has been properly granted to meet in good faith a competitor s aHowance although it obviously believes that the practice of making promotional payments on a discriminatory basis for 20 odd years without attempting to establish a nondiscriminatory program comes within the realm of permissible behavior. It does suggest however the elimination of one element of proof required in a meeting competition defense to a 2 (a) violation and that is proof that the discriminatory payment was made in response to a payment offered by another seHer in an actual competitive situation. This element of proof, however, goes to the "actual core" of the meeting competition defense which " consists of the provision that whenever a lawful lower price of a competitor threatens to deprive a seHer of a customer, the seHer, to retain that customer, may in good faith meet that lower price. StiLndard Oil Co. v. 340 U. S. 231, 242. Respondent' s argument, as we understand it, is that the granting of promotional aHowances is a legitimate method of competing and that in an industry in which the practice of granting allowances is widespread a seller should be permitted to grant disproportionate aHowances to meet competition generally without showing that any particular payment was made to meet a specific competitive offer. There is, of course, nothing inherently unlawful about promotional aHowances. Cooperative advertising has traditionally been regarded as a legitimate method of sales promotion. Congress has found however that a sales promotional allowance " becomes unjust when. the customer is dedving from it equal benefit to his own business and is thus enabled to shift to his vendor substantial portions of his own advertising cost, while his smaHer competitor, unable to command such allowances, cannot do so. " H. R. Rep. No. 2287 , 74th Cong. , 2d Sess. 15- (1936). Consequently, the basic purpose of 2 (d) was to insure RABINER & JONTOW, INC. 689 638 Opinjon that competing purchasers from the same seller would receive allowances on a nondiscriminatory basis. This purpose would be defeated if a seller could justify discriminations by the general showing that its competitors were granting promotional aJIowances and that it would be competitively disadvantaged by failure to utilze allowances as a method of sales promotion. If this were the rule, an sellers could justify discriminations in the granting of promotional allowances merely by showing the general use of such allowances by others in the industry and the value of such allowances as a competitive tool. The granting of promotional allowances would then be governed by a broad reading of 2 (b), not by 2(d) which requires that promotional payments be made available on proportionally equal terms.

The meeting competition defense, however, is an exception to the prohibitions of the statute and, as such, must be strictly construed. The Great Atlantic Pacific Tea Co. v. Federal Trade Commission 106 F. 2d 667 (3rd Cir. 1939), United States Scharton 285 U. S. 518 Spokane I.E.R. Co. v. 241 U. 344. In cases brought under both 2 (a) and 2 (d), therefore, a discrimination may be justified as a good faith "meeting of competition" only when the seller is otherwise complying with the applicable subsection and the particular discrimination is made in a genuine defensive response to another seller s offer in a specific transaction. ' In other words, a seller who has made no attempt to comply with the substantive requirements of the Act is precluded from claiming that his discriminations were made in good faith to meet competition.' We have held therefore that a seiler engaging in cooperative advertising must do so through a comprehensive, nondiscriminatory program, and that after such a program has been established, deviations from it in the form of more generous allowances may be excused in individual instances shown to be good faith attempts to meet promotional allowances furnished by competitors. Exquisite Form BTl1Ssiere, Inc. v. Federal Trade Commission 1965 Trade Cas. 11 71,491 (7 S. & D. 1291) .

'It is foi" this reason that the Commission and the courts have consistently held thllt discriminations made generally to meet competition (10 not come within the meeting competition defense. "Section 2(b) permits a single wmpany to sen one customer at a ' Jower' price and of that only to tbe extent that it is made 'in good faith to meet an equally low price of a competitor.' " Federal Trade Commw8ion v. Cement Institute, et al. 333 U. S. 683 , 725. "See in this connection Federal Trade Commissi oJi v. ii. E. Staley Mfg. Co., 324 U. S. 746, wherein one of the reasons given by the Court for rejecting the 2(b) defense was that respondents had "never attempted to establish their own nondiscriminatory price system, and then reduced their price when necessary tQ m,"et competition. Dissenting Opinion 70 F.

Respondent' s argument that the hearing examiner erred in dismissing its 2 (b) defense is rejected. We are of the opinion that respondent has failed to establish that its discriminatory allowances were made in good faith to meet competitors' allowances for the reasons set forth in the initial decision. Respondent' s appeal is denied. The hearing examiner s intial decision wil be adopted as the decision of the Commission. Commissioner Elman dissented and has filed a dissenting opinion.

DISSENTING OPINION SEPTEMBER 19 , 1966 BY ELMAN Commissioner:

This case is part of the Commission s program, initiated in 1962, to eliminate discriminatory promotional allowances in the wearing apparel industry througb the imposition of orders upon a number of suppliers. I wil not repeat here in detail my reasons for believing that that program has been neither effective nor equitable. See Abby Kent Co. , Inc. Docket No. 328 (August 9 1965) (dissenting opinion) (68 F. C. 393, 407). As the Commission recognizes, violations of Section 2 (d) have been widespread in the wearing apparel industry; department and specialty store chains to a large extent have been responsible for discriminatory allowances in the industry; and individual suppliers, like respondent, have felt compelled to grant such allowances because of general competitive conditions in tbe industry, The wearing apparel industry is highly fragmented, consisting of thousands of manufacturers, most of them very small in relation to the chain and department store buyers. For most manufactuers, the buyer is in the driver s seat; whatever he wants in the way of advertising or promotional allowances, the buyer is usually in a good position to get.

Respondent is one of the two suppliers, out of the group of about 300 sued by the Commission, which refused to sign 2 (d) consent orders. The suppliers which signed such orders represent only a fraction of the entire industry, and only eight of the outstanding orders are directed against members of respondent' particular segment of the industry-ladies' coats and suits. As respondent points out, more than 500 of its direct competitors are not under order. It is not hard to see why an enforcement policy designed to place even a substantial number of suppliers under , RABINER &; JONTOW, INC. 691 638 Dissenting Opinion order can accomplish little. The abilty of large and powerful buyers to exact discriminatory allowances from suppliers not under order remains unimpaired. Even if the Commission could be sure of full compliance with the outstanding orders, this basic gap would not be plugged. Moreover, the impression persists that issuance of these orders has had little or no effect in eliminating discriminatory allowances in the industry. According to industry spokesmen there is a great missing step between the law and its enforcement" and "the Commission orders have not deterred some leading retailers from continuing to demand and receive discriminatory advertising allowances. (New York Times July 10 1966 , sec. 3, p. 1.) In view of the general competitive conditions prevailng in the industry and the Commission s limited capacity to police outstanding orders, many suppliers under order apparently feel that they must continue to grant discriminatory allowances.

The Commission s enforcement policy is deficient in yet another respect. If, as seems to be assumed, many department and specialty store chains have a practice of inducing and receiving discriminatory promotional allowances, that practice is surely not confined to ladies' coats and suits or to any other single line or product. Department stores nowadays sell almost everything under the sun. Even if the Commission were to place under order every supplier in the wearing apparel industry-and no one suggests that it should or could-large department and chain store buyers would stil be able to obtain discriminatory allowances on al1 the other products they carry. Thus, the imposition of orders on cloak-and-suiters like respondent does not even make a dent in the problem of alleged abuses of buying power by large retailers. The issuance of this order, like the other orders against suppliers has moved the Commission no closer to its goal of eliminating prevalent ilegal and discriminatory promotional allowanceswhether in the ladies' coat and suit industry, the wearing apparel industry generally, or in any other industry making products sold in chain or department stores.

I think it is also inequitable to issue this order against respondent. The Commission holds that it is not a defense that these allowances were granted in response to general competitive conditions in that segment of the garment industry of which respondent is part. Again, I wil not repeat here my reasons for believing that the Commission s interpretation of the 2(b) defense imposes an impossible and unrealistic burden on sellers. See _ Dissenting Opinion 70 F.

National Dairy Products Corp. Docket No. 7018 (decided July , 1966) (dissenting opinion) (p. 215 hereina; rti-Valley Packing Co. Docket No. 7225 (decided July 28 1966) (dissenting opinion) (p. 290 hereina. In order to satisfy the Commission that it was meeting competition in good faith, a respondent must prove that the "payments were made in order to meet comparable payments in specific, individual, competitive situations it is not enough to show that it acted defensively in response to general competitive conditions" prevailng in the segment of the industry in which it does business. To prove its good faith, a respondent must come forward with "documentation" or "specific evidence" showing that it used "reasonable diligence in verifying the existence" of a comparable allowance offered by a particular competitor.

As applied to the circumstances existing in the wearing apparel industry, these requirements of proof make the 2 (b) defense unavailable, as a practical matter, to any supplier against which the Commission determines to proceed. Whatever the technical justification for the Commission s position, we should recognize the actual commercial consequences. In this industry, as the Commission has recognized, discriminatory allowances are both "widespread" and "secretive. Abby Kent Co., Inc. , supra. To bar a single seller, or only some sellers, from granting allowances in an industry where the practice has become an everyday competitive necessity, and where it derives from the covert exertion of pressure by large and powerful buyers, means that such sellers will have to compete at a substantial disadvantage. In this industry, if a chain or department store buyer tens a seller that he wants a promotional allowance, the seller need not be informed whether the buyer has already received a specific offer of a comparable allowance from a specific competitor; he knows well enough from general conditions prevailing in the industry that the buyer can and wil obtain such an allowance, whether from the seller or a competitor, and unless the seller grants the requested allowance he wil lose the account. What more does he have to know in order to meet competition in good faith? For these reasons and others I have elaborated elsewhere, it seems to me to be a serious mistake in the allocation of its enforcement resources for the Commission to have channeled, and tn be continuing to channel, its energies primarily in the direction of imposing 2 (d) orders on a relatively small number of suppliers in scattered segments of the wearing apparel industry. It would PHILIP MORRIS ORIGINALS , LTD. , ET AL. 693 638 Complaint have been, and still would be, far more effective and more equitable for the Commission to pursue an enforcement policy realistically designed to accomplish the central objective of the Robinson-Patman Act to curb and prohibit a11 devices by which large buyers gained discriminatory preferences over smaller ones by virtue of their greater purchasing power. C. v. Henry Broch Co. 363 U.S. 166, 168. I would follow here the general enforcement policy-aimed primarily at alleged abuses of buying power-which was stated not too long ago in Max Factor and Shu/ton (Docket Nos. 7717 and 7721 , July 22, 1964) (66 F. 184).

FINAL ORDER This matter having been heard by the Commission upon respondent' s appeal from the hearing examiner s initial decision, and the Commission, for the reasons stated in the accompanying opinion, having denied the appeal:

It is ordered That the initial decision of the hearing examiner , and it hereby is, adopted as the decision of the Commission. It is further orde,' That respondent 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, Commissioner Elman dissented and has filed a dissenting opinlOTI.