Campbell Taggart Associated Bakeries, Inc.

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IN THE :VIATTER OF CAMPBELL TAGGART ASSOCIATED BAKERIES, INC. CO'iSENT ORDER, OPINIONS , ETC. , IN REGAIW TO THE ALLEGED VIOLATION OF SEC. 7 OF THE CLAYTON ACT AND THE FEDERAL TRADE COMMISSION ACT Docket 7938. COJ)'Iplaint, June 1-, 1960" Decision, Apt. 7, 1967 Consent order requiring the Nation s second largest chain lmking company with heaJquartCls jn Dallas, Texas, to divest four acquired baking plants and related assets, and also forbids it to acquire any domestic producer or 5c11c1' of baking goods for the next 10 years without prior approval of the Federal Trade Commission.

COMPLAI'iT The Federal Trade Commission, having reason to beJievc that the above-named respondent has violated and is now violating the provisions of Section 7 of the amended Clayton Act (D. , Title , Section 18), and Section 5 of the Federal Trade Commission Act (D. S. C., Title 15, Section 45), and it appearing to the Commission that a proceeding by it in respect thereof would be in the public interest, hereby issues its complaint stating as follows: COU:\T I PARAGRAPH 1. Respondent, Campbell Taggart Associated Bakeries, Inc., is a corporation doing business under and by virtue of the laws of the State of Delaware, with its principal offces Hej)orteJ lis flame"ued by hearing examiner s ord r of April " 196 . by adding" sul;p"r,,graph to Paragraph Eight.

510 FEDERAL TRADE CO:tMISSION DECISIONS Complaint 71 F.

and place of business located at 6211 Lemmon Avenue, Dallas 21 Texas Respondent was organized under the laws of the State of Delaware in J 927 and through ownership of voting stock maintains control of approximately 50 subsidiaries which operate approximately 67 baking plants iocated in 58 cities and 21 States, principally in the South, in the :Ylidwest and in the State of California. In addition, respondent exercises cor:trol over its subsidiaries by placing its offcers in key executive positions in its subsidiaries and by directing the formation and control of the policies, practices and acts as hereinafter referred. Further, respondent directs and controls the purchase of primary "ingredients used by its subsidiaries, directs and controls advertising and promotional programs engaged in by its subsidiaries, and directs and controls prices and selling areas of its subsidiaries. Respondent, through the ownership and control of its subsidiaries, is nOlv, and has been, directly and indirectly, engaged in the manufacture, distribution and saJe of bread and bread-type rolls and in the purchase of the necessary ingredients therefor. These products are primarily sold under the well-known and extensively advertised trade name of j'Rainbo. " Respondent is the second Jargest commercial baker in the 1.inited States and its total sales during the year J 959 were $173 389 607. PAR. 2. Respondent's subsidiaries are located in various States of the United States other than the State in which the respondent maintains its principal place of business. In the regular course and conduct of its business, as described herein, respondent ships, or causes to be shipped, bread and bread-type rolls directly from its bakeries to the purchasers thereof, some of whom are located in States other than those from which such shipments originated. Furthermore, in the regular course and conduct of its business, respondent purchases various raw materials for the manufacture of the products of the bakeries operated by its subsidiaries, as well as the supplies, equipment and other needs for such manufacture, and ships, or causes to be shipped, such items to said bakeries, many of ,which are located in States other than those from which said shipments originated. In the exercise of such controls and activities by respondent there is maintained across State lines a steady flow of correspondence and other contracts between and among respondent and its subsidiaries. By these means and methods, among others respondent has maintained, and still does maintain, a course of trade in commerce, as Hcommerce " is defined in the amended CAMPBELL TAGGART ASSOCIATED BAKERIES , INC. 511 509 Complaint Clayton Act and in the Federal Trade Commission Act, in bread and other bakery products, among and between the various States of the United States.

PAR. 3. Sales of bread and bread-type rolls are usually made from each of respondent's bakeries, or bakery plants owned or controlled by one of respondent's subsidiaries, throughout an effective area of distribution of approximately 150-300 miles from each plant. This area of distribution is governed by the distance each plant can economically ship its products. Within this effective area of distribution, each plant encounters competition from local independent bakers, regional bakers and other national bakers. In addition to these marketing areas, the bakery plants owned or control1ec1 by respondent's subsidiaries and independent local bakers, regional bakers and other national bakers are all in competition \with one another in various other sections of the country as hereinafter a1Jeged.

PAR. 4. Prior to the acquisition alleged herein, Grocers Baking Company was a corporabon organized, existing and doing busjnes,s under and by virtue of the laws of the State of Kentncky, with its principal place of business located at 1455 South 7th Street, Louisvile, Kentucky.

It was engaged in the manufacture, distribution and sale of bread and other bakery products, and, in addition to its own plants, owned and controlled three subsidiaries which were engaged in the manufacture, distribution and sale of bread and other bakery products. Groce)"s Baking Company, and its subsidiaries, owned and operated plants located as fo1Jows: Corpon'!tiun Location of pla11t Groce!'s Baking Company Louisville, Kentucky Paducah, Kentucky OweJ1sboro, Kentucky Bowling Green, Kentucky :xington, Kentucky Grocers Baking Company of Johnson City (Subsidiary). Johnson City, Tennessee The Gro(:ers Bakir.g COJ1IJany Bedford, Indiana (Suhsidiary) . Ne,v Albany, Indiana The Hi-Class Baking Company (Subsidiary) . Evansville, Indiana For the fiscal year ending June 28, 1958, the combined sales of Grocers Baking Company and its subsidiaries, in bread and Complaint 71 F.

bakery products, were $13 001 289, which volume placed it among the ten largest commercial bakers in the United States. In addition, the value of shipments of Grocers Baking Company in the State of Kentucky placed it in the number one position in that State with approximately 19% of the total sales of bread and bakery products.

PAR. 5. Grocers Baking Company, and its various subsidiaries in the regular course and conduct of their businesses, shipped or caused to be shipped bread and lJread-type rolls directly from the bakeries to the purchasers thereof, some of whom were located in States other than those from which such shipments originated. Furthermore, in the regular course and conduct of their businesses, Grocers Baking Company, and its subsidiaries, purchased various raw materials for the manufacture of the products of the bakeries, as well as supplies, equipment and other needs for such manufacture, and shipped, or caused to be shipped, such items to said bakeries, many of which were located in States other than those from which said shipments, originated. By such means among others, Grocers Baking Company, and its subsidiaries is de-maintained a course of trade in commerce, as "commerce" fined in the amended Clayton Act and in the Federal Trade Commission Act, in bread and bread-type rolls among and between the various States of the United States.

PAR. 6. In Aprij, 1959, respondent acquired all of the assets of Grocers Baking Company and its subsidiaries. Prior to this acquisition, respondent competed substantially, through bakeries operated by some of its various subsidiaries, with some or all of the baking plants operated by Grocers Baking Company in the saJe and distribution of bread and bread-type rolls. Such baking plants of respondent are Jocated in Indianapolis, indiana; Nashville, Tennessee; Cincinnati, Ohio; l\lemphis, Tennessee; and Asheville, :\ orth Carolina.

PAR. 7. Beginning on or about January, 1950, respondent has entered into a continuous practice of acquiring the assets of certain additional corporations Jocated throughout the United States engaged in the manufacture, sale and distribution of bread and bread-type rolls. AJI of these acquired corporations at the time of the said acquisitions, in the regular course of their respective businesses, manufactured, sold and distributed bread and breadtype rolls in and throughout various States of the Vnited States or purchased 01' teceived shipments of various ingredients such as flour and yeast, or other essential products and materials, related to the manufacture, saJr and distribution of bread and CAMPBELL TAGGART ASSOCIATED BAKERIES , INC. 513 509 Complaint bread-type rolls, from producers, suppliers, manufacturers or processors located throughout the rnited States. All of the acquired corporations, prior to and at the time of the acquisitions, were engaged in commerce, as "commerce " is defined in the amended Clayton Act and the Federal Trade Commission Act. PAR. 8. In a series of transactions referred to in Paragraph Seven herein, respondent acquired all or part of the assets of the following corporations, which operated bakeries which were engaged in the manufacture, saJe and distribution of bread and bread-type rolls.

In 1954 , respondent acquired the following corporations, all located in the State of California:

(1) Kilpatrick's San Francisco Bakery, 2030 Folsom Street San Francisco 10, California, a California corporation with annual sales in 1953 of $4 032 310. , with a baking plant Jocated in San Francisco, California.

(2) Kilpatrick's Marvel Bakery, 1312 East 8th Street, Oakland, California, a California corporation with annual sales in 1953 of $3 630 098. , with a baking plant located in Oakland California.

(3) San Joaquin Baking Company, L. and Los Angeles Streets Fresno, California, a California corporation with annual sales in 1953 of $3 979 555. , and with baking plants located at Fresno and Modesto, California.

(4) Holsum Bread Company, 715 North Court Street, Visalia California, a California corporation with annual sales in 1953 of $867 953.47 , with a baking plant located in VisaJia, California. (5) Old Home Bakers, 3266 10ntgomery Way, Sacramento, California, a California corporation with annual sales in 1953 of 501 231.88, and with baking plants located at Sacramento and Chico, California.

The above-listed acquired corporations collectively sold approximately 31 % of the bakery products in their marketing area at the time of the acquisitions. These acquisitions constituted a new market entry into this area by respondent and made respondent the largest producer of bakery products in this area. In J 959, respondent acquired :\read' s Fine Bread Company, 1950 Texas A venue, Lubbock, Texas, a Texas corporation which owned and operated, among others, three bakeries Jocated in Rosweb and Clovis, ::ew Mexico and Lubbock, Texas. For the fiscal year ending October 3J , 1958, the combined sales of these three acquired bakeries in bread and bakery products were $4 462 230. This acquisition eliminated one of the largest independent whole- Complaint 71 F.

saJe bakeries in the Roswell and Clovis, New :VIexico and in the Lubbock, Texas markets.

In addition to the above-listed corporations, respondent has acquired, among others, all or part of the stock or assets of the following corporations, and in each instance eliminated an independent wholesale bakery as a competitive factor in its respective market area.

In 1950, respondent acquired Zim s Bakery, Colorado Springs Colorado.

In 1951, respondent acquired Purity Baking Company, El Paso, Texas.

In 1956, respondent acquired Jessee Baking Company, Grand Island, K ebraska.

In 1960 respondent acquired Noll's Baking Company of Alton Illinois, through one of its subsidiaries. * In each and all of the acquisitions as alleged herein, respondent organized subsidiaries for the €xp_ress purpose of operating the acquired properties.

PAR. 9. Respondent has violated Section 7 of the amended Clayton Act in that the acquisition of Grocers Baking Company, as well as the other acquisitions listed in Paragraph Eight, either individually or collectively, may have the eflect of substantially lessening competition or tending to create a munopoly in the respondent in the following ways, among others: 1. Respondent has become, actually or potentially, the leading and dominant supplier of bread and bread-type rolls within the section of the country" of the State of Kentucky and, also, within certain substantial portions of that State. 2. Respondent has become, actually or potentially, the Jeading and dominant supplier of bread and bread-type rolls ill other section(s) of the country " in which Grocers Baking Company had bakery plants and in which respondent competed with Grocers Baking Company in the saJe and distribution of these products.

3. Respondent has become, actually or potentially, the Jcading and dominant supplier of bread and bread-type rolls in the "section of the country " consisting of the entire distribution area of the bakeries of Grocers Baking Company.

4. Respondent has become, actually or potentially, the leading and dominant supplier of bread and bread-type rolls in other section (s) of the country" consisting of the entire combjned Added by order uf hearing- e:-amino da:ed April 2 . 1963. CAMPBELL TAGGART ASSOCIATED BAKERIES , INC. 515 509 Complaint distributional area of the acquired California corporations and consisting of the distributional areas of the other acquired corporations, individually and collectively. 5. Respondent has eliminated actual or potential competition by and between it and Grocers Baking Company, and by and between it and other bakeries acquired and described in Paragraph Eight, in each of the "section (s) of the country" or market areas described.

6. Respondent may substantially Jessen actual and potential competition throughout the country in the manufacture, sale and distribution of bread and bread-type rolls. 7. Respondent has eliminated Grocers Baking Company, and the bakeries it has acquired as alleged in Paragraph Eight, as independent competitive ractors in the manufacture, sale and distribution of bread and bread-type rolls in the "section (s) of the country" described.

8. Respondent has enhanced its competitive advantage in the manufacture. sale and distribution of bread and bread-type rolls to the detriment of actual and potential competition throughout the country, 9. Respondent has significantly increased the trend to industrywide concentration of the manufacture, sale and distribution of bread and bread-type rolls.

10. Respondent has precluded and prevented suppliers of various items and products used in the manufacture, sale and distribution of bread and bread-type rolls from selling the same to Grocers Baking Company, and to the other bakeries described in Paragraph Eight.

11. Respondent has enhanced its power and ability to preclude or foreclose new entrants into the bread and bread-type rolls industry in the sections of the country described. PAR. 10. The foregoing acquisitions, individually and collectively, and the acts and practices of respondent, as herein alleged constitute violations of Section 7 of the Clayton Act (D. , Title , Section 18) as amended and approved December 29 , 1950. COUNT II PAR. 11. AJI of the allegations of Paragraphs One through Xine hereof are hereby realleged and incorporated herein by reference and made a part of this Count II as though each were set forth in full herein.

PAR. 12. By its policies and practices of acquiring bakeries throughout the United States, respondent has acquired the power Complaint 71 F.

and ability to achieve an actual or potential monopoly in the manufacture, saJe and distribution of bread and bread-type rolls in the United States.

By virtue of its position in the bakery industry and its continuous growth by acquisitions, respondent has acquired an actual or potential monopoly power to impede and prevent the growth and business opportunities of its competitors, as well as their ability to survive in the manufacture, saJe and distribution of bread and bread-type rolls in the United States.

In the course and conduct of its business in commerce, respondent has used its increasingly dominant position and economic power to engage in, and is now engaged in, performing 01' effectuating various policies, acls and practices in the business of manufacture, distribution and sale of bread and bread-type rolls in the United States. Among such acts, methods and practices are: 1. Direct payments of cash to grocers for preferred space for the display of respondent's products;

2. Reductions in prices or charges to some grocers or retailers-without relation to any savings in respondent' s costs in the manufacture, distribution or sale of its products-for the purpose, or with the effect, of gaining entry into the stores of such grocers or retailers, thereby enhancing the potential resale of these products at the expense Of competitive products; and 3. Giving discriminatory rebates, discounts and allowances, by various methods, in order to enable the purchasers of respondent bread, as well as its other bakery products, to reduce the consumer prices therefor, or in lien thereof, to enjoy a greater net profit on retaij sales of respondent' s products.

PAR. 13. The effect of the acquisitions alleged and the consequent and effectuating policies, methods, acts and practices of respondent as alleged, has been or may be: 1. To divert to respondent, from its competitors, who are not in the economic position to successfully engage in such policies methods, ads and practices, a substantial share of the sales of bread and bread-type rolls;

2. To discourage or tend to foreclose the entry of any neVi' competitors in the manufacture, distribution and sale of bread and bread-type rolls;

3. To lessen, hinder, restrain and suppress competition in the manufacture, saJe and distribution of bread and bread-type rolls; 4. To actually or potentially enable respondent to dominate the manufacture, sale and distribution of its products, in various sections of the country; and ......................... ............ . ................ . CAMPBELL TAGGART ASSOCIATED BAKERIES , INC. 517 509 Initial Decision 5. To tend to create a monopoly in respondent in the manufacture, sale and distribution of bread and bread-type rolls in those sections of the country where respondent sells and distributes such products.

PAR. 14. The foregoing policies, methods, acts, practices and acquisitions of respondent, as herein alleged, are all to the prejudice and injury of respondent's competitors and to the public; have a tendency or capacity to hinder and prevent, and have hindered and prevented, actual or potential competition in the manufacture, sale and distribution of bread and bread-type rolls in commerce and constitute unfair methods of competition and unfair acts and practices in COmnl€lce within the intent and meaning of Section 5 of the Federal Trade Commission Act (D. , Title 15, Section 45) and constitute a violation thereof. Ml. Edwanl H. McGrail and Mr. V. Rock Gnmdnwn, JT. for the Commission.

MT. Frederick M. Rouee and Mr. Ronald J. Wilson of Kirklcend Ellis, Hodson, Chaffetz Masters Washington, D. 1111'. Frazor T. Edmondf:;on and 1Y11'. Donald H. ;J1acka1,wn Dallas, Tex. , attorneys for respondent. INITIAL DECISIOl\ BY JOHN B. POIl\DEXTER, HEARING EXAMI:'ER JULY II , 1966 I:'DEX Page PRELI1\lIXARY STATE:VIENT 519 FIXDIXGS OF FACT - - un - 524 1. TheBakeries,BusinessInc.and -Organization of Campbell Taggart Associated 524 II. THE BAKING I:'DUSTRY . 530 A. Product Categories. -- 530 B. Types of Producers and Methods of Distribution in the Baking Industry 533 1. Wholesale Bakeries -- 533 2. "First" Position or: Bread Racks .. ...... -- - - m 533 o. " Overloading" Bread Racks and " Stale Returns 531 4. Home Service or Homie-to- House Bakeries. 535 5. Grocery Chain Bakeries - m 535 6. Retail Multi- Outlet Bakeries 536 C. Ownership of Baking Companies 536 D. Postwar Trends in the Baking Industry 539 E. Growth Through Acquisition 541 F. Line of Commerce 546 G. Area of Geographic Competition 548 .....,........................ .. .......... ... Initial Dccision 71 F. FINDINGS OF FACT-Continued Page III. THE CHALLENGED ACQUISITIONS 549 A. The Acquisitions in California 550 1. The Kilpatrick Bakeries .m 550 a. Areas of Distribution 552 b. Commerce 552 2. San Joaquin Baking Company and Holsum Bread Company .m 553 a. Areas of Distribution 553 3. Old Home Bakers, Inc. (Sacramento and Chico Plants) .... u"-- i/. 554 a. Area of Distribution of Sacramento Plant. 555 b. Area of Distribution of Chico Play!t 556 13. Concentration in the Distribution Area of Baking Planes Acquired by Subsidiary Corporations of Campbell Taggart in Northern California 556 C. The Relevant Sections of the Country. 559 D. Competitive Practices in California 574 IV. A. The Acquisitions in Kentucky, Indiana, and Tennessee. 579 B. Background and negotiations Leading to Acquisitiom, 580 C. Acquiring Subsidiaries of Campbell Taggart 682 D. Actual Competition Between Grocers and Campbell Taggart Subsidiary Plants 583 E. LJisirihution Areas of Louisvile, Kentucky, and Ne\v Albany, Indiana Plants, Areas #1 and #8 585 1. Area of Distribution, Lexington Kentucky Plant, Area # 2 585 2. Area of Distribution, BO\vling Green Kentucky Plant, Area #3 585 3. Area of Distribution, Owensboro Kentucky Plant, Area #4 586 1. Area of Distribution, Paducab Kentl:cky Plant, Area #5 586 I). Area of Distribution, Evansvile Indiana Plant, Area #6 587 6. Area of Distribution, Bedford Indiana Plant, Area #7 588 I. Area of Distribution, Johnson City, Tennessee 1 plant, Area #9 588 A. Complaint Counsel's Original Survey Heports 589 B. Revised Survey Reports 591 C. 1larket Shares Shown by the Revised Special Survey Reports Filed by the Forty-five Reporting Baking Companies 594 . ...... , CAMPBELL TAGGART ASSOCIATED BAKERIES , INC. 519 509 Initial Decision FINDINGS OF F ACT Continued Page D. Competitive Practices, Such as " Coficentn...ted Service Change of Label, Free Bread Racks, Payment for Shelf Space, Discounts to Customers Overloading" Shelves, etc. 598 VI. A. The Acquisitions in Texas and Nevl :\Iexico 601 1. Mead's Fine Bread Company, A Texas Corporation 601 a. Background of Purchase -- .m 602 b. Concentration Within the States of Texas and New Mexico. u no.. . - - -- , 604 c, Concentration Within Areas :. 10 , # 11 , aYJ d # 12 the Distribution Areas of I\Icacl's Plants in Lubbock, Texas, Rcswell and Clovis, New Mexico 604 (1) Sales Reported in Area # 10 -- - 605 (2) Roswell, ;'ew Mexico Area #11 607 (3) Clovis, New Mexico Area #12 - 609 d. The Relev::nt Geographic Market Areas. fill B. Acquisitions With No Sales Data or Oral Tf:stimony in Rec01.d 1. Dan-Dee Bread Company Acquisition ....- . 611 a. Background Leading to Acquisition. 612 2. The Purity Baking ComIJ ny, El Paso, Texas - (i13 a. Background of Purchase 6lt 3. Jessee Baking Company of Grand Island, Graj1d Island .iebraska . 615 a. Background of Purchase 616 4. NolJ's Baking Company, A Corporation, AJton, Ilinois 618 a. Background of Purchase 618 b. CompctitiflIl 019 CONCLUSIONS 622 1. The Acquired C011fJanics fi22 A. The Acquisitions in C.slifomia - 1. The Grocers Eakil1g Company 023 2. ::Iead's Fine Bread Company - 623 3. Dad-Dee Bread Company 623 4. Purity Baking Company 62:J 5. Jessee Baking Company 624 6. Noll's Baking Company 624 B. Sections of the Country 624 C. The Relevant Line of Commerce. 624 D. Reasonable Probability of Lessening Competition or Tending to Create a Monop)oly 624 ORDER 632 PRELIMI ARY STATEMENT The complaint in this proceeding was issued by the Federal Trade Commission on .June 14, 1960, charging Campbell Taggart Associatcd Bakcries, Inc. , a corporation sometimes hereinafter referred to as Campbell Taggart or respondent, with violation Initial Decision 71 F. of Section 7 of the Clayton Act, as amended, and Section 5 of the Federal Trade Commission Act, as a consequence of a series of acquisitions, beginning in January 1950. The complaint contains two so-called counts. Count I challenl;es the legality under Section 7 of the amended Clayton Act of each of the following alleged transactions: 1 1. The alleged acquisition of Zim s Bakery (Dan-Dee Bread Co. ) of Colorado Springs, Colorado, in 1950; 2. The alleged acquisition of Purity Baking Company of El Paso, Texas, in 1951 ;

3. The alleged acquisitions of Kilpatrick' s Bakeries, its subsidiaries, and Old Home Bakers of California, in 1954; 4. The alleged acquisition of Jessee Baking Company of Grand Island, K ebraska, in 1956;

5. The alleged acquisition of Grocers Baking Company and its subsidiaries, of Kentucky, Indiana, and Tennessee, in 1959; and 6. The alleged acquisition of Mead's Fine Bread Company of Lubbock, Texas, Roswell and Clovis, Kew Mexico, in 1959. On April 24 , 1963, the complaint was amended so as to chaJlenge the acquisition of ""oll' Baking Co . of Alton, Ilinois, in 1%0.

Count I further alleges that respondent, incorporated under the laws of Delaware in 1927, through ownership of voting stock maintains control of approximately 50 subsidiaries which operate approximately 67 baking plants located in 58 cities and 21 states principally in the South, in the Midwest, and in the State of California. Count I further alleges that respondent exercises control over its subsidiaries by placing its offcers in key executive positions in Hs subsidiaries, and by directing the formation and control of the policies, practices, and acts as hereinafter referred to. Connt I also alleges that respondent directs and controls thc purchase of primary ingredients used by its subsidiaries, directs and controls advertising and promotional programs engaged in by its subsidiaries, and directs and controls prices and sellinl; areas of its subsidiaries. Count I further alleges that, throul;h the ownership and control of its subsidiaries, the respondent is and has been, directly and indjrectJy, engaged in the manufacture distribution, and sale of bread and bread-type rolls, and in the 1 The tral1SHction are listed ir. the ordev of their OCCUl':- ence, date,vioe, not in the order ;n which they arc alleged in the complaint. CAMPBELL TAGGART ASSOCIATED BAKERIES , INC. 521 509 Initial Decision purchase of the necessary ingredients therefor; and that respondent is the second largest commercial baker in the United States and its total sales during the year 1959 were $173 389 607. Count I further alleges that the various acquisitions, individually or collectively, may have the effect of substantially lessening competition or tending to create a monopoly in the respondent by making the respondent the ieading and dominant supplier of bread and bread-type rolls in various geographic areas, by precluding suppliers of ingredients from selling to each of the acquired companies, and by enhancing respondent's power and ability to preclude or foreclose new entrants into the bread industry in each of their locations; and, throughout the country, respondent may substantially lessen competition and enhance its competitive advantage in the bread business to the detriment of competition and had significantly increased the trend to industry- ,'i"ide concentration.

Count II , after incorporating by reference the allegations of Count I in their entirety, charges that respondent's policies and practices of acquiring bakeries created in respondent the po\ver and ability to achieve an actual or potential monopoly In the bread business in the United States, and gave respondent monopolistic power to the prejudice of its c:ompetitors and their ability to survive. Count II also charges that respondent used its dominant position and economic pO\v€r resulting from the acquisitions to perpetuate various trade practices, including cash payments price reductions, and discriminatory allowances to its customers in violation of Section 5 of the Federal Trade Commission Act. On October 18, 1960, respondent filed an answer, denying the charging allegations of the complaint. Respondent pleaded specially that it did not bake any bread, and was not engaged in the baking business; that it ,vas a holding and service C01l1pany which O\vned voting stock in autonomous subsidiary corporations whose operating offcers, many of \whom o\vned substantial voting stock, were responsible for the production, distribution, and sale of the subsidiaries' products in their respective areas of operation. Following a pre-trial conference at which guidelines for the conduct of future hearings were prescribed by the hearing examiner on the record, hearings were held during 1961-1%5 in California, Washington, D. , Dallas, Texas, Louisvile, and Paducah, Kentucky. At the original hearings held in Louisville and Paducah in 1%3 , the hearing examiner sustained objections Initial Decision 71 F. made by counsel for respondent to the receipt in evidence of certain exhibits offered in evidence by complaint counsel, being some of approximately 75 Section 6 (b) reports, designated as Special Report Sur'cey of Mflnufflcture1' of Bflkery Products which had been prepared and submitted by respondent, its subsidiaries, and numerous third party baking companies, in response to formal request by the Commission. Each of these special reports, sometimes called 6(b) reports, was identical, on multi-page forms, and was issued by the Commission pursuant to authority granted it by Section 6 (b) of the Federal Trade Commission Act. Each exhibit stated on its face that it was a "Special Report form in connection with a survey of sales of bakery products made by wholesale bakers, grocery chain bakers and home service bakers for the years 1958 through 1961 , inclusive " and called on the particular bakery to execute and give certain financial, statistical marketing, and distribution information called ror in the form. Counsel for respondent ob.i evted to the receipt in evidence of these special reports on several grounds, among them being that said special reports and the infonnation contained therein were unlawfully obtained, since such special report forms had not been approved by the Bureau of the Budget prior to their issuance as required by the Federal Rcports Act.

The hearing examiner sustained respondent s objections to the receipt in evidence of such special report exhibits on the ground of non-compliance with the provisions of the Federal Reports Act. ultimately, the Commission sustained the ruling of the hearing examiner and the special repori forms were submitted to the Bureau of the Budget for approval. Conditioned on substantial changes being made therein, the Budget Bureau approved the special report forms. In March 1964, using the approved forms complaint counsel began a resurvey of the baking firms originaJJy surveyed. A stipulation, dated December J4, 1%4, authorized \written cross and redirect examination with respect to the resurvey responses, thus obviating further oral testimony \with respect thereto. Over respondent' s objections, the resurvey exhibits (CX 447-52J), together with written cross and redirect exami- The Feu",ral H",porb Act (5 1.. C. 1:19 (c) "nrl Et.reau of the budget Ci:' culnr A-4CJ) pn;vide . in substance"" that no Fedl'r,,1 ag!;npy shall conclud or pon o, tr.e coliPn:on of information upon identir_al items from t",n 01' Tlwl"e pe ons Unless, in advance tJf "lk' ption tJ), rn-'. sio;- tJf "ny forms to be uoed ir. l;ch collection, the agc1CY shall have submitted such forms to the Director of tile Budget Bur,"h\1 and th", lJi'" ector shali have stated thm r.e does not d:sapprov ' the propo ecl collection of information. pp.

CA:IPBELL TAGGART ASSOCIATED BAKERIES I:-C. 523 509 Initial Dccision nation, were received in evidence at a hearing held on l\1ay 18, 1965. Complaint counsel then rested their case-in-chief. Thereupon, respondent requested and was granted leave to file a \written motion to dismiss the complaint.

On May 28 , 1965, respondent filed a written motion and supporting memorandum to dismiss the complaint on the ground that complaint counsel had faiJecl to satisfy their burden of proof to support the allegations of the complaint with respect to each and all of the challenged transactions and trade practices, individually and collectively. This motion to dismiss was denied by the hearing examiner by order dated July 9 , 1965.

Thereafter, on August 31 , 1965 , after appearing with complaint counsel before the examiner in chambers on August J 3 1965, respondent filed a formal notice of election to rest its case on the evidence already in the record made during complaint counsel's case--in-chief. The election \V8.S based on complaint counsel's alleged failure to "carry their burden of proof to establish the allegations of the complaint " including their "failure to present reliable evidence of market shares, on the record, with respect to any and an of the charges of the complaint, as required by the judicial and Commission decisions in 111merger cases " (Xotjce , August 31 , 1965). Approxin1ately 95 witnesses testifi.ed at various sessions of the hearings, all being called at the instance of c.complaint counsel. Several '\vitnesses \were recalled and testified different sessions of the hearings. The record contains approximately 5 000 pages of transcript and a total of approximately 602 exhibits, most of them being multi-pap;e doc1111cnts, aggregating several thousand pages.

Proposed findings of fact, conclusions of 1mv, briefs thereon and a proposed order have been submitted and filed by respective counsel. Complaint counsel' s proposed findings contain 164 type- \written pages, with an additional 53 pages (containing a total of 171 footnotes) attached thereto which complaint counsel designate as HAppendices. " These 'j Appendices " contain figures, statistics, and tabulations which purport to show, among other things, percentages of market shares and universe figures based on the figures contained in the Section 6 (b) survey reports by wholesale bakery plants (CX 447-521), which were received in evidence and are in the record.

Rt;spondent has filed a motion, and memorandum in support thereof, to strike or disregard certain portions of complaint counsel's proposed findings and conclusions, which respondent claims Initial Decision 71 F. are based on complaint counsel's own characterizations and conclusions as set out or tabulated in the so-called "Appendices rather than on record evidence. Respondent says that the market share rankings, as proposed by complaint counsel and contained in the so-called "Appendices " are not supported by record evidence. For example, respondent asserts that, in the so-called Appendices " attached to complaint counsel's proposed findings complaint counsel are not simply prcsenting the sum of figures already in t.he record; "they are taking individual sales statistics in the record, characterizing them as totals, and then drawing unsupported conclusions from their own characterizations-ajj without benefit of record testimony or record evidence. " Complaint counsel filed an answer opposing said motion and requesting that respondent' s motion be considered as a reply to complaint counsel's proposed findings, conclusions, and order. On March 1 , 1966, oral argument was held on the proposed findings filed by respective counsel and on respondent' s motion to strike or disregard certain portions of complaint counsel' s proposed findings. The proceeding is now before the undersigned hearing examiner for initial decision. All proposed findings of fact and conclusions of Jaw not specifically found or concluded herein have been rejected.

Upon the basis of the entire recOld, the hearing examiner makes the following findings of fact, conclusions of law drawn therefrom, and issues the follo\ving order: FINDINGS OF FACT The BU)3'inclJs and Organ'izat'iorl- 0/ Cccmpbell Tcc99ccrt Associated Baken:es, Inc. 1. Can1pbel1 Taggart Associated Bakeries, Inc. , is a corporation organized in 1927 under thc laws of the State of Delaware, with its home omce and principal place of business located at 6211 Lemmon A venue, Dallas, Texas.

2. Campbell Taggart Associated Bakeries, Inc. , owns a majority of the common (voting) stock of 58 sepal.ate so-called subsidiary corporations which, in turn, operate 71 bakery plants in 71 cities, located in 22 States of the United States. These 71 bakery plants bake and seh bread, bread-type rolls, and other bakery products at wholesale, principally under thc trade names CAMPBELL TAGGART ASSOCIATED BAKERIES, INC. 525 509 Initial Decision of Rainbo, Colonial, and Kilpatrick, to both chain and individually-owned grocery stores, supermarkets, restaurants and public institutions, such as schools, hospitals, etc. (Complaint, Answer; Tr. 2543). Two subsidiary corporations seJl and distribute bakery products under the trade name Manor at retail by means of house-to-house routes. A subsidiary, Bel-Art Advertising, Inc., provides advertising services for the baking plants and two additional subsidiaries, American Foods, Inc. , and Rainbo Foods, Inc., manufacture and distribute refrigerated biscuits and ice popsicJes (:VIadsen, Tr. 2540-42). 3. The total net sales of Campbell Taggart subsidiaries for 1958 through 1%2 are as follows:

Year Totu/net sales (000 omitted) 1958 (CX 319) $162,434 1959 (CX 320) 173 389 1960 (CX 321) 197 576 1961 (CX 322) 202 162 1962 (CX 522A) 208,739 4. The names of the ,,8 subsidiary corporations first mentioned and the percentage of their common stock mvned by respondent Campbell Taggart Associated Bakeries, Inc., as of 1%2, as well as the percentage of its common stock in American Foods, Inc., and Rainbo Foods, Inc., are as follows:

Percent of O'tstanding AjJliaterlcoJIl'unlJ C01l1l0n stock o1vned Rainbo Baking Co. of Albuquerque 69. Colonial Baking Co. of Asheville G2. Colonial Baking Co. of Atlatlta 53. Colonial Baking Co. of Augusta 51.7 Rainbo Raking Co. of Aurora 51.00 Rainbo Baking Co. of Beaumont. u 51.95 Colonial Baking Co. of Cedar Rapids 56. Colonial Baking Co. of Cl1attanooga 50. Rainbo Baking Co. of Cincilwati 91.53 Rainbo Baking Co. of Clovis 90. Colonial Baking Co. of Columbus 51. Rainbo Baking Co. of Corpus Chris':l 99. Manor Baking Co. (Dallas, Tex. 50. Rainbo Bread Co. (Denver, Colo. 50. Colonial Baking Co. of Des !'James 62. Colonial Baking Co. of E1 Dorado 61.76 Rainbo Baking Co. of Ell-aso 95. Rainbo Baking Co. of Empol'ia 65. . . ...................................) . 526 FEDERAL TRADE COM)!ISSION DBCISIONS Initial Decision 71 F. T. Pe"cent oj out. tanding ADil1ated COJI1Jan!l common stock owned Colonic.! Baking Co. of Evansville 85. Colonial Baking Co. of Fort Smith 90. San Joaquin Bakeries, Inc. (Fresno, Calif. 60. Ra.inbo Bread Co. of Grl1nd Island. 60. Rainbo Baking Co. of Hal'ingen 53.43 Rainbo Baking Co. of Houston 52. Betts Baking Co. (Hutchinson, Kans. 58. Colonial Baking Co. of Indianapolis, Ind. 50.47 Colonial Baking Co. of Jackson ...... 50.47 Rainbo Baking Co. of Johnson City 95. Rainbo Baking Co. of Joliet - 50. Manor Baking Co. (Kansas City, RIo. 54. Rainbo Baking Co. of Lexington 90. Colonial BakiTIg Co. of Little Rock. 54. Rainbo Baking Co. or Louisville 95. Rainbo Baking Co. of Lubbock - 94.44 Colonial Baking Co. of Memphis 52. Colonial Baking Co. of Alabama - 57. Colonial Baking Co. of Muncie, Ind. 50.40 Colonial Baking' Co. of XashviJle 50. Rainbo Baking Co. of Oklahoma City. 51.63 Colonial Baking Co. of Owensboro . 7G. Paducah Colonial Baking Co. 90. Peoria Colonial Baking Co. 50.46 Rainbo Baking Co. of Phoenix 50. Rainbo Bakers, Inc. (Pueblo, Colo. 58. 110 Rainbo Bread Co. of Roanoke 54.40 Rockford Colonial Baking Co. 50.47 Rainbo Baking Co. of Ros'velJ - - 97. Rainbo Baking Co. of Sacramento Valley 64. Rainbo Bread Co. of Saginaw 63. Rainbo Bread Co. of St. J oseph) - 65. Colonial Baking Co. of Saint LOllis 58. Rainbo Baking Co. of San Antonio 51.00 Kilpatrick' s Bakeries, Inc. (San Francisco, Calif.) 59. Colonial Baking Co. 01 Spri11gfield 64. Rainbo Baking Co. of Tucson 52. Rainbo Baking Co. of Tulsa 59. Rainbo Raking Co. of \\laco .... 85. Rainbo Baking Co. of Wichita 52. American Foods, Inc. (Dallas, Tex. 60. Rainbo Foods. Inc. (Dallas, Tex. 60. (See CX'7JA-I-) 5. Thus, respondent's majority stock ownership in ear,h of the subsidiary corporations :ranges between 50.28SL and 99. 3:3( the outstanding common (voting) stock in the ))nrticulal' corporate subsidiary. The minority stock interests are generally owned by the operating' heads (President or Vice President) of CAMPBELL TAGGART ASSOCIATED BAKERIES, I'\C. ,27 509 Initial Decision the subsidiary corporate baking plant. In some instances, there is an agreement that Campbell Taggart may buy back the stock at book value in the event the owner ceases to be the operating head of the plant (Madsen, '11'. 2580-81).

6. Offcials of Campbell Taggart serve on the Board of Directors of many of the subsidiary corporate baking plants. As of July 17, 1%1, Mr. Frazor T. Edmondson, Secretary of Campbell Taggart and a Director and Vice Chairman of its Executive Committee, Mr. Alexander T. Page, Treasurer of Campbell Taggart and Mr. Walter J. Lyman, Assistant Secretary of Campbell Taggart, were the Secretary, Treasurer, and Assistant Treasurer, respectively, of each of the 60 subsidiary corporations (CX 71A-H). M1' Edmondson, Legal Counsel and Chairman of the Executive Committee of Campbell Taggart, as well as a Director of 25 of its corporate subsidiaries, testified, among other things that he had only attended three or four Board meetings of the subsidiaries in the last few years ('II'. 2976), and his position as Secretary of the subsidiaries was administrative, and, being Jocated in the home offce of Campbell Taggart, he could relieve the plant heads of administrative details, such as the maintenance of stock transfer records, property records, etc. Mr. Edmondson further testified that he did not participate in the marketing decisions of these subsidiary corporations in his role as director or secretary ('11' 2976-2981). Mr. Alexander T. Page, Treasurer of Campbell Taggart and of each subsidiary corporate baking plant, testified that he keeps the books, prepares an Federal and State income tax returns, franchise taxes, and similar reports to the States and Federal Government for respondent and its corporate subsidiaries ('II'. 2935-36).

7. The Board of Directors of Campbell Taggart has the over-all responsibility to the stockholders for the operation and management of the company, including the acquisition of stocks or other assets of other companies, and for the expenditure of capital for the benefit of subsidiary corporations (CX 99; Tr. 2521). The Board of Directors, from among its members, elects an Executive Committee, including a Chairman thereof, which committee oversees the day-to-day operations of the corporate respondent. In turn, another committee, called the Operating Committee, appointed by the Board from among the offcers of Campbell Taggart, oversees the day-to-day operations of the various departments in the headquarters of Campbell Taggart, such as production, sales, engineering, purchasing, and finance (CX 77; Tr. 2526 2736). The Operating Committee determines the amount of , Initial Dccision 71 F. capital expenditures to be made in each subsidiary baking plant for the coming year, and where the funds for such expenditure wil be obtained (CX 76). In stock acquisitions or other assets of companies which Campbell Taggart may consider for acquisition the Operating Committee makes an investigation and a recommendation to the Executive Committee which, in turn, makes its recommendation to the Board of Directors (1'1' 2522). 8. At its headquarters in Dallas, Texas, Campbell Taggart maintains various departments, from '\which it provides services to its various subsidiary corporate baking plants, such as research sales, production, engineering, advertising, accounting, auditing, and pul' chasing. For these services, Campbell Taggart charges each subsidiary corporation a fee of 2'1 % of the annual sales of the subsidiary corporation (Madsen, 1'1'. 2547). The basic formula for bread and bread-type rolls for the subsidiary baking plants was developed in the Campbell Taggart laboratory in Dallas, but the JocaJ plant operating head is not obligated to strictly adhere to this formula, and may change the formula to suit tastes of customers in the particular area (1'1' 2654-55). 9. The Sales Service Department, located in the Dallas headquarters of Campbell Taggart, reviews reports prepared and mailed in by the local subsidiary baking plants, containing information \'with respect to sales, tonnage stnle returns " etc. (Hazelrig, 1'1'. 2812 , 2842). If these statistics indicate potential problems the Sales SCl'vic€ Department may makesuggestions for improved performance (1'1'2816 2848). Upon the request of a plant operator, the Sales Service Department may assign a sales service representative to visit the plant, study the local problem or situation, and make recommendations io the plant n1manager (Tr. 2741-43).

10. Campbell Taggart maintains a purchasing service in its headqlwrters, where it purchases supplies, including flour, for the subsidiary baking plants (Vesecky, Tr. 2983- , 2990). The corporate subsidiary baking plants submit weekly Inventory Heports on forms furnished by Campbell Taggart, from which the Purchasing Department of Campbell Taggart determines the flour needs of the corporate subsidiary (11'. 2992). 'Cpon the basis of the information contained in these weekly Inventory Reports, the Pmchasing Department obtains qnotations on the price of the total amount of the lIour requirements for each plant as reflected in these reports, and the flour is purchased by Campbell Taggart with instructions to the milJ to ship a specific: amount of CAMPBELL TAGGART ASSOCIATED BAKERIES, I);C. 529 509 Initial Dccision flour from the total purchase direct to the particular subsidiary baking plant or plants. The flour supplier then bills the subsidiary consignee baking plant, and that plant pays the supplier direct ('11'. 2988-2997). However, Mr. Vesecky testified that, in some instances, the local subsidiary baking plant buys some items direct, without purchasing through the Campbell Taggart Purchasing Department. These items have included cracked wheat sugar, shortening, transportation equipment, and uniforms (Tr. 2993, 2997-98).

11. The Accounting Department, the Auditing Department, and the Payroll Records Department are maintained in the Dallas headquarters of Campbell Taggart, where records and reports submitted by the subsidiary baking plants are kept. The reports and forms, which the subsidiary baking plants are required to fie with Campbell Taggart, as well as detailed instructions for the completion and submission of these reports, are set forth in an Accounting Manual (CX 310), which was prepared by Campbell Taggart. These reports and forms are uniform for each plant and, from them, the operating results of one subsidiary plant may be compared with those of any other subsidiary baking plant. Also, each individual baking plant, as distinguished from each subsidiary corporation, is required to submit to Campbell Taggart a weekly Inventory Report. This report contains information as to the amounts of ingredients used by that particular plant each week in its baking operations (CX 310; '11' 2878). From this information, the Purchasing Department of Campbell Taggart may determine the flour and other ingredient requirements for the subsidiary baking plants ('11' 2992). 12. Bei-Art Advertising, Inc. , a wholly-owned subsidiary of Campbell Taggart, operates as an advertising agency for the subsidiary baking plants, and receives agency commissions from these plants as compensation for any advertising services \which it has performed for such plant (Joyner, '11'. 2718-2720, 2725). At the request of a subsidiary baking plant, Bei-Art will assist the plant in preparing most any type of local advertising promobon, such as newspaper, radio, television, bilboard, or point of purchase materials which the subsidiary baking plant may decide to use (1'1'2722 , 2724, 2730). Neither Campbell Taggart nor any of its subsidiary baking plants use any national advertising. All advertising is done by and in the Ilame of the individual subsidiary baking plant in its local area of distribution (Tr. 2728). 13. As a majority stockholder in each corporate subsidiary bak- Initial Dccisic,n 71 F. ing plant, Campbell Taggart selects the President or operating head of each baking plant, and determines the amount of his salary and also the amount of dividends, if any, to be paid by the subsidiary corporate baking plant. Campbell Taggart also approves all capital expenditures of each subsidiary in excess of $750 (Madsen, Tr. 2543, 2550 , 2569 , 2611). OccasionaJiy, it may become necessary for Campbell Taggart to make a loan to one its subsidiary corporations, or guarantee the payment of a loan made by one of its subsidiary corporations (Madsen, Tr. 2559 25(2) .

14. The President Ol' operating head of each subsidiary corporation baking plant decides \vhat prices are to be charged for all products baked at his particular plant. The 10caJ plant head also has charge of aJl the sales, advertising, and merchandising within his area of distribution (:ladsen, Tr. 2683; Joyner, Tr. , Tr.2730; Edmondson, Tr. 2972-76; Hazelrig, Tr. 2853; Page 2934-3G). All decisions with respect to pricing, promotion, and sales are made by the local plant heads, and Campbell Taggart does not participate in these decisions (Knoles, Tr. ) 128; Snyder Tr. 1376; Gossadge, Tr. 3362; Mabic, Tr. 3501; Rains, Tr. 3640, 3645 , 3648; Stafford, Tr. 3979; Ford, Tr. 4201-4202; Mitchell Tr. 4312; Elliott, Tr. 4355; Branaman, Tr. 4593-95). Campbell Taggart did not supply any funds or credit with which to finance or subsidize prices for bread or other products, or any other marketing concessions by any subsidiary, and each local plant used its own funds to finance any marketing concessions which it gave (Knoles, Tr. 1121, 1125; Snyder, Tr. 1376; Rains, Tl' 3(49). The Baking Industry A. Product Categories 15. The sixty subsidiary corporations in which Campbell Taggart is the majority stockholder, including the bakery plants \which were acquired as a result of the challenged transactions are engaged primarily in the production and sale of bakery products. The Bureau of the Census has classified the industry of bread baking under what it designates product Code 2051-BT( ad and Related Yroducts (CX 166). The baking- industry produces a wide variety of products, which include bread and bread-type rolls, refrigerated doughs and mixes, frozen bread and biscuits CAMPBELL TAGGART ASSOCIATED BAKERIES, INC. 531 509 Initial Decision sweet yeast goods, soft cakes, pies, pastries, doughnuts, biscuits crackers, pretzels, and potato chips (CX 166, Table 6A, p. 20E- 13; Cooper, Tr. 379; Parsons, Tr. 91; Madsen, Tr. 2541). 16. The complaint alleges that the "line of commerce " is "bread and bread-type rolls. " In the baking industry, bread and breadtype rolls include white pan bread, white hearth bread (such as French and Italian bread) (Fontana, Tr. 155), dark breads (such as whoJe wheat, cracked wheat, rye, and pumpernickel), specialty breads (such as raisin, diet, protein, and buttermilk), and rolls baked with bread-type dough (such as brown and serve, hamburger, wiener, kaiser, and parkerhouse) (CX 166, Table 6A, 20E- 13). The 1954 Census of Manufacturers of Bakery Products received in evidence as CX 166 , referred to above, contains statistics compiled from information obtained by the Bureau of the Census from manufacturers of bakery products. However the statistics published in CX J 66 are mere totals, since the Bureau of the Census is prohibited by law from publishing any statistics that identify individual companies. As stated in paragraph J 5 above, the Bureau of the Census has classified the baking of bread under what is designated as Standard Industrial Classification, Industry Code 2051-Brettd ttnd ReZttted Products (SIC 2051).

17. For the purpose of summarizing' the product information contained in the J 954 Census of Manufacturers of Bakery Products, the code structure used is a 1-digit code for the total primary products in an industry, a 5-digit code for the class of product and a 7-digit number for the individual product; thus, the Code 2051-Brcttd ttnd Related Products is used for the total primary products for the baking industry (excepting retail single-shop bakeries) ; Industry Code 20511 for bread and bread-type rolls; and Industry Code 2051111 , etc., for the individual products making up the category of bread and bread-type rolls, such as white pan bread, white hearth bread (such as French and Italian bread), whoJe wheat, cracked wheat, rye, and pumpernickeJ, specialty breads (such as raisin, diet, protein, and buttermilk), and rolls baked with bread-type dough (such as brown and serve hamburger, wiener, kaiser, and parkerhouse), Sweet goods of all types, including yeast raised doughnuts, sweet rolls, pies, pastries "This ciassification Code 2!J51- Bread ana Related T'rodll:ts. doe not ir.c:ude st8tistic for retail sing-lc-shoIJ bakeries, that j" plant., or "stablj hmeots IJroducing bakery produds pri. marily for direct sa e to cor. sumers on :he premjse, these being clc, ified ;n retail trade Industry Code 5462, and not in Industry Code 205: , , , p.

Initial Decision 71 F. and cakes are excluded from the category of bread and bread-type rolls, both in the baking industry and in the Census classification SIC 20511 (CX 1G6, Table 6A, p. 20E-13). 18. The Standard Industrial Classification does not provide for separate industry data for the different types of bakeries included in Industry Code 2051. In order to provide additional detail to reflect the differences among bakeries 'i. interrelationships of value and type of bakery products shipped, materials used, value added by manufacture, employment, etc. , Industry Code 2051 has been divided into four sub-industries, namely, Wholesale Bakeries, Grocery Chain Bakeries, Honse-to-House or Home Service Bakeries, and Retail Multi-OutJet Bakeries. These four sub- Classification 2051-Bj' eadindustries under Standard Industrial and Related Products wiJ hereafter he discussed individually. 19. All bread and bread-type roll products are produced in simi- Jar production processes entailing- the mixing of ing-redients, principally flour, yeast, shortening, and ,vater, then raising the dough molding the dough into the shape of the loaf or roll aising the dough again in the pan, baking, cooling, slicing, if necessary, and wrapping- (Pennington, Tr. 220; Kilpatrick, Tr. 610-611). All bread products are produced with the same equipment, by the same labor force, distributed on the same trucks, sold to the same type of accounts, to the same type of consumer, for the same purpose, consumption (Ecker, Tr. 955). \Vhite and variety breads are competitive, and the housewife will generally buy one or the other, rarely one of each (Moore, Tr. 988; Stankey, Tr. 1179; Fahn, Tr. 1290). In recent years, the industry has developed bread and related bakery products in new forms, including frozen products and refrigerated doughs, ready for baking by the housewife (Parsons, Tr. 91; Cooper, Tr. 379; Madsen, Tr. 2541-42). 20. According to the Census data, the aggregate value of shipments by the baking industry for 1958 , the last year of record was $3 578 968 000 for bread and related products, and $2 220 959 000 for bread and bread-type rolls (CX 167, Table 6A 20E-12). These figures do not include the sales of bread and related products by single unit retaij bakeries, or sales of refrigerated dough. If sales by single-shop retaij bakeries with baking on the premises are included, the total value of shipments bread and other bakery products for 1958 was S4 741 979 000 (CX 167, Table 1 , p. 20E-3).

CAMPBELL TAGGART ASSOCIATED BAKERIES , INC. 533 509 Initial Decision B. Types of PTOducers and Methods of Dist?'ibution in the Baking Industry 1. Wholesale Bakeries 21. Bakery products are distributed through a variety of means from the baking plant to the ultimate consumer. Wholesale bakeries generally produce bread and related products in a local baking plant, and distribute these products daily by delivery trucks operated by a driver-salesman. Some delivery trucks are stationed , and operated from, the baking plant. Others may operate from depots or Joading stations, sometimes located as far as 250 miles from the plant (Lang-edorf, Tr. 845; Inglis, Tr. 1849, 1854). Larg-e transport trailers carry bakery products from the baking plant to the depots, where the baked goods are loaded onto the delivery trucks (Kilpatrick, Tr. 593; Gossadge, Tr. 3333). Customers of wholesale bakeries are mainly retail grocery stores, restaurants and institutions, such as schools, hospitals, and military bases (Parsons, Tr. 72-75; Kilpatrick, Tr. G08-G09; Snyder, Tr. 652; Litte, Tr. (85). Sales by wholesale bakers to their customers particularly retail grocery stores and restaurants, are made on a consignment basis. Driver-salesmen pick up all unsold products, which arc more than two or three days old in the case of bread, and four or five days old in the case of sweet goods, and credit the customer s account with the wholesale price of these stale returns. " The wholesale bakeries' customers pay only for those products which are actually resold or consumed (Pettis, Tr. 529; Kilpatrick, Tr. GOG; Knoles, Tr. 707; HazeJrig, Tr. 2753). The grocer determines the brand or brands of bread to be carried for sale in his store, the Jocation and amount of space on his bread racks where the diflerent brands of bread baked by competing wholesale bakeries are placed by their driver-salesmen and displayed for sale to the store s custOTI1ers. The grocer controls the amount of bread that may be placed on the rack by the particular wholesale bakery driver-salesman (Pettis, Tl' 497; Robbins, Tr. 557; Holiday, Tr. 1057).

2. "First" Posit'Lon on Bread Racks 22. Modern grocery stores are planned so that the flow of customer traffc will follow a set pattern, and bread racks are placed by the grocer along an aisle in this flow of traffc at a location convenient to the store s customer. It seems to be the consensus 534 FEDERAL TRADE COMMISSIO); DECISIONS Initial Decision 71 F. among bakers that the best or "first" position on the bread rack is the preferable location. This is the position or place on the bread rack which is first observed by the customer in following the traffc pattern through the store. The consensus among wholesale bakers who testified in this proceeding is that the "fil' " position is the most desirable on the bread rack, since the greatest number of bread sales arc made from this position. Therefore, they believe that the baker who has the "first" position will selJ the most bread. Also, most bakers believe that a customer is more likely to select bread from a full stack on the rack than from depleted stack of bread on the rack. Therefore, bakers attempt to keep the racks supplied with a full stack 'Of their particular brand , asof bread, and each strives for more space on the bread rack well as "first" position (Tr. 234 , 949, 995 , 2754, 3240- , 3252 3522-24). Grocers do not want to "run out" of bread, and they insist that bakers maintain an adequate supply of fresh bread on the racks ('11'. 1959-1960, 1989), Some grocers even request the driver-salesman to leave extra bread in the back room so the grocer won t run out ('11'. 558).

3. I' verloading" Bread Racks and "Stale Returns 23. At hearings in California, a considerable portion (If the time was spent in receiving testimony relatjng to "overloading or "loading" bread racks in grocery stores. The terms are synonymous. "Overloading" a bread rack has Deen described as placing more Joaves of bread on the rack than would normally be expected to sell between deliveries over and above a reasonable carry-over" (Tr. 302-303 , 366-67, 438, 467 , 475 , 527, 749-750 3241 3577, 3712 4502). The bread remaining unsold on the bread rack is picked up by the driver-salesman and is called "state returns " and disposed of by the bakery. The desirable amount of so-called "carry-over" appears to be some\vherc in the area between 157;, and 20% of the average amount of bread sold in the particular store (Tr. 486- , 542 , 751 , 771 , 798-99), The proper rate or percentage of so-caPed " stale Tetllrns" cannot be deter- :\iany factorsmined or measured \with mathematical precision. influence the rate or percentage of "stale returns " such as the type of store, economics, weather or climatic conditions, seasonal factors, promotional activity, civic functions, wrapping on the bread, etc. Even a lic\\' bakery moving into an area will tend to increase the rate of IIstale returns " for bakers who were already CAMPBELL TAGGART ASSOCIATED BAKERIES , I 535 509 Initial Decision in that particular market (Tr. 95- , 384- , 521 , 535, 738- 802 962 1057 1617). Union contract limitations as to the days of the week on which driver-salesmen may deliver supplies of fresh bread to stores or the opening of a new upeJ: market in an area may affect the rate of "stale returns " (Tr. 801-802). 24. Out of aggregate shipments of bread and bread-type rolls of $2 004 371 000 in 1954, and $2 220 959 000 in 1958 (exclusive of sales by single unit retail bakeries), wholesale bakeries accounted for $1 647 418 000 in 1954 , and $1 762 171 000 in 1958 (CX 166, Table 6A, p. 20E-13; CX 167, Table 6A, p. 20E-12). 4. H01ne Service or House-ta-House Bakeries 25. Home service or house-to-house bakeries produce bread and related products in plants similar to those of wholesale bakeries. Instead of distributing their products to grocery stores, restaurants, and institutions, home service bakeries distribute on route trucks direct to the customer by delivery to the door of the housewife. Home service bakeries sell their products at retail price levels, and bypass the retail grocery store in the distribution process (Pennington, Tr. 193). From the aggregate shipments of bread and bread-type rolls of $2 004 371 000 in 1954, and $2 220 959 000 in 1958 (exclusive of sales by single unit retaij bakeries), home service bakeries accounted for $182 036,000 in 1954 , and $213 021 000 in 1958 (CX 166, Table 6A, pp. 20E- , 14; CX 1G7 Table 6A, pp. 20E- , 13).

5. GTocery Chain Bakeries 26. Grocery chain bakeries are O\vned by retail grocery chains such as The Great A & P Tea Company (CX 469A- 5) ; Safeway Stores, Inc. (CX 511A-S) ; and Kroger Co. (CX 481A-R). Such grocery chain bakeries produce bread and related products for sale in their Q\vn retail stores where store employees arrange the products on the bread rack (Perry, Tr. 1401 , 1417). Grocery chain stores, which operate their o\vn baking plants, usually give their own products preferred position on the bread rack, and may exclude or limit the bread products of wholesale bakeries (Lewis Tr. 4516). In 1954, the grocery chains operated 142 baking plants which accounted for 7 % of the value of shipments of the bread and bread-type rolls industry (SIC 20511). 1n 1958 , the number of plants in this category increased to 178, and the value of shipments increased to 9.5% of the value of shipments of the 536 FEDERAL TRADE CO!. !ISSION DECISIONS Initial Dccjsion 71 F. bread and bread-type roJJs industry (SIC 20511). More than one-half of the shipments from these plants were of bread and bread-type rolls (SIC 20511; CX 166, Table 6A, pp. 20E- , 14; CX 167, Table 6A, pp. 20E-12-14).

27. Out of aggregate sales of bread and bread-type rolls of 001 371 000 in 1954, and $2 220 959 000 in 1958 (exclusive of sales by single unit retaij bakeries), grocery chain bakeries accounted for $140 081 000 in 1954, and $212 018 000 in 1958 (CX 166, Table 6A, pp. 20E- , 14; CX 167, Table 6A, pp. 20E- 13). A & P, Safeway and Kroger reported the following total value of bread and bread-type rolls produced during 1961 , the last year for which the record contains data: Total vah.e of bread COmpal!lI and bread-type rolls The Great A & P Tea Co. (CX 469H) $119 570,000 Safeway Stores, Inc. (CX 511F) 266 620 Kroger Co. (CX 481 774 917 6. Retail Multi-Outlet Bakeries 28. This category, Retail Multi-Outlet Bakeries, is included as one of the four sub-industries under Standard Industrial CJassification 2D5l-Bread and Relcded PToclucts and refers to retail bakeries selling chiefly through nonbaking outlets operated by the same company. Retail multi-outlet bakeries do no baking and receive bakery products from a plant at another location. The total value of alj products produced in retail multi-outlet bakeries was $61,805 000 in 1954, and $92 353 000 in 1958 (CX )66, Table , p. 20E-11; CX 167, Table 4, p. 20E-10). It should be noted that this category, Retail Multi-Outlet Bakeries, does not include statistics for retail single-shop bakeries, that is, plants or establishments producing bakery products primarily for direct saJe to consumers on the premises, for the reason that retail single-shop bakeries have been classified by the Bureau of the Census in its 1954 and 1958 Census of Manufacturers of Bakery Products (CX 166 and 167, respectively) under a different classification from 2D5l-HTead Clnd Related Products. Single-shop bakeries have been classified under what the Census Bureau calls Retail Trade, Industry Code 5462.

C. Ownership of Baking Cornpcmies 29. Some baking plants are independently owned, either by an individual, partnership, or corporation, with no connection to CA:IPBELL TAGGART ASSOCIATED BAKERIES II\C. 509 Initial Decision any other baking plant (American Bakery, CX 448G; Pankey Bros. Bakery, CX 504E; Baby Bear Bread Company, CX 491G), whereas another ownership may operate several baking plants in only one particular area or region of the country. As of 1962 some of the regional baking chains included Southern Bakeries Co., with headquarters in Atlanta, Georgia, operating 18 plants in the Southeast (CX 509H), with reported sales of all products in 1958 of approximately $25 000 000 (CX 523); Mrs. Bairds Bakeries, Inc., with headquarters in Fort Worth, and operating 9 plants in Texas (CX 450H), whose 1958 total sales of all products were approximately $23 400 000; Brown-Greer & Co. , with headquarters in Knoxville, Tennessee, operating 4 plants in Tennessee, Kentucky, and Virginia (CX 453H, Z- , Z- , Z-34), with reported total sales of all products during 1958 of $13 700 000; and Betsy Ross Bakeries, Inc. , with headquarters in BJuefield West Virginia, operating 7 plants in Ohio, West Virginia, and Kentucky (CX 152H), and reporting 1958 sales of ajj products at $2 462 326.

30. Other corporations own baking plants in several sections of the country. These are referred to as "chain" bakeries. As of 1962 , the national chain bakeries included Continental Baking Company, with headquarters in Rye, "ew York, with 75 baking plants (CX 161H) ; American Bakeries Co. , headquarters in Chicago, Ilinois, with 48 baking plants (CX 447H) ; General Baking Co., headquarters in New York, N. , with 48 baking plants (CX 468F) ; Interstate Bakeries Corp. , headquarters in Kansas City, Missouri, with 32 baking plants (CX 474H) ; Ward Baking Co., headquarters in New York, N. , with 23 baking plants (CX 520H) ; and Langendorf Lnited Bakeries, Inc. , hcadquarters in San Francisco, California, with 14 baking plants (CX 488H). To these companies should also be added the 71 subsidiary baking plants majority-owned and controlled by respondent, Campbell Taggart Associated Bakeries, Inc. These national chain bakeries, including the 71 plants majority-owned and controlled by respondent, reported the following total sales (in thousands of dollars) for 1958 , 1959 , 1960 , 1961 , and 1962 , respectively, the last year for which the record contains data (CX 522): ;;.

932204259825045 United 7174 72 $69 LangendorfI I L-. Inc., Co. 594951225 223496 101122120120 Foods, Baking $104 fOf!lerly V/ard Ward Gorp. 873298456082874 $116124140139149 Tnterst..t.c Bakeries 114234243496258 Co $152 162157157 American Bakeries - 104 540715 Baking" Co. 169,163 167 $166 171167 General I. II :

- 435 163 Tagg-artbaking- 208 $16 - plants173390 202 mpbc- 197,577 sill,.'idiary , I Co. !41 004642717 ental 385410429454 ContBaking- $328: Year 195919601961 CAMPBELL TAGGART ASSOCIATED BAKERIES , INC. 539 509 Initial Decision D. Pastwelt TTends in the Bakin,q Industry 31. Since World War II, costs for ingyedients and labor have increased the costs of production and distribution in the baking industry (Lerek, '11'. 296; Goeppert, '11'. 433; Pennmgton, '11'. 202; vVarisse, Tr. 3276). To counteract rising costs, many baking plants have been modernized and enlarged in recent years, and new automatic equipment installed, such as continuous mix machines and new ovens. This modern equipment increases the daily output potential of the plant, and Jowers the baking cost of bread per load (Perry, '11' . 1416; Meyer, '11'. 1587; Inglis, '11' 1852- 53; Greer, '11'. 3572; Lewis, '11'. 4431- 83). Also, with improved highways and mechanized equipment the geographic urea of distribution of a modern baking plant has been increased from approximately 50 miles from the plant to several hundred miles (Warisse, '11'. 3237; Goeppert, '11' 426; Pettis, '11'. 519; Bird, '11'. 737; Langendorf, Tr. 815; Inglis, '11' 1854). As of the date of hearings, Oro\veat Baking Co. and Pepperidge Farms baked goods in Los Angeles, California, and transported them more th"n 800 miles for distribution around Clovis and Roswell, C'ew :lfexico (CX 458Z-31). Winn-Dixie produced baked good in Greenvice, South Carolina, and shipped them Into Georgia, Tennessee North Carolina, Virginia, Kentucky, and Indiana, more than 300 miles (CX 521K-L). The controlling considerations in plant distribution today are population density; topographical barriers such as mountains; television and newspaper coverage for advertising purposes; union contracts which limit the distance a driver-salesman may cover by restricting his maximum number of working hours; and intensity of competition in the new area (Parsons, '11' 77, 90; Pennington, Tr. 212-14; Evers, Tr. 4560; :\1archeck, Tr. 3178).

32. Some baking companies increase their volume by acquiring other bakeries, while others have diversified into other related industries (Lewis, '11' 4461). Since 1952 , some companies have diversified and broadened their product line. For example Con tinental Baking Company has gone into the production of frozen food, potato chips, English muffns, peanut storage, and the rental business (CX 524A-B). General Baking Company has gone into the production of candy, and has acquired an advertising agency (CX 524C). American Bakeries and Ward Baking , p.

Initial Decision 71 P. Company have gone into the manufacture of frozen foods (CX 524C-D; CX 524E-F).

33. In the face of postwar changes and increased competition in the baking industry, those firms, which were unable to meet the increased competition and rising costs of production and distribution, have faced the alternatives of going out of business, or affliating with, or selling out to, a larger company (Pettis '11'. 511 515; Pugh, Tr. 1518-19; Meyer, '11'. 1593). 34. During the postwar years, retaij grocery chains have begun the production of bread and related products in their own baking plants. Between 1954 and 1958 , the number of baking plants owned by retail grocery chains grew from 142 to 178 (CX 166, CX 167, Table 1, p. 20E-3). The value of shipments by grocery chain bakeries increased from $265 851 000 to $382,499 000, and their share of total shipments of bread and bread-type rolls increased from $140 081 000 in 1947 to $212 018 000 in 1954 (CX 166, Table 5B, p. 20E-12; CX 167, Table 5B, p. 20E-11). These postwar conditions have resulted in a trend toward fewer but larger, baking plants.

35. In 1954 , there were 18 714 bakeries in operation in the L'united States, including single-shop retail bakeries with baking on the premises (SIC 2051 , 5462), and their total value of shipments was $3 711 299 000. Of the 18 714 total bakeries, 5,426 were wholesale bakeries, 142 grocery chain bakeries, 217 houseto-house bakeries, and 318 retail multi-outlet bakeries, or a total of 6 103 bakeries under the Census Industrial Classification Code 2051 , with total shipments valued at $3 067,017 000 , and 12 611 single-shop retail bakeries with baking on the premises (SIC 5462), with total shipments valued at $644 282 000 (CX 166, Table 1 , p. 20E-3). Four years Jater, in 1958, there were 17 886 bakeries in operation, including single-shop retail bakeries (SIC 2051 , 54(2), with total value of shipments of $4 741 979 000. Of these, 5 199 were wholesale bakeries, 178 grocery chain bakeries, 361 house-tn-house or home service bakeries, and 247 retail multi-outlet bakeries, or a total of 5, 985 bakeries under SIC 2051 with total value of shipments at $4 098 612 000; the remainder 901, were single-shop retail bakeries under SIC 5462 , with total value of shipments at $643 367 000 (CX 167 , Table 1 20E-3) .

36. Thus, there were 828 fewer bakeries of a1l types in the CAMPBELL TAGGART ASSOCIATED BAKERIES , INC. 541 509 Initial Decision United States in 1958 than in 1954 , a though total value of shipments increased by $1 030 680 000. Also, there were 118 fewer SIC 2051 bakeries than in 1954, although total value of their shipments increased by $1 031 595 000. Likewise, there were 710 fewer single-shop retail bakeries with baking on the premises (SIC 5462) in 1958 than in 1954 , with a decrease in total value of shipments of $915 000. In short, present day trends in the baking industry, as in other industries, Jead to fewer establishments or bakeries, with modern, automatic equipment, resulting in lower baking costs per loaf, but increased volume and value of shipments per bakery (Findings 31 and 35). E. Growth Th1ough Acquisition 37. Each of the so-called national chain bakeries referred to in Finding 30 herein has achieved substantial growth through acquisitions. CX 521A-G shows the relative growth of these particular companies by acquisitions during the period 1950- 1964. A brief outline of the acquisitions made by each of these companies is as follows:

;n' 1950 19541958 1950 19541958 249 638014 360 300469 assets 237 912626 .un100 003051 AcquiringcompanY $61 116 .nn .n.--n Year 1952 1953195419551958 19581958 19581959 1959 1960 19611950 19511955 1954 acquired I I lu i I PI"n," 1 1 1 1 acquired I .n.. - --Mo. Fa. - Co. Nebr.N.C. Ltd. Fla. Tex. Inc. , Joplin, Co. -- Co. Paso, 0 Co. m Tampa, Baking Colo. Ncbr.- Inc. El company mo. Pittsburgh, Co., Lincoln, Bahry, Raleigh, , , Bakery, Okla. Calif. Baking Co" Nebr. Inc., Muffn Biscuit s) Co. Co., Co. Co., Co., Co., Calif. Tex. Minn. City, &Hawaii. Calif.Omaha, Springs, Baking Ill. , Bread Chip California Bakery, Holsum Island, National Bakers, n s (Zim Baking- Raking Francisco, Baking Bread English Pedro,Inc., Diego, Raking Baking s s Chicago, Colorado Grand San Honolulu San San Rochester, Greenville, Oklahoma Acquired Southe Smith Royal MarkwardtDiCarlo Omar,Rochester BraunFinney Brownies Love Cain HolsumDan-Dee Purity Jessee Kilpatricks I I .

m.-_ Co. Subsidiaries Baking Taggart company Acquiring Gontinental Campbell 1961 1963 1950 1954 1958 1961 196: 195019541963 979' 108' 660 671 I160 096' I317 656507271 456 265 485 288 321 150 709 377716617 1954 1954 1954 195419591959 19601953 1956 1957 1958 1958 1960 19G91953959190219631963 I I I I I ! I 1 2 2 ; 1 1 1 - - III. Ill. Ky. Fla. , Ill.Vn. Calif. Co. Inc. III. Calif. , Dutch, Chicago, Mi3.miChicago, Inc. ,, Fruit Co. Louisvile, Co. Visalia, Bakery, Danvile, AJton Co. Inc., House Co.(joint Richmond, Service Inc., , Inc. , Corp. , Angeles, Holland Co., Pa. Penn. :vel Calif. Co.S. Co., Co., Co. s Co. Bread Raking Los Candy MCalIf. Tex. Bakers Calif. , Mont. Wash. Duttermints, , Bakeries, Bread Baking Fine s Baking Bakeries, Bakeries Baking s Bakeries Baking Baking erjes, s s DeKamp s\Vash.Raking with Advertising s Joaquin Home Fresno Sacramento, Lubbock, Spartanburg, IIcIena,Ba Seattle, Seattle, Philadelphia,venture Oakland Kilpatricks San Old Holsum GrocersMead' NoJl' Becker Van Eddy VerneII' Thompson Boulevard Sage Purity Stella AtlasGrable Dressel II I I J Corp.

Co. Bakeries Baking General American ;;.

Year 19501954 1958 19611963 1950 19541958 I 490 866934 713 913660 134150,532 334199 968 226597 assets Acquiringcompany 37,06,887 Year 1964 196419501951 1951 19541954 1957 19591960 1961 1962 1964 1950 1%21953 acquired Plant!;acquired Pa. of N.N. Inc.N. Calif. Dressel hy plant Point, Co.. Inc. Co. Co. Co. Ruffalo, Inc. Durham, , Bakeries, Oakland, Kingston, High baking Co., Co., Co. Co.La. Dak. Calif. Baking Baking-Mich. Co., Bakery, Co.Fla.Co., Baking Bakery, (acquired Co., Wis. , Volis. N. Bakeries United City,Associated Ill.Inc. Colo. Baking Cake Tenn., Raking Baking Hay, Tasty, Cake Sunlit Orleans, BakingBaking Raking- Cream s company Hackel's Karl's s Nasa Ne'\v Chicago Rourke Milwaukee, Jacksonville, Sacramento Denver Green Traverse Bismarck, Hart's Bakeries,Langendorf Mrs. Ambrosia Remar Butter Campbell-Sell KingstonCobb' SchaU' Sweetheart Memphis, La \\taUsDurham Acquin,d Mrs. I , I Co. (Cont:d. Corp. Bakjng- Corp. Inc.Ward Bakeries Bakeries company Foods,(Formerly Acquiring American Interstate Ward :;.

1961 1963 1950 19541958 1961 196:1 I I 294 161 698 008 912 369 341 441 571 786 816315 583 017 1953 19591959 19591960 1963 1964 1964 1964 1950 19521955 1955 1956 19561958 1962 ' I 1 1 - Calif. and N. Oreg. Wash. Inc. Co. , Co. Calif. Inc. , Oakland Inc. Angeles, Co. , Foods, Biscuit Co. Inc. Tacoma, Cake Jamaica, Calif. Portland, , Calif. & Los Co., Calif. Co. N. Co. Bakery, f. Calif. Co., Calif. Calif. Inc. Bakery, RI. Co., Bakery, Bakeries Baking Frozen Francisco Co., Pie isco, Cheese Cali Obispo, Bakery, Mich. Products"rash. Fla. Baking Pie Mount, Barbara,Wafer San, Farm Baking Queen Alice Franr Rite Baking Luis Angeles,Baking French Ashbrook HOllse Segundo, Royal England Bakeries, Rocky Pawtucket, Miamierscy EI Santa South Seattle, Los San Berkeley, San Watsonville, Detroit, Made JohnstonNew BellFarm J Rose Nancy CaliforJ1ia Hal-Grain KrUerGrandma Peerless Cities JordanRush Valley I ,i i Inc.

Bakeries, United Langendorf , ,, Initial Dccision 71 F. 38. Thus, it is seen that, during the period 1952-1961. Continental Baking Company, with $154 287 000 net sales in 1962 (CX 522A), acquired 17' baking plants located in twelve States; General Baking Company acquired 19 plants located in four states during the period 19S3-1958; American Bakeries Corp. acquired 65 bakeries located in four States during the period 1953-1964; Intp.rst2.t Bakeries Corp. acquired 15 baking plants located in nine States during the period 1950-1964; Ward Foods, 1nc., formerly '1T ard Baking Company\ acquired 18 plants located in seven States duriug the period 1950-1964; Langendorf United Bakeries, Inc., acquired 8 bakeries Jocated in three States during the period 1950-1958 (Langendorf, itself, being acquired by American Bakeries, Inc., in 19(4) ; and, finally, during the period 1950-1960, the subsidiaries of respondent acquired the 24 baking plants which are the subject oj' this proceeding. In the course of these acquisitions respondent and its subsidiary companies increased their assets from $33 430 592 in 1951 , to $74 219 805 in 19GO , an increase of 810 819 213. During the saJIe period, net sales increased fmm $100, 607 186 to 8197 576 870 , an increase of approximately 897 000,000 (CX 312-321). F. Line of C01nrnerce 39. Complaint and respondent's counsel agree that the relevant Jjne of commerce " or product .market in this proceeding is bread and bread-type rolls," classified by the Bureau of the Census under what it caJis Standard Industrial Classification Code 20511 (SIC 2(511), but counsel do not agree that sales by retail single-shop bakeries should be included along ,with sales of bread and bread-type rolls by SIC 2051 bakeries (such as those operated by respondent and its subsidiaries) to determine the total universe oJ producUon market shares in the appropriate areas of geographic competition. Complaint counsel say, in effect, that, since the Bureau of the Census has classified retail singleand notshop bakeries in the retail trade, Industry Code 5462, in Code 2051 Brf'ad and ReJatcd Products, therefore, neither . Four of the above :7 pl wb, which had bE'fIl acquired from Orn:'r, Inc. , in 1\15H ere sold by Continental i:. Xovemoer B62, 1Jl rsuant. to a e",Jfent o:'der in Docket Ko. 7 80 lfiCi l,' 118:1J, a p,ocpcd:ng brought fcgainst CnIltincnta: ' GY th" F,' (lera: T:' ade Con mi,sion. Tbc complaint in that Sect:on 7 procfcding, fled in 1 \1IjIJ , ailegec that Continent,,\ \Va, " the li1rgest commerce;a\ \,akn of "'J,itc \, eac" in the United States, with some RG p:ants locat('r) in appro"i. !y sixty- fou, cities in 29 States and llw D:strict of Columbia. and u:Etril)ll ed by 3jJ' proximately 3:,;-\ agen ics and depots throughout forty- four Sf. ales CAMPBELL TAGGART ASSOCIATED BAKERIES , INC. 547 509 Initial Decision retail single-shop bakeries, nor their production output of bread and bread-type rolls, should be included in determining the total universe of manufactured bread and bread-type rolls. Complaint counsel urge that only the four sub-industries classified by the Census Bureau under its industry Code 2051-Bread and Related Products, namely, Wholesale Bakeries, Grocery Chain Bakeries IIouse-to-House or Home Service Bakeries, and Retail Multi- OutJet Bakeries and their production output should be included and considered in determining the total universe producUon market shares of bread and bread-type rolls in the appropriate area or areas of geographic competition in this proceeding. 40. At first glance, it would appear that, since respondent and its subsidiary bakeries are wholesale bakeries, and are classified by the Census Bureau in its 1954 and 1958 Census of Manufacturers (CX 1GG and 167, respectively) under the Industry Code 2051-Bread and Related Products (SIC 2051), which includes only four sub-industries, namely, \Vho1resale Bakeries, Grocery Chain Bakeries, House-to-House Bakeries, and Retail Multi- Outlet Bakeries, only production figures fl'011 these four subindustries should be hlCluded in determining the total production market share universe of bread and bread-type rolls for use in this proceeding. However, the method of production of bread products (SIC 2051) and bread and bread-type 1'oils (SIC 20511) is the same for V./wholesale Bakeries, Grocery Chain Bakeries Home Service Bakeries, and I\etail :VIuJti-Outlet Bakeries as it is for retail single-shop bakeries, that is, plants or estabhshments producing bakery products principally for direct sale to consumers on the premises. Of course, there may be differences in the size and age of equipment in the large wholesale bakeries in Census Classification Codes 20,,1 and 20511 from the equipment used in retail single-shop bakeries (SIC 5452). :\everthe- Jess, the baking process for bread and bread-type rolls is the same. ?lost of the witnesses who wej'e asked the question at hearings testified that the retail single-shop bakery, which bakes and sells bread and bread-type roll on the premises, is a competitor of the wholesale bakery selling in the saine city, to\vn, or area whether it be a national so-caJlee chain or 10caJ independent (Parsons, Tr. 91 , 100; Fontana, Tr. 171-187; Pennington, Tr. 266; Cooper, 'fl' . 358; ),loore, 'fl'. 93G- 87; Stankey, 'fl'. 1449- 1150; Kilpatrick, 'fr. 1348). Since they arc competitors, their production of bread and bread-type mils should be included in computing the total universe of market shares. In making that , Initial Decision 71 F. determination, the actualities of the market place are more important factors to be considered than the manner or method in which the Census Bureau may have classified retail single-shop bakeries. Upon the basis of a preponderance of the evidence, it is found that the production of bread and bread-type rolls by wholesale bakeries, grocery chain bakeries, house-to-house bakeries, retail multi-outlet bakeries, and retail single-shop bakeries is the relevant "line of commerce" for the purpose of this proceeding.

G. ATea of Geographic Competition 41. In determining the "section of the country " or relevant geographical market, the lllajority opinion of the Supreme Court in United States v. Philadelphia National Bank, et al. 374 U. 321 (1962), said (at 357):

We part company with the District Court on the determination of the appropriate " section of the country." The proper question to be asked in this case is not .where the parties to the merger do business or even .where they compete, but where, within the a)'ea of competitive overlap, the effect of the merger on competition ,vill be direct and immediate. , This depends upon the geographic structure of supplier-customer relations. Further in an earlier case Tampll Electric Co. Nash1:ille Coal Co. et al. 365 U. S. 320 (1960), the Court said (at 327): Second the area of effective competition in the kno\\n )ine of commerce must he charted by careful selection of the market area in \which the seller operates, and to which the ).Jurchaser can practicably turn for supplies. short, the threatened foreclosure of competition mu t be in relation to the market affected.

Also, in Brown Shoe Co. , Inc. v. United States 370 CS. 294 (1961), that Court said (at 336):

Congress prescribed a pragmatic, factual approach to the definition of the relevant market and not a formal, legalistic one. The geographic market selected must, therefore, both " Col'csponcl to the commercial )'ealities " of the industry and be economieally sihTIificant. 42. :II ost bread customers prefer fresh bread. Therefore, the distance from Its plant in which a bakery can seJl and distribute its products is Jimited by the perishable nature of the product. The average shelf life of white bread is two or three days, depending on weather, economic conditions in the area, the type of \\rrapping, and other factors. If not sold by the store within two or CAMPBELL TAGGART ASSOCIATED BAKERIES, INC. 549 509 Initial Decision three days, the unsold bread, called "stale returns " is then picked up by the bakery plant driver-salesman and the racks restocked with fresh bread (Finding 21 herein; 1'1'. 74- , 214 , G05, 731 2809-2810). Other limitations on distance are topography, population density, competition, union contracts covering driversalesmen, advertising media, and other factors menUoned in Finding 31 above. For these reasons, actual competition between wholesale baking plants takes place on a local or regional Jevel and not on a national level. l:pon the basis of a preponderance of t.he evidence, it is found that the geographic market area of competition of the baking plants here under consideration ranges from approximately 50 miles from the plant to several hundred miles (Goeppert, 1'1'. 426; Pettis, 1'r. 519; Kilpatrick, 1'r. 605-60G; Bird, 1'1'. 737; Langendorf, 1'1'. 845; Inglis, 1'1'. 1854), depending on the area, type of store, etc.

43. In order to measure the competitive effect of the acquisitions complained about, it will be necessary to consider the market and distribution area of each acquired plant and the aJternate sources to \which a purchaser in that particular market area can practicably turn for supplies. TaJnpa Elect'i'ic Co. Nashville Coal Co. , supra. Each challenged acquisition will be examined.

The Challenged Acquisitiuns 44. Count I of the complaint chalJcng-es the Jcgality, under Section 7 of the Clayton Act, of the alleged acquisitiuns Joy subsidiaries of Campbell Tag-gart Associated Bakeries, Inc. , of baking companies located in seven Sepi:late geographic areas of the l.united States, as follows:

1. Zim s Bakery (Dan-Dee Bread Co. ) of Colorado Spring-s Colorado, in 1950 ;

2. Purity Baking Company of El Paso, Texas, in 1951; 3. Kilpatrick's Bakeries, its subsidiaries, and Old Home Bakers of CaJifoj'ia, in 1951;

4. Jessee Baking Company of Grand Island, :\ebraska, in 195G; 5. Grocers Baking Company and its subsidiaries, of Kentucky, Indiana, and Tennessee, in 19S9;

(j. :\lead' s Finc Bread Co. , of Lubbock, Texas, Roswell and CJovis, New Mexico, in 1959; and 7. NolJ's Baking Co. of Alton, IIJinois, in 1960. Initial Decision 71 F. 45. Section 7 of the Clayton Act (15 U. A. S 18), as amended, effective December 29, 1950, provides: No corporation engaged in commerce shall acquire, directly OJ' indirectly, the whole or any part of the st.)ck or other share capital and no corporation subject to the jurisdiction of the Federal Trade Commission .shall acquire the whole or any part of the assets of another corporation eng-aged also in commerce, where in any line of commerce in any section of the country, the effect of such acquisition may be substantially to lessen competition, or to tend to create a monopoly.

46. To establish violations of Section 7 of the Clayton Act in this proceeding, complaint counsel must establish, by a preponderance of the reliable and probative evidence in the record, with respect to each of the acquisitions challenged in the complaint that a corporation engaged in commerce: (1) Acquired the stock, other share capital, or any part of the assets of another corporation also engaged in commerce at the time of the challenged transaction;

(2) That each such acquisition substantially affected competition in an identified "line of commerce " in a "section of the country; and (3) That the effect of each such acquisition "may be substantially to lessen competition, or to tend to create a monopoly in such "line of commerce " in a " secbon of the country. 47. At the request of complaint counsel, hearings were held and testimony received with respect to only two of the seven areas in which the challenged acquisitions were located, namely, the California and Kentucky areas. In addition to the oral testimony, there were also received in evidence various documentary and statistical exhibits with respect to the acquisitions in California, and Section 6 Special Survey Reports concerning the acquisitions in the Kentucky area, Lubbock, Texas, Ros\vell and Clovis, New Mexico. The California acquisitions wiIJ first be considered. A. The Acquisitions in California 1. The Kilpatrick Bakeries 48. Prior to January 1954 , Harold, Donald and James Kilpatrick were the sole stockholders of Kilpatrick' s San Francisco Bakery, a corporation, located in San Francisco, California, and Kilpatrick' s Marvel Bakery, a corporation, Jocated in Oakland, California. These two bakery corporations jointly owned all of the outstanding stock of the San Joaquin Baking Company, with CAMPBELL TAGGART ASSOCIATED BAKERIES , INC. 551 50fj Initial Decision plants located at :VIodesto and Fresno, California, which, in turn, owned aJl of the outstanding stock of the Holsum Baking Company, which operated a baking plant at VisaJia, California. The Kilpatrick brothers decided to affliate with respondent (1'1'. 583; 2663-(4). As a result of negotiations instituted by Mr. Harold Kilpatrick in 1953 , and consummated in January 1954 , Harold, Donald and James Kilpatrick and the respondent, Campbell Taggart Associated Bakeries, Inc. , entered into an agreement wherein and whereby the assets and business of the Kilpatrick bakeries in San Francisco and Oakland \were purchased by a new Delavvare corporation, Kilpatrick Bakeries, Inc., which was formed by respondent, Campbell Taggart. A second Delaware corporation was formed by Campbell Taggart, San Joaquin Bakeries, Inc., which purchased the assets of the Modesto, Fresno, and Visalia bakeries from San Joaquin Baking Co. , Holsum Baking Co. , and the Kilpatrick brothers (CX 103; Edmondson, 1'1'. 2965 (8). The former Kilpatrick' s San Francisco Bakery, Kilpatrick' s IVlarvel Bakery, San Joaquin Baking Company, and Holsum Baking Company were dissolved and the Kilpatrick brothers converted the assets of the five baking plants to the new corporations. The total price paid by Kilpatrick's Bakenes, Inc., and San Joaquin Bakeries, Inc. , to the Kilpatrid:: brothers for the five bakeries was 361 174 , plus the value of inventory. $1 000 000 of the purchase price \vas paid in cash, and the balance represented in promissory notes executed by the newly-formed corporations, Kilpatrick' Bakeries, Inc. , and San Joaquin Bakeries, Inc., payable in yearly installments, and guaranteed by Campbell Taggart (CX 103). 49. As a result of the acquisitions, Campbell Taggart acqClired a 59. 78 7 stock interest in Kilpatrick' s Bakeries, Inc., the n€\V owner of the two former Kilpatrick bakeries located in San Francisco and OakJancl, and a 60.74% stock interest in San ,Joaquin Bakeries, Inc. , the ll€\V owner of the three bakeries located in Modesto, Fresno, and Visalia (CX 71G, 71D). The Kilpatrick brothers and their associate, :vr. Randall Risvold, purchased approximately 30% of the stock in Kilpatrick' s Bakeries, Inc. (CX 1713). Mr. Harold Kilpatrick continued as President in the new corporation, and his brothers, Donald and James, as Vice Presidents (CX 71G). The Kilpatrick brothers, along with the former operating heads of the San ,Joaquin plants, Messrs. Arthur Bradford, Wendell Asbury, and Rex KnoJes, purchased stock interests in San Joaquin Bakeries, Inc. , of approximately 25 % (Tr. 1621 26). Mr. Arthur Bradford became President and Director of the new San Joaquin Bakeries, Inc., and continued as manager of the ...

552 FEDERAL TRADE COM IISSION DECISIONS Initial Decision 71 F. Fresno plant; Messrs. Harold Kilpatrick, WendeJl Asbury, and Rex KnoJes became Vice Presidents and Directors, respectively; and Mr. Frazor T. Edmondson, Vice President and Secretary and a member of the Board of Directors and Executive Committee of Campbell Taggart, was elected Secretary of the new corporation (CX 71D). Mr. Knoles continued as Manager of the Modesto plant and Mr. Asbury continued as :"lanager of the VlsaJia plant. 50. For the year 1953 , the year prior to the acquisitions, the net sales of bread and bread-type rolls, profits, and assets of the former Kilpatrick bakeries were as follows: ).etsa:es :.dp!'ofit Assets Kilpatrick' San Francisco Bakery (CX 279C) 4 $3,315,263 ! $393 939 397 137 Kilpatrick' s ::arvel BakeTY (Oakland) (CX 281C) . 3 404 346 337 213 915 072 San Joaquin Bakers (Modesto and Fresno) (CX 284C) 162 376 231 981 336 046 Holsum Baking Co. (Visalia) (CX 286C) 065,228 685 617 728 a. Areas of Distribution 51. Mr. Harold KiJpatl'ick identified the area outlined in red on a map, CX 19, as the general area of distribution of the Kilpatrick San Francisco and Oakland plants at the time of their acquisition in 1954. The two plants transported bread about 100 miles to the north, to the town of Willits, approximately 100 miles to the south, to the town of J amesburg, and about 65 miles from their Oakland plant to their Stockton depot to the east. The San Francisco and Oakland plants are indicated by green dots, and the depots within the area of distribution are indicated by red dots. The effective area of distribution from the depots ranged from 15 to 50 miles, sometimes more, depending 011 the area, type of store, etc. (Tr. 605-606).

b. Commerce 52. Prior to the acquisitions in 1954, the Kilpatrick plants in San Francisco and Oakland had purchased their ma.i or raw ma- . Adjusted to account for interplant transfers between Kilpatrirk' s San Francisco and Oakland bakeries.

, CAMPBELL TAGGART ASSOCIATED BAKERIES II'C. 553 509 Initial Decision terials from companies outside the State of California (CX 1 04A; Tr. 614). The newly-formed corporate subsidiary of respondent Kilpatrick Bakeries, Inc., has continued to purchase its chief raw materials from the same suppliers located outside the State of California, and has continued to use thc same brand name for its bread Kilpatrick" (Tr. 614-15).

2. San Joaquin Baking C01npany and HolSU7iL Bread C01np(Lny 53. Prior to the acquisitions, as stated in paragraph numbered 48 above, Kilpatrick' s San Francisco and Oakland bakeries owned all of the stock of the San Joaquin Baking Company, which operated wholesale baking plants in Modesto and Fresno, California; the San Joaquin ,Baking Company, in turn, owned all of the stock of Holsum Bread Company, which operated one plant at Visalia, California (CX 103; Tr. 584). In 1954, all of their assets along with these three plants, were purchased by the ne,v Delaware corporation formed by respondent, San Joaquin Bakeries Inc. (CX 103; Tr. 697). Their 1954 sales, profits, and assets are set out in paragraph numbered 50 above.

a. Areas of Distribub:on 54. Mr. Rex Knoles, General I\Jnnager of the San Joaquin Baking Company s Modesto plant, who became a stockholder and Vice President of San Joaquin Bakeries, Inc., after the acquisition in 1954 , and who continued as General :.1 lTager of the :\Iodesto plant, identified the area of distribution of the :VIodesto plant by marking with a red crayon on a map, CX 27. Thc furthermost area of distribution of the Modesto plant was to Stockton to the north or northwest; Los Banos on the south; Patterson and Vernalis on the west; and Buck :VIeadows on the cast (Tr. 1060, 10(7). Approximately one-third of the plant's business is in and around Stockton, and approximately 20% in Modesto (Tr. 10(9). 55. The Fresno plant of San Joaquin Bakeries, Inc. , is located in what is known as the San Joaquin Valley south of Modesto (CX 55). Prior to the acquisition in 1954 , the Fresno plant was a member of the W. E. Long Bakery Cooperative, from which the plant received purchasing and cost accounting servkes. The plant used the " Betsy Ross " label, a trade-mark used by the W. E. Long Company (Tr. 1610-)6) 1). The Fresno plant operates approximately 55 bread routes, with one depot located at Merced, California (Tr. 1600).

554 FEDERAL TRADE COMMISSroI- DECISIONS Initial Decision 71 F. 56. NIl' Arthur Bradford, President and Manager of the Fresno plant of San Joaquin Bakeries, Inc. , identified the area of distribution of the Fresno plant by encircling- it with a red line on a map, ex 55. The distribution area includes the town of Fresno and extends north to Merced; to lVendota and Dos Palos to the west; to Five Points, Hardwick, and Kingsburg to the south; and to Orange Cove and Reedley to the east. Some of the area oatlined by IV11' Bradford is mountainous, and deliveries are made only to stores and towns located on high'\vays projecting out from the main area (1'1'. 1597-99).

57. The Visalia plant of the San Joaquin Bakeries, Inc. formerly known as the Holsum Bread Company plant prior to 1954, is located southeast from the Fresno plant and serves an area generally south and southeast of ' the area served by the Fresno plant. Mr. Wendell Asbury, Vice President of San Joaquin Bakeries, Inc. , and l':Ianager of its Vi8a1ia plant, and w.hn served as IVIanager prior to the acquisition in 1951, outlined the distribution area of the plant with a blue pencil on a California :::oad map, which was received in evidence as ex 57. The northern portion of its distribution 3j.'ea generally embraces the \vidth of the San Joaqull Valley, extending- to the east from VisaJia as far as Three Rivers; to the north from Visalia as far as Se-'ille and Yettern; and, west from Visalia, beginning at a point a little west of Stratford, extends further west in a narrow strip as far as Avenal. Beginning at a point below Delano, south of Vis alia, the distribution area narrows like a long arm, and includes the towns of "Vasco, Shafter, Bakers1"eld, Lamont, Arvin, and extends as far south of Visalia as Tehachapi, in the mountains, immediatcJy north of Los Angeles, California (Tr. 1644-47). 3. Old Home Eaken, Inc. (Sacmmento and Chico Plants) 58. At some time p1'iot to December, 1953 , ::111'. Earl Schnetz President and contl'oJling stockholder in Old Home Bakers, Inc. a company which operated a baking plant in Sacramento and a plant in Chico, California, made an offer to sell controlling interest in the two plants to Campbell Taggart Associated Bakeries Inc. Campbell Taggart refused the offer. Subsequently, pursuant to an agreement dated January 20 , 1954 , Mr. Schnetz and Old Home Bakers, Inc., sold and transferred all of the physical assets of its bakeries located in Sacramento and Chieo, California, to Home Bakers, Inc. , a Delaware corporation formed by respondent. The agreed purchase price was $1 112 839 , plus the cost of CAMPBELL TAGGART ASSOCIATED BAKERIES, INC. 555 509 Initial Decision inventories on hand. Of the total purchase price, $350 000 was paid in cash, and the remainder represented by promissory notes payable in annual installments, and guaranteed by respondent (CX 108).

59. In the acquisition of the Sacramento and Chico plants CampbeiJ Taggart Associated Bakeries, Inc. , acquired a 64.70% interest in the new corpomtion, Home Bakers, Inc. Mr. Earl Schnetz became a 111inority stockholder and President of the new corporation, Home Bakers, Inc. , and :YIanager of the Sacramento plant. Mr. Vernal L. DuFrene also became a minority stockholder and continued as Manager of the Chico plant. Later the name of the new corporation, Home Bakers, Inc. , \Vas changed to Rainbo Baking Company of Sacramento Valley (Tr. 2639). Mr. DuFrene became Chairman of the Board of the new corporate subsidiary, Rainbo Baking Company of Sacramento Valley (CX 71G; Tr. 2578).

60. In 1953, the approximate net sales and net profits of the Sacramento and Chico plants of Old Home Bakers, Inc., were as follows:

13. "" B T rolls I Ketprofits Old Home (Sacramento) (CX 288) 674 007 I $118,410 Golden Krust (Chico) (CX 288) 942 856 ( a. A1' a of D'ist?'iuu(ion of SnCTwnento Plant 61. Mr. Harry D. Snyder, who became a stockholder, President, and General \lanagel' of the Sacran1ento 111ant of Rainbo Baking Company of Sacramento Valley in June 1958 , outlined on a California road map, CX 41 , the area of distribution of the Sacramento plant. A considerable portion of the area outlined by JVr. Snyder is mountainous, and, consequently, the plant operates trucks along the higinvays in several directions from Sacramento, in some instances to depots, where driver-salesmen pick up the break in other trucks and distribute it to customers. For example, the plant operates along the highway north of Sacramento to l\Jarysville, and as far north as Biggs. To the east of Biggs is a mountainous area, National Forests. Plant trucks operate along the mountain highway to :\evada City to the east, and continue up the mountain highway to Sierra City. Trucks also operate up mountain Highway 80 to Truckee, California, and, dClring the Initial Decision 71,' Suit1mer season when the resorts are open, along the north, ,vest and south edges of Lake Tahoe, located partly in California and K evada. South from Sacramento, the plant distributes to Lodi; and southwest from Sacramento to Fairfield and ;I apa. b. Area of Distribution of Chico Plant 62. The distribution area of the Chico plant is north of the distribution area of the Sacramento plant. A good part of the Chico plant' s area of distribution is also in a mountainous area. Being mountainous, the distribution area of the Chico plant is limited to areas accessible by highways. The distribution area to the south of Chico extends to the town of Oroville; to the north it extends along the highway as far north as Yreka; to the east through Quincy and Portola to Hallelujah Junction; and to the southwest to WiJows. Depots are located in Oroville, Quincy, Red Bluff, Redding, and :'iIount Shasta (Tr. 680 , 683- , 1385- 1391-92) .

B. Concentration 'in the Distribution A nco of Baking Plconts Acquired by Subsidia1'y Corpomtions of Campbell Tco,qgcort in 1V orthern Californ'in 63. It will be seen that the distribution area of the baking plan!s acquired by subsidiary corporations of Campbell Taggart Associated Bakeries, Inc. , in Northern California covers a good part of the populated area in a north and south direction between Los Angeles County, California on the south, to the town of Yreka, California, in the north . Yreka is located approximately 2;) lniles south of the Oregon border. :: orthern California is a heavily grmving area, and its population is increasing each year (CX 19 , 27 , 41 , 43 , 55 , 57). Beginning in the year 1953 , the earliest year for which sales data of particular bakeries is shown by the record, to and including the year 1%0, the Jatest year in which sales data is available in the record, the sales of bread and bread-type rolls by the overwhelming number of bakeries from whom complaint counsel obtained sales data and offered it in the record, have steadily increased (see the Tabulation on pp. 561- 566 herein). FOJ' example, Athens Baking' Company, an independent baker with a plant in Oakland, Califomia, reported its sales from 195:-1 through 1960 as follows: 19G3- $142 521; 1954--$255 71; ; 1955-$321 305; 1956-S346 014; 1957-$349, 939; 1958-$457 393; 1959-$380 820; and 1%0-$443 945 (CX CAMPBELL TAGGART ASSOCIATED BAKERIES , INC. 557 509 Initial Decision 52A-C). It will be noted that the sales of this small bakery showed a steady increase during each of the years 1953 through 1960, as well as sales of most of the 35 baking companies which reported their sales (Tabulation, pp. 561-566 herein). 64. The only evidence in the record from which market shares of baking companies competing with those baking companies acquired by subsidiaries of Campbell Taggart may be computed is sales data contained in the responses by approximately 35 baking plants to a questionnaire (e. ,Q. CX 39B-D) attached to a subpoena duces tecum issued at the instance of complaint counsel. The questionnaire requested various sales and production data for the years 1956 through J 960. These responses were received in evidence at hearings held in California in 1961. At hearings held in Washington in :Hay 1965 , complaint counsel supplemented the original subpoena responses with data for the years 1953 through 1955 (e. CX 10C-D). The questionnaire requested each of the 35 California baking companies to segregate its sales of hread and rolls for the following areas: (1) "San Francisco, California within the confines of the city limits; (2) the "San Francisco-Oakland Standard Metropolitan Area, which includes Alameda, Contra Costa, Marin, San Francisco, San :Vlateo and Solano Counties, California; (3) "Sacramento, California which is coextensive with Sacramento County, California; (4) Modesto, California; (5) "Fresno, California; (6) "Visalia California; and (7) "Bakersfield, California (e. CX 39C). Complaint counsel stated that the 35 baking companies surveyed distributed in the distribution areas of the baking companies acquired by Campbell Taggart affliates in California. 65. For various reasons, many of the responding baking plants did not segregate their sales of bread by the "areas" designated in the questionnaire. Some cOlnpanies did not keep their records in such a manner as to accurately reflect their sales in limited areas of their entire distribution areas. For example, the questionnaire designated the City of Sacramento, Caljfornia, as being coextensive with Sacramento County. In reporting their sales some companies reported sales only within the city limits, \vhile other firms also reported sales in their surrounding environs (Tr. 872 , 1308, 1540, 1781). Some firms were not able to segregate sales within the San Francisco City limits, as instructed in the questionnaire (CX ;\9B-D; Tr. 901 , 980, 1;,08). Most competitor baking companies considererl Santa Clara County as part of the Greater San Francisco l\larketing area, although the questionnaire Initial Decision 71 F. did not include Santa Clara County within the San Francisco- Oakland Metropolitan Area (Tr. 981 , 1169-1171 , 1222, 1268). 66. There was also confusion among reporting baking companies with respect to " stale recoveries," Some baking firms included "stale recoveries " in their responses (Oroweat Baking Co. , CX 48H; Modern Baking Co. , Tr. 1219) while other firms excluded "stale recoveries (Continental Baking Co., CX 31H; Homekraft Baking Co.,Tr. 1262). Some reporting firms included sales to other bakers and interplant transfers (Oroweat Baking Co., CX 48H; Gravem-Inglis Baking Co., Tr. 1844), while others excluded this item (Langendorf United Bakeries, Inc. , Tr. 1043; Continental Baking Co. , CX 31H). Some J1cluded r1iscounts and allowances (Sunlight Baking Co., Tr. 1020; Oroweat Baking Co. Tr. 1503), while others excluded discounts and allowances (Continental Baking Co., Tr. 1172; Homekraft Baking Co., Tr. 1266). 67. Most of the California baking companies solar1 freely across the boundaries of the " areas " designated in the questionnaire and \were unable to accurately segregate sales in accordance with the "areas" designated in the questionnaire (Tr. 901 , 980, 1308). Some of the California baking companies distributed throughout the Northern California area. For example, the distribution area of the San Francisco plant of the Continental Baking Co. extenr1ed, as of the date of the hearing in 1%1 , north from San Francisco as far as Lkiah vhere one of its depots was located (Tr. 726). Ukiah is located approximately 125 miles north of San Francisco. South from San Francisco, the plant' s distribution area extended to Greenfield, which is located south of Salinas. East from San Francisco, the distribution area extended to VaJJejo. Southeast from San Francisco, the distribution area extended to Fresno and Tularc (Tr. 746), Depots were located at l:kiah, Santa Rosa, San Rafael, VaJJejo, Redwood City, Santa Clara, Salinas, and Fresno, The distribution area extended weJJ beyond the towns where the depots were located (Tr. 726). The Sacramento plant of Continental Baking Co. server1 the entire Sacramento Valley. The furthermost point north from Sacramento was Redding. South from Sacramento, the distribution area extended as far as 25 miles south of JIodesto. Vlest from Sacramento, the distribution area extended as far as Cordelia which is located about 10 miles east of Vallejo (Tr. 793). As of 1961 , Gravem-Jnglis Baking Co. of Stockton, California, transported its products as far north as Sacramento, and as far SQuth as Bakersfield (CX 61; Tr. 1838-39). Oroweat Baking Co. distributed from its San I, rancisco plant to Sacramento, and as far CAMPBELL TAGGART ASSOCIATED BAKERIES , INC. 559 509 Initial Decision north as the Lake Tahoe area, and as far south as Fresno (CX 47). Renon-Parisian Fontana Bakery distributed bread from its San Francisco plant as far north as l:kiah and Marysville (Tr. 169- 170). Bread baked in Fresno was sold in MarysviJle to thc north and Los Angeles to the south, and bread sold in Frcsno was baked in San Francisco to the north and Los Angeles to the south (Tr. 475-76). Valley Queen of WatsonviJle distributed its bread from Sacramento in the north to Delano in the south, and Langendorf United Bakeries, Inc., distributed bread from its San Francisco plant as far north as Mount Shasta, almost to the Oregon line (Tr. 845).

C. The Rele'uant Sections of the Country 68. For these reasons, it is impossible to determine reliable market shares :for some of the baking plants in the "areas " originally specified in complant counsel's questionnaire. It is significant that complaint counsel, in supplementing the original subpoena responses with data for the years 1953 through 1955, abandoned their attempt to secure sales data for any iimited geographic area within the distributing area of the particular bakery, but, instead, requested the baking plant to submit data for its total sales throughout its entire distribution area in Northern California, irrespective of any particular city or county within its distribution area (CX 12D, E; RX 61A, B). Lpon the basis of the evidence, it is found that the relevant geographic market areas in which to measure the competitive effect of the acquisitions in California by subsidiaries of respondent are the areas of distribution of each acquired baking plant in Northern California, their combined areas of distribution, and the areas of distribution of competitive baking plants to whom customer purchasers or bread and bread-type rolls may practically turn Ior alternative sources or supply.

69. Aside from the inaccuracies and inconsistencies in the sales data reported by the 35 baking companies subpoenaed by complaint counsel, above referred to, respondent contends that the sales ta contained in the responses from the 35 reporting companies do not provide any reliable foundation for any findings of fact of any market shares in any properly defined geographic area for still another important reason. pondent contends that complaint counsel's pm'ported survey of only 35 baking plants selling bread and bread-type rolls in :-orthern California is obviously incomplete for the reason that the testimony at hearings in California from baking company offcials identified an addi- Initial Decision 71 F. tional 33 competing baking companies which distributed bread and bread-type rolls in C\orthern California from whom complaint counsel did not request or obtain any sales statistics. These 33 companies were in addition to the 35 companies subpoenaed by complaint counsel. In other words, complaint counsel did not obtain market share data from any of those 33 companies. Some of these competing companies were substantial bakers, including General Baking Company s Van de Kamp Division (1'1'. 531 1665) ; HeJm s Baking Co. (1'1'. 530, 1(68) ; and Catherine Clark (1'1'. 914- 15). Other bakers included: Frederick's (1'1'. 92) ; Larraburu (1'1'. 113) ; Italian French Baking Co. (1'1'. 113) ; Royal Baking Co. (Tr. 184) ; Roma (1'1'. 217) ; Oakland RolJ Co. (Tr. 381) ; Weber Baking Co. of Los Angeles (1'1'. 530 , 555) ; Perinis French Bread (1'1'. 555); Hamburgcr Schwarzbrot (1'1'. 914); Ukraine Baking Co. (1'1'. 914) ; Brenners (Tr . 915) ; Welch (1'1'. 916) ; Prosser Baking Co. (Tr. 952) ; Madera Baking Co. (Tr. 953) ; Pisano French Bread Co. (1'1'. 1211) ; Purity Baking Co. (1'1'. 1222); PV (Tr. 1223); Barone, French Baking Co. (Tr. 1285) ; Fluers Baking Co. (1'1'. 1392) ; Morning Fresh (1'1'. 1392) ; Masters Baking Co. (Tr. 1393) ; Mom s Bread (1'1'. 1394) ; Fresno (1'1'.Baking Co. (1'1'. 1631) ; Our Own, pyranees, Farm House 1659) ; Deluxe (1'1'. 1660) ; Spencer (1'1'. 1678) ; Cow Wow (1'1'. (1'1'.1(78); Frank's Bakery (1'1'. 1078) ; and Palermo Bakery 1078). For these reasons, respondent says that, even overlooking the errors and inconsistencies in the sales data reported by the 35 baking companies subpoenaed by complaint counsel, a reliable market share universe cannot be determined from sales statistics of only these 35 baking plants when the testimony identified an additional 33 baking plants selling bread in K orthern California from whom complaint counsel did not obtain sales statistics. 70. Passing over, for the present, respondent' s objections to the reliability of the sales data submitted by the 35 baking companies subpoenaed by complaint counsel, a tabulation of the sales data contained in the responses from these 35 baking plants, and also sales data furnished by the subsidiary baking plants controlled by respondent, is as follows:

I I G , G, , H B C No C C B B C E, :Hn , , , , , A, ,31D D, A, 31D , A , A A A D A A A ex A ) 52 5.1 116 Hii 29 115 165 ,,1 51 014 1!J,452 303764248 31S 45!) 8% 022 2iO 875111 10" 262 Trol 346' G71 016,789, "33 1:\8 116':)4(; 260 719. 3,,' 7771 . 1 :1 ' 1 1%6 0116"OJ56 Hll736381 9281 18,5% 022 70!) 31" 30!) G08 715 346 5!JO 230 128052 256 O:J6 138 4!Jl 401 :H)2 067 :01 871 2 4 3 14 2 2 1 I I - i I=-----=-,----- ,, 305433n!: 1(;g 287 :J76 830 710! H2 472 313 ,15 8L5 88c nTro!l 063 !J76 845 !1!11 812, 127 552 80(1 185 ",1 015 I 2 5 32J17;' I . 1.843 'Uc,. - l- 1!1 8 30.17:H8:;?! 73833! 350 64 142 472 22. m "cs 32J90J127 410,947 138 RH!J 2 1), 127 38fi 30!J,H):; 71;; "09 1,0;52 12 5,1 l, 1 3. 5 i I - ,- rnlls 713063667 101)81(1 640 170 578 877 1;;" 198 211 2"5' S61187 6S:J 5H1 1)8:1 127 421, 797 0,,8 705 608. ;'70256;= 7. ' &Irj '77" I I I -,'01R13 c, 1%4 ) () g "c 2. ,iC5 713 :n1 709423 51, 4,,0 817 446 OS5 :;, 53 :;: 087057 551 655,570 ,:J 1, 1.,%,315 3 1 1 G 746 127 121 :nl r,1 '011 -02H 1;;8 " roll 521 17H 101 180 8:;3 20:! 770 8!10 548 ;;:::: 11'1 2?'9 13GYI" .107 20!) 726 12!J 320, G6!J, 992 020 "88 c,. & 142. ,,12 , 1m- 7 7 (i ;;21H;:802 003 Wi!) G8fi ;'18 ,() ,(; 770 8!)O 721 307 )() 1! J7. 12D 320 38!J 05' '8C "!7 Hl,,27021 .2!1 702 812 ,Z:!!J 0 11 4 1 1 r,, Ltd. Co.. , Corp, mcl"ly Co. OaklandramentoIlle.. Co. Inc. Co. , Cu. Co.. Bakery. Bakery, Baking- Dakin!' (fOlmel-Cream Cu.(fo,'Baking Sa naking Co. plant Bakin" Bak.'ries Bakers,Bakeries, Francisco and Baking fi,-d Crust Sbe Inglis Baking- Crust Franr.isco j,eandro Bua",. Baking- nemar Tot.:11 Tabl m Sann",-u:kySac"ament.o Oakl,,!.,,! Sae"amenlo San Ib,ywarrl Baker Sacram"nto Fresno Stockton San Company Athens Channel Colonial Continental Cottage Golden Coldcll Golden Gntv(' Humecr"fl Intcrstatt' en' I I G G, G, e, e H B B fl, E, Nos. 310 . , , , , , n, A A A A,A ,31D3IIJ 0A, BA. eA, C A A ex ) J 52 54 51 H 51 I I 2.2:,1'" 1(; 16 1" 65 I 030 0 0:13 rJ88 832 820 768936 611 021 968 322 roll;; !)!J1!),024 621 751 316.337 07G :;7: 240 865 ,153 3:'0 BT 1.!J02 336 &44392H2 n 1 ; i 1 I 1960 0 536378 500 317 33!! 237 0 144 290 87'1 2:'7 41:' 710 212 K'O" ,) 01 ,, All 443,815H57 534 481 :;:;1 0 417 153, 06!J 368. 732 ,,01 :;60 :: J?,, l 068 670 101 08:; 189 rolls H20278 441177 1:'I!! 7!i3 l!J4 62 ii 7;;7 22!) 38n 371 10:'. 261 028 2!JO :n2 ,980 1 2 3 2 5, BT3HO1,32-;,33, 1.'''fI 2 14Sf\- I& I , - 8:j HJ59 H20841229 407J10721 OOJ 2f;7 ,16)1 0:1(; 322 120 587 707i 2 3,3427 17 2 1. :J. All3HO942250. 761 7%, 1l.0 -105 :;14 112 70:; 1.156 038 2112 rJOO 1 ii - '2:; I 17 3n00:'1!J1 4388(1 121 ;)26,J:12S 2:;7 6H\ rJO, ,R . ro!1s :'I!1 12 \:;:; 1 !I 127 EJ- 037." 182388 ,H7!),46 BT 1 2 2, 1 !12;j 2,W10 1!H 8rJf; &- i i --7B- I 1%8- 2 J 3,,:; 1:;31 173 383S07 28 2S0 97, , 3HH ,) :\ ,6, 083, 5T!I 2:\:\ 1 212 H17 000. 8!i 357 329.-12;' All 178,5;'2 :3215 110720 i 3 2 '6.'q" 1 2. - -1 2 12 - I , , 'i --1 rolls 15(\ f1% 0:, 07: 1:,0 G, ,,14 7G3 3 132. 1112"1 7FI I1GO,12:J 1 319 032 0IiSI\(;5,6(\1 lJ)G:-\ 1 2 2, ? ri& 6.!l21 5 11.087 ,707 \179,-181 12 11 - 1-:;-,:1 1==- 1 1();,7- :6. G !J3!J 618 72() 76H 873 7:'2 'i8!) 9n: 272 3 RSO 312 T All 31978B,381.27 73.2n,737,250 001 214 (;, 263522 11(;127,, 1.417 13!) Ltd" Co. Co. , Corn. Inc" Co. Oakl,md, Int. Co. Co. (former\y Sacramento i,, I,plant Co. Crl'amC" naKHY, kery,B, nahinr, IJ;k;ng (form",'\y U:tkinv, Baking Co. nakeries, and Baking men:_o Tot,,! Tnl;lis l1aking" Leandro But.t"rB;;kir;f; Hema,' CrustsfieldCrustamenLo State g"k"rs, Hakl'Francisco Fra.nci Total n"kinr: m SanB"rkdeyS,,,,ramento Oakland S;tcn Company AthensChnooel ColonialSan Continental CottageHayw,-,_Go\denBak,,,GoldenS'lct- GoldenFresno(;raVt'StocktonHomenartSan Interstate :;

e E E, Nos. !lA fiG!JE E 5 5,, B, 45DD, , A A, A, A, A ex 4, 33 6713 48 10 14A5 : 13!J i 1 1 ! 5 74D 5 000 8 345, 1111 000 5;,0 02:-J 813 2 107,) rons 7 3.) (j, 331 66(; ;;12 0:11 fi10. 158542, 701 fit ,21872 2 & 4 5 16, 2 i 'i 1956 R --I 415 S!J723018 268 384 814 000 02a 813204 107 ,) 110 031.;;50 610 158,542 701 906 1,8 H65,S4:;.000! 171 740 S12 I 542543 O(i0: 77R 105 87, 174 000 904556 rolls 275 557 662 '174 902 738. ,87!1.(; BT 4 266586, 2 & 1 I 04 EL,5B 6 J4233 r,022792 684 672 H75 000 ,D:,;;r; ):;. G All 831 2, , 604 :;60 n'; D02 510, 26 1153,46 2 7 258fi :-c , ! S;,6 f10G400 7!1 (i1:1 273 273 540 mll 211663 lG!; 8!18,H1, 707 7fQ ;;62 0 BT 1:111.871& lS, ;,38 2 - 1j 19,,4 1() :; S17 10S 017 613 27:1 27:J (;fi, ;1:;:82 724. 80H ;J38 78r, 781 ;,62 028 118 18' 2 5 - I i 1 - 0 J 11 0 :!4 6 ) 100 fJ46 34fi 461 074 ,2:\1! 7:'6 , mlls ", 3 ,I 83, 2 37 80, 9!) 6 781 007 273, j:n: 76(; ), ;,10 I3T , J 1 I 5, I 1: ! 9 B 0 I , I 8 (;) 1%:1 4 100 f;R;: 73. H, ,:; 8,9 J D 08 3 G 583,835 --I67:\,208 ), 32160.7 All 09" 3 76(), 437 !l,!"R:J,:;16,311; 1 7 18,:c- 1 tahle.

;"

S.l-. "f , end (salesonly)l Inc , at Co, only).Co.. FonVma Co Co. pbmt sco UnitedII". Inc. Baking: Stn!"' Bakin" ,md McAllister ,Jose A"p,.,es Tob;1 IJ"kinr; Cruz Baki"g B"j'erdield F"anciPar;s;an Jo"an"isco Angel(' Tot;d footTJoll' lomestl'fId,Los OaklandFresno 11GOBerkeleySan S"c Bakeries Santa Sacram.ento Los(Bakersfield San Bak"rks.S"n Comp,lny Langcndorf Mod,,'n Muz;o Orow",,!. Oroweat H"ncm- Safeway 00' E 9C 81'; D B E E, C, 5, 5, 4;,D No,. , , , , , , , . A A. A A 4 4 ex 1. , 48 15 :!, I. 3 3:1 39 (;7B I !3 i I44A' ! 7613 mile fJ42 7%000 7!J7 432 200 G81 100074 '-17 BT 182-,' 351378.484 8;', 57, 7D3 618,980 470 152 7!J1 4;;, & 7!J1 -- I I I 1960 f195 H1G 241 67G000 ')91 980 200 584 525 074 S82%: 400734 01:J 7!JO, 565.428 881 618 170. 1!'2 3,70l.007fJl ! ,.ol1s 878251378:12000 82!J 350 f100 77(; 'J88740' 627':;78 OG5 984.447 :\2!J B1.; 453, 114742 521 !JG. 727_ & 3688 ,,:. j 857 20061:\000 667 167 )j78 600 7761 447 710 All 238380,780,575620 5%, 808 06G :J2!))j88 6HH 017 ::; 1,)84 :J 1, "" 1747:4 8D8 1Z:J000 030 40:; 401 400 077 108 !JH1 030850 4:?3470, BI' 188 702 ;'8;', 688, 92(, 878 G42 3,522 & !8, B - - JUGS 7(;1 721 5E\1 E\15 000 661 488 101 100 077 1091 831 !J81 812 ,; All 132 2RI 4!)0 55fi. Gb2 003 780, ;'8f1 6(,1 n2f1 87f1(j42 :1.:;22 , i ! $ r 0G3 351000 81- 18,; G86 000 ,73 209 (;23!180 (;03 BT 26" !17261U58 3!11111 6;;7 731 520, :;71 819 :'6:-; .'.'8 122 & :! , 1G:-; 1815272 3000 33; 4281 6RG OOO ;'73 20!J 623 !)HO (,03 07H 1!)1 300 ,f112, (;72 812 520 37J. 81!1 :;1;3 ,,58, 122, 7 I-=All in taule. of S. (salesonly). end Fontana In,' S. Co.. only).Co.. , at. plant Co Co. fi(,ld United ;anTnc.. Inc.. and M"Albter, ofieklBnking S!.o,-' ,10Hc Ang-ees To1.al 1bkingC,' B;1king 1bk(,l" Baking- Anl,,'I,' "'-anciseoPa,.i Frane'sco Total fool.note cat Oak!"ndFres!l" 1160Bcrkd"ySanHomcstead.L() Bak"ri"s Sanla Sae:""n1tenlo 1,0'0(Bake,' San Bakeries.San See COInpany Lang-endorf M()j"rn Muzio Orow,,,,t. Oro' Henon- Safew"y C 22 :i6A 1 1 D 288 288 2H2I , 2801 , T, I , ,C C, n B, B 287 , Nos. , N- 27\JC 281C , , , C, ,,8A C , , A 2HDA 2DO 280C 282C ex 284C 2!J:1 285286C, 18A 20 21 17A 13A, ! I , _ I 52" 754 1G8 115 ?:rOII-; 502 ,,72 I71 581 7112 25!) 206' 9%, ODD 37!J, 478 31",9171 51;5 215,885511 285 32!) 072 582 1.24!) 4 1.S'1,1 16' i 72 i = 1 1 i 1056 :,, 264 168 25!J 523! 754 1155 230 171 581 870 752 249 511 28, 7!)!) 215,885! 170 051 m!!) 379 478 550 633 3 1 11 85 .-- ! ;T 080 8!18 325 223 880,748! 1128: 07,794 !)53 804 818 "OIl ;;,s 811 117,157 814 297 142 303242 546 fi31103, 351 TIT 5, B& - 16 69 ! 1%:; 13G 898 :J2,j 223 728718 476 6:,2507 7!J4 052 518 All 827 400,773 814 112 3HO212 fi2:1 338, 631103, 07;J '13'. 401 ,;;, 80 I I ; 070 619! 110 993 190 17fi702 81fi 760 621 54,761 51'0 710 2f;. D7S G03 257 684127,fI8 206 12lJ, 2 421 16. B&BT 63, i I 1!J54 - I 061 058 140 ,,3 23!J 071 176702 !J38 R8- 260 All 6:\3 1011 710 26:i 836840, 677 1.252684127 7:,359 I I 856, 86:1 206 006 212 766 roll 297 :J76 ,2(j:G '''c 608 007 35 31 719 fi74042 1111; J 06:! lD8, 217 rn 179 :187 & B I 1%3 1 3 :! !)41 7:J71 608 518856 :n4 37fi 228 604 , 542 404 719, 908 !J42 H!'1 162 01)" 227 8fi7 AI' :!,3L;,263 455 - 11--, .

In,. Inc, orn\Jani"5 Inc" Co. total ' plan!. Bakery, Bakeries, all B"k"ri(' " and Tag-gar!. Fnuwisco Bakinf Bakery, Quc"n Tala! Tol,,1 Tolal Jose Tolal San Oakland SacramentoChico .JoaquinMorlcstoFresnoVisalia Sul!sidiarics San "'.'abonvill" Company SunliL" Valley Ki!j,atr;ck' Rain1m San Campbell ;n' C 22 56A I 1 D 288 288 2801 , 2821 I , ,T C, C, ,H Nos. B 287 ,U , N- 27!JC 281C, , , , 58A ,C C. AA 290 A 280e 282C 289 :3A. 17A 18A 284C 2832852H6C, 12 1 ,: I 12021 211 16!) 770 rolls 264 868 896 792 6885 347 766 113 080578 T !J46 046 265 219 8 312 7!'O 63, 06;;432728 ,?25 807 ,) :J 2 I 20 106 88 i Ii 800 038! H96 792 131 766 897 080678211 501 026 766 265 219 48.,. 381 7:;0 131, 065 A .,.,) U321.728 5 843 - 4 109, - :

- 03 674713 1 545 003 180 21H 605 580 673 162 710 ''2 r :1) r 147 933 348671 642 821 871 696 635 865 6, 4.,'j3 856 . 1!J!J 432 763 :;45 558 103 771 162 674 218 All 771 1(;0 821 871 693, 937 635, 318.713671 i;53 210" UI33.11 4 - 102 75n =- ;L ),)101!68;", 700 202 274 , 893 42, 078 813 VI2 644 338 913, 498. :;29 47H 501 744 5g4, 500 4 1 1 18 . 8fig.1.321 ! ! ,:_ 19::!! 51,8 313 532 883 418 813 5!15101685 fi1- 536 930 , 4 )J3 8:438, 611 178. 5000 1.86fi13211 3. I I ' available. 7H1 152 H50 502 011. 134.'70 OI4 377 17:-; 640 230 647 H77 40, 766-' 5:H 54' 189, not 1.33 1.740.3101.270 &BTiI 4' 17 1:155 I 1!157 5: 11 (j78 817 ,:J 841 O :'10 131 570 014 716 10,,:J- :;31 545 0!_ for S41 6!J, 2:-;O 617 :J.623. 1.3:; '''7m 1.7101.270? 417i robs type Inc. ==1 Inc. lori brpad ,md Inc. om"ani"s Co. plant Bakery, Bak",,;c5, Baker;es, all l,r"ad and s Tag-art of F!'ancisco Bahcry. Baking- Queen .j()se Tolal Toted ()dcslo Totalhell Total S:ln Oakland Sacramento Chico ,JocHluin FresnoVisalia Scalp!; San Watsonville Sa'"ldla,l" 1 Company Sunlile Valley Kilpatrick' Rainho San Camp . .......... . .... .. ....._ . .... ......... CAMPBELL TAGGART ASSOCIATED BAKERIES, INC. 567 509 Initial Decision 71. From the sales data submitted by the 35 baking companies in response to complaint counsel's subpoena questionnaire and tabulated on pages 561-566 herein, it is seen that the largest seller of bread among the 35 baking companies in Northern California in 1953 , the year preceding the California acquisitions complained about, was Langendorf United Bakeries Inc. with net sales of $18 673 208 for all products manufactured and $15 543 234 for bread and bread-type rolls. This production amounted to 25.37% of the $61 247 766 total 1953 sales of bread and rolls reported by the 35 companies from whom complaint counsel obtained sales data. Other baking plants among the 35 companies who reported the next largest volume of b,.ead and roll sales for 1953 were:

breado.nd bread-type rolli Kilp2.trid;: Bakeries (S. F. and Oakland plants) -- 719 608 or 10.97% of the total $61 247 766 bread and roll sales repo!'t d by the 35 bakihg companies (CX 279C, 281C; Tabulation on pages 561-566 herein), Continental Baking Co. -- u- . _HU"'"'''' 153 428 or 10.05% of the total bread and roll sales reported by the 35 baking companies (eX SID; Tab. , pp. 561-566 herein) .

Inte:rstate Bakeries Corp. ..u.. .................. ...... .....................-.. 018 614 or 8. 19 % of the total bread and roll sales reported by the 35 baking companies (CX 5ll; Tab. , pp. 561-566 herein although' h Remar s 1953 bread and roll sales arc not available, and the figures in the Tabulation are mere estimates).

Old Home Bakers, Inc. (Sanamento and Chico) -- 616 863 or 70 of the total breed 2nd roli sales reported by the 35 baking companies (CX 288; Tab., pp. 565-566 herein). Gravem-Inglis Baking Co. (Stockton) -- 669,548 or 4.36% of the total bread and roll sales reported by the 35 baking companies (CX 65G; Tab., pp. 561-562 herein). Safe,vay Stores, Inc. (Oakland and Fresno) .- .................... 499 46:1 or 4.08'% of the total bread and roll sales repo:rted by the 35 baking companies (CX 4i1D; Tab., pp. 563-564 herein). Sunlite Bakery, Inc. (San Jose) .. o. ........... - 479 297 or 05t.7r; of the t.total bread and ron sales reported by the 35 baking companies (CX 12D; Tab. , Pl). 565-566 hei:ein). Oro'Neat Baking Co. (San Francisco) . ..........- - 7()6 756 or 2.88% of the tot.al bread and roll sales reported by the 35 baking companies (CX 48A, ; Tab. , pp. 563-564 herein) .

72. If the bread and mil sales of all five baking plants formerly controlled by the Kilpatrick brothers in Korthern California are lumped together, their total sales for 1953 would be: . .. . . . .. . . ... . Initial Decision 71 F. bread and bread- type rous Kilpatrick, S. , and Oakland (CX 279C and 281C) .. -- -- $ 6 719 608 San Joaquin Bakeries, Inc., Modesto and Fresno (CX 284C) 4, 135,206 Holsum Baking Co. , Visalia (CX 286C) 063 917,820 Total 11Thus, the total sales of the five baking plants formerly controlled by the Kilpatrick brothers in 1953 represent 19.45% of the total bread and ralJ sales reported by the :35 baking companies. Their sales, when combined with those of Langendorf, the largest seller among the :35 companies, amount to 44. 8270 of the total sales reported by the 35 companies.

73. What about the competitive situation after the acquisition of the five baking plants by the subsidiaries of Campbell Tag-gart? The net sales of bread and bread-type rolls reported by these five baking plants for 1954 were as follows: 195-', bread and Dread-tY.7J6 Tons Kilpatrick, S. F., and Oakland (CX 280C 282C; Tab. , pp. 565-566) . -- -- 975 89:1 San Joaquin Bakeries, Inc. , Modesto, Fresno, and Visalia (CX 283C, 28GC , 287C; Tab. , pp. 565 566) 064 816 Total 040,809 Thus, their net sales of bread and bread-type rolls in 1954 amounted to 18. 9:3 of the total bread and rolJ sales of the :35 reporting baking plants for 1904, as against 19.45 % for 1953 the year prior to the acquisitions. 1f the bread and rolJ sales of the OJd Home Bakers plants in Sacramento and Chico are added to the sales of the Kilpatrick and San Joaquin plants, we see that the total net sales for 1904 of the seven plants acquired by the subsidiaries of Campbell Taggart are as follows: Kilpatrick. .. 975 993 San Joaquin ........m ............ . m............... .. 064 816 Old Home Bakers, Inc. Sacramento and Chico (CX 289C , 290C; Tab. , p. 565 . 1 257 951 Total 298 760 The total net sales of bread and bread-type rolls reported by the 35 companies in their responses io complaint counsel' s subpoena questionnaire for the year 1954 were $63 429 621 (Tab., p. 5(0). On this basis, the reported net sales of bread and bread-type rolls by the seven baking plants acquired by subsidiaries of Campbell Tagg-art represent 20. 69 % of the total sales reported by the :35 baking companies for 1954. The Langendorf sales amounted :

CAMPBELL TAGGART ASSOCIATED BAKERIES, INC. 569 509 Initial Decision to $15 720 442 in 1954 (Tab. , p. 563), or 24.78% of the total sales reported by the 35 companies. Thus, the combined sales of the Campbell Taggart subsidiary and Langendorf plants constituted 50.47% of the total sales reported by the 35 companies in Northern California in 1954. However, their combined sales in 1960 had dropped to 43.02% of the total sales reported by the 35 companies (see Percentage Chart, p. 570). 74. As a further basis for comparison, the net sales of bread and bread-type roJIs by these seven acquired baking plants and the total sales reported by the 35 baking companies (Tab. , pp. 565- 566 for the years 1955 through 1%0 are as follows: 7 plants to total sales Total net sales of the 7 Total net sales reported reported by the 3,; quired by the 35 companips I Pmen,"gecompaniesof ""eo b, the 1955. $69 351 848 24. 1956.. 329, 126 072 145 22. 1957.. 17,189 377 034 687 22. 1958.. 338 700 607,929 22.47 1959 147 580 87,856 673 21.79 1960 774 770 807 648 22. 75. Meanwhile the net sales of Langendorf United Bakeries Inc., kept pace with the steady growth in sales of most of the other 35 reporting baking plants during the succeeding years 1954 through 1960, the latest year for which sales figures are available. The net sales of bread and bread-type roJIs of the Langendorf bakeries and the percentage of their total sales to the total sales of the 35 reporting companies for the years 1954 through 1960 (Tab., pp. 563-5(6) are as follows: Percentage sales of Langendorf L'united Bakeries, Inc., to total Yc!nlv net sa cs of Total net salt,s reported' net sHies reported by L"ngen --thee;;;:P Wmp"" 1954- I-'he35 478 1955 - 557,778 , 69 351 848 1 25.1956. 331 318 I 72,072145 22.1957 - 17,657 814 034 687 1 22.1958 189 030 81 22. 1959. J 8 956 829 87 8,,6613 25. 575 797 1 93 807 648 I 20. 76. Keeping in mind that Langendorf United Bakeries, Inc. reported the Jargest volume of bread and bread-type l'olJ sales among the 35 reporting baking plants (see paragraph 71 above) .................. :. . Initial Decision 71 F.

for the year 1953 , the year immediately prior to the acquisitions complained about, it is interesting to compare the percentages of the total sales of the Langendorf bakeries and seven plants acquired by subsidiaries of Campbell Taggart, to the total sales reported by the 35 companies, for the succeeding years 1954 through 1960, which are as follows:

Pcrcentag-e of sales of 7 Percentage efsales of . acquired IJlantsto total Langendorf vIants to net sales reported by totalsalcsr€ported 35 companies by 35 companies 1954. 25. 24. 1955.. 24. 25. 1956u 22. 22. 1957. 22. 22. 1958u 22.47 22. I959u 21.79 25. 1960u ....u 22. 20. The percentages remain rather constant throughout the period, except for the year 1959, where the Langendorf percentage shows a gain of about four percentage points and a drop of more than four percentage points in 1960 (Tab., p. 564 herein). 77. The percentages of sales by thc eight wholesale baking companies reporting the largest dolLr volume of bread aed breadtype roll sales in the :\ orthel' California area among the 35 reporting companies during the years 1954 through 1960 , the last year for which sales figures are shown in the record, are as follows: 1\)56 - 1957 1958 1- 1959 I 1960 mpbell T art Subsidiaries 25. 69, 24.17 22. 03 22.4 (Tab., pp. 565-566) Langendorf 24.781 25.32 22.66 22. 63: 22. 29' 25. 20. (Tab., pp. 563-564).

Continental 10. ' 11.27 14.08 14. 14.10 13. (Tab. , pp. 561-562) 113. Interstate m.... 84 I 8. 57 8. (Tab., pp. 561-562) . 1 8. Gravem-Inglis 4.41 05 ' 02 3. 54 3. 1 4. (Tab. , pp. 561-562).

Safeway ...-... 1 4. (Tab. , pp. 563-564) Sunlite .. 1 4.45 29, 4. (Tab. , pp. 565-566) u .

Oroweat Baking Co., S. F.- 2.81 2. 29 i 2. 1 3. (Tab. , pp. 563- 564) u CAMPBELL TAGGART ASSOCIATED BAKERIES, INC. 571 509 Initial Decision 78. As demonstrated by the sales reports of the 35 baking companies shown on pages 561-566 of the tabulation herein most of the 35 companies have continued to prosper and grow since the acquisitions in 1954 of the Kilpatrick and Schnetz controlled bakeries by corpor2.te subsidiaries of Campbell Taggart. The wholesale price of bread in Northern California varies from town to town, depending on local competitive conditions. For example, the price of the 111 lb. loaf of white bread fluctuated , 731);between 261/20 and 28 40 in San Francisco (1'1' 357 was 280 in Sacramento (1'1'. 650) ; 28 40 in Fresno (1'1'. 731) ; 280 in Chico (1'1'. 1386); and 281j2 in Bakersfield (1'1'. 1656). A glance at pages 561-562 of the tabulation shows that Athens Baking Co. , an independent baker, increased its sales 140. between the years 1953 and 1960. Colonial Baking Co. increased its sales of bread and bread-type rolls from 8512,401 in 1953 , to 751 936 in 1960, an increase of 437.07% (Tab., pp. 561-562; CX , B). Safeway Stores, Inc. increased its sales between 1953 and 1960 from $2 499 461 to $4 582 474 , or an increase of 83.34%. Many of the reporting companies have improved their plant faciJities and extended their areas of distribution. In 1957 , Colonial Baking Co. built a new plant in South San Francisco with a replacement cost in excess of $2 milion (1'1'. 1585- 87). Also in 1957, Gravem-Inglis Baking Co. , a member of Quality Bakers of America cooperative, built a new, modern plant with a replacement value of $311 million (1'1'. 1853). In the two years following the construction of this plant in 1957, Gravem-Inglis increased its sales approximately 37%. Also, it was testified at hearings in 1961 that Safeway had announced plans to construct a new plant in Richmond for Safeway s 255 retail stores in Xorthern California (11' 1401 , 1416-17). 79. Of course, not a1l of the baking plants in Northern California were successful. Valley Home Bakery, a house-to-house bakery, located in Santa Clara County, went out of business some time during 1960 (1'1'. 1582- 83). Channel Bakers of Sacramento went broke and out of business in August 1%0, due to a strike in which the plant was picketed for nine months (1'1'. 1509). Mr. Robert A. Pugh, formerly Secretary-Treasurer of Channel, testified that the plant had excessive transportation costs, was a hand operation (1'1' 1517- 18), and that the acquisition in 1954 of the Old Home Bakers plants in Sacramento and Chico by subsidiaries of Campbell Taggart did not have any adverse effect on ChanneJ's business, but actually gave Channel Initial Decision 71 F. a Jittle edge" because Rainbo concentrated on white bread sales (Tr. 1521).

80. During the period between 1952 and 1959, SunJite Bakery operated bakeries in Portervile and Bakersfield, which sold bread under the "Sunbeam" label The plant in Bakersfield was inadequate, and it was closed in 1959 , and the Porterville plant was closed in 1961. "Sunbeam" bread has continued to be produced in Sunlite Bakery s Stockton plant, and distributed out of Bakersfield and Portervile (Tr. 491 , 511 , 514, 515, 536-37) as before. Another bakery, Valley Queen, fied bankruptcy proceedings in 1%2 under Section 11 of the Bankruptcy Act (CX 13Q). Mr. Nicholas G. Lerek, of Valley Queen, who has been in business and in competition with Kilpatrick Bakeries since 1945, testified among other things, that Kilpatrick's affJiation in 1954 with Campbell Taggart had no adverse effect on his business, and that the operations of the former Kilpatrick bakeries since their acquisition by subsidiaries of Campbell Taggart had been no different than before the affliation in 1954 (Tr. 1245-46). 81. Prior to 1955, only three wholesale baking companies distributed bread in Bakersfield, California, and the immediate area namely, Golden Crust, Sunbeam, and Langendorf (Tr. 1(62). Safeway and a French bakery also sold bread in Bakersfield (Tr. 1690). In October 1955, Rainbo Baking Co. of Visalia entered the Bakersfield market (Tr. 1652), followed by Oroweat and also by Hel:n, a home service bakery, both of Los Angeles in about 1956 (Tr. 1665, 1900) ; by Interstate in 1956 or 1957 (Tr. 1665) ; by Van de Kamp in 1956 or 1957 (Tr. 1(65) ; and by Valley King, a home service bakery, Our Own, Farm House Harvest Queen, Smiths, Spencer, Cow Wow, and Pyrenees at different times between 1951 and 1960 (Tr. 1659 , 1678 , 1684). In short, whereas three baking plants were distributing bread in Bakersfield in 1955, there were approximately 16 in 1961. 82. Langendorf, Gravem-Inglis, Golden Crust, Valley Queen Oroweat, Madera, and Continental began selling in the Fresno area for the first time during the period between 1953 and 1961 (Tr. 4:)1 , 461- , 1614- , 1832). Seven baking companies were identified on the record as having entered Santa Clara County since 1952: Interstate, Bidou, Renon, Cottage, Colonial, Modern and Valley Queen (Tr. 221- , 1006).

83. Interstate Bakeries Corp. began distributing bread and bread-type rolls in the Stockton and Modesto areas, and its Oakland plant began distributing in Santa Clara, San Mateo, San Francisco, :'iIarin, and Solano Counties after 1954 (Tr. 1555-56). CA:.PBELL TAGGART ASSOCIATED BAKERIES, INC. 573 509 Initial Decision Continental Baking Co. also began distributing bread in the Modesto area in 1955 (Tr. 1091). Muzio Baking Co. added two routes in the Sacramento area after 1955 (Tr. 1295), and Catherine Clark, Interstate, and Colonial extended their areas of distribution in the San Franciso area (Tr. 1586). 84. Prior to the acquisition of thc seven California baking plants by the new corporate subsidiaries of Campbell Taggart Associated Bakeries, Inc. , in 1954, there was no competition between any baking plant affliated with Campbell Taggart and any of the seven baking plants acquired by the Campbell Taggart subsidiaries in Northern California. In fact, no baking plant affliated with or controlled by Campbell Taggart distributed bakery products anywhere in California in 1954 (CX 71A-H). The nearest baking plant affliated with or controlled by Campbell Taggart was Jocated in Phoenix, Arizona, which is about four hundred miles from the nearest California plant in Visalia (Tr. 1343). In 1954, there were no corporations affliated with Campbell Taggart which operated bakeries in Oregon Washington, 2'evada, Idaho, or l;tah (CX 71A-H). So, the acquisition by Campbell Taggart of the seven baking plants in Northern California is \'vhat is sometimes referred to as a "market extension.

85. K or is there any evidence in the record to show that any competition between any bakery plant affliated with or controlled by Campbell Taggart and any of the seven baking plants Jocated in California would or would likely have occurred in 1954 or at any time in the future. There is no evidence in the record to 8hmv or to support any inference that any of the California plants or any affliate of Campbell Taggart had any plans or intentions to expand its area of distribution across the four hundred miles of desert and mountains between the California plants and the Campbell Taggart affliated bakery plant in Phoenix, Arizona. K or is there any evidence in the record that Campbell Taggart or any of its subsidiary baking plants extended its area of distribution by the construction of any new baking plants anywhere at any time. Any finding that any Campbell Taggart subsidiary was a potential competitor of either of the former Kilpatrick controlled or OJd Home bakeries in California would be based on pure speculation.

S6. Prior to the acquisition of the seven baking plants in California by corporate subsidiaries of Campbell Taggart in 1954 there was some overlapping of the distribution area of the Kilpatrick San Francisco plant with one or more of the routes of , , 574 FEDERAL TRADE CO IMISSION DECISIONS Initial Decision 71 F. the Sacramento plant of Old Home Bakers in and around the towns of Napa and Lodi. However, the amount of business involved in the overlap \vas a very small percentage probably a littie touching of routes on fringe areas " (Tr. (13). The record does not show that any baking companies operate baking plants in the towns of Napa or Lad!, but indicates that the 1\apa and Lodi areas are served by more than a dozen baking plants located in San Fran6sco, Oakland, St.ockton, and Sacramento (CX 1B , 1D , 19 , 30 , 34 , 41 , 45T, 46C , 47 , 50, 53 , and (4), The record does not contain any sales data for any plant located in Napa or Lodi for any year either before or after the 1954 acquisitions complained about. ;vr. HarolerKilpatrick testified that in 1953 the distribution area of Kilpatrick Bakeries "overlapped to some extent with the San Joaquin distribution areas" around Modesto (Tr. 613). However, at that time the San Joaquin Bak-eries and the Kilpatrick Bakeries were then under COn1UlOll ownership and control by the Kilpatrick brothers (Tr. 1338-39). There is no specific testimony in the record as to any change in distribution areas after 1954, but, at the time of hearings in California in 1961, the Kilpatrick plants in San Francisco and Oakland and the Rainbo plant in Sacramento were still distributing bread in the Napa and Lodi areas, and the Kilpatrick plants still overlapped the distribution area of San Joaquin Bakeries near :Vlodesto (CX 19 , 41). So, evidently these overlaps continued after 1954.

D. Compet-ti1-'(3 Practices 1:n CaJijo' nia 87. In California, large retail grocery chains have had rapid growth since 1954 and have become the most important customers of wholesale bakeries. The nUillber of retail grocery stores have decreased, and the large retai) grocery chains have increased the number of their stores (Tr. 206-207, 371). This growth of the large retail grocery chains, the increase in population in N orthern California, and the extension and enlargement of the distribution areas of baking plants have increased competition bct\veen baking plants and have incrca ed pressure by grocery retailers on their suppliers of bread for better and more frequent service and other competitive concessions. This increased competition on both the selllng and buying side of the market for bread and other bakery products caused rnany California baking companies to provide more frequent bread deliveries to grocery stores, make larger shelf displays overload" bread racks, grant discounts to customers, furnish free bread and racks to stores, CAMPBELL TAGGART ASSOCIATED BAKERIES, INC. 575 509 Initial Decision free tickets to ball games ano other sporting events, free pencils and balloons, entertain customers, provide lady demonstrators in stores, and similar concessions (CX 70A-Z89; Tr. 1095- , 1481 1617- 1833 , 1995).

88. Several representatives of baking companies who were in competition with subsidiary baking companies of Campbell Taggart testified that some of the Campbell Taggart subsidiary baking companies had " over1oaded" bread racks, and granted discounts, trade concessions, and other so-called "giveaways " to some of their customers at various times since 1954, after these seven baking plants were acquired by subsidiary corporations of Campbell Taggart (Tr. 233-245 , 435 , 446-451 , 497-600 , 562- 67 4). In fact, a considerable portion of the testimony during hearings in California related to these practices. An example of the testimony offered by complaint counsel to substantiate the charges set forth in Count II of the complaint that respondent initiated the practice by wholesale baking plants in Northern California of "overloading" grocery shelves, granting discounts and other discriminatory concessions to customers after its subsidiaries acquired control of the seven baking plants in California was the testimony of the owner and president of an independent baking company, ,vho had been operating in California for many years prior to 1954. This witness testiied to the following: Prior to 1955 , he had only a few competitors, Langendorf, Sunbeam Safeway, a French Bakery, and Oroweat (Tl' 1(82) ; then Helm Van de Kamp, and Weber came into the Bakersfield area as competitors (Tr. 1684) ; "Rainbo " came into the area in 1955 or 1956; in 1957 or 1958, an old grocery customer of his (witness bakery demanded a five per cent discount on bread pL:rchases and, when the witness refused to pay the discount, the grocer discontinued purchasing bread from the witness' bakery because Rainbo Bakery of Visalia allowed the grocer a discount (Tr. 1684-85) ; Weber was the first bakery to give the five per cent discount ('fl'. 1686) ; his (the witness ) stale returns increased in 1956 and 1957 (Tr. 1687-88).

89. On cross-examination, thc witness testified that: his stale returns have increased with the Thelr competition coming in (Tl'. 1(91) ; the witness' bakery gives discounts on bread sales (Tr. 1691) ; grants credit to some bread customers (Tr. 1692) ; when ,,-'itness ) bakery gave one store a discount, the store "thre\v Rainbo out" (Tr. 1695) ; ' witness' bakery gave another store a discount and Rainbo "got thrown ont" (Tr. 1698) ; witness' bakery gave another sto:c€ a discount, and Rainbo nnd all the other bakers "got Initial Decision 71 F. thrown out " except Sunbeam and witness' bakery (Tr. 1697); Rainbo was "thrown oui" of another store because \vitness' bakery gave it a discount (Tr. 1(97) ; in the cases of the grocery stores, the witness testified that his bakery gave the stores a discount and Rainbo was "thrown out " the witness' bakery being the first before Rainbo to pay the discount (Tr. 1699) ; Rainbo was the first bakery in Bakersfield to give a discount (Tr. 1700) ; Langendorf United Bakeries (which was selling bread in Bakersfield before Rainbo came into the area) had been giving discounts to "three or four" customers prior to the time Rainbo came into the area (Tr. 1700); in 1956 or 1957 , the witness' bakery in Bakersfield began selling bread in Fresno "because Rainbo moved over there. lie took a lot of business and I tried to get some business back" (Tr. 17(4) ; the witness advertised his entry into Fresno in ne\vspapers and on television, and was still distributing bread in Fresno at the time of hearings in California in 1961 (Tr. 1704); witness employed some persons who had been working for Rainbo in Fresno (Tr. 1705); his (witness bakery gave one loaf of bread free of charge as a sample to the owners of grocery stores in Fresno (Tr. 1705); witness began distributing bread in Fresno with four trucks and, at time of hearings in 19M Jle had nine trnck routes (Tr. 17(5) ; witness bakery granted a 25'7 discount to one customer of the Rainbo plant in Fresno, and that nainbo plant lost the account to the witness' bakery in Bakersfield (Tr. 17(6); the witness' bakery gave away magic tricks in grocery stores, instead of pencils and balloons (Tr. 1706) ; the witness employed and paid wrestlers, hired a hall and put on wrestling matches for the free entertainment of aD grocer ymen in the area whom he invited and also served them free sandlviches and refreshments; one of the wrestling matches was before Rainbo came into the area (Tr. 1706- 1707); his (witness ) bakery built a lot of bread racks for customers "like everybody else do " (Tr. 17(8) ; for 11 years prior to 1961 , he has been loaning $125 000 to $150 000 to 35-40 custon1ers each weekend as an accommodation for check-cashing purposes (Tr. 1709 , 1723); his (witness ) bakery has not given away pencils and baJJoons or souvenirs in the Jast four or five years (Tr. 1714) ; grocers are not always testing the truth when grocers state that a particular bakery is giving the grocer a discount ('11'. 1714) ; his (witness ) bakery s sales of bread have gone up each year in the Jast few years (Tr. 1714). 90. 011 re-direct, complaint counsel asked the witness why the witness' bakery gave discounts to several grocery stores, and the , CAMPBELL TAGGART ASSOCIATED BAKERIES, INC. 577 509 Initial Dccision witness replied that he had to meet the competition of one of his competitors, Sunbeam, who was giving the stores a discount ('11'. 1716- 18); one bakery gave a discount, then all bakeries gave a discount ('11'. 1729) ; some grocers dcmand a payment of $200 from a baker before allowing the baker to place his (the baker s) bread in the store ('11' . 1730); bakers, including the witness, have been furnishing their customers free bread racks for 30 years ('11'. 1731) ; all bakeries grant credit to their customers, and the \vitness has carried some of his customers for six months ('11'. 1734).

91. Most every bakery offcial who testified at the hearings admitted that these types of trade concessions were common in Korthern California (Tr. 1187-88. 1229 , 1274- , 1502, 1558- 1560, 1860-61). A substantial number of witnesses, upon whose testimony this hearing examiner places credence, testified that they had competed with some of the baking plants, had observed their operations and sales, both before and after their affJiation with Campbell Taggart in 1954, and had not observed that any of these plants had initiated any policies of giving discounts, free goods or paying for space on bread racks in their areas of distribution. These witnesses further testified that there was no noticeable change in the manner of operation of the bakeries after their affliation with Campbell Taggart than before the affliation in 1954 ('11' 920 , 992, 1185 , 1245-46). Upon the basis of the preponderance of the reliable evidence and testimony, it is found that these trade practices, hereinbefore discussed, were not instituted by subsidiary baking plants of Campbell Taggart, but were prevalent in the California area for some years prior to 1954. 92. One of the practices to which most attcntion was given at hearings concerned "overloading" of shelves, or placing more bread on the rack than can reasonably be expected to be sold before it becomes stale ('11' 302 , %2, 1682). Some bakers believe that the practice of "overJoading" causes the rate of stale returns to rise ('11' 499, 740). The idea seems to be prevalent that "overloading" increases sales, since some believe in so-called "pile psychology," that is people buy off of a bigger piJe ('11'. 2753). Overloading" has been discussed in paragraph 23 hereof. There does not seeem to be agreement among bakers as to the exact percentage of stale returns \which necessarily indicates "overloading. " At least one witness testified that a 100/, rate of stale returns was normal ('11'. 9(9), and another witness testified that he did not believe a 15j:"t stale return rate necessarily indicated overloading" ('11' 962). Indeed, the evidence shows that a high ................... ....................... Initial Decision 71 F. Lll( ' Dc:rcellL;t) e of stale retllll1S is not necessarHy due to overlcadillg,'" but may be attributable to the weather, seasonal factors, promotional activity, economic conditions, civic functions union contracts restricting delivery days by driver-salesmen the entry of a new competitor, Dr what has been characterized as a "bouncing market" (Tr. 95- , 384- , 521 , 738- 802, 96 1057 , 1617).

93. It is not possible to eliminate stale returns entirel y because of so many factors. Also, it must be remembcred that it is the grocer who actually controls the size of the stack of bread on the rack. He does not want to run out of bread. Therefore, most grocers demand that the driver-salesman put more, rather than Jess, bread on the rack (Tr. 1959-1%0). The actual rates or percentages of stale returns for the years 1954-1961 of the seven baking plants in orthern California acquired by Campbell Taggart subsidiaries were received in evidence during hearings. They are as follows:

Pncentnge ratio of stale 7 rns to gross sales of bread and brew-type rolls CamPbeliTaggRrtSUbSidiary lmking plant 1954 Hiss "-fJ D60 I 1961 I-- 6' 10. 5 I ;n Fra isco -- 81 9.7I-'fJ9. (eX 280 e, I , 0 , 11 , Z13 , Z19) Oakland 7.4 8.4 (CX 282 C, I, 0 , U, , Z7, Z13, Z19) Modesto 11.9 11.4 11.0 12. 11. 10. (CX 283 e, !, 0, L , Z7, Z13 , Z19) Fresno (CX 285 C, I , 0 11, , Z7 , Z13 , Z19) Visalia ".P. 10. 11. 11.5 10. 11. (eX 281 e, I , 0, 11 ZI, Z7, Z13, Z19) 8 !Sacramento (CX 289 e, I , 0 , 11 , ZI, Z13 , Z19) Chico 6.4 (CX 290 e, I , 0, 11 , Z7 , Z13 , Z19) The rates of state returns reported by these seven baking plants as shown above, do not appear to be abnormal. 94. The other area, in addition to California, where hearings CAMPBELL TAGGART ASSOCIATED BAKERIES, INC. 579 509 Initial Decision were held and oral testimony received with respect to acquisitions of bakery plants located in that area, was Kentucky. The acquisitions of bakery plants Jocated in the Kentucky area wiJj now be considered.

A. The Acquisitions 'in Kentucky, Indiana, and Tennes.s' 95. In :VIay 1959, the assets of Grocers Baking Co. of Kentucky and its three wholly owned subsidiary corporations were purchased from Grocers Baking Co. by eight corporate subsidiaries of Campbell Taggart Associated Bakeries, Inc. (CX 115A-D). At the time of the purchase, Grocers Baking Co. , a Kentucky corporabon with headquartels in LouisviJje, Kentucky, (CX 115A) , operated bakeries in Louisville, Lexington, Bowling Green, Owensboro Hnd PHducah, Kentucky ('11' 3053- 54). In addition, Grocers Baking Co. of Kentucky had two wholly owned subsidiaries Grocers Baking Co. of Johnson City, a Tennessee corporabon which operated a ba!,ery in Johnson City, Tennessee, and Grocers Baking Co. of Indiana, an Indiana corporation, which operated bakery plants in New AJbany and Bedford, Indiana. Grocers Baking Co. of Indiana, in turn, had a \wholly-owned subsidiary, Hi- CJass Baking Co. , with a baking plant in Evansville, Indiana ('11'. 3U53-54) .

96, AJI of the nine plants owned by Grocers Baking Co. and its subsidiary corporations produced and distributed bread and bread-type rolls. Grocers Baking Co, of Kentucky shipped products produced in its Bowling Green plant into Tennessee, and products produced in its Paducah plant were shipped into Ilinois and :VIissourl ('11'. 4582- , 424J-42). Some bread produced in its O\vensboro, Kentucky plant Ivas distributed also in Indiana. The Johnson City, Tennessee plant of Grocers Baking Co. distributed its products in Tennessee, Virginia, Kentucky, and North Carolina ('11' 3J61, 4335-36). The New Albany plant of Grocers Baking Co. of Indiana sold and distributed its products in Indiana and Kentucky, and the Evansville plant of Hi- Class Baking Co, (a Grocers subsidiary) distribuled and sold its products in Indiana and IJinois ('11' 3875; ex J37), 97. A portion of the territory served by Grocers Baking Co. and its subsidiaries included coal mining regions and so-called depressed areas, which have been Josing population and been declared areas of labor surplus by the United Slates Department of Commerce ('11'. 1288- , 17J9). As of June 28, 1958, the end of its :, 580 FEDERAL TRADE CG:DIISSION DECISIONS Initial Decision 71 F. last full fiscal year, Grocers Baking Co. had assets of $6 081 006 (CX 168B). The consolidated total sales by Grocers Baking Co. of bread and bread-type rolls for the years 1956 through 1 , immediately prior to the saJe of Grocers in May 1959 , were as follows:

Year Sales rorlt d('nd - I 3121956 665 000 $306 963! - $ 1957 950 000 ' 386 425 1958 000 000 142 104 (Tr. 3167, 3170-71.) 98. The 1958 sales of bread and bread-type rolls, and profits for each plant of Grocers Baking Co., were as follows (CX 470I-L) : Sales Profits Louisvile - 682 308 $95 211 Lexington ...uu... 208 778 130 975 Bo\vling Green 202 174 ; 140 Owensboro 330 293 i 168 067 Paducah 367 075 I 214 Evansville 224 150 '77 880 Bedford 940 670 131 New Albany 920 943 155 Johnson City 495 211 530 Total $13 371 602 C $645 303 B. Backgiound and Negotiations Leading to Acquisitions 99. As to the events leading to the sale of Grocers ' assets to subsidiaries of Campbell Taggart in May 1959 , the offcials of both companies maintain that the initiative for the sale originated with offcials of Grocers Baking Co. According to :vr. I. E. Madsen, Chairman of the Board, and former President of Campbell Taggart Associated Bakeries, Inc. , ollciaJs of Grocers Baking Co. told representatives of Campbell Taggart that they were anxious to affliate with Campbell Taggart. AccordingJ)', Mr. :VIadsen told the Campbell Taggart representative to inform the has never gone afterGrocers offcials that Campbell Taggart " bakeries. We never approach the people who want to join us, and 5 These totr.i sales 011'00 uncon uliuat('d and include interplant sale!;. E interplant SF, S are eliminated, total consolid d sf1les of the nine plants for the year 19,,8 would be approximately $13 000 000 and profit about S442 104, as shown in paragralJh 97 abovr, CAMPBELL TAGGART ASSOCIATED BAKERIES, INC. 581 509 Initial Decision if they are interesled they can contact me. " Shortly thereafter :'Ir. :'ladsen received a call from Mr. Kenneth Hikes, then President of Grocers Baking Co., who asked that they arrange a meeting to discuss "working out a deal." The following day, :'Ir. Hikes and Mr. William Gossadge, then Secretary-Treasurer of Grocers Baking Co., came to Dallas and conferred that evening with Mr. :Yladsen, President of Campbell Taggart. As a result of these preliminary discussions, according to 1\'1'. Madsen s testimony, Campbell Taggart began an invcstigatlon of the feasibility of the matter, which culminated in the offer by Campbell Taggart to acquire the Grocers plants and assets (1'1'. 2657-59). 100. From the standpoint of Grocers Baking Co., Mr. Kenneth Hikes, former President, testified among other things, that: " the time I approached Campbell Tag-gart the future looked pretty dark to me for a number of reasons, and the reasons were I would say, peculiar to our company (1'1'. 3157) ; the sales volume of the company in terms of production was "on a declining trend because of price increases " (1'1'. 3154), and "we were losing ground in the market" (1'1' 3171), even though the company sales and profis increased between 1956 and 1908, from sales of $12 665 000 and profits of $30(j 693 in 1956, to sales of $13 000 000 and profits of $442 104 in 1958 (1'1'. 3153 , 317J). Mr. William Gossadge, former Secretary- Treasurer of Grocers Baking Co. testified as follows:

There were various reasons, and the one that had the greatest bearing on our decision to seek a purchaser .vas the fact that our company was bankrupt as far as personnel, as far qualified individuals .who could canyon. We had top management of on:y four people. \Ve had no replacement program. \Vc also could see the industry, it appeared from our analysis of the industry to be very bleak. " * "' Up to that time we were on decline volume-\vise and we could anticipate a greater decline. We anticipated a reduction in profits due to increased costs increased labor contracts, and we felt jf \ve could find a buyer it \vould be for the best interest of our stod:holders, therefore we sought Campbell Taggart (Tr. 3375-76).

101. At that time, Mr. Hikes testified, Grocers Baking Co. was considering the necessity for discontinuation of bread production in its Bedford and BawJing Green plants entirely, and the conversion of the Bowling Green plant to cake production (1'1' 3158 3164). According to lVr. Hikes, both of these plants were earning minimal profits in 1958; the Bedford plant having profits of S7 181 on sales of $940 670, and the Bowling Green plant having profits of $29 140 on sales of $1 202 174 , or profit/sales 582 FEDERAL TRADE COM r;SSION DECISIONS Initial Decision 71 F. ratios of 0.8 percent and 2.4 percent, respectively (CX 470J, L). Also, Mr. Hikes testified:

Our plans were to buiid a plant (in Johnson CityJ that would cost between $650 000 an $700 000 , and in addition to that we had installed in our Louisville and Lexington plants two pieces of machinery that cost us $125 000 each. They were bread making machinery. \\ic had also, plans for a similar piece of machinery in .the Johnson City Plant, so that we had staring- us in the face over a period of a little over a year expenditures of over $1 000 000 for a new plant and these pieces of machinery, that is, bread making machinery * 0; * If we had gone ahead ,with the Johns(m City plant our cash position would have been very much strained ('11'. 3170). 102. The agreement between Campbell Tag"g-art Associated Bakeries, Inc. , and Grocers Baking Co. for the transaction pro- Baking Co.vided for the purchase of physical assets of Grocers by "subsidiary corporations of Campbell Taggart" for "a cash , plussum equal to their book value as of date of acquisition 280 000" (CX 115B). Two existing corporate subsidiaries of , Colonial Baking Co.Campbell Taggart Associated Bakeries, Ine. of !\ashviJe and Colonial Baking Co. of Indianapolis, and six newly formed corporate subsidiaries purchased the assets of particular plants of Grocers Baking Co. (Tr. 2971; CX 113B , 115A- D).

C. Acquirin.Q Subsidiaries of Campbell Ta.QIJart 103. Campbell Taggart formed the Rainbo Baking Co. of Louisville, Kentucky, a corporatiun, to acquire the assets of Grocers' Louisville, Kentucky, and New AJb8.ny, Indiana bakingplants. The Rainbo Baking Co. of Lexington, Kentucky, a corporation, was formed to acquire the assets of Grocers' baking plant at Lexington, Kentucky. The Rainbo Balong Co. of Johnson City, a corporation, was fermed to take over the assets of the Grocers plant at Johnson City, Tennessee ('l'. 2644- 48). The Paducah Colonial Baking Co. , a corporation, was forrned to acquire the assets of Grocers' plant at Paducah, Kentucky. The Colonial Baking- Co. of Owensboro, a corporation, was formed to acquire the assets of Grocers' Owensboro, Kcntucky plant. The Colonial Baking Co. of Evansville, a corporation, was formed to take over the ussets of the Hi- Class Baking- Co. subsidiary of Grocers at Evansville Indiana. The assets of the Bedford, Indiana plant of Grocers were taken over by the Colonial Baking Co. of Indianapolis, Indiana and the assets of the Bowling- Green plant of Grocers were taken CAMPBELL TAGGART ASSOCIATED BAKERIES, INC. 583 109 Initial Decision over by the Campbell Taggart subsidiary, Colonial Baking Co. of Nashville, Tennessee (1'1' . 2644-48).

104. Campbell Taggart Associated Bakeries' stock investment in each of the affliated corporations which purchased plants of Grocers Baking Co. ranged from 50.5 percent in Colonial Baking Co. of Indianapolis to 95.8 perc:ent in Rainbo Baking Co. of Louisvile (CX 71C-F), Each of the former Grocers Baking Co. plant managers became a director in the new corporate subsidiary, and seven of the eight pJam managers continued to operate his plant as President of a newly formed subsidiary or as Vice President of an existing subsidiary. :Wlnority stock interests were held by plant managers and other Jocaj operators (CX 107A 120B). Also, Mr. William D. Becker, counsel for Grocers Baking Co., became a Director of Rainbo Baking Co. of Louisvile, together with a representative of Campbell Taggart Associated Bakeries, Inc. , (CX 71E , 113C).

101). In thc years following the transaction, some of the former Grocers Baking Co. plant managers retired from the baking business. Mr. Clyde Duncan retired as plhnt manager of the Bedford plant of Colonial Baking Co. of Indianapolis "because of health reasons" a year and a half after the transaction (CX 94E). In January 1%2, :VII'. William Rains retired as President of Rainbo Baking Co. of Lexington at the age Gf sixty-eight to become Chairman of the Board (1'1' 3619 , 3651-52), and Mr. Dick Dodds became Chairman of the Board of Paducah Colonial Baking Co. shortly after the transaction (1'1'. 2973 2975; CX 1J8H-J). D. Actual Competition Between C,' ocos and Campbell Taggart Subs1:diary Plctnls 106. At the time of the purchase of the assets of Grocers Baking Co. by subsidiaries of Campbell Taggart in 1%9 , subsidiary baking plants of Campbell Taggart competed in a small portion of the total distribution area of the Grocers Baking Co. plants (CX 137). The only substantial competition by any Campbell Taggart subsidiary baking plant with any Grocers plant prior to May 1959 was that between Colonial Baking Company of Indianapolis, Indiana, and the Grocers plant in Bedford, Indiana (CX 134A 137). Colonial of Indianapolis also competed in a small portion of the distribution area of the Grocers Evansville, Indiana plant (CX 133B, 137), and an insignificant portion of the distribution area of the Grecers Kew Albany, Indiana plant (CX 136 , 137). The Rainbo Baking Company of Ci'lcinn2. , Ohio, another Campbell Taggart subsidiary, competed in an infinitesimal portion of Initial Decision 71 F. the distribution area of the Grocers Louisville, Kentucky plant (CX 128B, 137). Another Campbell Taggart subsidiary, Colonial Baking Company of Nashvile, Tennessee, competed in small portions of the Bowling Green and Owensboro, Kentucky plants of Grocers (CX 130A , 181 , 187). Two other subsidiary Campbell Taggart plants, Colonial Baking Company of ;\ashvile, Tennessee, and the .Jackson, Tennessee branch plant of Colonial Baking Company of Memphis, Tennessee, competed in a small way in the extreme southern distribution area of the Paducah, Kentucky Grocers plant (CX 132B, 187).

107. An examination of the map (CX 137), which purports to outline the general areas of distribution of the former Grocers plants, indicates that, although Campbell Taggart subsidiary baking plants competed with seven of the former Grocers piants, there was only competition in a substantial portion of the distribution area of the Bedford, Indiana Grocers plant. The competition with other Grocers plants was in fringe distribution areas (CX 137). Mr. Kenneth Hikes, former President of Grocers Baking Co., called as a witness by complaint counsel, identified the map, CX 137, and testified that the map, CX 137: "* * * is very general. * * * it depicts more or less the limits that we extended to. It does not show exactly where each truck went. * * * In other \\lords, it covers the general area that we covered, yes, sir. * '" * Yes, it depicts the extremities of each route" (Tr. 3158-59). To ilustrate the comparatively small portion of the total distribution areas of the Grocers plants in which they competed with delivery routes operated by Campbell Taggart subsidiaries, consider the number of routes where they competed. At the time of the purchase of the assets of Grocers Baking Co. by subsidiaries of Campbell Taggart in 1'1ay 1959 , Grocers plants were operating about 254 routes (1'1'. 8158). Of these 254 routes, only 15 to 17 of Grocers' trucks operated and competed in territories where subsidiary baking plants of Campbell Taggart also operated trucks (Tr. 3159-3160). So, it is seen that, although there was competition between Campbell Taggart subsidiary baking plants and Grocers plants prior to the acquisition of Grocers ' assets by Campbell Taggart subsidiaries in May 1959 , the only competition in a substantial portion of the distribution area of any Grocers plant was in the Grocers Bedford plant' s area of distribution (CX 137). Since Campbell Taggart subsidiaries and Grocers plants were both engaged in the H' :mufacture and sale of bread and bread-type rolls at the wholesale level, this acquisition may properly be characterized as "horizontal" CAMPBELL TAGGART ASSOCIATED BAKERIES, INC. 585 509 Initial Decision E. Distribution ATe(LS of Louis'uille, Kentucky, (Lnd NeTv Alb(Lny, Indi-ctna, Plants, Area. #1 and #8 108. Prior to its acquisition, the Grocers Louisville plant was operated by its parent company, while the New Albany plant was operated as a part of the Grocers Baking Co. of Indiana, a wholly owned subsidiary err. 3054). The Louisvile plant distributed in Area # 1 , as designated by con1plaint counsel in the Special Survey Reports, and its routes extended approximately forty-odd miles from the plant in Louisvile. It operated one depot at Lebanon, Kentucky, distributing in Marion and Tyler Counties, Kentucky, which extended the area of distribution approximately thirty-five miles at its furthermost point (CX 128A 137; Tr. 3085- , 3341-15). The !\ew Albany, Indiana plant was located across the Ohio River from Louisville, in what complaint counsel designated in the Special Survey Reports as Area #8 and distributed within a radius of approximately fifty miles from its plant, solely within the State of Indiana (CX 137; Tr. 3346). Its parent, Grocers Baking Co. of Louisville, purchased all materials and ingredients for both the Louisville and New Albany plants, and directed the operations of each plant (Tr. 3061-(3). 109. Subsequent to the acquisition of Grocers by subsidiaries of Campbell Taggart, the New AJhany and Louisville plants were combined to make up the Rainbo Baking Company of Louisville ('r. 2641-47) .

1. ATen of Di.'tribut-on, Lex'in gton, Kentucky, Plant, Area No. 110. Prior to the acquisition in May 1959 , the Lexington plant was operated as a part of Grocers Baking Co. of Louisville. Subsequent to the acquisition, it became the Rainbo Baking Company of Lexington (CX 129A; Tr. 3053- , 3619). 1ts principal area of distribution extended from Cynthiana, located in Nicholas County, Kentucky, and extended south to the Tennessee border. Depots were located at Richmond, Somerset, Corbin, and Morehead, Kentucky. Its area of distribution has not changed since the acquisition (Tr. 3639).

2. Are(L of D1:stTibutwn, Bowling Screen, Kentucky, PI(Lnt ATe(L Nu. 3 111. Prior to the acquisition, the Bowling Green, Kentucky, plant was operated as a part of Grocers Baking Co. of Louisville the parent company. Depots were located at Hopkinsville, Kentucky, and Clarksville, Tennessee. The Bowling Green plant dis- 586 FEDERAL TRADE CO)admission DECISIONS Initial Decision 71 F. tributed bread in the South Central portion of Kentucky and some of the border towns in "orthern Tennessee (CX 130A , 137). The Colonial Baking Company of Nashville, Tennessee, was one of its competitors (CX 130B, 137). Subsequent to the acquisition the Bowling Green plant of Grocers became a branch plant of the Colonial Baking' Company of l\ashville, Tennessee. The Bowling Green plant took over distribution in a new area between Hopkinsville and Kentucky Lake, Kenlucky, which was vacated by the Campbell Taggart subsidiary, Colonial Baking Company of Paducah, Kentucky. The BO\vling Green plant gave up the Clarksville, Tennessee depot and distributioi1 area to the Campbeli Taggart subsidiary plant at XashviJle, Tennessee (CX 137; '11' 4259-4261 , 4584). The Bowling Green plant does not now compete with any other CampbeH Taggart subsidiary. 3. Area of Distribut,ion, O'wensboro, Kentucky, Plant, Area i.Vo. 4 112. Prior to the acquisition, the O,vensboro plant was operated as a part of the Grocers Baking Co. of Louisville. 1t did not operate any depots, but distributed in Kentucky and a small area in the State of Indiana. The furthermest point of distribution from the piont was approximately sixty miles. The Colonial Baking Company plant. of X ashville, Tennessee, sCl'yed a small por- Uon of its distribution area. Subsequent to the acquisition, the Cwensboro plant surrendered Hunting-burg, Indiana, to the Campbell Taggart subsidiary plant at Jndinnapolis; and Henderson Sturgis, and MorgnnfJeld, Kentucky, to the sub,;idiary plan'C at Evansville, Indiana. The Owensboro plant no longer compeies with either the Campbell Taggart subsidiary plant at Nashville Tennessee, nor Its brarlch plant at Bowling Green, Kentucky ('11'. 4198- , 4196; CX 137). In exchange for the area which the Owensboro plant gave up, the Campbell Taggart subsidiary at Nashvile, Tennessee, turned over to it a depot Jocated at Madisonville, Kentucky, together with routes and trucks. The volume of saJ€s of this depeit was allegedly $5 000 per week (Tr. 4195-98). 4. AFea of I;h8trilndiou, Paducah, Kentucky, Plant, A1'ea l\lo. ,5 118. Prior to the acquisition, the Paducah plant was operated by Grocers Baking Co. of Louisville. The Paducah plant, located within Area #5, as designated by complaint counsel in the Special Survey Reports, had depots located at EJdorado and C2rtel'ville Illinois, and Cape Giradeau, ::li8sou1'i, and distributed bread in Eastern Missouri, Southern llinois, and the '.vestern edge of Kentucky (CX 132A , 137). Two Campbell Taggart subsidiaries, the CAMPBELL TAGGART ASSOCIATED BAKERIES, INC. 587 509 Initial Decision Tennessee branch plant of Colonial Baking Company of Memphis and the Colonial Baking Company of Nashvile, sold bread along the southern edge of its distribution area, The area of distribution from the plant is approximately forty miles in radius and, with the three depots, is extended an additional fifty milf- s (CX 132B 137; Tr. 4211-12). Subsequent to the acquisition, this plant' s area of distribution was altered. It discontinued distribution in Fairfield, Illinois, located r;eal' the northeast corner of lts distribution area. It surrendered Princeton, Eddyville, Dexter, and Cadiz Kentucky, to the Bowling Green bl'2.TIch plant of Colonial Baking Company of Nashvile. It surrendered Murray, Kentucky, on the south, to the ,Jackson, Tennessee branch plant of the Colonial Baking Company of :Ylemphis, and it withdrew from a small area with anyin l'vlissourj on the west. It does not now compete Campbell Taggart subsidiary baking plant (CX 137; '11'. 4257- 42(2). The Cartervile, Ilinois depot, which had been previously used by the Grocers Paducah plant, was reheated in Carbondale Ilinois, and the Harrisburg, JJlinois, depot was relocated in EIdorado, Ilinois ('11'. 4262-63).

5. Area of Distl"ibution, E'uans' uille, Indi(cna, Plant, Area jVo. 6 114. Prior to the acquisition, the Evansville, Indiana plar.t, located in Area #6, as designated in the Special Survey Reports operated under the name, Hi- Class Baking Compm1.Y of Evansville, Indiana, an Indiana corrwration, and as a subsidiary of Grocers Baking Co. of Louisville, Thc plant, with depots located at Vincennes, Oakland City, \Vins10\\, Indiana, and IVlt. Carmel Illinois, distributed over an area "\within a radius of forty miles from the plant in Southern Indiana and Southeastern Illinois. Colonial Baking Company of Indiana, a Campbell Taggart subsidiary, sold some bread along the northeastern fringe of its distribution area (CX 133B , 137), After the acquisition, this plant became the Colonial Baking Company of Evansville, and some of its distribubon area was changed, The Evansville plant discon- , In-tinued distribution in the Vil1cennes area when Vince!mes diana, was placed in the distribution area of the Bedford Indiana plant ('11'. 3182-8;" 3877). When this area was transferred to the Bedfo;'d plant' s distribution area, the entire route including the dl' iver-salesmen, also went along 1.0 the Bedford plant (Tr. 3894-95). The Evansville plant, which had not distributed in Kentucky under Grocers (CX Un), moved int ) Henderson and Sturgis, Kentucky, and opened a depot at l\Torganfield, Kentucky ('11'. 3875). Colonial of Owensboro, Kentucky, "couldn Initial Decision 71 F. serve Henderson and this area " so Colonial of Evansville took over. The distribution area of this plant does not now overlap with that of any other Campbell Taggart subsidiary (Tr. 3878- 79) .

6. ATea of Distribution, Bedfor-d, Indiana, Plant, ATea No. 115. The Bedford plant was formerly operated by Grocers as a subsidiary, under the name of Grocers Baking Co. of Bedford Indiana. It distributed wholly within the State of Indiana within a forty-five mile radius of the plant, and operated depots in Columbus and Washington, Indiana. Colonial Baking Company of Indianapolis, a Campbell Taggart subsidiary, distributed in a substantial portion of its distribution area. After the acquisition the Bedford plant was made a branch plant of the Colonial Baking Company of Indianapolis. After the acquisition, the Bedford plant discontinued serving Seymour, Indiana, located in the northeastern portion of the distribution area of the Grocers Bedford plant, and discontinued serving Bloomington and the area above it to the north, and Bloomfield to the west (Tr. 3150-51; CX 137). These areas are now covered by the Colonial Baking Company plant located at Indianapolis (CX 458Z). The Bedford plant began serving Vincennes and Bicknell, Indiana, on the west, which were formerly served by the Evansville plant (CX 137). After these changes, the Bedford plant did not compete with any Campbell Taggart subsidiary (Tr. 3455-56). 7. Area of IJistTibution, Johnson City, Tennessee, Plant, Area No. 11f,- Prior to the acquisition, the Johnson City baking plant was a \wholly owned subsidiary of Grocers, operating as the Grocers Baking Co. of Johnson City, Tennessee. The plant distributed bread in the States of Virginia, Kentucky, Tennessee, and a small portion of :\orth Carolina, with depots located at Big Stone Gap, Virginia, and Morristown, Tennessee (CX 135A , 137; Tr. 31(4). Prior to the acquisition, Grocers had purchased property on which it planned to erect a new plant, which was estimated to cost between $650 000 and $700 000 (Tr. 3164 , 3169-70). The area of distribution from the plant was approximately forty miles, which was extended an additional fifty miles through the use of depots (Tr. 4344). After the acquisition, the plant became the Rainbo Baking Company of Johnson City, Tennessee. After the acquisition, the Johnson City plant discontinued selling in :\orth Carolina (Tr. 4335), and began selling in Richlands, Vir- CAMPBELL TAGGART ASSOCIATED BAKERIES, INC. 589 509 Initial Decision ginia ('11'. 4336). A new depot was established in Abingdon, Virginia ('11'. 4343-44).

117. After the acquisition of the Johnson City plant by Rainbo Baking Company, a Campbell Taggart subsidiary, approximately $400 000 was expended on the plant, together with additional sums for the overhaul of machinery used in the old plant (the rundown condition of this plant was given by :VII'. Hikes as one of the reasons for selling the assets of Grocers to subsidiaries of Campbell Taggart; '11'. 3170 , 4337-39). The Johnson City plant lost $6 840 on its operations for 1959 (CX 298B, 1. 70), and borrowed S550 000 from the First National Bank of Dallas (CX 298B , 1. 2). In 1960 an additional $175,000 was borrowed by this plant from the First National Bank in Dallas (CX 298H, 1. 2). No dividends were paid during 1959 , 19GO , and 1961 to Campbell Taggart, owner of the remaining 95 % of the outstanding common stock of this company (CX 298B, H, K, 1. 73). A. Complaint Counsel's Original Swvuey Reports 118. For the purpose of portraying the competitive situation in the disnibutlOn area of the former Grocers Baking Co. plants both before and after their acquisition by subsidiaries of Campbell Taggart Associated Bakeries, Inc. , in :Vlay 1959 , and to show a universe and a market share for the acquisitions of Grocers Baking Co. of Louisville, Kentucky, and Mead's Fine Bread of Lubbock, Texas, Roswell and Ciovis 'ew Mexico, by subsidiaries of Campbell Taggart, compJainl counsel, In :.Iarch 1962, mailed to approximately 75 baking companies an eighteen-page questionnaire, described as a "Special Report, Survey of l\Ianufacturers of Bakery Products" (CX 331A-B). This original Survey Report requested sales and profit data from each of the 75 baking companies for the years 1958 to 1961 ill certain geographic areas listed by county,li numbered 1 through 12. T\vo maps were included in the Survey Report forms. One map, purported to show the States of Kentucky and Tennessee, and parts of Arkansas I\lissouri, Illinois, lndiana, Ohio, \Vest Virginia, Virginia, and North Carolina, 'Ivith the counties shown thereon, and heavy lines outlining nine numbered areas, 1 through 9 :381B- F). Complaint counsel stated that each of those areas as outlined corre- C \Vholesale baking companies do not lim;: the;,- l:" cad d;st ;bur:oL by county boundaries, !lor do they keejJ Ic.cords of their sales on a county basis tRX SCA- F through RX 5GA F, 46%).

590 FEDERAL TRADE COMMISSIO DECISIONS Initial Decision 71 F. sponded to the general distribution areas of each of the nine former Grocers Baking Co. plants ('fr. 3070 , 3095). On the other map, heavy lines outlined counties embracing a small area in \Vest Texas, marked Area 10, and t.wo separate are2.S embracing certain counties in eastern New Mexico were outlined with heavy lines, and marked Areas 11 and 12, respectively. Complaint counsel stated that the maps were intended to be of assistance to the responding baking company in locating the area or areas from which it was to report its sales data ('fl'. 3070). 119. After most of these Survey Reports were completed and returned to complaint counsel by most of the 75 baking companies to whom the report forms were mailed; several of the Survey Reports \were offered in evidence through sponsoring witnesses at hearings held in Louisville and Paducah, Kentucky, in Jal'uary 1963. :'umerous errors in these reports were disclosed at the hearings, both on direct and cross-examination, aggregating some $30 million (CX 333M; 1'1' 3185; CX 334 Y; 'fl'. 3224- 25; CX 335P; 1'1' 3271-73; etc. ). Some of the errors were apparent on the face of the Survey Reports. Some of the errors were due to misinterpretation of the instructions and definitions given in the Survey Report questionnaire. Other errors may have been due to the circumstances that some of the counties named in the separately numbered geographic areas did not coincide with the pictorial map which purported to indicate the same multi-county geographic numbered areas, The result was that son counties were included in different gl;ographic areas, depending on whether the numbered areas or the map were followed by the reporting company (CX 331B, E).

120. On January 21, 1963, the hearing examiner sustained the objections raised by respondent's counsel to the receipt in evidence of these original Survey Reports on the ground that they were unlawfully obtained because the Survey Report forms had not been first approved by the Bi' reau of the Budget, 'is required by the Federal Reports Act of 1942 (Tr. 3817; 5 D. C. 9 139 (c), 1956). Complaint counsel appeaJed from this ruling of the hearing examiner excluding the Survey Reports. By order dated July , 1963, the Commission sust2.ined the ruling of the hearing examiner excluding Ute Special Hepol'ts. By order dated August 16 1963, the hearing' examiner struck much of the evidence taken at hearings in Kentucky relating to these Sm' vey Reports. Complaint counsel then submitted the Survey Report questionnaire to the Bureau of the Budget for approval, as required by the Federal CAMPBELL TAGGART ASSOCIATED BAKERIES, INC. 591 509 Initial Decision Reports Act. Conditioned on specified revisions in the questionnaire report form, the Budget Bureau approved a revised form of the Survey Report on Xovember 8 , 1963. In its conditional approval, the Budget Bureau required that the conflict between the numbered county areas and the pictorial maps be eliminated by deletion of the maps, required that changes be made in fivc definitions, and required the addition of three new clarifying definitions in the Survey Report form. Finally, complaint counsel revised the questionnaire special Survey Report in accordance with the conditional approval by the Budget Bureau, and the revised questionnaire was then circulated in March 1964 to the 75 baking companies originally surveyed. Sixty-one of those 75 baking companies executed, completed, and returned the revised Survey Report qaestionnaire forms to complaint counsel. Fourteen companies did not return completed revised Survey Reports to complaint counsel for various reasons, such as not selling bread in any of the areas called for, having gone out of business, etc. , the end result was that executed and completed revised special Survey Report forms were returned to complaint counsel from 61 of the 75 baking companies surveyed. Forty-five of the completed Reports were from baking companies selling bread in one or more of the areas designated 1 through 9 in the Special Reports (areas 1 through 9 purported to correspond to the general distribution areas of each of the nine former Grocers plants located in Kentucky, Indiana, and Johnson City, Tennessee; 1'1'. 3070 , 3095), and 16 completed Reports were returned to complaint counsel by baking companies selling bread in one or more of the areas designated 10 through 12 in the Special Reports. B. Re'uised Survey Repor.

121. The revised and completed Special Survey Report questionnaires (CX 447-521) were again offered in evidence by complaint counsel on March 31 , 1965. Respondent again objected to their receipt in evidence on various gl' ounds. Many of respondent' objections to the revised Survey Reports related to substantial errors and inconsistencies which appeared upon the face of the revised Survey l reports. The revised Survey Reports produced changes in the survey data aggregating some $250 million (1'1' 4903 4905); see JVemorandum of Objections by Respondent to Staff Counsel's Survey Questionnaire Reports, p. 28, filed March , 1965.

592 FEDERAL TRADE COMMISSI01' DECISIONS Initial Dccision 71 F. 122. Respondent also objected to the receipt in evidence of the revised Survey Reports on the ground that the Survey Reports disclose on their face serious omissions which unfairly inflate the respondent's alleged "market share" in the so-called Kentucky area (the alleged distribution area of the former Grocers Baking Co. plants, designated as Areas 1 through 9 in the revised Special Survey Reports), as well as in the Texas-New Mexico geographic area, designated as Areas 10 , 11 , and 12 in the revised Special Survey Reports (CX 447-521). For example, respondent contends that complaint counsel's survey of baking companies selling bread and bread-type rolls in and around Kentucky is incomplete, for the reason that the 45 baking companies which responded to complaint counsel's Survey Report, covering areas 1 through 9 listed 13 competitors in the Kentucky area whom complaint counsel did not contact for data. That is, complaint counsel did not mail the Special Survey Report forms to these 13 companies for completion. Census data corroborate these omissions. According to the 1958 Census of Manufacturers, there were 39 wholesale bakeries producing bread and related products in Kentucky in 1958 (CX 167 , Table 2, p. 20E-6). By contrast, complaint counsel collected 1%8 data from only 13 wholesale bakeries producing in Kentucky. Also, complaint counsel railed to count sales in the State of Kentucky by baking firms who sold within Kentucky yet outside the numbered geographic Areas which cover only a part of Kentucky (CX 44(1), and did not collect any data from retail bakeries anywhere in the Kentucky area except those which made home service deliveries, such as Donaldson Baking Co. (CX 462), or were owned by a retail grocery chain, such as Kroger and A & P (CX 469 , 481). 123. Respondent further argues that, in not counting these competitors, this inflates prcjudiciously respondent' s alleged market share by making it appear that a smaller universe exists, which is the denominator of the fraction upon which respondent' market share is to be computed. Respondent says that when there is a short count in selecting the universe, the incvitable result is to make the respondent's market share look bigger, to respondent' s prejudice (Tr. 4789-90).

124. Respondent also says that the geographic Areas designated in the Survey questionnaire bear no resemblance to the actual or distribution pattern of the numerous competing baking companies marketing in the Kentucky region. That, of 67 baking plants reporting sales in these geographic Areas, only CAMPBELL TAGGART ASSOCIATED BAKERIES, INC. 593 509 Initial Decision seven distributed solely within anyone of the Areas (eX 447 A- , 521A-R). In the 60 remaining instances, the company sold freely across the boundaries of the geographic Areas. Also, few companies maintained sales records by county, a fact conceded by complaint counsel (Tr. 4(96), so that segregating- sales by multi-county geographic Areas was "one of the biggest problems posed by the Survey Report (Minutes, Advisory Council on Federal Reports, p. 4 , September 19 , 1963). Respondent also says that, even if the nine multi-county geographic Areas described in the Special Survey Reports were accurately drawn to conform with the actual distribution areas of the former Grocers Baking Co. plants, the relative size of each of the plants will be magnified and distorted in relation to their competitors. Such a procedure inevitably includes the entire sales of the particular Grocers plant, while competitors, which have different and overlapping distribution areas, report only part of their sales. This distortion is ilustrated by geographic Area 5 , says respondent, which was intentionally dra W1 by complaint counsel to include only the counties in which the Paducah plant of Grocers Baking Co. distributed (CX 447E). Yet, numerous substantial competitors, although not producing bread in geographic Area 5, distribute into the Area from every side: Ward from St. Louis, Continental from Memphis and St. Louis, and Lincoln from Evansville (CX 461P, 4891 520K). Therefore, complaint counsel' s Area 5 would include all the sales of respondent' s subsidiary plant in Paducah but only part of the sales of competitors who produce outside but ship their bread into geographic Area 5. 125. Respondent points out that the Special Survey Report lists 12 counties in more than one geog-raphic Area. Where a company distributes bread in counties which are listed in more than one geographic Area, the Survey Report form instructs the reporting company to report its sales in these counties in both geographic Areas (CX 447F), thereby "double countingthose sales. This "double counting" instruction caused many errors which were corrected (CX 489Q, 497S , 504Q), but several reporting companies never did double count their sales (CX 474A- , 497A-U), including Grocers Baking Co., whose market share is of prime importance in this proceeding (CX 470A-B). 126. Finally, respondent says that the failure of complaint counsel's revised Special Survey Report, issued in March 1964 to elicit sales data for years more recent than the period 1958- 1961, accentuates its lack of trustworthiness and probative value Initial Decision 71 F. as a valid measurement of respondent's alleged monoply. Respondent points out that compJaim counsel recircuJated the revised Survey Reports in March 1%4 , and request.ed only sales data for the same years called for in the original Survey Reports 1958-1961 , although, at t.hat time, 1%4 , sales information for at least the years 1962 and 1963 was then available. Respondent says that, inasmuch as the complaint' s allegations of potentially monopolistic effects arising from the questioned acquisitions in 1959 are best judged in light of the actualities of the market place from 1959 to date, the resurvey s attempt to cut off any such information beyond 1%1 deprives the survey data or reliability and probative value as of 1966.

127. After considering the detailed oral and written objections to the revised Special Survey Reports urged by respondent, some of which reports still contain errors apparent on their face, and being of the opinion that respondent' s objections to the revised Survey Reports relate more to the weight to be given the individual reports than to their basic admissibility, the hearing examine:!' overruled respondent' s objections and received the revised Special Survey Reports in evidence on March 31 , 1965 (1'1'. 4912) .

C. lvlarket Shares Shou:n by the Revised Special SU'i/J' cy Reports F'filed by the Forty-Fiu' c Report.'iny Baking Companies 128. The sales data contained in the Revised Special Survey Reports submitted by the forty-five baking companies is the only evidence in the record fl'Oil '\which market shares for subsidiaries of Campbell Taggart, Grocers Baking Co., and the other reporting baking companies, as '\vell as the ioial universe fen' the nine geographic areas specified in the Special Survey Reports, may be computed. The sales data submitted by Campbell Taggart in its Revised Special Survey Report on behaii of its subsidiary baking plants are contained in CX 458. The sales data for Grocers Baking Co. are contained in its Revised Special Survey Report CX 470. The sales data for the remaining forty-three baking companies reporting sales in either or al1 of the nine geographic areas designated by complaint counsel as the former Grocers Baking Co. distribution area are contained in the follo'moving numbered record exhibits: CX 447 , 448, 419; 462 , 463 , 454 , 455; 457; 460 , 161 , 462; 467 , 468 , 469; 474; 476; 481; 483 , 484 485 , 486 , 487; 489 , 190, 491 , 492; 195 , 496 , 497 , 498 , 499; 501, 502; 504, 505, 506; 509, 510; 514 , 515; 519 , 520 , and 521. , CAMPBELL TAGGART ASSOCIATED BAKERIES INC. 595 509 Initial Decision 129. The total sales of bread and bread-type rolls in these nine geographic areas, as reported by the forty-five baking companies in their Special Survey Reports, above referred to, for 1958, the year prior to the acquisition, were $59 904 713. Of this total, Grocers Baking Co. accounted for $12 997 799 , or 21.70% of the total sales of bread and bread-type rolls reported by the forty-five baking companies as having been made by them in one or more of the nine geographic areas in 1958. Of course, it should be kept in mind that Grocers Baking Co. sold and distributed bread and bread-type rolls in each of the nine separate geographic areas specified by complaint counsel in the Special Survey Reports, whereas, only two of the other forty-four baking companies surveyed reported sales in each of the nine geographic areas, namely, the Great A. & P. Tea Co. and The Kroger Co. The ten baking companies reporting the Jargcst sales of bread and bread-type 1'0118 in one or more of the nine geographic areas specified in the Special Survey Reports, and the percentage of each of their total sales to the total sales reported by the forty-five companies, for the years 1958, 1959 , 1960, and 1961 are as follows:

II toPercentagetotal sales Sales or reported by bread T. roils Company ami I the45P:Jnl,com- Grocers Baking Co. .... $12 997 799 I 21.70 47GI Brown-Greer & Ce. ) Inc. 562 073 ! 453 N , Z6, Z40 The Kroger Co. 617 589 I 481 K, L , 0 , Q Lincoln Bakery, Inc. - ... 538 891 489L Lewis Bros. Bakeries, Inc. 103 642 4980, P Donaldson Baking Co. 634 000 4.40 462N General Baking Co. 474 739 468N The Great A. & P. Tea Co. 452 000 469 S , T , LT, V American Bakeries Co. 436 635 4470 Hecht' s Bakery, Inc. 360 340 486N Total, J 0 companies $40 1'7, 708 67. Total 1958 sales .... $59 904 713 reported by the 45 companies in areas Nos. 1- ....

Initial Decision 71 F. T. Percentage: tototalsal€S Sales of reported by bread and the45 com- Company T, rolls panies GrocersBakingCo.-- 895 804 470I Subsidiaries of Campbell . 166,696 23. 458 22, 23 Taggart, Z5, 27, , 29 , 213, Total 062 500 215 216 Z17 , Z18 Brown-Greer & Co. , Inc. 547,775 453N, 26, 240 The Kroger Co. 493,433 481 K, L, M 0, P , Q Lincoln Bakery, Inc. .... 434 341 489L Lewis Bros. Bakeries, Inc. 861 579 4980, P The Great A. & P. Tea Co. - 721 000 469 S, T , U Donaldson Baking Co. 562 000 4G2N General Baking Co. - 537 577 31 I 468N American Bakeries on 414 808 4470 Hecht' s Bakery, Inc. . 408 022 486N Total $41 043 035 69. Total 1959 sales - m... $58 893,082 reported by the 45 companies in areas Nos. 1- Subsidiaries of Campbell - $15, 031,141 24. 458Z2 , Z3 Taggart, Z5 , Z7 , Z9 , Z13 Z15, Z16 , 217 Z18 Brown- Greer & Co., Inc. 488 979 7.46 453N , Z6 , Z40 Lincoln Bakery, Inc. 591 101 489L The Kroger Co. 104 841 481 K , L, M, 0 , Q The Great A. & P. Tea Co. 033 000 469 S , T , 1. , V Lewis Bros. Bakeries, Inc. 608,459 4980 , P Hecht s Bakery, Inc. - - 519 903 19 1 486K Donaldson Baking Co. 472,000 462:\ 7 The figure 84. 885 804 represents total 1959 sales of Grocers plants up to May 23 , 10. , when Grocers sold its assets to subsidiaries of Campbell Taggart. , CAMPBELL TAGGART ASSOCIATED BAKERIES, INC. 597 509 Initial Decision ;:a to total sales Sales of reported by I bread and the45 eom"

Company T. rolls pall€S American Bakeries - 452 992 07 4470 General Baking Co. . 291 270 I 486N Total. $41 593 686 Total 1960 sales .... ..... $60 197 748 reported by the 45 companies in areas Nos. 1- Subsidiaries of Campbell . $16 297,702 I 26. 458Z2, Z3, Z4, Taggart, Z7 , Z8, Z9 Z13, 215 , 216 Z17, Z18 Brown-Greer & Co. , Inc. 512 035 24 I 453N, Z6, Z40 Lincoln Bakery, Inc. - 631 326 4891, The Kroger Co. 331 980 35 I 481 K , 1" M, 0 , Q The Great A, & P. Tea Co. . 142 000 I 04 I 469 S, T , X Hecht' s Bakery, Inc. 541 856 486:\ American Bakeries 533 747 4470 Lewis Bros. Bakeries, Inc. 533 538 4980, P Donaldson Baking Co. 466 000 462N General Baking Co. 937 789 468N Total - $42 930 973 68. Total 19f)1 sales .......... $62 294 654 reported by the 45 companies in areas Nos. 1- 130. From these figures, it is seen that Grocers' 1958 sales were more than double its nearest competitor, Brown- Greer & Co. Inc. Campbell Taggart subsidiaries sold very little bread in Areas #1 through #9, accounting for 3.52% of the 859 904 713 in total sales reported by the 45 baking companies in 1958 (CX 458Z 13 Z 15-Z 18). The ten companies reporting the largest volume of sales accounted for 67. 0870 of the total sales reported by the 45 companies in the nine areas. While Grocers accounted for 21.70 the next nine reporting companies collectively accounted for 45. 3870 of the total sales reported by the 45 companies in 1958. ! Initial Decision 71 F. 131. In May 1959 , the assets of the Grocers plants were acquired by subsidiaries of Campbell Taggart. From the chart on page 596 herein, it is seen that the combined 1959 sales of the Grocers and Campbell Taggart subsidiary plants were $14 062- 500 , or 23.88% of the total sales reported by the 45 baking companies. The ten companies reporting the largest volume of sales in Areas #1 through #9 constituted 69.69% of the total sales reported by the 45 companies in 1959. The chart on pages 596shows that in 1960 the sales of the Campbell Taggart subsidiary plants in Areas #1 through #9 amounted to 24. 97';u of the total sales reported by the 45 companies, or an increase of 1.09 % over 1959 sales. The total sales of the ten "companies reporting the largest volume of sales for 1%0 amounted to 69. 10% of the total sales reported by the 45 companies. The chart further shows that in 1%1 the sales by Campbell Taggart subsidiaries amounted to 26.16 % of the total sales reported by the 45 companies, or an increase of 1.19 % over 1960. The total sales of the ten companies reporting the largest volume of sales for 1961 amounted to 68.92% of the total reported by the 45 companies. Brown-Greer & Co. Inc. , d/b/a Kern s Bakery, Inc. , ranked second to Grocers in 1958 and 1959, and second to Campbell Taggart subsidiaries in 1960 and 1961 , in reported sales among the 45 reporting baking companies. Brown-Greer s reported 1958 s les of $4 562 073 amount to 7.62% of the total sales reported by the 45 companies, 72'/;, in 1959 , 7.46% in 1960, and 7.24% in 1961. D. Competitive Practices, Such As "Concentrated Sert'ice Chanae of Label, Free B,'ead Racks, Pnyrnent for Shelf Space Discounts to Customers OveTload' ing" Sheh' . etc. 132. In their proposed findings, complaint counsel lay great stress on the circumstance that, after the acquisition of the Grocers plants by Campbell Taggart subsidiaries in 1959, CampheJl Taggart began \vhat it characterized as "concentrated service to the former Grocers baking plants (CX 81C(7)), and, beginning in 1%0, began to change the labels of bread formerly used by Grocers from " Honey Krust" to HColonial" and "Rainbo. " The concentrated service" consisted of Campbell Taggart sales, production, and advertising personnel being dispatchcd from its headquarters to the subsidiary baking- plants. These personnel assisted the reg-ular plant personnel on a temporary basis at the different subsidiary plants in sales, production, advertising, etc. These are specialized services which Campbell Taggart makes CAMPBELL TAGGART ASSOCIATED BAKERIES, INC. 599 509 Initial Decision available to its subsidiary baking plants, similar to the cooperative organizations such as Quality Bakers of America, W. E. Long Co. , and American Bakeries Cooperative which provide specialized services to their members (Tr. 1226-28; 1872; 4446). There was nothing unusual or ilegal in changing the label from "Honey Krust" to " Colonial" or "Rainbo " which are the standard labels used by Campbell Taggart subsidiaries on their bread products. 133. At hearings held in Kentucky, as in California. considerable testimony was received concerning the practice of Campbell Taggart subsidiary baking plants providing free bread racks to their customers, free screens for doors bearing the " Honey Krust Colonial " or HRainbo" label, granting discounts to customers paying grocery store customers for shelf space in their stores overloadingJi' bread racks, etc. The evidence demonstrates that these and similar practices are generally prevalent in Northern California and in the Kentucky. Indiana, and Tennessee areas where testimony on trade practices in the baking industry was received. Grocers and its competitors indulged in some of these practices, and the subsidiary baking plants of Campbell Taggart have conbnued them, as have their competitors. These practices were not initiated by Campbell Taggart, nor by any of its subsidiary baking plants. The evidence 8ho\V8, and it is found, that these practices have been prevalent in the Kentucky area, in varying degrees. for many years (Tr. 3359, 3499 , 3976- , 3567, 4108). 134. It is the contention of complaint counsel that Campbell Taggart subsidiaries "overloaded" bread racks in grocery stores thereby causing competitor baking plants to also "overload" racks, resulting in an increase in the rate of "stale returns " for both the Campbell Taggart subsidiary baking plants and their competitors (see Paragraphs 87-92 herein). lost baking plants strive to keep their "stale returns" below 10% of their sales, although one witness testified that a 10% rate was normal (Tr. 9(9), and another testiied that a 15 jf, rate of return does not necessarily indicate "overloading" (Tr. 962). From the revised Special Survey Reports, the hearing examiner has computed the percentages of "stale returns " of bread and bread-type rolls of the Campbell Taggart subsidiary plants for the years 1960 and 1961 , which are as follows:

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

600 FEDERAL TRADE CO MlSSION DECISIONS Initial Decision 71 F. Percent I 1960 i 1961 Rainbo of Louisville and New Albany 7:29 ex 458 Rainbo of Lexington 10.38 I 11.43 ex 458J Colonial Baking Co. of Nashvile Bowling Green plant --....-- 0-- . 10.57 I 9.43 ex 458K Colonial Baking Co. of Owensboro . 35 8.35 ex 458K Paducah Colonial Baking Co, - 41 I 8.88 ex 458L Evansvile Colonial Baking Co. - .....,m. 04 I 6.25 ex 458L Colonial Baking Co. of Indianapolis, Ind. Bedford plant ''-'''''.'- m...... -- . 8. ! 9,49 CX 458M Rainbo Baking Co. of Johnson City, Tenn. . l1.59 CX458J It is seen that the highest percentage rate of "stale returns " for a Campbell Taggart subsidiary was that for the Johnson City, Tennessee plant in 1960, 11.59%. However, in 1961 , the latest year for which evidence is in the record, the rate dropped to 08%.

135. For purposes of comparison, the hearing examiner has computed the rate of "stale returns" of the company reporting the second largest volume of sales in Areas #1 through #9 Brown-Greer & Co. , Inc. , d/b/a Kern s Bakery, Inc. It so happens that Mr. John L. Greer, President of Brown- Greer & Co. , Inc. was one of the witnesses who testified at hearings in Louisvile Kentucky, concerning trade practices in that area. Mr. Greer testified that Campbell Taggart subsidiaries had "overloaded" grocery shelves, and Kern s plants were compelled to retaliate in order to keep their own bread on the racks in grocery stores (Tr. 3582, 3(12). The rates of "stale returns" of the Brown-Greer & Co. , Inc. plants in London, Kentucky, and Bristol, Virginia, in Areas #2 and #9, respectively, for the years 1958, 1959, 1960 and 1961 , are as follows:

I - erc€n 1958 ! 1961 1-Kern s Bakery, Inc. "- 1 London, Ky. . ...- . .... 15,39 17. ; 15.46 I 17.26 I ex 4531 Kern s Bakery, Inc.

Bristol, Va. 6 I 453Z 115. 136. A comparison of the rate of "state returns"' shows that the rate for the Brown-Greer plants is higher than the rate for any of the Campbell Taggart subsidiary plants. Even the Camp- CAMPBELL TAGGART ASSOCIATED BAKERIES, INC. 601 509 Initial Decision bell Taggart subsidiary plant with the highest rate of "stale returns, " 11.59% for the Rainbo Baking Co. of Johnson City, Tennessee, is considerably lower than the 15.90% rate for the Brown-Greer plant in Bristol, Virginia, also located in Area #9. These two plants are competitors in the same distribution area (#9), and the statistics in the record do not substantiate complaint counsel's contentions as to shelf "overloading" by Campbell Taggart subsidiary baking plants. If the maximum 11.59% rate for a Campbell Taggart subsidiary plant should be considered as shelf "overloading," it cannot be said with justification that Campbell Taggart subsidiaries originated the practice when at least two competing Brown-Greer baking plants had rates of "stale returns" of better than 15% in 1958 (prior to the acquisitions complained about), and better than 17% in 1959, an average of 14.83% in 1960, and an average of 17.41 % in 1%l. A. The Acquisitions in Texcrs crnd New Mexico 1. M ecrd' s Fine Brecrd Cornpcrny, A Texcrs COTporcrtion 137. lWead's Fine Bread Company, a Texas corporation, operated a baking plant in Lubbock, Texas, where its headquarters were located, and single baking plants in Roswell and Clovis, l\ew Mexico (CX 122). Each plant sold bread and bread-type rolls at wholesale to grocery stores, restaurants, and institutions in West Texas and Eastern ew :Ylexico, within the distribution areas of the three plants. The distribution area of the former lWead's plant in Lubbock is indicated by blue crayon marks along the path of highways leading mostly north and south from Lubbock on part of a road map, CX 150K The Lubbock plant operated loading warehouses in Plainview, Bluefield, Midland, and Odessa, Texas. The distribution area of the !lIead' s plant in Lubbock is located in what complaint counsel designated as Area #10 in the revised Special Survey Reports.

138. The distribution area of the Roswell plant is indicated by lines in red crayon on a portion of a road map, and received in evidence as CX 150J. The red crayon marks on CX 150J indicate that the distribution area of the Roswell plant included the town of Roswell, and extended south to towns located on Highway 285 as far as Loving, l\ ew Mexico, and west from Roswell among Highway 70-380 as far as Hondo, where the highway branched in two directions: From Hondo, a distribution route followed Highway 70 to Glencoe, then southwest to Ruidoso, :Ylescalero Tularosa, and Alamogordo. From Hondo, another route extended 602 FEDERAL TRADE COXIMISSION DECISIONS Initial Decision 71 F. northwest along Highway 380 to Lincoln, Capitan, and Carrizozo. The Roswell plant operated loading warehouses in Ruidoso Artesia, and Carlsbad, t\ew Mexico.

139. The distribution area of the Clovis plant included the town of Clovis, and extended southwest along Highway 70 to Portales then due south among Highway 18 through Lovington, Hobbs, and as far as J al near the southeast corner of New Mexico. North from Clovis, the distribution area extended to towns located along Highway 18 and Highway 275 as far as Cameron, then north on Highway 39 to San Jon, thence northwest along Highway 66 to Tucumcari, and continuing along Highway 66 in a southwesterly direction to Santa Rosa. The route then extended in a southeasterly direction among Highway 84 to Fort Sumner. The Fort Sumner route extended due west along High'..ay 60 to Vaughn, Ne\v Mexico. From Clovis in a westerly direction, a route extended through towns located along Highway 60 to Fort Sumner, t\ew Mexico. The CJovis plant. operated loading warehouses in Tucumcah, Fort Sumner, Santa Rosa, and Hobbs. t\ew Mexico. 140. The distribution area of the Roswell plant is designated as Area # 11 in the revised Special Survey Reports, and the distribution area of the Clovis plant is designated as Area #12. The West Texas and Eastern Xew Mexico areas in which the three Mead's plants were located are sparsely populated, and, therefore, the distribution areas of the three plants were limited to grocery stores, restaurants, etc., Jocaied jn t()\vns along the designated highway rout.es. The combined sales of bread and bread-type rolls of the three plants for the year 1958 amount.cd to $2 911 848 (CX 493G, H).

a. Background of PUTchase 141. Like the acquisitions in California and Kentucky, ,'espondent claims that the purchase originated wit.h thc Mead families who owned Mead' s bakeries. Mr. 1. E. ;Vradsen, Chairman of the Board, and former Prcsident of Campbell Taggart Associated Bakeries, Inc., testified that the Meads approached representatives of Campbell Taggart and suggested that arrangements be made so that Mead's bakcries could become associated with Campbe)) Taggart (Tr. 2(71). Accordingly, several representatives of Campbell Taggart inspected ;Vread's plant.s. Several members of the Mead family owned and operated Ylead' s Fine Bread Company, with headquarters in Lubbock, and other Mead' , including Doc " IVlead, owned baking plants in Amarillo, Texas. Prior to September 3, 1959, several members of the Board of Directors CAMPBELL TAGGART ASSOCIATED BAKERIES, INC. G03 509 Initial Decision of Campbe1J Taggart had inspected ;VIead's plants. However, at a meeting of the Campbe1J Taggart Boavd of Directors on September 3, 1959, it was decided that no action at that time would be taken regarding the purchase of Mead' s plants (CX 120D). N gotiations continued, and an agreement was reached with the Mead family, who owned Yread's Pine Bread Company, for the purchase of the assets of the plants i:l Lubbock, Texas, and Roswell and Clovis, New Mcxico, for $1 200 000, plus inventories, accounts receivable, etc. lVII'. ?\lack Head then Secretary-Treasurer of Mead's Finc Bread Company, agreed to become associated with the new corporations to be formed by Campbe1J Taggart to acquire the assets of the three plants. :\Ir. :\lead was employed for a period of five years at a salary of $20 000 per year (CX 121). On October 15, 1959, an agreement was executed between Mead' Pine Bread Company and Campbell Taggart Associated Bakeries, Inc., for the purchase. Campbe1J Taggart caused three new subsidiary corporations to be formed for the acquisition of the three baking plants, namely, Rainbo Baking Co. of Lubbock, Rainbo Baking Co. of Roswe1J, and Rainbo Baking Co. of Clovis (CX 121B , 122A). Campbe1J Taggart purchased stock in the newlyformed subsidiaries varying from 90% to 97% (CX 71B, E , G; 121B). Mr. Mack Mead became a Director of each new subsidiary (CX 71B, E , G; 121C), and the Plant Yranager of each former Mead' s plant remained as President-Director and a stockholder of each new subsidiary (Tr. 2959, 2963; CX 71B, E, G; 81C). 142. Prior to the acquisition of :\Iead' s Pine Bread Company by subsidiaries of Campbe1J Taggart in 1959, Campbe1J Taggart subsidiaries operated baking plants located in eight towns in Texas: Dallas, \Vaco, Houston, Beaumont, Corpus Christi, Harlingen, San Antonio, and El Paso. Prior to the acquisition, a Campbell Taggart subsidiary also operated a baking plant in AJbuquerque, K ew Mexico. Albuquerque is located approximately 200 miles from Roswe1J , 217 miles from Clovis, and 324 miles from Lubbock. Lubbock is located approximately 327 miles from Dallas. Roswe1J is Jocated approximately 204 miles from EJ Paso. Therefore, at the time of the acquisition in October 1959 , the eJosest Mead' s plant to a Campbell Taggart subsidiary plant was the Roswe1J plant, located approximately 200 miles from Albuquerque. Roswc1J is also approximate I)' 204 miles from El Paso Texas, where anuther Campbell Taggart subsidiary plant is located. Prior to, and at the time of, the acquisition of Mead's Pine Bread Company by Campbell Taggart subsidiaries in October 1959, the only competition between a Mead's plant and a Camp- Initial Decision 71 F. bell Taggart subsidiary plant was on two extension routes in Alamogordo and Tularosa, located in Otero County, Kew Mexico where the Rainbo Baking Co. of El Paso, a Campbell Taggart subsidiary, and the Roswell plant of Mead' s Fine Bread Company also distributed (CX 138A , 150J).

b. Concentration Within the States of TexCLS and N ere Mexico 143. No oral testimony was received with respect to the bread sales in Texas and Kew Mexico, Areas #10, #11 , and #12. The only bread sales data for specific companies in the distribution area of the former Mead's Fine Bread Company in Texas and New Mexico: Areas #10, #11 , and #12, are those contained in the revised Special Survey Reports submitted by the sixteen baking companies in response to complaint counsel's Section 6 (b) Special Reports. These revised Special Survey Reports contain sales data for the years 1959, 1960, and 1%1 , and were received in evidence under exhibit numbers: CX 447, 450 , 451 , 458 , 466, 471, 472, 473, 475, 478, 493, 494, 511 , and 517. 144. According to the 1958 Census of .Manufacturers, the total value of shipments of bread and bread-type rolls for the State of Texas amounted to $116 745 000 (CX 167, Table 6B, p. 20E-15). Of this total, subsidiary plants of Campbell Taggart in Texas sold $23 091 000 (CX 327), or 19.77)10. However, it might be noted that none of the Campbell Taggart subsidiary plants located in Texas, including the Rainbo plant in EJ Paso, sold bread in Area #10 , where the :Vlead's Lubbock plant was Jocated (CX 458Z-14). The Mead's Fine Bread Company plant in Lubbock had sales of 31 631 583 , or 1.3)1 of the State total (CX 493G). 145. The 1958 Census of Manufacturers reports that total shipments of bread and bread- type rolls for the State of ew Mexico were $9 196 000 (CX 167 , Table 6B, p. 20E-15). The Mead's Fine Bread Company plants in Roswell and Clovis accounted for $1 280 265 of this total, or approximately 13. 90)1 (CX 493H). The Rainbo Baking Co. plant in Albuquerque, a Campbell Taggart subsidiary, accounted for $2 502 000 of the K ew Mexico total, or approximately 27. 290 (CX 327). c. Concentration Within Areas ;#10, #11 and :#12 the Distribution Areas of Mead's Plants in Lubbock, Texas, Roswell and Clov1:s, Nero Mexico 146. In 1958 , 14 baking companies, which submitted revised Special Survey Reports, reported that they sold $10 015,498 in bread and bread-type rolls in Areas #10, #11, and #12 (CX CAMPBELL TAGGART ASSOCIATED BAKERIES, INC. 605 509 Initial Decision 447 450 451 458 466 471 472 473 475 478 493 494, 511, and 517). The Mead's plants in Lubbock, Texas, together with its plants at Roswell and Clovis, New Mexico, accounted for $2 911 848 , or 29.07%. Rainbo Baking Co. of El Paso, Texas, a Campbell Taggart subsidiary, accounted for . 12%. (1) Sales Reported in Area #10 147. Nine baking companies reported bread and bread-type roll sales in Area #10 of $6 698 880 in 1958. According to complaint counsel, Area # 10 is located within the distribution area of the Mead's Fine Bread Company Lubbock plant. According to the revised Special Survey Reports submitted by the 14 baking companies selling bread in Area #10, the four companies reporting the largest volume of bread and bread-type roll sales in Area #10 in 1958, 1959, 1960 and 1961 , and their respective percentages to total sales, were as follows:

:n' ex 451 403L 458Z10 466N :tovemher - 18 24 in Per"ent! ry I 28. i5.941450P10. 191:21 OOO 404 iii-- 689: 324 6'. ubsidi )61 iJ'2;i4' 128 20i 773 i:iJ g-art_ I 2 I Ta 5()7_ Perc.:"t 35_ 26.47 110.22 86 Campbell 000 591 820--754 165 a, j60 _m_891 i 1 1,076730 Lulobock $2, 3.21 111.00 1;6B3 Percent 33."26.88 I of I 111.08 Co, - 664!539705 435 :341 lS9 Baking 3i6:ooo843220821 859022754 956 I 1 Hainbo , t I ' by 4721), rr.5J)6:$2 ;

i (CX 24.36 -1616: 11.00 ' aCljuired - 3Iij748 000 583 m__-855 755 880 were 1j5a, H)58 631 082 736 860698 $2;4 $6 ' Lubbock of September Co, on, TexasTexas Breetd Inc. Lubbock companiescompaniescompaniescompanies Lubbock, Lubbock, 9999 Fine Bakeries, Inc., , s Lubbock Co" Lubbock companies s Inc. of Odessa 4 sales,sales,sales,sales, Mead' Baird' then).Mrs, BreadCo.Co"Bakeries, Co" sales,1958 1959 1!J601961 (Jf to Raking', o!d Fine Baking'Baking 4!",81\1, s TotaJTotal Total TotalTotal as:;ets Baird's Baking (CXPlant u "Th.' BaldridgeMead'RainboHolsumMrs. Frost 19!",9 CAMPBELL TAGGART ASSOCIATED BAKERIES, INC. 607 509 Initial Decision According to the above figures, which are taken from the revised Special Survey Reports submitted by each baking company. Baldridge Baking, Inc., of Lubbock. reported the largest sales of bread and bread-type rolls in Area #10 during 1958, accounting for 35.96 % of the $6 698 880 sales reported for the nine companies. The Mead's Fine Bread Company Lubbock plant reported sales of $1 631 583 , or 24.36% of total area sales. Holsum Baking Co. of Lubbock accounted for the third largest volume of sales, $1 082 855 , or 16.16 % of the total. Frost Baking Co. of Odessa reported the fourth largest number of sales for Area #10 in 1958 $736 755 . or 11.00% of the total. These four baking companies accounted for 87.48% of the total sales reported by the nine baking companies for 1958 in Area #10. In 1961 , of $7 552 146 reported bread sales in Area #10, Rainbo Baking Co. of Lubbock the Campbell Taggart subsidiary which purchased the Mead' Lubbock plant, had sales of $1 856 555 , or 24.58% of the total sales of the nine companies. In 1961, the sales of the four baking companies reporting the largest volume amounted to 91.21 % of the total sales reported for the area.

(2) Roswell. New Mexico, Ana. #11 148. Five baking companies reported sales of bread and breadtype rolls in Area #11 in 1958 , 1959 , 1960, and 1961. Their reported sales and respective percentages to total sales are as follows:

(; 473N 475N 458Z14 ! j458Z11 ,4711 , .r t 35.42 1.01 617 0000 -"em 25 I 379 030 000 965 506 214 238 119 lm$683 688 N).

45HM, i:mc"t-! 33.83, 12. ?OO, (CX 1 54 513031 800 1959 24- 857 628226 -.1 I November , in "nt 81 21 6 ;:i 11.2 - / 006072 800. 138 833 subsidiary, ;;, t 201224 Taggart i- I 12.04 1.90 6_ Campbell ;:,,"t; I - 00. I a :

572 000 614; Mexieo, 218 216 124 New Roswell, of -- Co. Paso Roswell Roswell -'-U El companies Baking Roswell, Co.,of - of all Mexico Co., Co.Co. Co. RainlJo Mexico Bread sales, to New ,Bakery, New Baking FineBakingBaking Baking assets s Eats Total Sold CarJshad Hobhs, 10 RolsuruMead'RainboHalsum Good Rainbo CAMPBELL TAGGART ASSOCIATED BAKERIES, INC. 609 509 Initial Decision From these revised Special Survey Reports it is seen that the five baking companies reported total sales of $1 815 661 in Area #11 of bread and bread-type rolls for 1958. Among these baking companies, the Holsum Baking Co. of Roswell reported the largest volume of sales in Area #11 , 37. 16%, and the Mead' Fine Bread Company plant in Roswell was second with 32.04% of the total in 1958. These two baking companies accounted for more than 69 % of bread and bread-type roll sales reported for the area in 1958. The Rainbo Baking Co. of El Paso, a Campbell Taggart subsidiary, accounted for 6. 86 % of the total in 1958. In 1961 , the Rainbo Baking Co. of Roswell, a Campbell Taggart subsidiary formerly a Mead's plant, reported bread sales amounting to 35.42 % of total sales in that area, and the Rainbo Baking Co. of El Paso, a Campbell Taggart subsidiary, reported sales amounting to 6.17% of the area total reported sales. (3) CloVl:s, New Mexico, Area #12 149. According to the revised Special Survey Reports, six baking companies reported sales of bread and bread-type rolls in Area #12 in 1958 , 1959 , 1960 , and 1961. Their reported sales and respective percentages to total sales are as follows: :;.

49 458Z12 473N 475N 517N 447- I 05 ccent 3.42 49.76 16.75 24 100. I , 858 621 000 411 813 703 1'61 738 248 357 184 cen 49.57' 16.60 24.35 l!)"D. I 1100. 656 357 200 337 602 152 N'Jvernl;c)" 1960 747 250 367 508 in sulI8,di"ry. 5. 19. 21.78 6. 41. i ' I i100. 369 596 056 200 215 253 689 T,q--gart $692 11 296 337I 96 551 Camphell ' 1%'80 46.54 22.36 21.59, 6.77 100. I Mexico 195 621 000 689 153 958 New 1008 $698 335 Clovis. ; 324 of -- . 101 Cq.

.... .. Co. B"kinr; Bakery companies r:;,in1.Q -- Co. all to Cornp:1ny of Baking, BakingMeXleo Co.Mexico :1c;"ds Mexico Texas .'salcs Bread Mexico Eats New, New Texas Bakeries suld New New , ,Baking. Fine Tohl1 s rican i\IeCLd"s Clovis Clovis, Roswell Hobbs Borger, Amarillo, .1 Mead' Rainbo HolsurnGoodTri-State Am(' CAMPBELL TAGGART ASSOCIATED BAKERIES, INC. 611 509 Initial Decision As will be seen from the revised Special Survey Reports, summarized above, a total of $1 500 958 in sales of bread and breadtype rails was reported by live baking companies for 1958 in Area # 12. Mead's Fine Bread Company of Clovis reported the largest volume of sales in Area #12 , accounting for 46.54% of bread and bread-type rail sales in the area. Holsum Baking Co. of Roswell reported the second largest volume of sales, accounting for 22.36% of area sales. Together, Mead's and Holsum Baking Co. of Roswell accounted for 68.90% of aJl bread and bread-type rail sales reported for the area. By 1961, the market share of Rainbo Baking Co. of Clovis, a Campbell Taggart subsidiary! amounted to 49. 761'0 of total sales reported for the area, and Holsum Baking Co. of Roswell sales dropped to 16.75%. Good Eats Bakery, Hobbs, New JIexico, increased its percentage of sales from 21.59% in 1958 to 24.05% in 1961 , and replaced Holsum Baking Co. of Roswell as the second largest seller of bread and bread-type rolls in the area.

d. The Relevant Geog1'aphw Market ATeas 150. The relevant geographic market areas in which to measure the competitive effects of the acquisitions by Campbell Taggart subsidiaries of Mead's Fine Bread Company are the areas of distribution of each acquired Mead' s plant, their combined areas of distribution, areas \which customers may turn for supplies Areas #10, #11, and #12.

151. In 1959 , the Rainbo Baking Co. of Lubbock bOl'owed $450 000 from the First National Bank in Dallas. This Joan was guaranteed by Campbell Taggart (TL 2973-74). In 1959 , the Rainbo Baking Co. of Roswell borrowed $200 000 from the First National Bank in Dallas, which loan was guaranteed by Campbell Taggart (CX 292B, 1. 2; '11' 2973- 74). In 1959 , Rainbo Baking Co. of Clovis borrowed $150 000 from the First ational Bank in Dallas, which Joan was also guaranteed by Campbell Taggart ('11'. 2973-74). This plant reported a loss for the last period of 1960 (CX 293H, 1. 70), and an operating Joss was reported for the entire year 1961 (CX 293- , 1. 73).

B. Acquisit'':o'f8 With No Sales Data Or Oral Testimony In Record 1. The Dan-Dee Bread CO'lllpany Acqu?:gition 152. On January 14, 1950, Rainbo Bakers, Inc. of Pueblo, Colorado, a Campbell Taggart subsidiary, purchased the assels of Dan-Dee Bread Company of Colorado Springs, Colorado, also Initial Decision 71 F. known as Zim s Bakery (Tr. 2551; CX lola-E). Rainbo Bakers Inc. of Pueblo is a Delaware corporation (CX 101A), in which Campbell Taggart owns 58.50% of its capital stock, with the balance of 41.50 % owned by other persons, including offcers of Rainbo Bakers, Inc. (CX 71F).

a. Background Leading 7'0 Acquisition 153. The only oral testimony in the record concerning this purchase is that of Mr. 1. E. Madsen, former President and Chairman of the Board of Campbell Taggart Associated Bakeries, Inc. Concerning the purchase by Rainbo Bakers, Inc. of Pueblo, Colorado, of Dan-Dee Bread Company of Colorado Springs, Colorado, Mr. Madsen testified that Dan-Dee Bread Company "was completely broke and was going to close up, and a lot of money was owed" (Tr. 2(22). This testimony is corroborated by a Dan-Dee balance sheet, dated December 3, 1949 (CX 305A through E), which showed fixed assets of 347,452. , which included Jand, buildings machinery, trucks, accounts receivable, inventories, current liabilities of 329 910. , plus long term debt of 316 036. , and reporting 1949 net loss from operations of $2 856.85 on total bread sales of $7 201.36. According to CX 100A- , a meeting was held on January 5 , 1950 , in the First National Bank of Colorado Springs, Colorado, at which the following were present: TvIessrs. H. Chase Stone, representing the Bank; George Asterita, representing Dan-Dee Bread Company; Kenneth :VlcCabe, President of Rainbo Bakers, Inc. of Pueblo, Colorado; and R. S. McIlvaine President of Rainbo Bread Company, Denver, Colorado. At this meeting, a discussion \vas held concerning a proposal on the part of :vI'. Asterita to arrange for the sale of certain physical property and assets of Dan-Dee Bread Company. Subsequently, pursuant to a written Purchase and Sale Agreement, dated January , 1950, the assets of Dan-Dee Bread Company, including reaJ estate, improvements, machinery, and motor vehicles, were purchased by Rainbo Bakers, Inc. of Pueblo for the sum of $47 452. paid in cash (CX 101A through E), being the amount shown in the balance sheet as the fixed assets of the company. 154. There is no evidence in the record to show the distribution area of Dan-Dee B:;'ead Company, of Rainbo Bakers, Inc. of Pueblo, Colorado, or the identity of any of their competitors, if any, at the time of the purchase or subsequent thereto. There is no evidence in the record to show where other baking plants of bread and bread-type rolls in the Pueblo or Colorado Springs areas are located, or where purchasers of bread and CAMPBELL TAGGART ASSOCIATED BAKERIES, INC. 613 509 Initial Decision bread-type rolls in these areas could turn for alternate supplies at the time of the purchase in 1950 or subsequent thereto. There is no evidence in the record to show where Dan-Dee Bread Company purchased its ingredients and supplies; whether Dan- Dee distributed bread and bread-type rolls in more than one state; or any evidence to establish that Dan-Dee Bread Company was engaged in commerce at the time of the purchase in 1950. At the time of the purchase of the assets of Dan-Dee Bread Company by Rainbo Bakers, Inc. of Pueblo, Colorado, on J anuary 14, 1950 (CX lola-C), Section 7 of the Clayton Act did not apply to the purchase of the assets of a corporation, but only to the purchase of stock.

155. There is no evidence in the record to show the total sales of bread and bread-type rolls of Dan-Dee Bread Company of Colorado Springs, Colorado, or Rainbo Bakers, Inc. of Pueblo Colorado, for 1950, or any other year, from which market shartc held by either of these baking companies may be computed. There is no evidence in the record to support any finding that any substantial competition was eliminated or lessened between Dan- Dee Bread Company and any subsidiary of Campbell Taggart Associated Bakeries, Inc. , as a result of the purchase in 1950. Nor is there any evidence to support a finding that any Campbell Tagg-art subsidiary was a probable or potential competitor of Dan-Dee Bread Company in any substantial area of geographic competition at any time prior to 1950 or subsequent thereto. J 56. Upon the basis of the entire record, it is found that the evidence fails to establish that the effect of the Dan-Dee Bread Company purchase in J 950 by a Campbell Tag-gart oubsidiary may substantially lessen competition or tend to create a monopoly in the sale of bread and bread-type rolls. On the other hand the meager evidence in the record concerning this transaction shows, that, at the time of the purchase, Dan-Dee Bread Company was in a serious financial condition, and the baking plant Jikely would have gone out of business except for the purchase of its assets by Rainbo Bakers, Inc. of Pueblo, Colorado (CX 305A-E). The evidence does not show that there was any other available purchaser. It is further found that Campbell Taggart Associated Bakeries, Inc. did not use its stock investment of 58. 50% in Rainbo Bakers, Inc. of Pueblo to bring about or cause a substantial lessening of competition in any geographic area. 2. The Purity Bakin,g C01nlJany, El Paso, Texas 157. In April 1951, Rainbo Baking Co. of EI Paso, Texas, a 614 FEDERAL TRADE COMMISSIO DECISIONS Initial Decision 71 P. Campbell Taggart subsidiary, purchased the physical assets of a baking plant from the former stockholders of Purity Baking Company, El Paso, Texas, which had been dissolved (1'1'. 2624; CX 102A-F). Prior to April 1951, Purity Baking Company was engaged in the wholesale baking business in EI Paso, Texas, and distributed its products in "El Paso and surrounding territory, and into Xew Mexico by way of a substation ('11' 2(24). Purity Balance Sheet at the close of business on April 7, 1951 showed assets of $239 563.92 (CX 303B).

a. Background of Purchase 158. The only evidence in the record" concerning this acquisition consists of a :\Iemorandum of Agreement dated March 29, 1951, between the former holders of all the outstanding stock of Purity Baking Company, a Texas corporation, and Campbell Taggart (CX l02A-F). This agreement recites, among other things that: the individual stockholders of Purity had previously offered to sell their stock to Campbell Taggart but Campbell Taggart had refused to purchase the stock; Purity Baking Company was to be dissolved and its assets distributed among its stockholders, who would then sell and transfer the assets of the former Purity Baking Company to a new corporate subsidiary to be formed by Campbell Taggart, Rainbo Baking Co. of El Paso. The purchase price was $365 000 plus liabilities at date of closing. 159. There is no evidence in the record to show the distribution area of the former Purity Baking Company at thc time of its dissolution in 1951 , 01' at any time thereafter, other than that Purity Baking Company distributed in El Paso, Texas, and the surrounding territory "\within 50 or 60 miles, including Ne\v Mexico ('II'. 2(24). There is no evidence in the record to show where the bread and bread-type rolls distributed in the El Paso area were baked, or where purchasers of bread and bread-type rolls in the EI Paso area could turn for supplies in 1951. Complaint counsel have failed to cstablish the relevant area of geographic competition with respect to this purchase. Complaint counsel did not offer any evidence with respect to the annual sales of Purity Baking Company, or any other baking company, from which market shares before or after 1951 could be computed, or on which concentration" among baking companies in the appropriate area of geographic competition could be determined. 160. In their proposed findings, complaint counsel state that the Rainbo Baking Co. of Albuquerque ew Mexico, distributed its bakery products immediately to the north of Purity, while the CAMPBELL TAGGART ASSOCIATED BAKERIES, INC. 615 509 Initial Decision Rainbo Baking Co. of Phoenix and the Rainbo Baking Co. of Tucson, Arizona, distributed to the west and northwest of Puris area of distribution; and that, to the east, in the remainder of the State of Texas, Campbell Taggart, through subsidiaries operated seven other baking plants. Complaint counsel do not mention the great distances between these plants, it being approximately 271 miles from El Paso to Albuquerque; 400 miies from El Paso to Phoenix; and 317 miles from El Paso to Tucson Arizona. The nearest Campbell Tagg-art subsidiary to the east of EJ Paso was located in Dallas, a distance of 630 miles. There is no evidence in the record to show that they were competitors or that any substantial competition was eliminated or lessened between any Campbell Taggart subsidiary baking plant and Purity Baking Company as a result of the 1951 transaction. There is no evidence in the record to support a finding that there was a reasonable probability of potential competition between any Campbell Tagg-art subsidiary and Purity Baking Company in any substantial area of geographic competition in 1951 or the foreseeable future. It is found, therefore, that complaint counsel have failed to establish that the effect of the purchase of the assets of Purity Baking Company by Rainbo Baking Co. of EI Paso may be substantially to lessen competition or tend to create a monopoly in the saJe of bread and bread-type rolls; that respondent did not use its stock investment in Rainbo Baking Co. of El Paso to bring about a substantialless8ning of competition; and that its formation and ownership of 95 % of the stocl, of Rainbo Baking Co. of El Paso did not have the effect of lessening competition. 3. Jessee Baking CompiLny of G,' o",d IsliLnd Gmnd Island, N ebmskiL 161. On and prior to iVay 7, 1955, Jessee Baking Company of Grand Island, a :\ebraska corporation, operated a baking plant in Grand Island, r,nd Jessee Baking Company of Colorado, a Colorado corporation, operated a baking plant in Sterling, Colorado. At some time subsequent to May 7, 1955, the exact date not being clear in the record, Campbell Taggart Associated Bakeries, Inc. purchased 60% of the capital stock of Jessee Baking Company of Grand Island, Nebraska, and all of the capital stock of Jessee Baking company of Sterling, Colorado (Complaint, Par. 8; Answer, Par. 8; Tr. 2641).

a. Background of Purchase 162. This purchase originated under the terms of an Option 616 FEDERAL TRADE COMMISSIO:- DECISIONS Initial Decision 71 P. Agreement, dated May 7 , 1955, wherein the owners granted to Campbell Taggart the option to purchase (for a period of 90 days) 60% of the outstanding capital stock in Jessee Baking Company of Grand Island and all of the capital stock of Jessee Baking Company of Colorado at the nominal price of $1 per share for the 546 shares, or a total of $546 (CX 1l0A-C), "since at the time Campbell Taggart became a stockholder the company was deeply in debt and the stock had JiWe if any value" (CX 107B). Also Campbell Taggart advanced $5 000 to .J essee Baking Company so as to enable it to continue in business while Campbell Taggart made an investigation to determine whether to exercise its option. If Campbell Taggart should decide to exercise the option Campbell Taggart further agreed to furnish Jessee Baking Company with "suffcient money to payoff all their indebtedness as well as working capital and furnish them service and help to make the operations profitable" (CX 74A , 11 OC) . 163. .Mr. I. E. Madsen, former President and Board Chairman of Campbell Taggart Associated Bakeries, Inc. , testified, among other things, that Jessee Baking Company was "completely broke; had a "terrible reputation; and "was on the point of closing" its Colorado bakery (1'1' 2640-41). A Balance Sheet of Jessee Baking Company of Grand Island, dated Aprij 2, 1955 (CX 307) tends to corroborate Mr. Madsen s testimony concerning the financial condition of Jessee Baking Company. This balance sheet shows total assets of $136 082.47, and total Jiabijities of $189 482. , or a negative capital account of $53 399.72. The balance sheet also showed a deficit of $71 196.66 at the beginning of the year, and a deflcit of $44 900.06 for the prior year 164. Campbell Taggart Associated Bakeries, Inc. , eventually exercised its option. The Sterhng, Colorado plant was closed, and the Nebraska corporation, Jessee Baking Company of Grand Island, V.las continued, but the corporate name was changed to Rainbo Baking Co. of Grand Island, according to Mr. :\Iadsen, because Jessee Baking Company had "such a terriblc reputation (1'1'. 2640-41). Campbell Taggart increased its investment in the Grand Island corporation by providing it with "'\vorking capital" and suffcient money " to payoff all their indebtedness" (CX 74A). The prior stockholders and operators of Jessee Baking Company, Mr. C. C. and CJara Jessee and their son-in-Jaw, :VIr. \Viliam Mil- Jer, retained 40% of the capital stock (CX 107B). :VIr. MiJler and the Jessee s daughter, Charlene, became Directors President and Vice President, respectively, of Rainbo Baking Co. of Grand Island, and continued to operate the plant (CX 71D). CAMPBELL TAGGART ASSOCIATED BAKERIES, INC. 617 509 Initial Dccision 165. Financial statements of Rainbo Baking Co. of Grand Island show that by the end of 1956 the Grand Island baking plant had reversed its financial decline and the total assets had increased to $321 000, with a profit of $28 000 on total 1956 net sales of $473 000 (CX 308G-I). Mr. Madsen testified that the transaction never meant anything to Campbell Taggart except a small fee \ve get for our services, but it has meant something to the Jessee farniJy. They are the only ones that reap from the benefits, because the daughter and son-in-la\v Ihave) been operating that plant ever since and (have) made a very fine living (Tr. 2641).

166. Complaint counsel did not offer any evidence as to the distribution area of either .Jessee Baking Company plant or any competitors at the time of the purchase of controllng interest by Campbell Taggart, or at any time thereafter. No evidence was offered to show where the bread and bread-type rolls distributed in the Grand Island and Sterling areas were produced, or where purchasers of bread and bread-type rolls in the Grand Island and Sterling areas could turn for supplies at the time of the purchase by Campbell Taggart of controlling interest in the former .Jessee Baking Company. Due to the absence in the record of evidence concerning bread distribution and sales in the Grand Island, Nebraska, and Sterling, Colorado, areas, it is not possible to determine the relevant area of geographic competition with regard to the purchase by Campbell Taggart of controlling interest in .J essee Baking Company.

167. There is no evidence in the record to show whether either of the ,Jessee Baking Com panics distributed bread in more than one state at the time of the purchase of control by Campbell Taggart. The evidence does show that Jessee Baking Company of Grand Island purchased ingredients from some suppliers located outside the State of Nebraska (CX 111A-B), but there is no evidence to show how these orders were placed or how delivery was made.

168. Complaint counsel offered no evidence concerning annual bread and bread-type rolJ sales of either Jessee Baking Company plant or any competitors for 1955 or any other year, and offered no sales data from Ivhich market shares of any baking company might be computed for any year before or after the purchase of controlling interest in .Jessee Baking Company by Campbell Taggart. There is no record evidence to support a finding that any Campbell Taggart subsidiary was a potential s1Jbstantial competitor of .Jessee Baking Company in any substantial area of Initial Decision 7. P. geographic competition at any time in 1955, 1956, or the foreseeabJe future. There is no evidence in the record to finding that any substantial competition was eJiminatedsupportor a Jcssened between any Campbell TaggiJ.rt subsidiary and Jessee Baking Company as a result of Campbell Taggart' s purchase of stock control in Jessee Baking Company. Upon the basis of the entire record, it is found that complaint counsel have failed to establish that the effect of Campbell Taggart's purchase of stock control in Jessee Baking Company may substantially lessen competition or tend lo create a monopoly in the sale of bread and bread-type rolls. It is further found, upon the basis of a preponderance of the evidence, that CampbcJl Taggart did not use its stock investment in Jessee Baking Company, by voting or otherwise, to bring about a substantial lessening of competition, and that its ownership of 6050 of the capital stock of Jessee Baking Company did not have the effect of substantially lessening competition in the sale of bread and bread-type rolls.

4. IVolts Baking Cmnpany, A Corporation" Alton, Illinois a. BCLck,gmund of Punl"'8e 169. This transaction concerns the purchase by Colonial Baking Company of St. Louis, St. Louis, ivlissouri, a Campbell Tagga subsicli,ny, of the assets of Kall's Baking COlllpany, a corporation of Alton, Illinois, in June 1960. Noll's was a wholesale baking plant selling bread, SVleet rolls, and ice cream (Tl'. 2535 , 2538- 39), Campbell Taggart Associated Bakerie" , Inc. , owns 58. 09 % of the capital stock of Colonial Baking Company of St. Louis with the balance of 11.105S owned by others (CX 71G; '11'. 2956 2963). 1\1'. 1. E. Madsen, fOl'ner President and Board Chairman of Campbell Taggart Associated Bakeries, Jnc. , called as a \vitness by complaint counsel, testjfied that the Yf.management of Koll's Baking Company asked the management of Colonial Baking Company of St. Louis jf there was any chance at all for them to get associated "with them. They Wel"e (loing everything in their power to bring it about, because they were going broke and going downhill, and according to the way it was going it was only a question of time until they would be out of business (Tr. 2534-35).

They had family troubles and they had financial troubles (Tr. 2GB?). 170. Colonial Baking Company of St. Louis purchased the assets of Koll' s Baking Company in June 1960 financing the purchase with its own funds and those borrO\ved from a St. Louis , CAMPBELL TAGGART ASSOCIATED BAEERIES, IKC. 619 509 Initial Decision bank (1'1'. 2539). There was no sales contract offered in evidence concerning this purchase. There is in evidence a statement contained in the minutes of a regular 111eeting of the Campbell Taggart Board of Directors held on December 3, 1959 (CX 8aC), to the effect that Mr. Walter WiJ1iams, President of CoJonlal Baking Company of St. Louis, was authorized "to acquire the Alton bakery for a price in the neighborhood of a half million dollars providing terms acceptable to the Committee could be ag-recd upon. b. Competition 171. lVr. Madsen testified that "There was a very slight diflerence" between the distribution routes of Colonial Baking Company of St. Louis and Kol1's Baking Company (Tl' 2538). This is the only testimony with respect to distribution routes in the Alton Illnois, area. There is no evidence in the record to show the actual distdbution area of Noll' s Baking Company or Colonial Baking Company of St. Louis or any of their competitors in 1960, or at any time thereafter. There is no evidence in the record io sho\v where bread and bread-type rolls distributed in the AJton, Ilinois area 'Nere baked, or where purchasers of bread Dnd bread-type rolls in the Alton, Ilinois, area could turn for an alternate source of supplies at the time of the purchase of the assets of XoJl's Baking Company by Colonial Baking Company of St. Louis in June 1960. There is not suffcient evidence in the record upon 'which the relevant area of geographic competition for the Nolls Baking Company purchase can be determined.

172. Complaint counsel did not offer any evidence in the record to show the annual bread and breacl-type ljl sales of XoJl's Baking Company or Colonial Baking Company of St. Louis, or of any of their competitors, upon '\which 1118rket shares of any b?J;:ing company in any year before or subsequent to 19(i() may be determined. From the evidu1ce in the record concentration" among baking companies in the Alton, Illinois, distribution area cannot be determined.

173. There is not suffcient evidence in the record to support a finding that any substantial competition was eliminated or lessened between 1\011' 8 Baking; Company and Colonial Baking Company of St. Louis, OJ' any other Campbell Taggart subsidiary, a result of the transaction in 1960. There is in the record evidence that the Executive Committee of Campbcll Taggart, at a meeting 011 Januar:y 20 01' .Jmnwl'Y 21 , 1958 , authorized 1V1r. \\Taltel' \Villiams, President. of Colonial Baking Company of St. Louis, to look for suitable property of suffeient size, possibly 10 to 20 Initial Decision 71 F. T. acres for the building of a distributing station and possibly eventually a second baking plant to augment the present production facilities which are rapidly becoming inadequate. Estimated cost of the necessary property, entirely on a guessing basis, $100 000" (CX 75B). The hearing examiner does not consider this evidence suffcient to support a finding that Colonial Baking Company of St. Louis was a potential competitor, or would likely become a substantial competitor, of Noll's Baking Company in any substantial area of geographic competition at any time or in the near or foreseeable future. Upon the basis of a preponderance of the evidence, it is found that complaint counsel have failed to establish that the eflect of the purchase of the assets of K ojl' Baking Company by Colonial Baking Company of St. Louis may substantially Jessen competition or tend to create a monopoly in the sale of bread and bread-type rolls. It is further found that Campbell Taggart Associated Bakeries, Inc. , did not use its stock ownership in Colonial Baking Company of St. Louis, by voting or otherwise, to bring about a substantial lessening of competition, and that its ownership of 58.90% of the stock of Colonial Baking Company of St. Louis did not have the effect of substantially lessening cOlnpetition.

174. In Count II , the complaint alleg-cs that, by virtue of respondent' s "position in the baking industry and its continuous growth by acquisitions, respondent has acquired an actual or potential monopoly power to impede and prevent the growth and business opportunities of its competitors, as wcJl as their ability to survive in the manufacture, sale and distribution of bread and bread-type rolls in the United States; and that respondent has used its "increasingly dominant position and economic power " to engage in some of the various competitive practices \which have been found to be prevalent in K orthern California and the Kentucky area (Findings 82-88; 125-129), These practices are not unique to Campbell Taggart subsidiary baking plants. They are common practices in t.he baking industry in Northern California and Kentucky and have been for many years, Jong prior to the acquisition of the baking plants in California and Kentucky by subsidiaries of Campbell Taggart. These trade practices were indulged in without regard to the "size " of the baking COTI1pany. The record shows that relatively small or "independent" baking companies as well as "large" baking companies engaged in many of these trade praclices prior to the acquisitions in California and Kentucky. From the record evidence, it is clear that it was not respondent's " dominant position and economic pmver" that CAMPBELL TAGGART ASSOCIATED BAKERIES, INC. 621 509 Initial Decision enabled its subsidiary baking plants to engage in these competitive trade practices. No causal connection has been shown between these general trade practices and the acquisition of the baking plants in California and Kentucky by subsidiaries of CampbeU Taggart.

175. Further, the record shows that CampbeU Taggart did not finance any of the competitive trade practices which may have been indulged in by any of its subsidiary baking plants (Finding 14). Also, the record does not establish that the trade practices indulged in by CampbeU Taggart subsidiary baking plants were different from those which are prevalent in the industry and induJged in by their competitors in K orthern California and the Kentucky area. 1\01' does the record establish that these competitive trade practices engaged in by its subsidiary baking plants have enabled Campbell Taggart to "acquire the power and ability to achieve an actual or potential monopoly in the manufacture sale and distribution of bread and bread-type roJJs in the United States " as alleged in Count II. The market share of Campbell Taggart subsidiary baking plants in bread and bread-type rou sales is far short of an actual or potential monopoly in any "section of the country." Aside from monopoly aspects, the competitive trade practices shown by the record to have been indulged in by some CampbeU Taggart subsidiary baking plants, such as cash payments to grocers for shelf spa-ce and granting discriminatory trade discounts to custonlers, constitute unfair methods of conlpetition and unfair acts and lJrHctices, in violation of Section 5 of the Federal Trade Commission Act.

176. On January 10, 1966, counsel for respondent filed a motion to strike from complaint counsel's proposed findings aU captions and statistics purporting to show rankings by market share, sales, and assets, in particular, contained in the fonowing proposed findings by complaint counsel based on the tabulations attached as Appendices A to T to complaint counsel' s proposed findings of , 128 , 130 fact, conclusions, and order and CX 522-524: Kos. 2 131 133 182 185 186 216 218-220 227 234 238 242, 253, 269, 278, 290, 292, 2%, 299, 345 , 346, 348, 350, and 352. In the alternative, respondent moved that the hearing examiner reject and disregard such rankings, captions, statistics, and proposed fmdings in the preparation of his i11itial decision. 177. At hearings held in Washington, D. , on March 31 1965 , upon objection by respondent' s counsel, the hearing examiner ordercd that the word "largest" be stricken from ex 522 conlplaint counsel's 523, and 524 on the ground that this was Initial Decision 71 F. characterization (Tr. 4926). In their motion to strike, counsel for respondent point out that complaint counsel's proposed findings cite these same exhibits as support for proposed findings that rank baking companies by sales and asset size, such as Commission s proposed findings Kos. 2, J28, J30, J31, and 133. Respondent' s counsel contend that complaint counsel have taken the sales data for individual responding companies as contained in the subpoena questionnaircs, or Section (j (b) Special Survey Reports as the case may be, processed these sales figures by computer into tabular form, and then asserted tileir own conclusion that the sales so tabulated represent 100 % of the total sales in a given area and thereby constitute a reliable I'tlniverse" from which to obtain market share rankings. In order to satisfy the objections contained in the motion to strike, the hearing examiner has disregarded the tabulations designat.ed Appendices A to T, which are attached to complaint counsel's proposed findings, and has computed market shares from the sales figures contained in the responses by the 35 California baking companies to the subpoena questionnaires and from the revised Special Survey Reports. To this extent, the hearing examiner rejects and disregards such rankings and captions which are objected to by counsel for respondent.

CONCLUSIONS 1. The respondent Campbell Taggart Associated Bakeries, Inc. a corporation, through its ownership of tile majority stock in each of its subsidiary corporate baking plants, its selection of the offcers thereof and their salaries, purchasing supplies and ingredients which are used in its corporate subsidiary baking plants carrying on a steady flow of correspondence and contracts with its subsidiary baking plants and suppliers of bakery ingredients with whom it deals as purchasing agent on behalf of its corporate subsidiary baking pl::.nts, maintains a course of trade in commerce as "commerce" is defined in the amended Clayton Act and doing, is engagedthe Federal Trade Commission Act, and, in so in commerce as 'jcommerce " is defined in said Acts. The Acquh'cd Companies A. The Acqu'isd'ions 1:n California 2. The record estabJisiles that each of the baking plants owned and controlled by the KiJpatricks and OJd Home Bakers purchased ;,.

CAMPBELL TAGGART ASSOCIATED BAKERIES, INC. 623 509 Initial Decision theh' major ingredients, such as flour, wrapping and packaging materials, from sources outside the State of California. Therefore the baking plants acquired by Campbell Taggart subsidiaries in California were engaged in "commerce within the meaning of the amended Clayton Act and the Federal Trade Commission Act. FOTemost Dui?"ies, Inc. 60 F. C. 944, at 1069. 1. The Grocers Baking Company 3. Grocers Baking Company, a Kentucky corporation, with headquarters in Louisville, the parent company, directed and controlled the operations of its nine baking plants which manufactured, distributed and sold bread and bread-type rolls in Kentucky, Indiana, Tennessee, Virginia, l\orth Carolina, and Ilinois (Ans. , Par. 5). Grocers also purchased the ingredients, wrapping and packaging materials from suppliers Jocated in other states (CX 330B, C). Grocers Baking Company ,vas, therefore, engaged in "commerce" as that term is defined in the amended Clayton Act and the Federal Trade Commission Act. 2. Mead's Fine Bnad Company 1. Mead's Fine Bread Company was a Texas corporation, with headquarters in Lubbock, where it operated a baking plant, and separate plants in Roswell and Clovis, "'ew Mexico. In 1954 Mead' s Fine Bread Company, through its operation of the three plants, 'vas found to be engaged in " commerce, lVJoore v. !Iead! Fine Bread Company, 348 es. 11 Dan-Dee Bread Company 5. Dan-Dee Bread Company, a Colorado corporation, operated a baking plant in Cohn'ado Springs, Colorado" At the time of the purchase of its assets by Rainbo Bakers, Inc., of Pueblo, a Campbell Tagg;art subsidiary, on January 14 , 1950, prior to the amendment of the Clayton Act, Dan-Dee was in financiaj diffculties and the baking plant likely would have gone out of business except for the purchase of jts assets by a Campbell Tagg-art subsidiary. There is no evidence in the record to establish that Dan-Dee was engaged in "commerce.

4. Purity Balc"ing Company 6. Purity Baking Company, a Texas corporation, operated a baking plant in El Paso, with distribution in "El Paso and surrounding territory" and into i\-: ew l\Iexico by way of a substation (Finding 157). Therefore, Purity was engaged in commerce. Initial Decision 71 P. 5. Jessee Baking Company 7. Jessee Baking Company of Grand Island, a Nebraska corporation, operated a baking plant in Grand Island Baking Company of Colorado, a Colorado corporation,, operatedand Jesseea baking plant in Sterling, Colorado. Jessee Baking Company of Grand Island purchased ingredients from suppliers located outside the State of Nebraska (CX l11A, B). Therefore, Jessee Baking Company of Grand Island was engaged in "commerce. 6. Noll's Baking Company 8. Xoll's Baking Company, an Illinois corporation, operated a baking plant in Alton, Illinois. There is no evidence in the record to show that Noll's was engaged in "commerce. B. Sections of the Country 9. The relevant geographic markets are the areas of distribution of each individual baking plant acquired by a Campbell Taggart subsidiary, the combined areas of distribution of baking plants acquired in Northern California, the combined areas of distribution of the Grocers Baking Company plants, the combined areas of distribution of the :vead's Fine Bread Company, and the combined areas of distribution of all baking plants acquired by Campbell Taggart subsidiaries in the entire United States. C. The Relevant Line of Comme,,e 10. "Line of Commerce " refers to a "relevant product or services market. S. v. Phitadelphia National Bank, et al. , 374 1)S. 321 , 356. The record establishes that the relevant "Line of Commerce " by which the effects of the acquisitions should be measured is the manufacture, sale, and distribution of bread and bread-type rolls.

D. Reasonable Probability of Lessening Competition or Tending to Create a I' onopoly 11. The Commission and the courts have looked to the industry setting in which the acquisition or acquisitions took place in determining the reasonable probability of the lessening of competition or tendency toward monopoly. The Commission has deemed the following criteria pertinent: the number of companies in the industry and their market share nationally; the decline if any, in the number of firms selling the product; the degree of concentration which may exist in the different markets through- CAMPBELL TAGGART ASSOCIATED BAKERIES, INC. 625 509 Initial Decision out the country; and the over-all merger movement which may exist in the particular industry. Foremost Dairies, Inc., supm, pp. 1053-1058.

12. Considerable changes have been taking place in the baking industry in the United States for the past fifteen years or so. In 1954, there were 5,426 wholesale bakeries in the United States (CX 166, Table 1, p. 20E-3), while in 1958 there were only 5, 199 wholesale bakeries (CX 1G7 , Table 1 , p. 20E-3). Total value of shipments increased by $1 031 595 000.

13. The increase in concentration in the wholesale baking business in the United States in recent years is illustrated by the acquisitions made by some of the so-called national chain bakeries, as shown in CX 524A-G and the tabulation shown under Finding 37. During the period 1952-1%1 , Continental Baking Company, a national wholesale chain bakery, with $454 287 000 net sales in 1962 (CX 522A), acquired 17 baking plants located in twelve States; General Baking Company acquired 19 plants located in four States during the period 1953-1958; American Bakeries acquired 65 baking plants located in four States during the period 1953-1%4; Interstate Bakery Corp. acquired 18 plants located in nine States during the period 1950-1964; Ward Foods, Inc., formerly Ward Baking Company, acquired 18 baking plants located in seven States during the period 1950-1%4; Langendorf United Bakeries, Inc., acquired 8 bakeries Joeated in three States during the period 1950-1958 (Langendorf, itself, being acquired by American Bakeries, Inc., in 19(4) ; and during the period 1950-1960, respondent has created many corporate subsidiaries, and these subsidiaries of respondent have acquired the assets of the 24 baking plants located in California, Colorado Illinois, Indiana, Kentucky, Nebraska, Xew Mexico, Tennessee and Texas. In these acquisitions, respondent and its subsidaries increased their combined assets from $33,430 592 in 1951 , to $74 249 S05 in 1%0, an increase of $40 819 213, or 122.10 percent. During the same period, their net sales increased from $100 607 186 in 1951 , to $197 576 870 in 1%0, an increase of $96 969 684, or 96.38 percent (CX 312-321).

14. The growth of respondent and its subsidiaries in sales volume during the years 1947 through 1%2 as compared to that of the other national chain bakeries is illustrated by the tabulation contained in CX 522A and B. For example, in 1953, the year prior to the acquisition by Campbell Taggart subsidiaries of the seven Ca.Jfornia baking plants, the total sales reported by Campbell Taggart and its subsidiary baking plants were $108 276. In 1960 . ..... () ! __ Initial Decision 71 F. their reported sales \Were S197 576. The sales reported by the other national chain bakeries for these years are as follows: ! C ntinentn merjc'ir; GE'rje). r;;tat lng I Bakeries ing kcnE';; l1g 1953 . I Ba 845 : $134,601 i $120 496 I $86 064 I B 132 1960 1 $198 243 171 140,4 225 :J-=6 From these figures, it is seen that, on a national basis, Campbell Taggart and its subsidiaries ranked third in ) 953 among these chain baking companies in total reported sales, and second in 1960.

15. The percentage of the market shares of bread and breadtype roll sales obtained by Campbell Taggart and its subsidiaries in the acquisitions in Northern California, Kentucky, Texas, and New Mexico is considerable. The tabulation in Finding 78 sho\vs the sales percentages of the eight baking companies which reported the largest volume of sales in Northern California during the years 1954 through 1960. The Campbell Taggart subsidiary plants accounted for 25.69j" Langendorf Lnited Bakeries, Inc. 24.78' ;i, Continental Baking Co. 10.57%, and Interstate Bakeries accounted for 8.84 % of the total sales reported by the 35 companies for 1951. The combined sales of tJ1e::e foul' campanies constituted 69.88% of the total sales reported by the 35 companies in Northern California in 1954. In 1%0, their combined sales amounted to 65. 14 % of the total reported s"Jes by the 35 companies.

16. In the Kentucky area, Campbell Taggart subsidiary plant sales accounted for iS2( of bread and bread-type roll sales reported for this area in 1958, prior to the acquisition of the nine Grocers Baking Co. plants in 1959 (CX 458Z13, Z15, Z)8). Tabulations from the reports of the ten baking companies reporting the largest volume of bread and bread-type roll sales in 1958 , 1959 ) 960, and) 961 are shown in Finding 129. In 1960, the year following the acquisition of the Grocers plants in 1959, Campbell Taggart subsidiary plant sales amounted to 24. 97jj) of the total sales reported by the 45 baking companies In Areas .1' through #9. The baking company reporting the next largest volume of sales was Brown-Greer & Co. , Inc. , d/b/a Kern s Bakery, whose reported sales amounted to 7.46Yc' of the total sales reported for the area in 1960. In 1%) , Campbell Tr,ggart subsidiary plant sales amounted to 26.16( : and Brown-Greer sales amounted to 24% of the total sales reported for the area. Thus, the reported CAMPBELL TAGGAR ' ASSOCIATED BAKERIES , INC. 627 509 Initial Dccision sales of the Campbell Taggart subsidiary plants were more than three times those of their next competitor. 17. In West Texas and Eastern New Mexico, Areas #10, #11 and #12, Campbell Taggart subsidiaries obtained a substantial share of bread and bread-type roll sales when they acquired the Mead' s Fine Bread Company, with plants in Lubbock, Texas, and Ros\vell and Clovis, New lVlexico, Areas #10, #11, and #12 respectively. The tabulation in Finding 147 herein shows the total sales of the four companies reporting the largest volume of sales in Area #10 and their respective percentages to the total sales. At the time Rainbo Baking Co. of Lubbock acquired the Mead's plant in Lubbock in 1959 , Baldridge Baking, Inc. of Lubbock reported the largest volume of sales reported for the area, 33.7670 of the total. Mead's which was acquired that year by Rainbo Baking Co. of Lubbock, reported 26.88 % of the total. In 1961 , Baldridge sales were 36. 84S?) , and Rainbo sales were 28.J8% of the total reported for the area. The combined sales of the four companies amounted to 91.21 % of the total sales reported for the area in 1961.

18. The tabulation in Finding 118 shows that only five companies reported sales in Area #11 in 1958 through 1961. I-Iolsum Baking Co. of Roswell reported the Jargest volume of sales in 1958 1959, and 1%0, and Rainbo Baking Co. of Roswell, a Campbell Taggart subsidiary which acquired the Mead' s plant in 1959 forged ahead in 1961 with 35.42% as against Holsum s 35. 15% of the total sales reported for the area. Their combined saies constituted 70.57% of the total sales reported by the five companies for 1961.

19. In Area #12, the tabulation in Finding 149 shows that :\Iead' s Fine Bread Company plant in Clovis, )Jew Mexico, reported the Jargest volume of sales, with 46. 54 % of the total for the area. Holsum Baking Co. of Roswell 'vas second, with 22.36%" and Good Eats Bakery of Hobbs, third with 21.59% of th total. After Rainbo Baking Co. of Clovis, a Campbell Taggart subsidiary, acquired the Mead's plant in CJovis in 1959, Rainbo reported the 5790 of thelargest sales among the five l'eporbng companies 49. total in 1%0, and 49.76% in 1961. In 1961 , the combined sales of Rainbo and Good Eats amounted to 74.81 % of the total bread and bread-type 1'011 sales for Area # 12.

20. In determining whether the effect of the acquisitions here involved "may be substantially to lessen competition, or tend to create a monopoly, " it will be helpful to look at the JegisJative history of Section 7 of the Clayton Act, as amended, and the inter- Initial Decision 71 F. pretation of that Act as made by the Supreme Court. That Court in Brown Shoe Company v. United States 370 U. S. 294, stated (at 315):

The dominant theme pervading congressional consideration of the 1950 amendments was a fear of what was considered to be a rising tide of economic concentration in the American economy . Other considerations cited in support of the bill were the desirability of retaining " local control" over industry and the protection of small businesses. And at 317 , the Court said:

Third, it is apparent that a keystone in the erection of a barrier to \vhat Congress saw was the rising tide of economic concentration, \vas its provision of authority for arresting mergers at a time when the trend to a lessening of competition in a line of commerce was stil in its incipiency. Congress saw the process of concentration in American business as a dynamic force; it sought to assure the Federal Trade Commission and the courts the power to brake this force at its outset and before it gathered momentum. 21. In United States v. PhiZ"cleZphi" Nation"Z Bank, et "Z. supm the Supreme Court proposed a simplified test of merger ilegality where, at 363, the Court stated: (WJc think that a merger \vllich produces a firm controlling an undue percentage share of the relevant market, and results in a significant increase in the concentration of firms in that market, is so inhcrcntly likely to lessen competition substantially that it must be cnjoillcd in the aosel1ce of evidence clearly sho\ving that the merger is not likely to have such anticompetitive effects.

22. Two recent decisions of that Court Unaed States v. Van GToceTY Company, et CLZ. 34 L.W. 1125, decided May 31 , 1966, and United States v. Pabst R?'e1Uin,Q Company, et aZ. 34 L.W. 4516 decided on June 13 , 1966, seem to prescribe a stiJ further simplified test of merger ilegality. In Von Justice Black, writing for the majority, traced the history and purposes of Section 7 of the Clayton Act and stated on page 4426 the following: Like the Sherman Act in 1890 and the Clayton Act in 1914, the basic purpose of the 1950 Celler- Kefauver Bill was to prevent economic concentration in the American economy by keeping a large number of small competitors in business.

23. In Van ) supra, Van, operating 27 retail grocery stores in the Los Angeles, California area, acquired its direct competitor Shopping Bag Food Stores, which operated 34 retail stores in the Los Angeles area. For many years before the merger, \which occurred on March 28 , 1960 , both companies had enjoyed great success as rapidly growing companies. In 1958, Van s retail sales : : , .

CAMPBELL TAGGART ASSOCIATED BAKERIES, INC. 629 509 Initial Decision ranked third in the Los Angeles area, and Shopping Bag ranked sixth. In 1960, their combined sales constituted 7. 5% of the total retaij grocery sales in the Los Angeles market. Their merger created the second largest grocery chain in Los Angeles. Also, the number of owners operating a single store in the Los Angeles grocery market decreased from 5 365 in 1950 to 3 818 in 1961. By 1963 , three years after the merger, the number of single-store owners had dropped still further to 3 590. During, roughly, the same period 1953-1962, the number of chains with two or more grocery stores increased from 96 to 150. During the period from 1949 to 1958, nine of the top 20 chains acquired 126 stores from their smaller competitors. Many acquisitions and mergers occurred in the Los Angeles grocery industry from 1953 through 1961 , including acquisitions made by companies which ranked among the 10 leading chains in the area. Upon the basis of these facts the majority were of the opinion that the grocery business was being concentrated into the hands of fewer and fewer owners and the small companies were continually being absorbed by the larger firms in the Los Angeles area, and held that the merger violated Section 7. The majority said (at page 4427): The facts of this case present exactly the threatening trend to"vard concentration which Congress wanted to halt. The number of small grocery companies in the Los Angeles retail grocery market had been declining rapidly before the merger and continued to decline rapidly afterwards. This rapid decline in the number of grocery store o\\'ncrs moved hand jn hand with a large number of significant absorptions of the small companies by the larger ones, If ever such a merger would not violate S 7, certainly it does when it takes place in a market characterized by a long and continuous trend toward fewer and fev.rel' owner- competitors which is exactly the sort of trend \which Congress with power to do so, declared must be arrested. In reply to Von s argument that the merger bet\veen Van s and Shopping Bag is not prohibited by Section 7 because the Los Angeles grocery market was competitive before the merger, has been since, and may conUnue to be in the future, the Court' majority, speaking through Justice Black, further stated (at 4427) :

It is enough for us that Congress feared that a market marked at the same time by both a continuous decline in the number of small businesses and a large number of mergers would, slowly but. inevit.ably gravitate from a market of many small competitors to one dominated by one or a few giants, and competition would thereby be destroyed. Congress passed the Celler-Kefauver Bill to prevent such a destruction of competition. In Pabst supnL the Supreme Court majority, speaking Initial Decision 71 F. through Justice Black, found that there had been a marked thirtyyear decline in the number of brewers and a sharp drop in recent years in the percentage share of the market controlled by the leading brewers. If not stopped, the Court said (at 4518) : '" * ". this decline in the number of separate competitors and this rise in the share of the market controlled by the larger beer manufacturers is bound to lead to greater and greater concentration of the beer industry into fewer and fewer hands. The merger of Pabst and Blatz brought together two very la.-rge brewers competing against each other in 40 States. In 1957 these iwo companies had combined sales which accounted for 23.95% of the beer sales in Wisconsin, 1L32% of the sales in the three-state area of Wisconsin, Ilinois and Michigan, and 4.49% of the sales throughout the country. In accord with our prior cases, we hold that the evidence as to the probable effect of the merger on competition in Wisconsin, in the three-state area, and in the entire country was amply suffcient to ,:how a violation of 9 7 in each and all of these three areas 0; 0; 0;. To put a halt to what it considered to be a "rising tide" of concentration in American business, Congress, \with full power to do , decided to do so, decided "to clamp down on mergers with vigor " Cciting United States v. Van s G?'OCWi"Y Co., sUPTaJ. It passed and amended 9 7 on the premise that mergers do tend to accelerate concentration in an industry. Many believe that this assumption of Congress is wrong, and that the disappearance of small businesses with a correlative concentration of business in the hands of a few is bound to occur whether mergers are prohibited or not. But it is not for the courts to review\v the policy decision of Congress that mergers which may substailtially lessen competition are forbidden, which in effect the courts would be doing should they now require proof of the con gressional premise that mergers are a major cause of concentration. \Ve hold that a trend toward concentration in an industry, whatever its causes, is a highly relevant factor in deciding how substantial the anticompetitive effect of a merger may be.

lieve?' sed and ?'ernanded.

25. Certainly, in view of these interpretations of Section 7 of the amended Clayton Act by the Supreme Court, the effect of the acquisition by respondent through its corporate subsidiaries of the former Kilpatrick and Old Home baking companies in Northern California, the former Grocers Baking Co., with subsidiaries and plants located in Kentucky, Indiana, and Tennessee, and Mead' s Fine Bread Company of Lubbock, with baking plants in Lubbock, Texas, Roswell and CJovis, New Mexico, may be substantially to lessen competition in the manufacture and saJe of bread and bread-type rolls.

26. The evidence is not sutncient to establish the allegation that the effect of the acquisition of Zim s Bakery (Dan- Dee Bread Co. ) , Purity Baking Co., Jessee Baking Co., and Noll' s Baking Co. CAMPBELL TAGGART ASSOCIATED BAKERIES, INC. 631 509 Initial Decision may be substantially to lessen competition, or tend to create a monopoly in the manufacture and sale of bread and bread-type rolls.

27. Complaint counsel request, in addition to an order of divestiture, a further order that "respondent for a period of five years shall not exercise the usc of the trade names ' Colonial' or ' Rainbo in any area of distribution now being vacated by respondent in compliance ''with this Order, " Counsel say, among other things that the trade names Ii Colonial" and "Rainbo" are now established in the distribution areas of each acquired baking plant and even if respondent and its subsidiaries divest themselves of the acquired baking plants held to be violative of Section 7, unless restrained, respondent can build new baking plants in the vacated areas and continue to use the trade names " Colonial" and Rainbo " therein, and "the \var to maintain vigorous competition wiJ have been lost." As pointed out by the Supreme Court in Von s Grocery Cu, ) sup1' it was i' Congress ' intent to protect competition against ever increasing concentration through mergers " and not to stifle competition by preventing respondent, if it so desires, to construct new baking plants in the vacated areas and use its own trade names as it has a lawful right to do. Section 7 of the amended Clayton Act is directed primarily against mergers which may restrain competition, and not against the construction by respondent of a new baking plant or plants. To accede to complaint counsel's request would impede rather than encourage competition, as all of our anti-trust laws are supposed to foster.

28. The discriminatory trade practices found to have been engaged in by some of respondent's subsidiaries, such as making cash payments to grocers for shelf space, granting discriminatory trade discounts to customers, etc. (Findings 174-175) constitute unfair methods of competition and unfair acts and practices, in violation of Section 5 of the Federal Trade Commission Act. Ordinarily, the acts of one corporation cannot be charged to a parent corporation . However, in unusual circumstances, where the subsidiary is a " nlere tool" of the parent, or the corporate identity of the subsidiary is a mere "fiction " the corporate shield will be disregarded Vcdional Lead Co. et al. v. ederal Trade Commission 227 F. 2d 825. liere, as shown in Findings 6- , respondent so directs and controls the affairs of its subsidiaries that respondent, as well as such subsidiary corporations, should be held responsible for the violations of the Federal Trade Commis- 632 FEDERAL TRADE COMMISSIO:\ DECISIONS Initial Decision 71 F, sion Act, even though the discriminatory trade practices which constitute the violations were actually committed by respondent's subsidiaries. The order to cease and desist to be issued with respect to said trade practices will be issued against respondent, its subsidiaries and affJiates, and their respective offcers, directors representatives, employees, etc.

ORDER It is ordel'd That respondent Campbell Taggart Associated Bakeries, Inc. , a corporation, and its offcers, directors, agents representatives, employees, subsidiaries, affliates, successors and assigns within one year from the date this order becomes final shall divest absolutely and in good faith alj assets, properties rights and privileges, tangible and intangible, including but not limited to, alj plants, equipment, trade names, trademarks and goodwill acquired by Campbell Taggart Associated Bakeries, Inc. as a result of its acquisition of the stock share capital or assets of the following named corporations: Kilpatrick's San Francisco Bakery, San Francisco, California; Kilpatrick' s iVarvel Bakery, Oakland, California; San Joaquin Baking Company, Fresno California; Holsum Bread Company, VisaJia, California; Old Home Bakers, Sacramento, California; Grocers Baking Company, Louisville, Kentucky, and its subsidiaries; :Wead's Fine Bread Company, Lubbock, Texas, together with alj plants, machinery, buildings, improvements, equipment and other property of whatever description which has been added to the property of any of the above named corporations by respondent, as may be necessary to restore each of them as an effective competitor in the lines of commerce in ,,,hieh each of the respective acquired corporations were engaged at the time of acquisition. By such divestiture none of the assets, properties, rights or privileges described in Paragraph I of this Order shall be sold or transferred, directly or indircctJy, to any person who is at the time of the divestiture an offcer, director, employee or agent of or under the control or direction of respondent or any of the respondent s subsidiary or affliated corporations, or to any purchaser who is not approved in advance by the Federal Trade Commission.

CAMPBELL TAGGART ASSOCIATED BAKERIES, INC. 633 509 Initial Decision It is further ordered That, pending divestiture, Campbell Taggart shall not make any changes in any of the plants, machinery, buildings, equipment, or other property of whatever description of the above listed companies, which shall impair their present rated capacity for the production of bread and bread-type rolls, or their market value.

It is further ordered That, for a period of twenty (20) years from the date this Order shall become final, respondent shall cease and desist from acquiring, directly or indirectly, through subsidiaries or otherwise, any assets, stock, or other share capital, or any other interest, in any other business, corporate or otherwise, which is engaged in the manufacture, sale or distribution of bread and bread-type rolls in the United States, without prior approval of the Federal Trade Commission. It is further ordered That, respondent, Campbell Taggart Associated Bakeries, Inc., its subsidiaries and affliates, and their respective offcers, directors, agents, representatives and employ- , in, or inees, directly or through any corporate or other device connection with, the manufacture, saJe or distribution of bread and bread-type rolls in commerce, as "commerce" is defined in the Federal Trade Commission Act, do forthwith cease and desist from:

1. Making cash payments to grocers or retail customers, furnishing, or offering to furnish, preclusive inducements such as bread racks of substantial value to obtain entry into such grocery stores, additional, or preferred shelf space, or to acquire De\V retail accounts.

2. Giving discriminatory reductions in prices or charges to some grocers or retail accounts \vithout relation to any savings in respondent's costs in the manufacture, sale or dis- 1'011 products for the pur- tribution of bread and bread-type , additional pose of gaining entry into such grocery stores retail accounts. or preferred shelf space, or to acquire new 3. Granting discriminatory rebates, discounts and allow- Dissenting Statement 71 F. ances to grocery stores or other retail customers for the purpose of gaining entry into such grocery stores, additional, or preferred shelf space, or to acquire new retaij accounts.

It is further ordered That, respondent shall, within sixty (60) days after the date of service of this Order, and every sixty (60) days thereafter unti respondent has fully complied with the provisions of this Order, submit in writing to the Federal Trade Commission a report setting forth in detail the manner and form in which respondent intends to comply, is complying or has complied with this Order. All compliance reports shall include. among other things that are from time to time required, a summary of all negotiations with possible purchasers, their identity, and copies of all written communications to and from such possible purchasers.

DISSENTING STATEMENT APRIL 7 , 1967 By REILLY Commissioner:

I disagree with the majority here. I do not believe this is an adequate settement.

When considered in connection with the comprehensive record compiled herein, the divestitures, as ordered, will do little to remedy the harm caused by respondent' s actions. The plants involved are only token representatives of group acquisitions. Since 1959, respondent has promoted its trade names within the relevant markets and has effectively submerged those of the acquired plants. After making the required divestitures, respondent wil continue to use its trade names within the markets, servicing the areas via the facilities of plants acquired through transactions that should have been matters of concern to the Commission. Today s achoD against babng industry acquisitions is in direct contrast with the Commission s actions in the dairy industry, an industry similarly structured and similarly plagued by anticompetitive moves toward concentration. Recently, I had cause to suggest that the Commission make known the "whys " and wherefores " of its settlements, pointing out that the business community used such settlements as guides. I renew this suggestion today. Guide Jines concerning what acquisitions the government will challenge are of litte value If the issuing body is seemingly inconsistent in its remedies.

CAMPBELL TAGGART ASSOCIATED BAKERIES, INC. 635 509 Decision and Order DISSENTING STATEMENT APRIL 7 , 1967 By JONES Commissioner:

Under this consent agreement CampbeJ! Taggart is permitted to keep the most important of the acquisitions here found to have been ilegal-that of Kilpatrick in California. Moreover, under the agreement CampbeJ! Taggart is ordered to seJ! only certain physical facilities, together with the trademarks, acquired from Grocers and Mead. Shortly after CampbeJ! Taggart made these acquisitions, it substituted its own labels for those acquired except for a few specialty items in the Mead operation. Therefore any purchaser of these facilities wiJ! buy essentiaJ!y dead labels which represent no share of the market and, because CampbeJ! Taggart can continue to serve these markets from other plants the purchaser wiJ! face the entrenched competition of CampbeJ! Taggart whose labels wiJ never leave the market. Under these circumstances it is unlikely in my view that divestiture can be effected to a viable, independent competitor. Although I do not believe that divestiture is always necessary to effect relief in a merger case, by the same token I do not believe that a ban on future acquisitions can always be an acceptable substitute for divestiture particnJarJy in industries which are not expected to show any appreciable rate of growth. However, in any case when divestiture is ordered it must be effective. In order to ensure the effectiveness of the divestiture ordered here, CampbeJ! Taggart should have been required, in addition to selling the physical facilities, either to seJ! its own labels or at a minimum to remove them from the divested areas for an effective period of time. Only such a divestiture, coupled with the fact that other CampbeJ! Taggart operations will stiJ! surround the divested areas, wiJ! reestablish CampbeJ! Taggart as a potential entrant and as the competitive force that such a position represents. Thus I agree with Commissioner ReiJ!y that this settlement is inadequate and offers only token relief which in my judgment leaves the respondent in substantiaJ!y the same market position as if these acquisitions had never been chaJ!enged or found iJ!legal.

DECISION AND ORDER The Commission having issued its complaint in this proceeding on June 14 , 1960, charging the respondent named in the caption hereof with violation of Section 7 of the Clayton Act, as amended Decision and Order 71 F. and Section 5 of the Federal Trade Commission Act, and hearings having been subsequently held at the termination of which the hearing examiner issued his initial decision on July 11 , 1966 from which initial decision cross appeals were filed by the parties under 9 3.22 of the Commission s Published Rules; and An agreement containing a consent order having been submitted by the respondent to the Commission for its consideration \which agreement contains inter alia a consent order, an admission for the purpose of this proceeding of aH the jurisdictional facts aHeged in the complaint, as amended, statements that the record on which the decision of the Commission shall be based shah consist solely of such complaint and said agreement, and that said agreement is for settement purposes and does not constitute an admission by respondent that the law has been violated as alleged in such complaint, and waivers and provisions as required by 9 2.3 of the Commission s Rules; and The Commission, having considered the said agreement containing consent order, which also provides for vacating the initial decision of the hearing examiner, and the Commission having determined that such agreement constitutes an adequate basis for appropriate disposition of this proceeding, the agreement is hereby accepted, the following .iurisdictional findings are made and the follmving order is entered:

, is 1. Respondent Campbell Taggart Associated Bakeries, Inc. a corporation organized, existing and doing business under and by virtue of the Jaws of the State of Delaware, with its principal offce and place of business Jocated at 6211 Lemmon Avenue Dallas, Texas.

2. The Federal Trade Commission has .i jurisdiction of the subject matter of this proceeding and of the respondent, and the proceeding is in the public interest.

ORDER It is ordered That respondent Campbell Taggart Associated Bakeries, Inc. , a corporation, and its offcers, directors, agents, representatives, employees, subsidiaries, affliates, successors and assigns within one year from service of this order shah divest absolutely and in good faith all assets, properties, rights and privileges, tangible and intangible, including but not limited to, all plants, buildings, mac:hinery, equipment, routes, customers loading stations, loading depots, trade names, trademarks and CAMPBELL TAGGART ASSOCIATED BAKERIES, INC. 637 509 Decision and Order goodwill or other property of whatever description for the production of bakery products situated at, (1) Clovis and Roswell New Mexico, and acquired as a result of its acquisition of :l1ead' Fine Bread Company, (2) situated at Bowling Green, Kentucky, and acquired as a result of its acquisition of Grocers Baking Companyand, (3) situated at Bedford, Indiana and acquired as a result of its acquisition of Grocers Baking Company of Indiana, a subsidiary of Grocers Baking Company; together with all improvements, additions and other property of whatever description which have been added to any of the properties of the abovenamed plants.

It is furthe?' ordel' That respondent or its subsidiaries shall not sell or transfer the aforesaid assets, tangible or intangible directly or indirectly, to anyone who at the time of divestiture is a stockholder, offcer, director, employee, or agent of, or otherwise directly or indirectly connected with or under the control or influence of the respondent, or to any purchaser not approved by the Federal Trade Commission in advance.

It is further ordered That, pending divestiture, respondent make no changes in any of the assets to be divested which would impair their capacity for the production and sale of bakery products, or their market value.

It is further ordered That for ten (10) years from the date of service of this order, respondent shall cease and desist from acquiring, directly or indirectly, without the prior approval of the Federal Trade Commission, any part of the share capital or assets of any firm, partnership or corporation which is then engaged in the production or sale of bakery products (I:united States Bureau of Census SIC Codes 2051 and 2052) in the I:united States: Pro1Jided, however That this provision shall not be construed to prevent the purchase of used machinery or equipment. It is further ordered That, within sixty (60) days after the date of service of this order, and every sixty (60) days thereafter until it has fully complied with the provisions of Paragraphs I , II and In of this order, respondent shall submit in writing to the Syllabus 71 F.

Federal Trade Commission a report setting forth in detail the manner and form in which it intends to comply, is complying, and/or has complied with this order. All compliance reports shall include, among other things that may be from time to time required, a summary of all contacts and negotiations with potential purchasers of the assets to be divested under this order, the identity of all such potential purchasers, and copies of all written communications to and from such potential purchasers. It is tw.ther ordered That Section IV of this order shall terminate if the Federal Trade Commission:'through trade regulation rules or other like non-adjudicative industrywide proceedings issues rules or guide lines covering the subject matter of this order.

VII It is further o1dered That the Initial Decision of the hearing examiner be, and it hereby is, vacated.

VII The Federal Trade Commission may, from time to time and upon application by respondent, issue such further orders as it may deem appropriate or just.

Commissioners Reilly and Jones have dissented and have filed separate dissenting statements.

II\ THE 2VIATTER OF ALLIED ENTERPRIZES, INC., ET AL.

ORDER, ETC., IN REGARD TO THE ALLEGED VIOLATION OF Tile FEDERAL TRADE COMMISSION ACT Docket 8722. COTrcpla,int, Dec. 1966-Decision, Apr. , 1967 Order requiring a North B:rentwood, Md., distributor of home intercom and fire detection or alarm systems to cease using deceptive referral and demonstration offers to ohtain customer leads, misrepresenting that his prices al' e reduc' ed or special or will result in avjngs to customer, neglecting to disclose that promissory notes will be sold to a finance company, and falsely representing that his products are ne,,, to the market. Syllabus 71 F.

Federal Trade Commission a report setting forth in detail the manner and form in which it intends to comply, is complying, and/or has complied with this order. All compliance reports shall include, among other things that may be from time to time required, a summary of all contacts and negotiations with potential purchasers of the assets to be divested under this order, the identity of all such potential purchasers, and copies of all written communications to and from such potential purchasers. It is tw.ther ordered That Section IV of this order shall terminate if the Federal Trade Commission:'through trade regulation rules or other like non-adjudicative industrywide proceedings issues rules or guide lines covering the subject matter of this order.

VII It is further o1dered That the Initial Decision of the hearing examiner be, and it hereby is, vacated.

VII The Federal Trade Commission may, from time to time and upon application by respondent, issue such further orders as it may deem appropriate or just.

Commissioners Reilly and Jones have dissented and have filed separate dissenting statements.

II\ THE 2VIATTER OF ALLIED ENTERPRIZES, INC., ET AL.

ORDER, ETC., IN REGARD TO THE ALLEGED VIOLATION OF Tile FEDERAL TRADE COMMISSION ACT Docket 8722. COTrcpla,int, Dec. 1966-Decision, Apr. , 1967 Order requiring a North B:rentwood, Md., distributor of home intercom and fire detection or alarm systems to cease using deceptive referral and demonstration offers to ohtain customer leads, misrepresenting that his prices al' e reduc' ed or special or will result in avjngs to customer, neglecting to disclose that promissory notes will be sold to a finance company, and falsely representing that his products are ne,,, to the market. ALLIED ENTERPRIZES, INC., ET AL. 639 638 Complaint COMPLAINT Pursuant to the provisions of the Federal Trade Commission Act, and by virtue of the autbority vested in it by said Act, the Federal Trade Commission having reason to believe that Allied Enterprizes, Inc. , a corporation, and William Marion . individually and as an offcer of said corporation, hereinafter referred to as respondents, have violated the provisions of said Act, and it appearing to the Commission that a proceeding by it in respect thereof would be in the public interest, hereby issues its complaint stating its ch2.rges in that respect as follows: PARAGRAPH 1. Respondent Allied Enterprizes, Inc. , is a corporation organized, existing and doing business under and by virtue of the laws of the State of Maryland, with its prineival offce and place of business located at 4550 Rhode Island A venue, North Brentwood, Maryland.

Respondent \Villiam l\Iarion is now and has been an offcer of the corporate respondent and formulates, directs and controls the acts and practices hereinafter set forth. His business address is the same as that of tbe corporate respondent. PAR. 2. Respondents are now and for some time last past have been engaged in the offering for sale, sale and distribution of home intercom and fire dctection systems to the 1'" blic. PAR. 3. In the cuurse and conduct of their business, respondents now cause, and for some time last past have caused, their said products, when sold to be shipped from their place of business in the State of Maryland to purchasers thereof located in various other States of the United States and in the District of Columbia, and maintain, and have maintained, a substantial course of trade in said products in commerce, as "commerce " is defined in the Federal Trade Commission Act. PAR. 4. In the conduct of their business, at all times mentioned herein, respondents have been in substantial competition in commerce, \with corporations, firms and individuals in the sale of home intercom and fj)'e detection systems of the same general kind and nature as those sold by respondents. PAR. 5. Respondents in the course and conduct of their business in offering for sale, selling and distributing their merchandise have engaged in and are engaging in the sale of said systems through a referral selling plan.

Said referral selling plan provides that purchasers \\'ill receive prizes in the amount of:

640 FEDERAL TRADE COMMISSION DECISJOI\S Complaint 71 F.

1. $100 for each person referred who purchases the Nutone Intercom System and Fire Alarm and Panic Alarm Systems. 2. $335 for the first (15) qualified demonstrations made through representatives.

3. $335 for the second (15) qualified demonstrations made through representatives.

4. $335 for the third (15) qualified demonstrations made through representatives.

In the event that the customer desires to participate in the plan and purchase the system from the respondents, he is presented with various documents including a contract, an application for a Joan, a promissory note, a Customer s Commission Agreement and Bonus Demonstration Guarantee.

The purchase of the said system from respondents and the execution of the proper instruments is a prerequisite consideration to participation in respondents' referral plan and any payments thereunder are based upon the chance that a referral named in the aforesaid instrument, in fact, wil allow a demonstration of said products, and the chance that said referral's name has not been already given by a previous purchaser. Further payments thereunder are contingent upon the subsequent sale of the merchandise to such person.

PAR. 6. In the course and conduct of explaining their aforesaid referral plan, respondents and their salesmen have represented directly or indirectly to prospective purchasers: 1. That by their participation in respondents ' program, purchasers will receive enough commissions from referrals to obtain their intercom systems at little or no cost. 2. That purchasers 'ivou1d receive from respondents suffcient money each month to take care of their monthly installments. 3. That the inlercom system is a new product on the market and is being sold at a reduced price as an introductory or advertising plan, and that savings are thereby afforded to purchasers. PAR. 7. In truth and in fact:

1. Few, if any participants in respondents' program receive enough referral commissions to obtain their intercom systems at litte or no cost.

2. Few, if any participants receive suffcient money from respondents to take care of their monthly installments. 3. The intercom systen1 is not a ne",' product on the market and is not being sold at a reduced price and savings are not thereby afforded to purchasers.

Therefore, the statements and representations referred to in ALLIED ENTERPRIZES, INC., ET AL. 641 638 Initial Decision Paragraph Six above were and are false, misleading and deceptive.

PAR. 8. In the course and conduct of its business as aforesaid and for the purpose of inducing the sale of its said products, respondents or their salesmen fail to inform or to adequately disclose to prospective purchasers that their installment contracts promissory notes will be discounted and sold to a third party, that they are signing a deed of trust to secure the total payment of the purchase price of the intercom system, nor are customers or prospective purchasers adequately advised that they are held responsible for the total amount of the purchase contract regardless of any other agreements written or implied. PAR. 9. The use by respondents of the aforesaid false, misleading and deceptive statements and representations and unfair or deceptive practices has had, and now has the capacity and tendency to mislead members of the purchasing public into the erroneous and mistaken belief that said statements and representations are true and into the purchase of substantial quantities of respondents' product by reason of said erroneous and mistaken belief and by reason of said unfair or deceptive practices. PAR. 10. The aforesaid acts and practices of respondents as alleged were and are all to the prejudice and injury of the public and respondents ' competitors, and constituted and now constitute unfair methods of competition in commerce and unfair or deceptive acts or practices in commerce, in violation of Section 5 of the Federal Trade Commission Act.

MT. Sheldon Feldman and M,. Robert E. FreeT, Jr. supporting the complaint.

No appearance for respondents.

INITIAL DECISION BY ABNER E. LIPSCOMB, HEARING EXAMINER FEBR1JARY 6 , 1967 1. The Complaint and Accompanying Notice The complaint in this proceeding ,vas issued on December 8, 1966, charging the respondents named therein with engaging in unfair or decepbve ads or pracbces in violation of Section 5 of the Federal Trade Commission Act. The respondents were duly served with the complaint and the accompanying notice, 'Ivhich informed them that they were afforded 30 days, after service of the complaint upon them, within which to file an answer to the allegations of the complaint.

Initial Decision 71 F. The respondents were also given notice that on the 30th day of January 1967 , at 10:00 a. , at the Federal Trade Commission offces, The 1101 Building, 11th Street and Pennsylvania Avenue NW., Washington, D. , a hearing would be held on the charges set forth in the complaint, at which time respondents would have the right, under the Federal Trade Commission Act, to appear and show cause why an order should not be entered requiring them to cease and desist from the violations of Jaw charged in the complaint.

II. The Hearing and Detault Judgment At the hearing held herein on January 30, 1967 , the respondents failed to appear either in person or by counsel, and counsel supporting the complaint moved the hearing examiner to enter a default judgment against respondents. In support of their motion counsel showed that the respondents had not, within the 30-day period prescribed in the notice accompanying the complaint, submitted an answer to the complaint and that under the provisions of Section 3. 5 (c) of the Commission s Rules of Practice for Adjudicative Proceedings a default judgment should be entered. The motion was duly granted and the record closed against the further presentation of evidence.

III. Findings as to the Facts 1. Respondent Allied Enterprizes, Inc. , is a corporation organjzed, existing and doing business under and by virtue of the laws of the State of Maryl,and, with its principal offce and place of business located at 4550 Rhode Island Avenue, Korth Brentwood Maryland.

Respondent William Marion is now and has been an offcer of the corporate respondent and formulates, directs and controls the acts and practices hereinafter set forth. His business address is the same as that of the corporate respondent. 2. Responder.ts are now and for some time last past have been engaged in the offering for sale, sale and distribution of home intercom and fire detection systems to the public. 3. In the course and conduct of their business, respondents now cause, and for some time last past have caused, their said products, when sold, to be shipped from their place of business in the State of Maryland to purchasers thereof located in various other States of the United States and in the District of Columbia, and maintain, and have maintained, a substantial course of trade in ALLIED ENTERPRIZES, INC., ET AL. 643 638 Initial Decision said products in commerce, as "commerce" is defined in the Federal Trade Commission Act.

4. In the conduct of their business, at all times mentioned herein, respondents have been in substantial competition, in commerce, with corporations, firms and individuals in the sale of home intercom and fire detection systems of the same general kind and nature as those sold by respondents. 5. Respondents in the course and conduct of their business, in offering for sale, selling and distributing their merchandise have engaged in and are engaging in the sale of said systems through a referral selling plan.

Said referral selling plan provides that purchasers will receive prizes in the amount of:

a. $100 for each person referred who purchases the Nutone Intercom System and Fire Alarm and Panic Alarm Systems. b. $335 for the first fifteen (15) qualified demonstrations made through representatives.

c. $335 for the second fifteen (15) qualified demonstrations made through representatives.

d. $335 for the third fifteen (15) qualified demonstrations made through representatives.

In the event that the customer desires to participate in the plan and purchase the system from the respondents, he is presented with various documents including a contract, an application for a loan, a promissory note, a Customer s Commission Agreement and Bonus Demonstration Guarantee.

The purchase of the said system from respondents and the execution of the proper instruments is a prerequisite consideration to participation in respondents' referral plan and any payments thereunder are based upon the chance that a referral named in the aforesaid instrument, in fact, will allow a demonstration of said products, and the chance that said referral's name has not been already given by a previous purchaser. Further payments thereunder are contingent upon the subsequent sale of the merchandise to such person.

6. In the course and conduct of explaining their aforesaid referral plan, respondents and their salesmen have represented directly or indirectly to prospective purchasers: a. That by their participation in respondents' program, purchasers will receive enough commissions from referrals to obtain their intercom systems at little or no cost. b. That purchasers would receive from respondents suffcient money each month to take care of their monthly installments. Initial Decision 71 F. c. That the intercom system is a new product on the market and is being sold at a reduced price as an introductory or advertising plan, and that savings are thereby afforded to purchasers. 7. In truth and in fact:

a. Few, if any, participants in respondents' program receive enough referral commissions to obtain tL:,' intercom systems at little or no cost.

b. Few, if any, participants received suffcient money from respondents to take care of their monthly installments. c. The intercom system is not a new product on the market and is not being sold at a reduced price and savings are not thereby afforded to purchasers.

Therefore, the statements and representations referred to in Paragraph 6 above were, and are, false, misleading and deceptive.

8. In the course and conduct of its business as aforesaid and for the purpose of inducing the sale of its said products, respondents or their salesmen fail to inform or to adequately disclose to prospective purchasers that their installment contracts or promissory notes wil be discounted and sold to a third party, or that they are signing a deed of trust to secure the total payment of the purchase price of the intercom system, nor are customers or prospective purchasers adequately advised that they are held responsible for the total amount of the purchase contract regardless of any other agreements written or implied. IV. Conclusions The use by respondents of the aforesaid false, misleading and deceptive statements and representations and unfair or deceptive practices has had, and now has, the capacity and tendency to mislead members of the purchasing public into the erroneous and mistaken belief that said statements and representations are true and into the purchase of substantial quantities of respondents products by reason of said erroneous and mistaken belief and by reason of said unfair or deceptive practices. The aforesaid acts and practices of respondents as herein found were, and are, all to the prejudice and injury of the public and respondents ' competitors; they constituted, and now constitute unfair methods of competition in commerce and unfair or deceptive acts or practices in commerce, in violation of Section 5 of the Federal Trade Commission Act; and this proceeding is in the public interest.

ALLIED ENTERPRIZES, IKC., ET AL. 645 638 Initial Decision ORDER It is ordered That respondents Allied Enterprizes, Inc., a corporation, and its offcers, and William Marion, individually and as an offcer of said corporation, and respondents' agents, representatives and employees, directly or through any corporate or other device, in connection with the offering for sale, sale or distribution of intercom, fire detection or alarm systems, or any other merchandise in commerce, as "commerce " is defined in the Federal Trade Commission Act, do forthwith cease and desist from: 1. Utiizing any program or plan under which the payment of money or other consideration to purchasers of respondents' products is contingent upon (1) the referral of names by such purchasers to respondents or their agents representatives or employees and (2) the sale or demonstration of respondents' merchandise to such referrals. 2. Using- any sales plan, scheme or device wherein false misleading or deceptive statements or representations are made for the purpose of obtaining leads or the names of propective purchasers.

3. Representing, directly or by implication, that respondents' customers are able to obtain respondents' products at little or no cost, or will receive earnings or compensation in any amount.

4. Failing to disclose orally at the time of sale and in writing on any conditional sales contract, promissory note or other instrument executed by the purchaser, with such conspicuousness and clarity as is likely to be read and observed by the purchaser that:

(a) Such conditional sales contract, promissory note or other instrument may, at the option of the seller and without notice to the purchaser, be negotiated or assigned to a finance company or other third party; (b) If such negotiation or assignment is effected, the purchaser will then owe thc amount due under the contract to the finance company or third party and may have to pay this amount in full whether or not he has claims against the seller under the contract for defects in the merchandise, nondelivery or the like. 5. Failing to reveal, disclose or otherwise inform customers, in a manner that is clearly understood by them, of all the terms and conditions of a sale and of any installment Complaint 71 F.

contract or promissory note or other instrument to be signed by any customer.

6. Representing directly or by implication that any price at which respondents' merchandise is offered for sale is a special introductory price or a reduced price. 7. Misrepresenting in any way the savings realized by purchasers of respondents' merchandise.

8. Falsely representing that any such merchandise or product is new to the market.

FINAL ORDER No appeal from the initial decision 'of the hearing examiner having been filed, and the Commission having determined that the case should not be placed on its own docket for review and that pursuant to Section 3.21 of the Commission s Rules of Practice (effective August 1, 1963), the initial decision should be adopted and issued as the decision of the Commission: It is ordered That the initial decision of the hearing examiner sh"ll, on the 11th day of April, 1967, become the decision of the COTI1mission.

It is t",.thel' ordered That Allied Enterprizes, Inc., a corporation, and \Villiam Marion, individually, and as an offcer of said corporation, shall, within sixty (60) days after service of this order upon them, file with the Commission a report in \writing, signed by each respondent named in this order, setting forth in detail the manner and form of their compliance with the order to cease and desist.