Beatrice Foods Company

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. In tue Marrer or BEATRICE FOODS COMPANY ORDER AND OPINION OF DISMISSAL, ETC., IN REGARD TO THE ALLEGED VIOLATIGN OF SECTION 7 OF TILE CLAYTON ACT Docket 8814. Complaint, April 30, 1970—Decision, September 28, 1972. Order nnd opinion dismissing a complaint alleging violation of Seetion 7 of the Clayton Act by a Chicago, Illinois, dairy company. The Commixsion concluded that the evidence is insufficient to support a finding that a violation of Section 7 has been shown in the “national market” of institutional dry foods wholesaling.

Complaint The Federal Trade Commission, having reason to believe that Beatrice Foods Co. has acquired John Sexton & Co., a corporation, in violation of Section 7 of the Clayton Act, as amended (15 U.S.C., Section 18), and/or in violation of Section 5 of the Federal Trade Commission Act, as amended (15 U.S.C., Section 45), hereby issues this complaint pursuant to Section 11 of the Clayton Act (15 U.S.C. Section 21) and Section 5(b) of the Federal Trade Commission Act (15 U.S.C., Section 45(b)), stating its charges in that respect as follows:

DEFINITIONS 1. For the purpose of this complaint the following definitions shall apply:

Complaint: 81 EEC.

'.(a) Dry Grocery Products: are processed: packed foods, including all foods canned in tins or glass-or preserved in: a dry state, ‘but excluding fresh or frozen pr oducts such as fresh or frozen meat, fruit, vegetables, fluid milk and-bread.:

{b): Institutions: are’ organizations preparing and ser ving, or. serving, food for.consumption on or off the premises, or meals away from home; :including: but not: limited’ to: restaurants, cafeterias, : hotels, schools, colleges, hospitals, nursing homes, industrial feeding | concerns, automatic merchandising concerns, clubs, and air lines. . . (e) : Wholesalers of Dry Grocery: Productsiare merchant. middlemen who buy various.dry. grocery:products from food. processors, producers and manufacturers anid ‘sell such. Products t to: ‘retail food. and grocery stores. yrs that (d) Institutional Dry Grocery ‘Wholesalers are e merchant middlemen who purchase various dry grocery products from food processors, producers and manufacturers: and ‘sell..such products to institutions. -: RESPONDENT, - ::

2. Beatrice Foods Company (Beatrice), a respondent herein, is a corporation organized and existing under the laws of the State of Delaware, with its office and principal place of business at 120 South Lasalle Street, Chicago, Illinois.

3. Beatrice was founded in 1897 in Beatrice, Nebraska. Beatrice is engaged in the business of producing, processing and/or distributing dairy, grocery and confectionery products, among others, and the operation of refrigerated warehouses. During its fiscal year ending February 29, 1968, ‘about 45 percent of Beatrice’s net sales were derived from sales of dairy products, about 37 percent from grocery and con- Yectionery products and about 10 percent represented rentals from its public refrigerated warehouses. Prior to December 20, 1968, Beatrice sold dry grocery products to John Sexton & Co. and it also sold and is now selling such products to other institutional grocery wholesalers, some of whom competed with John Sexton & Co. and compete ‘now with Beatrice. Beatrice also sells other products to institutional wholesalers and directly to institutions.

4, During its fiscal year ending February 29, 1968— (a) Beatrice’s net sales totaled $1,052,431,480, exceeding one billion dollars for the first time. In conducting its business, Beatrice has over 23,000 employees, markets over 5,000 products, and operates about 500 plants and branches.

. BEATRICE. FOODS. CO. -. | - 483 481. De Complaint, (b) Beatrice was the 46th largest national advertiser. Among its better known trade names and products are the following: 8 Dairy Division:

“Meadowgold” milk and frozen desserts Grocery Division: wth “Bonds” pickles and relishes ' “Ma Brown” pickles and relishes “L&S” pickles and relishes..- - “Rainbo” pickles and relishes « “American”. pickles and relishes...

“Ma Brown’ jellies and preserves: : — “L&S” jellies and preserves). --'-.

“Ruby Bee” jellies and preserves “Mario’s” olives ' :

“Fisher’s” nut products “Adams” snack. foods “Rudolph’s” snack foods — “Pepis” snack foods - “Time-4” snack foods!"

“Treat” snack foods *°"*° - “Pik-Nic” snack foods “Kobey’s” snack foods “Liberty” maraschino cherries and’ glazed fruits Confectionary Division:

“Clark” candy bars “Richardson”. mints “Louis Sherry” ice cream “Dannon” yogurt “La Choy” chinese foods ~ “Temple” chinese foods “Gebhardt’s” Mexican foods. _.

“Rosarita” Mexican foods: - “Shedd’s” margarine and. salad dressing _ bs “Lambrecht” frozen: foods.

“G-W” pizza pies - “Lambrecht” pizza pies “Burney Bros.” baked foods “Aunt Nellie’s’”’:glass packed vegetables and-fruit drinks “Lady Betty” glass’ packed vegetables and fruit drinks “Murray” cookies: * foe - “Mother’s” cookiés © “~" Re “Sugarine” artificial sweetenere “Miracle White’ laundry products:* ‘Holloway” milk duds and.caramels “Jolly Rancher” candy bars (c) Substantially all of Beatrice’s non-dairy business, and most of its dairy business, is the result of acquisitions made over a period:.of time. Since January 1,.1960, Beatrice has acquired among others the following non-dairy firms:

1960- M. J. Holloway & Co.

Gebhardt Chili Powder Co.

Mitchell Syrup & Preserve Co.

Grand Trunk Warehouse & Cold Fisher Nut Co.

Cal-Compack Foods, Inc.

G-W Food Products Corp.

Burney Bros., Inc.

1961 Deppe-Vienna Baking Co.

Storage Co. - Adams Corp. : 1964 Pik-Nik Company Rosarita Mexican Foods Co.

Liberty Cherry & Fruit Co.

Southland Pecans Liberty Baking, Ine.

ASA FEDERAL TRADE COMMISSION DECISIONS Complaint Cincitinati Fruit & Extract Works, | Inc. ani:

The Sugarine Co.

Speciality Foods, Ine.

Bloomfield Industries Regal By-Products Co.

Chicago Produce Terminal 1965 — Chesterton Candy Co.

Aunt Neliié's Foods’ Stiffel Co.

Stahl Finishing Co- Vigortone Products Colorado By-Products:Co.

da a 19660 OE Switzer Licorice. Co. : Ly, Jolly Rancher, ‘Tne., S byte nd Temple Frosted Foods. .

Knickerbocker Mill Rudolf Foods... ;, Mid-West Forging & Manufacturing Co.

Ross-Wells, Ine.

Geerpress Wringer Co.

Quincy Market Cold Storage Co.

Tampa Cold Storage Co:

Inland Underground Facilities, Inc.

81 F.1.C.

1967 © ‘Mother's Gookies Golden Cookie Co.

J. Warren Bowman, Inc, Julian Bail Industries — South Georgia Pecan Co.

General Water Conditioning, Inc.

James H. Rhodes & Co. .

Airstream, Inc.

Melnor Industries, Inc. - Tekni-Craft Inc.

Indiana Moulding & Frame €o..

Charmglow: Products, Ine.

World Dryer.Corp: - nal Imperial. Oil & Grease €0., Ine.

Southeastern Reduction Co.

Lone Star Rendering Co... .

Buttercrust Bakeries: - Oswald Jaeger Bakery -:

Fast Coast Foods .

Farboil Co. weit be ged Hart Ski Manufacturing. Co. Ine. sees) Morgan Yacht Corp.

Max H. Kahn Curtin Co.:

Vogel-Peterson Co.

Hi-Temp, Inc.

Market Forge San Angelo Bay Products Co.

Lubbock Rendering Co. | Pré-1960 acquisitivns include but are not limited to D. L. Clark Co., Thos. D. Richardson Co., La Choy Food Products, Bond Pickle Co., ‘Mario's Food Products, Squire Dingee Co., Tasty Foods, Inc., Shedd- Bartush Foods, Inc., A. F. Thibodeu Co., Detroit Refrigeration Co., and Lackawanna Cold Storage Co.

5. At all times relevant herein, Beatrice sold and shipped, and is . now selling and shipping, products in interstate conimerce throughout the United States; hence Beatrice was, and is, engaged in commerce as “commerce” is defined i in the Clayton Act and the Federal Trade Commission Act.

Tit JOUN SEXTON & COMPANY 6. John Sexton & Company (Sexton) was, on December 20, 1968, a corporation organized and existing under the laws of the State of Iinois with its principal office and place of business located at 4700 BEATRICE FOODS CO. . 485 481 Complaint South Kilbourn Avenue, Chicago, Illinois. It is now operated as a division of Beatrice.

7. Sexton was originally established in 1883 in Chicago, Ulinois and incorporated in 1898. It was on December 20, 1968, an institutional dry grocery wholesaler, distributing dry groceries to restaurants, clubs, hospitals, schools, colleges, hotels and other purveyors of prepared food services. It operated thirteen warehouses which served as distribution centers, servicing over 70,000 customers throughout the continental United States, in the West Indies and Hawaii. Nearly all the products distributed by Sexton were sold under its own trade names or brands and. labels. About 27 percent of the products distributed. by Sexton were manufactured. or processed and packed, bottled, or canned by Sexton in its own plants. Sexton purchased other dry: grocery products from.food manufacturers, including. Beatrice... 8. Sexton operated a laboratory for the systematic testing of “quality” in the products it produced, the products it distributed and for the development of new products. Sexton had developed, and. placed on the market since July 1, 1967, a number of new convenience products including “Jet Set,” an instant gelatin, canned “Chopped: Chicken Livers” and ‘ “Spoon- Redi,” a line of puddings to be spooned directly from the can into dessert dishes.

9. During its fiscal year ending June 28, 1968, Sexton had net sales of $91,053,770 and net earnings of $2,000,945. Sexton was on December 20, 1968, the largest independent institutional dry grocery wholesaler in the United States and the only such wholesaler distributing nationwide and manufacturing a significant portion of its products. Sexton’s position had in part. been attained by the acquisition of a number of distributors and a food manufacturer including the following:

(a) In August 1943, J. C. Stewart Co., an institutional wholesaler located in Pittsburgh, Pennsylvania.

(b) In 1964, National Brands, Inc., Grocery Department, an institutional w wholesaler then located in } Miami, F Florida. (c) In 1965, Cincinnati Foods, Inc., an institutional wholesaler located in Cincinnati, Ohio. .

(d) In January 1953, The Columbia Conserve Company, a food manufacturer located in Indianapolis, Indiana. 10. Sexton sold dry groceries to institutions located in over 150 Standard Metropolitan Statistical Areas (SMSA), as defined by the Executive Office of the President, Bureau of the Budget, and in over 60 other localities. Sexton had nationally a market share of approximately 5 percent in the institutional dry grocery wholesale industry, 486 , FEDERAL TRADE COMMISSION” DECISIONS Complaint 81 FEC.

and in a nuimber of the SMSA’s and other markets. which it sérves Sexton has market shares ranging from 10 percent'to about 50-percent. _ “11: At all'times relevant’ herein, Sexton’ sold’ and shipped’ products in interstate commerce throughout the United States; ‘and‘on ‘Decer-_ : 0, 1968 Sexton was engaged in-corimerce as’ “commerce” i is defined ‘in the Clayton Act and the F ederal Trade Commission Act. “TRADE AND. COMMERCE ag ae a 42: “The institutional dry ‘grocery whiolisaling: sndustey- oénsists shimiily of a: “number ‘of ‘small indépendent concerns ° operating’ in local or regional markets, generally from ‘one: warehouse or’ at most three or four ‘warehouses, each concern ‘selling ‘for the most part. prod-. ucts bearing ‘its label: ‘The industry’ i is characterized; on’ ‘the: whole, by. (a) the solicitations of orders: ‘by a stirect: salesriian, ‘(b) ‘the ‘extén- ‘sion of crédit by the wholesaler, ‘and ‘((c) the delivery: of dry’ groceries ‘tothe premises of ‘the purchaser, ¢ either by common’ carrier’ or in ‘ the ‘tuck of seller.’ paire i “713. Since 1960 a merger trend has’ been. dAeieloping i in ‘the institutional dry grocery wholesale industry: ‘Among others, Sexton’ has acquired two institutional dry grocery wholesalers during that period, Consolidated Foods Corporation has acquired during this period at least three, and Food Corporation of America has acquired one. © : 14. In the Chicago SMSA, a number of institutional dry grocery wholesalers have entered, or are now planning to enter, the “institutional frozen food wliolesale industry. Prior to December 20, 1968, Beatrice was and is now an institutional frozen food wholesaler in the ‘Chicago SMSA, and prior to December 20, 1968, Sexton had contemplated entry into the institutional frozen food industry and was a potential entrant in that industry.

Vv ACQUISITION 15. On or about December 20, 1968, Beatrice acquired the business and assets of Sexton, exchanging therefor approximately 375,000 shares of Beatrice’s preferred convertible preference si stock valued at the time at about $37, 500 000. - ‘BEATRICE FOODS Co. ~ - 487 481 ~ “Complaint:

vI EFFECTS OF - ACQUISITION #16. The effect of the acquisition by Beatrice of Sexton may be to lessen competition substantially or to tend to.create a monopoly.or to _ restrain “competition. in the institutional. dry grocery wholesale industry and/or in the institutional frozen food wholesale industry, in the United States, or sections thereof, in the following, among other ways:

_ (1)... Actual-and potential competition, between Beatrice. and Sexton in the manufacture of dry groceries and the direct or indirect. distribution of dry groceries to institutional: purehasers has been, :or. may. be eliminated.

- (2) Sexton has been eliminated as-a. substantial independent competitive factor.

(3) Sexton has been, or may be, foreclosed as a customer for independent packers of dry: groceries. - .

(4) Beatrice has been, or may be, foreclosed or otherwise unavailable as a source OF supply” for ‘other institutional dry: grocery wholesalers. “ (5) Sexton hasbeen eliminated as a potential independent entrant into the institutional frozen food wholesale industry. (6) Beatrice will be substituted for and take over Sexton’s large institutional dry grocery wholesale market shares in individual SMSA’s and other markets.

(7) The merger trend in the institutional dry grocery wholesale industry may be further accelerated. - .

(8) As a manufacturer of utensils and equipment for institutions, a seller of bakery and dairy products to institutions, and a public warehouse operator, Beatrice has, or may have, decisive competitive advantages.over its competitors in the institutional dry grocery wholesale industry.

(9) Barriers to entry into the institutional dry grocery wholesale industry have been or may be heightened.

' (10) Barriers to entry into the manufacturing of dry groceries for the institutional market and into the wholesaling of dry groceries to the institutional market may be heightened as a result of Beatrice’s substantial financial resources, its advertising capabilities. and the combining of the nationally known Beatrice Foods and Sexton’ names. 488 FEDERAL TRADE COMMISSION: DECISIONS Initial Decision | 81- FTC.

Vit VIOLATION 17. The acquisition of Sexton by Beatrice,.as alleged above, cof stitutes a violation of Section 7 of the Clayton Act. (15 U.S.C. 18) as ‘amended, and/or a violation of Section 5 of the Federal Trade Commission Act (15 U.S.C. 45), as amended.

Mr. Carl J. Batter, Jr, Mr. Lewis F. Par her, and Mr. William M. Sexton, supporting the complaint. .

Mr. Edward L. Foote, Mr. Terry M. Grimm, Mr. John 0. Malugen, of Winston, Strawn, Smith & Patterson, anid Mr. John P. Fou, Ir, Chicago, Tlinois, for respondent. © - Inrrtsn. Deciston py ANprew C. GoopHorr, Heartng EXAMINER MAY. 14, 1972 STATEME NT OF PROCEEDINGS On April 30, 1970, the Commission - ‘issued its complaint against respondent charging it with violation of Section 7 of the Clayton Act, -as amended (15 U.S.C. Section 18), and.Section 5 of the Federal Trade Commission Act, as amended (15 U.S.C. Section 45). A copy of the complaint and notice of hearing was served upon respondent, and respondent thereafter appeared by its counsel and filed an answer admitting certain of the allegations of the complaint but denying that it had violated Section 7 7 of the Clayton Act or Section 5 of the Federal Trade Commission Act. Hearings were thereafter held, at which time testimony and documentary evidence were offered in support of and in opposition to the allegations of the complaint. At the close of all the evidence and pursuant to leave granted by the examiner, proposed findings of fact, conclusions of law, briefs and proposed orders were filed by counsel supporting the complaint and counsel for the respondent. Oral argument was also heard by the examiner.

Proposed findings not herein adopted either in the for m or substance proposed are rejected as not supported by the evidence or as involving immaterial matters. Having reviewed the entire record in this proceeding, including the proposed findings, conclusions and briefs submitted by both parties, the examiner, based upon the entire record, makes the following:

‘BEATRICE FOODS CO. | 489 » 481 Initial Decision FINDINGS OF FACT Jurisdictional Facts * mo, 1. Beatrice Foods Company (Beatrice) is a corporation organized and existing under the laws of the State of Delaware, with its office and principal place of business at 120 South Lasalle Street, Chicago, Tlinois. a: .

2. At all times relevant to this proceeding, Beatrice sold and shipped, and is now selling and shipping, products in interstate commerce throughout the United States; hence Beatrice was, and is, engaged in commerce as “commerce” is ‘defined in the Clayton Act and the Federal Trade Commission Act. 3. John Sexton & Company (Sexton) was on December 20, 1968, a corporation organized and existing under the laws of the State of ~ Illinois with its principal office and place of business located at 4700 South Kilbourn Avenue, Chicago, Illinois. It is now operated as a division of Beatrice. os 4. At all times relevant to this proceeding, Sexton sold and shipped products in interstate commerce throughout the United States; and on December. 20, 1968,.Sexton was engaged in commerce as “commerce” is defined in the Clayton Act and the Federal Trade Commission Act. .

5. On or about December 20, 1968, Beatrice acquired the business and assets of Sexton, exchanging therefor approximately 375,000 shares of Beatrice’s preferred convertible preference stock valued at the time at about $37,500,000.

Beatrice 6. Beatrice is engaged in the business of producing, processing and distributing dairy products and specialized food products sold through its Grocery Products Division primarily to retail grocers, and also operates cold storage or refrigerated warehouses. Its sales to the retail grocery trade are made primarily through food brokers, of which it has 1400 throughout the United States, and it is one of the largest suppliers of dairy and grocery products to this trade. Based upon 1959-1960 data, the Commission found in 1965 that Beatrice was the third largest dairy company in the United States and a large supplier of other food products, Beatrice Foods Co., Docket 6653 (Dec. April 26, 1965) [67 F.T.C. 473]. It has over the years enjoyed a substantial growth, more than tripling its net sales between 1961 and 1970. During its fiscal year ending February 29, 1968, about 45 percent of Beatrice’s net sales were derived from sales of dairy products, 1 The complaint alleges and the answer admits the essential juridictional facts. 494-841-—T75 oe pe ' 490 FEDERAL TRADE. COMMISSION: DECISIONS | Initial Decision 81 F.T.6.

about 37 percent from grocery and:confectionery products and about 10 percent represented rentals from its public refrigerated: warehouses. In 1970; dairy products accounted for 31 percent of its total sales, and grocery and confectionery products amounted to 31 percent of its net sales in. 1970. Its: Warehouse. Division owns and operates 22 refrigerated and three dry storage warehouses in major cities of the United States. .Revenue from: this operation.amounted to: 4 percent of net sales. in 1970. Beatrice.also-has.an agri-products, chemical and manufacturing and international-divisions which’ accounted for 34 percent of its sales in 1970..Beatrice’s net sales. for: fiscal year ending February 29, 1968 were $1,052,431,480. In 1970 Beatrice’s total sales were $1,576 million with total assets: of-nearly: $632: million: Beatrice was ranked. 88rd “in.a list. of 500 Jargest industrial corporations in: 1969 (CX.40E, 126).:In conducting ;its busiziess, Beatrice:has over.23,000 employees, markets over 5,000: products, and. operates about 8 500 Plants and branches.

- %. The Beatrice Grocery. Products. Division, of: which Sexton became a part, was created by. acquiring specialty food processors with relatively high margins of profit compared to.the Beatrice Dairy Division. Beatrice in the: pleadings admitted that the acquisitions set forth in Paragraph 4 of the complaint in fact occurred and. are responsible. for the development. of the Grocery Products. Division.’ _.8. In addition to its principal sales to the retail grocery trade, Beatrice packs many of its grocery products in the larger institutional sizes and sells these products through its brokers to the institutional. trade either direct to the institutions or through institutional grocery wholesalers. These sales in 1967 amounted to approximately $13 mil- 2M: J. Holloway & Co., Gebhardt Chili. Powder Co.; Mitchell Syrup & Preserve Co.; Grand Trunk Warehouse & Cold Storage Co.; Adams Corp:; Pik-Nik Company; Rosarity Mexican Foods, Co.; Liberty Cherry & Fruit Co. ; Fisher Nut Co. ; Cal- Compack Foods, Ine. ; G-W Food Products Corp.; Burney Bros., Ine. ; ; Deppe-Vienna Baking Co. ; Southland Pecans; Liberty Baking, Inc. ; Cincinnati Fruit & Extract Works, Inc.; The Sugarine Co. ; Specialty Foods, Inc.; Bloomfield Industries; Regal By-Products Co. ; Chicago Produce Terminal; Chesterton Candy Co.; Aunt.Nellie’s Foods; Murray Biscuit ‘Co. ; Stiffel. Co. ; Stahl Finishing Co.; Vigortone Products; Colorado By-Products Co. ; Switzer Licorice Co. ; Jolly Rancher, Inc. ; Temple Frosted Foods; Knickerbocker Mills; Rudolf Foods; Mid-West Forging .& Manufacturing Co.; Ross-Wells, Inc.; Geerpress Wringer Co.; Quincy Market Cold Storage Co.; Tampa Cold Storage Co. ; Inland Underground F Facilities, Ine. ; Mother’s Cookies; Golden Cookie Co.; J. Warren Bowman, Inc.; Julian Bail Industries; South Georgia Pecan Co.; General Water Conditioning, Inc.; James H. Rhodes & Co.; Airstream, Inec.; Melnor Industries, Inc.; Tekni-Craft Inc.; World Dryer Corp. ; Indiana Moulding & Frame Co.; Charmglow Products, Inc.; Imperial Oil & Grease Co., Inc.; Southeastern Reduction .Co.; Lone Star Rendering Co.; Buttercrust Bakeries; Oswald Jaeger Bakery ; East Coast Foods; Farboil Co.; Hart Ski Manufacturing Co., Ine. ; Morgan Yacht Corp. ; Max H. Kahn Curtin Co. ; Vogel: ‘Peterson Co. ; Hi-Temp, Inc.; Market Forge; San Angelo Bay Products Co.; Lubbock Rendering Co.; D. ‘L. Clark Co.; Thos. D. Richardson Co. ; La Choy Food Products; Bond Pickle Co. ; Mario’s Food Products; Squire Dingee Co. ; Tasty Foods, Inc,; Shedd-Bartush Foods, Inc.; A..F. Thibodeu Co. ;. Detroit Refrigeration Co. ; and Lackawanna Cold Storage Co.

BEATRICE FOODS. CO. ma 491 481 Initial’ Decision lion. (See App. A.) Beatrice likewise is in a’ position to sell its dairy products direct to institutional buyers throughout the United States from its various ‘dairy operations. In Chicago, Beatrice owns. and operates Burney Bros. which is one of ‘the largest. bakery products manufacturers and distributors in Chicago. It sells both fresh and frozen bakery products in substantial volume to both: the retail-and institutional trade (Tr: 530-40). In Chicago Beatrice also owns Produce Terminal and Food Marketers, both of which distribute frozen — foods in substantial amounts to the institutional trade. Consequently, Beatrice had institutional sales ‘of approximately $12 to'$13 million from these 3° wholly-owned. operations'in Chicago prior to acquiring Sexton, which had sales of $21- million from ‘its Chicago. warehouse. (CX 1,174; Tr. 580-40)" Other’ ‘operations of Beatrice: sella ‘wide variety of prodicts 1 ranging ‘from house trailers ‘to skis’ (CX 408, pp. 14, 15) Sexton, :

9. On December 20, 1968, Sexton was and had been for many years in the food service. industry distributing dry groceries to institutions i.¢,, restaurants, cafeterias, clubs, hospitals, schools, colleges, hotels, _in- “plant feeders and other purveyors of prepared - food to the public. Prior to. its acquisition by Beatrice, it operated 13 warehouses which served as distribution centers throughout the continental United States.’ Since the acquisition it has opened a new warehouse in Minneapolis. Nearly all the products distributed by Sexton were sold under its own trade names or brands and labels. During its fiscal year ending June 28, 1968, Sexton had net sales of $91 million and net earnings of $2,000,945. Sales during its last fiscal year ending February 1970 were approximately $100 million, Sexton operated and still operates food processing plants in Indianapolis, Indiana, and Englewood, New Jersey. The plant in Indianapolis processes food products which are sold exclusively by Sexton under its own labels. The principal products are soup, soup mixes, canned meats, jams, jellies and preserves, pickles and pickled products, mayonnaise, fruit juices, ready-to-mix desserts. (See App. B.) The Englewood, New J ersey, plant handles imported products, principally coffee, tea and spices (CX 6). Total sales of products from these plants to Sexton warehouses were approximately $11 million in 1963 and $16 million in 1967. Its own manufactured products are about 25 percent of total Sexton sales. (Complaint and Answer, Para. 7) The remainder of Sexton sales are of dry (canned) grocery products and other res- % Atlanta, Boston, Chicago, Cincinnati, Dallas, Detroit, Los Angeles, New York, Orlando, ' Philadelphia, Pittsburgh, St. Louis and San Francisco. Initial Decision 81 ELC.

taurant supplies, such as paper products, cleaning detergents and chemicals. -These products are purchased from a large number of other manufacturers or processors, including other divisions of Beatrice (CX 15). The -record indicates that the amount of sales made. by Beatrice to Sexton was about $1 million a year or less (CX 15). Fhese sales must have been: and remain. relatively small, since the record. does. disclose that Beatrice canners and processors sold primarily to the retail trade and-only incidentally canned for the institutional trade (Tr...1289-91, 1705). ‘Sexton does not handle any fresh or frozen products of any kind in its business. Sexton sells its © products by means of street salesmen, who call upon the restaurants and other institutions, promoting Sexton products, taking orders for products which are then delivered to the institutions on Sexton trucks or by common carrier. (Tr. 1268, e¢ seg.) In the early 1960’s Sexton established a sales division to deal with a development in the institutional trade, the establishment of a considerable number of multiunit institutional buyers. This division differed from the usual street salesman division since it was dealing with large volume buyers with feeding units scattered over ‘a large area. (city, state, several states, oreven nationwide), but with a central buying office employing trained and sophisticated buyers, who required different types of services from its suppliers than that provided by a street salesman selling in a limited area. (RX 25; Tr. 1621) Sexton, with its 14 warehouses and its two manufacturing plants, was and is the largest institutional wholesaler in the United States. In its 1967 Annual Report (CX 41C, p. 4). Sexton reported to its stockholders :

There is a marked trend toward chain food service operations, this study reveals. Products of uniform quality. and their availability to every outlet across the country, are of prime importance to chain buyers. As the industry’s only full-line national distributor selling exclusively to the institutional market, Sexton is in an ideal position to capitalize on this trend. (See also CX. 41C, p. 2; CX 41D, p. 8.) The Merger ;

10. With regard to the background and purpose of the acquisition of Sexton by Beatrice the president of Beatrice, Mr. William G. Karnes, testified as follows (Tr. 1699):

Q. Now directing your attention, Mr. Karnes, to the Sexton Company, can you tell us briefly how you got interested in the Sexton Company-and who you discussed it with in the company, in Beatrice Foods.

A. You mean who I discussed it with in Beatrice Foods? Q. Yes.

BEATRICE FOODS: CO. 493- 48i Initial: Decision A. Well, over a period of time we knew the Sexton people. I: personally knew the officers of Sexton. In fact I was personally acquainted with three of the past presidents of Sexton. We put their figures together with ours and on a pro forma basis we could see that by joining with Sexton we would increase our earnings ‘per share about four or five percent. mo mes Q. Can you explain that, on a pro forma basis? What do you mean on a pro forma basis you would increase’ your earnings per share? A. Well, we take our P&L and our earnings with the-number. of shares ‘outstanding and we add it to, add their earnings in the last known fiscal year: We had their annual‘report: And on the basis of the stock we were going to offer them, ‘which ‘happeried::‘to: be.a ‘convertible preferred stock, after paying the dividend on: thé: convertible: preferred, which was a fixed’ dividend; vhe remaining earnings of Sexton would be consolidated into Beatrice, and that consolidation of remaining earnings would raise-all of our common: shares outstanding at that time-about’ four or five cents, . POPE Shree Vay d So it’met that test that I mentioned earlier, that all these situations have to. I mean is it a ‘good investment: ‘We felt that: Sexton was a good investment. : ons ‘ :

- But going further, as we explored it, we were: -e-partioularly in interested because of the fast growing phase of their business: which were the roultifood units, food service-units. I think they are referred to in the trade as the Mufso accounts. And we saw the tremendous growth of this type of account.

We are in the food business. We have been in the food business fora number of years. And this was a portion of the food business that we were not in and it was growing very rapidly. And as officers of a publicly owned company we felt we should be in this business. We discussed it with our economist, a man by the name of Eli Shapiro, who is at the present time a professor of finance at) Harvard Graduate School of Business, and he, too, pointed out the fast growing business of the. multi-units.

Now, it is true that Sexton only had a beginning in there. They weren’t very large in it. Actually nobody is very large in this business. Sexton had a beginning in it. So it gave us a foothold in that very large growing segment of the food: business.

We saw that Kraft was in it, Consolidated was in it, General Foods, Armour, almost anybody in the 500 Fortune Magazine group in the food business had entered it, and we found we weren’t in it and it was an area of business we should be in. , Mr, Karnes also pointed out (Tr. 1703) that there were some disadvantages in acquiring Sexton since it would result in Beatrice sell- 494. FEDERAL TRADE. COMMISSION , DECISIONS © Initial. Decision 81 F.T.C.

ing to the institutional trade in competition with,certain, of its customers who were purchasing. Beatrice. products for sale to the. same trade. Mr. Karnes testified further (‘Tr.. 1721-22) : wa Q. Mr..Karnes, in terms of your decision to recommend to the board to buy. Sexton, did. you give.any. consideration at, all to the competitive structure of the entity ? A. Yes, we did: As. I said. -yesterday, we took. a. look at it. We had been.i in.the food business. ever since the inception of our company. We were. food manufacturers: and. food processors and we know. that the © Sexton was in,.as-I,said yesterday, :at least two different. types. of business.’ They ‘were in the. traditional. type of. business..with routes and street.salesmen: with .all, of the problems .that. entails with the union. and distribution: difficulties;. That. portion of.the business we. were not interested: in,.Tf- that had: been all. that: Sexton. had had, ‘we. would not. be interested.in it. :

_ But ‘we -were: also aware of ‘this, that the multi-unit accounts. were growing. It was growing very fast.,And J can’t,stress that too much, that this was our: principal: reason..for, being interested. in Sexton.- . Here we are, a-food, business. We. had. been oriented to, as.I say, supermarkets and the retail. Here’s a fast growing part of the, business with more of the food. dollar being spent,away from home year after year.and we were not in it.

As we looked around, we saw other food companies, the Krafts and the General Foods.and Consolidated Foods and many others that had established the institutional business over the years. They had products where-they were branded. They had the Kraft brand or they had the Genera] Foods brand and they were accepted. They had sold some of these over the years through distributors but now were in this fast growth of the multi-unit accounts which. would become almost.a national type of selling crossing geographic lines. They had gone direct . with their own sales forces and gone beyond the distributor and deyel-oped their own direct business. with their own sales force. We just felt that if we didn’t get into this and get a foothold that we were passing up a very important segment of the food business. . | Market Inwolved .

11. The broad field with which the complaint deals is the manufacture and distribution of food and related products to the institutional trade. The institutional trade historically consisted of all types of organizations pr epar ing and serving, or serving food for consumption on or off the premises ( so-called “food away fr om home”). These include restaurants, cafeterias, hotels, clubs, schools and colleges, hospitals, nursing homes, religious organizations, industrial feeding con- - BEATRICE. FOODS: CO. |. 495 481 2: Initial ‘Decision cerns, automatic vending companies, and. airlines. (CX 71; Tr.-232, et seg.). The. food: processors-or packers who supply this trade pack special packages of products :for this:trade, generally in larger’ sizes than.that supplied .to-the retail grocery trade, € 9: -» #10 cans of vege- ; tables and fruits...

12. The institutional trade buys alll: types of products, including meats; : seafood, vegetables, fruits and dairy products:-The majority of these products: at the present time can be’ supplied to the institution: either in the form of: fresh. food, frozen. food, or:dry (canned) food. Some :products, ¢.g., lettuce. or anchovies can only be supplied in ‘one form—-lettuce must be -fresh—anchovies must be canned. In addition | to food products, institutions purchase a wide-variety of related. products. These include paper products.of all kinds, soaps and detergents, chemicals, cooking. utensils, ‘dishes: and silverware, lighting 'f ‘fixtures and supplies.

18. .Products are ‘procured by the. institutional trade j in two ways. Food. processors or packers and manufacturers of related products sell and ship directly to the institutions by. utilizing food brokers as‘sales agents.or by means oftheir own sales:force, The ‘record contains little data:concerning these. direct: sales, however, they must be considerable, particularly.in fresh and: frozen meats. Dairies:and bakeries ‘also sell substantial amounts of their products direct to institutional users at the local level (¢.g., Beatrice Bakery Division, CX 7, pp. 7-9). The second method of distribution, and the one involved in this proceeding, isthe purchase and resale of grocery and related products by institutional wholesale distributors to the institutional trade. 14. The typical institutional wholesaler operates its business from: a single location or warehouse. A number of institutional. wholesalers may have two or three warehouses in a limited geographic area. These wholesalers typically employ street salesmen, calling on the trade and taking orders. Credit: is usually extended and orders are delivered by truck either wholly-owned. or by contract common carrier. The area of distribution for an institutional wholesaler is limited by the distance it is economically feasible to deliver by truck. This is roughly within 100 to 150 miles of the wholesaler’s warehouse. (Par. 12, complaint and answer; Tr. 255,.256, 269, 279-280) Historically the institutional wholesaler has been somewhat of a specialist in that.it limited itself to a single line of products, either dry groceries or frozen groceries or fresh produce. This was because of the specialized handling required by each of these lines, particularly frozen. and fresh groceries which require refrigeration and are generally delivered more frequently and over a smaller trading area (Tr. 232, 244, 247,249, 1714) 496 _ FEDERAL TRADE COMMISSION “DECISIONS Initial. Decision 81 FTC.

15. In recent years. commencing about: 1958, the institutional trade has, shown a substantial increase. This is largely. accounted for by the growth in what are termed “Multi-Unit. Food Service. Operators,” usually. referred to as “Mufso” accounts and. the increasing trend: of more people eating away from home in these establishments (Fr. 282):. _ These types of accounts are characterized by having’a number of units’ where food is sold to the public. They include “in plant” feeding: organizations, such as A.R.A., Saga Foods, Automatic Canteen ;- large chain restaurants, such as Stouffer’s; chain retail ‘stores, such as F.. W. Woolworth, Walgreen Drug Stores, and.8..S. Kresge; airlines, such as United who operates Sky Chef restaurants..and. supplies. itsélf and: other, airlines for.in flight meals; chain ‘franchise organizations; such: as: McDonald’s, Burger: Chef, Burger: King; chain caféterias, such as: S.-and W.; chain hotel: and motel organizations, such as Holiday: Inn and Howard Johnson’s. (CX 71; Tr. 234, 236) In addition, in: recent: years schools and. colleges have to a great extent centralized their food buying practices:as a: result of the: growth of: school populations.and the increase in school feeding: programsi:) 1): 0.6 he le - 16: These large-chain: type-organizations are distinguished from:the traditional type institution, in:that:they have employed.trained ‘buyers at. central locations who. buy for. their: food: outlets‘ which: may be scattered over.a large geographic area, a state, parts of-several states, a whole region or the entire United States (RX 16). These buyers are sophisticated and purchase, after conducting tests, the products they feel are best suited to their particular operation. The institutional wholesalers and food processors changed their selling practices ‘to meet this new, demand in the market. Specially trained salesmen, more sophisticated than the usual street salesmen, were required. For example, Sexton in the early 1960’s put in a separate division to handle these national accounts or house accounts (Tr. 2046-47). Trade associations, such as the Association of Institutional Distributors (AID) (CX 2) were formed. These organizations were formed by. institutional wholesalers to enable them to have a representative who could call on the various Mufso accounts and meet their requirements of delivering uniform products over a much larger trading area than was covered by any. one wholesaler member (Tr. 16, 237, 282). 17. The growth of these Mufso accounts is demonstrated by a 1970 structural analysis of Mufso (CX 71) which shows a growth stated in retail sales value by such organizations from approximately $9 billion to $18 billion. In effect, Mufso sales doubled in five years, 1965 to 1970.

18. As a result of this demand the sales of institutional wholesalers increased considerably at the same time. Institutional wholesalers exeuidboggia \ BEATRICE FOODS CO. _ 497 481. : Initial ‘Decision panded their lines. A number of dry institutional wholesalers have added frozen food lines'to meet demand (Tr. 232). Likewise a number: of institutional frozen food wholesalers have added dry grovéries to their lines. (Tr. 331, 415, 552, 661, 822-23, 1713-14, 2052-53). -Food: retailers (chains) are also interested in n entering: ‘the food service field (Tr. 2398; CX 45A).

19. ‘Complaint counsel ‘contend that the relevant market involved in this case is limited to the sale and distribution of full line institu: tional dry products. Excluded by complaint counsel are all frozen and fresh products, and all products sold by specialty houses or wholesalers who operate on a cash and.-carry basis.’ (Prop. Findings 45-55, incl.)' They contend that: the market involved is confined to the activities of institutional ‘dry ‘grocery wholesalérs. Their case was tried on’ this’ basis in view of the industry definitions set. forth in Paragraph 1-of the complaint and the limits placed onthe trade and commerce in- | volved by Paragraph 12 of the complaint: Paragraph 12 defines the’ relevant industry as “a'‘number of small independent concerns operating in local or regional markets, generally from one warehouse, or at most three or four warehoiises; each ‘concern selling for the most part: products bearing its ‘label. The industry is characterized, on the whole, by (a) the solicitations of orders by a street salesman, (b) thé extension of credit by the wholesaler, and: (c) the delivery of dry groceries to the premises of the purchaser, either by common carriet or in the. truck of seller.”

20. The respondent, while admitting that it is engaged in this type of industry, urges that the definition is unrealistic and artificial; that the definition of dry grocery products in Paragraph 1 of the complaint may be an accurate definition as far as it goes but is not realistic since it excludes relevant and competitive product lines, frozen and fresh foods, which Sexton does not handle, but with which it must compete in the market. Respondent, as part of this argument, also contends that realistically there are two separate and distinct lines of commerceé involved: the traditional wholesaler customer who is handled by’street salesmen and have one or at most a few eating establishments in a small area, and second, the Mufso-type of accounts who are serviced by the wholesaler in an entirely different fashion. (Resp. Prop. Findings 1 and 2) Sexton’s argument is that it is engaged in both lines and that they are separate and distinct since the competition which exists in the traditional field is altogether different from 4 Paragraph 14 of the complaint alleges and the record supports that “a number of institutional dry grocery wholesalers have entered or are now planning to enter the institutional frozen food wholesale industry.” Initial Decision 81 F.T.C.

that met when trying to sell to Mufso accounts. Mr. Karnes, the . president of Beatrice, testified and it is found that the real reason for the merger with Sexton was to get. into the rapidly growing Mufso business (Tr. 1715-18). And that liad Sexton been only in the traditional street salesman. type of wholesaling, Beatrice would not have been interested in the acquisition (Tr. 1721). The emphasis in Sexton has been and is to obtain as much Mufso -business as it can.. Sexton sales to Mufso accounts in 1968 was only about 3 percent of its total (Tr. 2047). At the present time, these have increased to about one-third of its total sales (Tr. 2046), or -about. $33. million, with the remaining $67 million still with the traditional type institutional trade. : 21. In the traditional institutional wholesale. market, it is. found that there is very little competition: between fresh, frozen and canned products. The usual restaurant, hotel, or. club has little, if-any, freezer space-so the street.salesmen selling dry. groceries meet. little. competition other than from other dry institutional wholesalers, (Tr. 1012-18). . Consequently, in the traditional area. it,can, be said,-as complaint counsel contend, that the wholesaling ‘of dry: institutional groceries® is-aseparate and distinct. market from the other, product lines,,frozen and fresh... However, with. the substantial growth of the Mufso accounts over.the past ten years, the sales of frozen. food: products by institutional wholesalers has increased substantially. This growth is best illustrated by the number of dry institutional wholesalers who have entered into the frozen field to meet the demand for frozen products (Tr. 472-73, 1013-14, 1626; 1630, 1715-16). It is likewise true that-in recent years a substantial number of institutional distributors of frozen foods have enlarged their product lines to include dry grocery products. Consequently, in the Mufso-type of buying there is much more competition across food lines—dry, frozen and fresh—and the dry groceries cannot be segregated in a real competitive sense from the other lines. , oo Recognizing this competitive situation in the Mufso-type of distribution between various types of food, and the fact that Mufso accounts are sold in a different fashion does not, however, preclude an examination of the dry institutional field and Sexton’s position in that field, since this is the business that Sexton was and is engaged in. Market Shares a 7 22. The figures concerning the. food industry are developed principally by the Bureau of the Census, Department of Agriculture and to some extent by the associations and publications of the industry. BEATRICE. FOODS: CO. 499 481: Initial Decision The figures are quite unsatisfactory for purposes of this proceeding. Based on: what is apparently the only evidence available, complaint counsel have presented statistics on which they base proposed findings as to Sexton’s market shares, first in the Bureau of the Census Chicago Standard Metropolitan Statistical Area (SMSA) and second, in the entire United States. Complaint counsel. subpoenaed 25 institutional dry wholesale grocers, including Sexton, selling in the Chicago market, obtaining total sales by each company and total sales in the Chicago SMSA in 1968 and 1969. (See Appendix C.) These figures show that Sexton had 16.18 percent of the sales of dry ‘groceries. in 1968 and 15.23 percent in 1969, was second. largest in.1968 and third in 1969. These figures also show that the top ten wholesalers in the Chicago SMSA had: 85.29 percent of total sales in 1968 and 84.57 23. Respondent attacks these figures on several grounds.. First, they improperly exclude all sales of frozen and fresh foods, which are competitive, particularly: in» Mufso. accounts..They, also exclude all sales by specialty institutional wholesalers,* ¢.g., Ursini, Tr. 2029, et SEQ a wholesaler catering to Italian: restaurants:or pizza house, and sales made by- some wholesalers to the ‘institutional trade :on a’ cash -and carry basis. Respondent has also presented evidence to the effect ‘that there are about 80 institutional distributors rather than the 25 called by complaint counsel (RX‘18) and that there are 75 to:100: frozen food institutional distributors in Chicago who were never called, at least some of whom sel] dry groceries (Tr. 1011, 2011, 1998-99). In addition, respondent claims that there are an unknown number of wholesalers located in other cities who come into Chicago and make at least some sales. Complaint counsel answer that some of the 25 dis- 5 For example, complaint counsel note in their Attachment F to their proposed findings that:

“Census data has certain limitations and involves certain problems. One problem is the reporting of sales of the same physical products by two or more levels of trade, such as manufacturers sales branches or brokers reporting the sale of the same physical products as the merchant wholesaler. A second problem is that the sale by the merchant wholesalers can include a wide variety of products but each merchant wholesaler is classified on the basis of his primary source of sales. Thus, the full line grocery merchant wholesaler may sell cleaning supplies, soft and hard goods, as well as produce, frozen foods and dry groceries. Hence non-food products are involved in the sales of most merchant wholesalers, as well as food products outside his primary line. A third problem relates to the sales by class of customers. The census report requests information on the percent of total sales to different classes of customers from each establishment. Thus, all of the sales of an establishment to the food service industry may be generated from minor products whereas the percentage may be applied, indeed can only be applied, to the total sales of the establishment which means to its primary product line. Thus the problems of the census data on the wholesale trade places severe limitations on the ways in which this data may be properly used.” ;

SIt appears that while complaint counsel have excluded any sales made by specialty houses of specialty products, all of Sexton’s sales of all products are included for comparison purposes, although some of them may also be specialty products. 500: ' FEDERAL TRADE’ COMMISSION “DECISIONS Initial Decision 81 E.T.Cz tributors who appeared were asked who:their competitors were, and that no’ one not called as:a witness and appearing’in Appendix C of this decision was identified as a competitor and that consequently this is an exhaustive list of such distributors selling in the Chicago SMSA.. The examiner must: reject: this: contention: by: complaint counsel. The: questions asked the witness: were: merely ‘to. identify his competitors. No. attempt was made to be exhaustive of-all-distributors'in Chicago: and there is no evidence upon which the examiner can find that these: 25 are complete and represént a’ total universe (Tr. 276). In fact the eviderice brought forward by respondent and not-refuted by complaint: counsel compel a, finding that:the list-is not.complete and. consequently. any conélusion as‘ to market: shares or: concentration ‘in: thé Chicago: SMSA as requested -by-complaint counsel is not possible. 24. Complaint counsel have also presented statistical calculations to show that: Sexton has:about’7.85 percent of-the total United. States: market in dry groceries. (Attachment F to complaint counsel’s:proposed findings: ‘yo The: docuinent: appears ¢ ‘to: ‘be. banedt- on the following procedure: hy i a :

‘a. The: Bureau of the: Census: shows: that: t: wholesalers have annual sales of approximately’ or ‘billions to: ) the food service. industry: (1967, $6.94 billion): : bests b. Chicago w wholesalers have total sales of approximately $440 million, representing 6.21 percent of the United States total for the year. 1967.

c. This exhibit next uses the tabulation of Chicago wholesalers and concludes that the dry grocery business in Chicago (as shown by the. 25 selected companies) is roughly $75 million. Therefore, it is concluded dry groceries represent approximately 16 percent. of all wholesale sales to; the food industry in the United States ($75 million+$440 million).

d. An estimate is thus obtained of total sales in the United States of dry groceries ($1,159,034,000). [16 per cent of $7 billion.] Sexton’s sales aré then. compared to that figure to arrive at the 7.85 percent figure.

25, As found above, the 25 wholesalers selected by complaint counsel who are general line dry w wholesalers are not the only companies wholesaling. such products i in Chicago. Consequently, complaint councel’s projections both in Attachment F of their pr oposed findings and in other SMSA’s in the United States as set forth in Attachment A to their proposed findings must be rejected since they. based it: in essential part on the 16 percent figure from their Chicago calculations as accurately representing total. institutional sales of dry groceries . BEATRICE FOODS :€0. © 5 © 501 481. Initial ‘Decision in other SMSA’s throughout the United States. Respondent: also contends with some logic that the tetal sales of dry groceries in '‘the:Chicago market were one: -third of Commission counsel’s figure of $440 figure (resp. ‘Reply Brief, p. 91). Consequently, « even if the 25 dry grocery wholesalers’ sales in the Chicago SMSA were a total market figure, the Sexton share of the Chicage' market of 7.85. - percent is double what it should be. The examiner, therefore, must reject this contention by complaint counsel.

26. Complaint counsel have also prepared a tabulation of selected vegetable and fruit products, comparing Sexton warehouse movement ‘( disappearance) of such products with total cannery movement (disappearance) of such products (complaint counsel Proposed Findings 39 and 40). A- copy of this tabulation is attached hereto as Appendix’ D. ‘This tabulation’ indicates that Sexton’s share of the market to be in the aréa of 3-5 percent. ‘Respondent ' in ‘its reply brief (pp. 17-18)" attacks this tabulation on several, grounds including the fact that this tabulation is based | upon. assumptions that Sexton’s inventory movement of their products is comparable to the | total movernent of such products, There is no record evidence one way or another on this point. Included in the tabulation are a number of so-called specialty items which complaint counsel elsewhere exclude from consideration as not being a relevant part of the market. The examiner is unable to base a finding .s to market share upon this tabulation.

27. Respondent has prepared tabulations from what evidence is available in the record and concluded that Sexton in 1967 had somewhere in the area of .4 percent to 2 percent of the total institutional market, depending on the products and competitors included in the universe (resp. Prop. Finding No. 6). Respondent’s figures, as those of complaint counsel, are based upon studies made by the U.S. Department of Agriculture in 1966 (CX 77) and the Bureau of the Census for 1963 and 1967 (CX 53-56). Both parties are in substantial agreement that total sales to the food industry in 1966 were approximately $10.9 billion (CX 147; RX 23C), Attempts were made to project these figures forward based upon estimated growth of the food service industry. The parties disagree on what the rate of growth is. Complaint counsel end up with a figure of about 4 percent per year, while respondent insists, with some substantial basis, that the figure is anywhere from 8 percent to 10 percent to 15 percent per year. Using a 10 502 FEDERAL TRADE: COMMISSION DECISIONS ‘Initial Decision * 81 ¥F.T.C.

percent. growth rate per year, respondent concludes that’ Sexton’s share of the institutional market is as follows: ; {Figures in percent] 1958 ~=—-s«1967 1970 Sexton’s market share of the food service industry --~----------------------- 0. 86 0. 62 . 6i5 Seeton’s share of the traditional customer industry - - ._:-=------------------ . ¢ 9 o § 0.9 . le 0.9 Sexton’s share of the MUFSO customer industry - - ------------------------- 28. After attempting to analyze and understand the statistical data presented by both parties, the examiner is unable to make any precise finding as to Sexton’s market share of the wholesale dry grocery market to the institutional trade. The respondent claims that it is somewhere between 0.9 peréent and 2.3 percent depending on what products are included in the market. (See Respondent’s Proposed Finding No. 6.) Complaint counsel urge that based upon their estimates and ~ analysis that Sexton had anywhere from 4 percent to 5 percent of the total market, based upon certain selected. products which Sexton. sold (see App. D) to 7.85 percent of the total dry grocery merchant wholesale market based upon their claim that Sexton had 16 percent of the Chicago SMSA sales, which claim was rejected above. The best. that the examiner can find, and this is based on averaging various claims, is that Sexton was making somewhere in the neighborhood of 1 percent to 4 percent of the total dry grocery sales in the United States at the time of the acquisition. .

29. Complaint counsel emphasize what they term the horizontal aspects of the merger (complaint counsel Proposed Findings 105- 195). It is true that at the time of the merger Sexton was manufacturing products in its Indianapolis and Englewood, New Jersey, plants and some of them were also made by Beatrice. These, however, were chiefly specialty items, made for Sexton’s own labels since they could not be acquired elsewhere. (See Appendix E). Complaint counsel’s tabulation shows that Beatrice and Sexton have substantial production out of the total in a few select products: 13.03 percent of ripe and green olives, 14.69 percent of other canned vegetables, 10.99 percent of dill pickles, and 23.04 of soy sauce. However, even if these figures are accepted, the examiner is at a loss to know what finding of adverse effect could be made as to the dry grocery wholesale trade. Beatrice and Sexton were not really competitors at the time of the acquisition, although both manufactured a few of the same products, each sold 7 These calculations are all of record as CX 147; RX 23C, 29H, 291, 29J. The testimony of respondent’s two experts also explain in detail the methods used in arriving at these figures: Dr. Gould Tr. 2349, et seg. ; Mr. Smith Tr. 2186, et seq. ‘ - BEATRICE’ FOODS ‘CO. 503 481. Initial -Decision to a separate and distinct market, and were not seeking any of the same customers. - Other Mergers in the Institutional Wholesaling Industry 30. First National Stores, Inc., of Massachusetts, a supermarket chain (Tr. 168), in 1969 acquired Suffolk Grocery Co., Inc., an institutional dry grocery wholesaler with sales of about $7.5 5 million at the time of acquisition, and in 1970 Albert Richmond Company, a frozen food distributor and meat purveyor with annual sales of from $2-$3 million at the time of acquisition (Tr. 169-70). Super Valu Stores, Inc., of Minnesota, acquired in 1965 Institutional: Wholesale Grocers, Inc., of Des Moines, and Food Marketing Corp., of Fort Wayne, and in 1964 Chastain Roberts, of Anniston. The latter two concerns also sold to food stores, but total institutional sales acquired by these three purchases were about $7.5. million (Tr. 173- 178). Super Valu has expanded internally into the institutional wholesaling industry in the Minneapolis-St. Paul area (Tr. 179, 1653): Kane Miller, of New York, acquired Economy Restaurant Supply, also of New York, an institutional dry grocery distributor, K&S, of Liberty, New York, which handled institutional dry groceries and produce, Dimyan Foods, of Danbury, Connecticut, an institutional distributor of frozen food and dry groceries, Yavner Brothers, of Norfolk, Virginia, an institutional dry grocery wholesaler and Multi Wholesale Grocery, and Leotis and Company, of Brunswick, Georgi gia, an institutional distributor (Tr. 241). Kane Miller has, by these acquisitions, made between 1961 and 1967, obtained $10-$12 million of sales in institutional distribution (Tr. 241). 31. Since May 1967, Consolidated Foods has acquired three institutional distributors: Pearce-Young Angel Company, Greenville, South Carolina; Premier Distributing Corporation, Detroit, Michi-— gan; and Snow Queen Foods, Inc., of Los Angeles. By these three acquisitions, Consolidated Foods obtained over $45 million of annual institutional sales (RX 179).

Continental Coffee Company acquired J. P. Michael, an Indianapolis institutional wholesaler, in 1969 (Tr. 208) and E. J. Byman, a Chicago institutional distributor, in 1970 (Tr. 997). S. E, Rykoff, of Los Angeles, has made a number of acquisitions between 1964 and 1970. These include Maret Foods, San Francisco; Bi-Rite Company, Fresno; Arizona Foods, J. W. Linder Co., Sacramento, R. M. Warren Co., Stockton, and two San Francisco organizations, the Institutional Distributing Division of Echo Foods, and the Institutional Division of S&W Fine Foods (Tr. 617). 504 FEDERAL TRADE COMMISSION: DECISIONS _ Initial Decision; 81 F.T.C.

Other acquisitions include the. purchase of Obee, Chicago, by National Tea Co. in November 1966 (Tr. 819), and the acquisition: of . Ellenbee Foods, in Cincinnati, by Frances A. Legitt, also of Cincinnati, both ‘institutional dry grocery ‘wholesalers: (Tr. 889). -Kraftco (Kraft Foods), through internal expansion, has entered into, the institutional wholesaling market, selling its products (Tr. 1154, et 80g: : oi CONCLUSIONS ‘or: FACT a 4. ‘Sexton’ S share ‘of. the institutional ary. grocery: wholesale trade is. not. large (1 percent to.4 percent): when: compared | to the total of such business i in the United States.:.

9. Sexton was. and is. the largest: institutional dry wholesaler 1 in: the United States with sales in excess-of $100 million a year. | 8. The institutional. dry wholesaling business-is substantially 4 frag. mented with active competition for-the :institutional trade,: both. the traditional trade: and. the .more;; repently developing ‘Mutao organ zations. . iolerr: ‘ Hi 4, The institutional wholesaling trade:i is: not characterized: asi being concentrated i in the hands of any. few large organizations.” 5. The record does not permit .a finding. that. Beatrice has conferred upon Sexton any advantages so significant as substantially to lessen. competition in the institutional dry wholesale trade. 6. Beatrice was and is one of the largest food suppliers in the United States to the retail grocery trade, with total annual sales primarily of food products of $114 billion.

. Beatrice has had many years of experience in the food business, selling to retail grocery stores and to some extent to institutions and institutional dry wholesalers. It also has a substantial network .of warehouses throughout the United States. These facts in combination with the testimony of Mr. Karnes, president of Beatrice, quoted above, compel a finding that Beatrice was not only a potential entrant. when it acquired Sexton but had in fact decided to enter the institutional field to get a share of that business, particularly the rapidly growing Mufso business. The only question was how to enter. 8, Asa result of its acquisition of Sexton, Beatrice eliminated itself as a potential competitor of Sexton and the other institutional dry wholesalers in the industry.

DISCUSSION AND CONCLUSIONS OF LAW 1 The leading cases dealing with potential competition in mergers found invalidity in situations where the merging firm was definitely BEATRICE FOODS. CO. ‘ 505 | 416 Initial Decision a likely or potential entrant. These decisions and subsequent authorities have developed the applicable principles, so that, for a merger to be barred because of its effect in eliminating potential competition between the merging companies, the following four factors or at least - some of them have been established: (1) the particular market has been shown to be substantially concentrated; (2) the merging firm within the market has been shown to be a leading or major factor in that market; (3) the merging firm outside the market has: been shown to be a likely entrant by internal growth or by a relatively small acquisition as alternative to the proposed merger; and. (4) the latter has been shown to be the most likely entrant, or one of such likely entrants. United States v. El Paso Natural Gas Co., 376 U.S. 651 (1964) ; United States v..Penn-Olin Chemical Co., 378 U.S..158 (1964), 889 U.S. 308 (1967) ; #7'C v. Procter & Gamble Co., 386 U.S. 568 (1967) ; Bendix Corp., FTC Docket 8739, opinion June 18, 1970, 3 CCH Trade Reg. Rep. :{ 19,288 [77 ETC. 731]. 2. To emphasize the factors principally relevant here, the. firm within’ the market (Sexton) has-been found to bea leading or major factor. It was the largest institutional dry wholesaler in the United States at the time of its acquisition. Consequently the merger cannot be justified as entry by a valid “foothold” or “toehold” acquisition. Bendix Corp., supra. The company outside the market (Beatrice) has been found to be a likely or potential entrant. In United States v. El Paso Natwral Gas Co., 876 U.S. 651, the Supreme Court called for an assessment of a company ’s nearness to the market, its eagerness to enter that market and its resourcefulness to enter that market. In United States v. Penn- Olin Chemical Co., 378 U.S. 158, 175 (1964), the Court emphasized the outside company’s resources and know-how, its capacity to enter, its long-sustained interest in entering and its competitive and economic reasons to do so. There can be no doubt that Beatrice had the distinctive capabilities, resources, incentives, and interests to enter the institutional dry wholesaling market.

3. Consequently it is concluded that the acquisition of Sexton by Beatrice constitutes a violation of Section 7 of the Clayton Act, as amended, since the effect of such acquisition may be substantially to ~ lessen competition in the institutional dry wholesale fine of commerce. _ 4, As charged in the complaint, the acquisition likewise violates Section 5 of the Federal Trade Commission Act. , 494. 341—73-—33 :006 FEDERAL .TRADE COMMISSION DECISIONS Initial Decision 81 F.T.C.

ORDER ©) :

Tbas ‘ordered, ‘That, ‘subject’ to the prior approval of the‘ Federal ‘Trade Commission, respondent ‘Beatrice Foods Company (Beatrice); through: its officers, directors, agents, representatives and employees ‘shall divest, within six (6) months from the effective date of this order, absolutely and in good faith all right, title,and interest and all assets, — “properties;: rights and: privileges;.. tangible and intangible, including without limitation all plants, warehouses, offices, equipment; machinery sand operating facilities, inventory, customer lists; trade names, 'lediseholds, trademarks and good :will-obtained: by Beatruce as a.result:of its ‘acquisition ‘of the John Sexton & Company: (Sexton), together with all additions and improvements théreto.of, whatever description’ which ‘have'been added to: Sexton, so'as to assure that. Sexton is reestablished as a separate and viable.competitor engaged in the business of produc¢- ‘ahg, processing or distributing institutional dry grocery products or any other: products added to its. line after its acquisition’ by Beatrice. mr ‘The divéstitiwre ordered in Paragraph I of this order shall not be effected, directly or indirectly, to. anyone who at the time of divestiture is an officer, director, employee or agent of, or otherwise under the control or influence of, Beatrice, or who. owns or controls, directly or indirectly, more ‘than one > (1) percent of the outstanding stock of Beatrice. .

ur In effectuating Paragraph I of this order, Beatrice shall complete divestiture’ in the following 1 manner and subject to the following conditions: — A. Beginning promptly on the effective date of this order, and for a period of ninety (90), days thereafter, Beatrice shall make diligent efforts to effectuate the divestiture required by Paragraph I of this order. B. If Beatrice fails to effectuate such divestiture within that ninety (90) day period, Beatrice shall within thirty (30) days thereafter submit a plan in form and substance acceptable to the Commission for the formation of a new and separate corporation (New Sexton) restoring Sexton as a viable entity and competitive factor in the institutional dry grocery wholesale industry in substantially the manner and form it was at the time of acquisition or has attained subsequent to its acquisition by Beatrice, such plan shall contain provision for: ., BEATRICE FOODS CO. +: -. 507 ATM ; _Anitial Decision ‘1. Transfer to New. Sexton of all business and assets required to: be divested. by Paragraph I of: this order; . : 2. Distribution of the capital stock of New Sexton to the public or tothe shareholders of Beatrice; .

3. Divestiture by any direct or indirect holder of more e than. one -(1). percent ofthe outstanding and issued capital stock of Beatrice of all stock or other interest in New Sexton within thirty (30) days from the date of receipt of such stock or interest. 4. Distribution of the capital stock of New Sexton within not more than one (1) year from thé effective date of this order. Providing, however, That the method of divestiture set forth in this subparagraph B may be effectuated by Beatrice at its discretion under the aforementioned circumstances and conditions at any time prior to the period designated herein. ct , Iv | Within thirty (30) days from the effective date of this order and every sixty (60) days thereafter until-it has fully complied with the. preceding portions of this order, Beatrice shall submit a verified report in writing to the Federal Trade Commission setting forth in: detail the manner and form in which it intends to comply, i is complying or has complied therewith. All such reports shall include, in addition to such other information and documentation as may hereafter be requested, without limitation (a) a specification of the steps taken by Beatrice to make public its desire to divest the Sexton business and assets, (b) a list of all persons or organizations to whom notice of divestiture has been given, (c) a summary of all discussions and negotiations, together with the identity and address of all interested persons or organizations, and (d) copies of all reports, internal memoranda, offers, counteroffers, communications-and correspondence concerning said divestiture. v Beatrice shall forthwith, pending divestiture, cease and desist from acquiring, directly or indirectly, any interest in any concern engaged in the institutional dry grocery business.

VI Beatrice shall forthwith cease and desist for a period of ten (10) years following the approval by the Federal Trade Commission of the divestiture required by Paragraphs I-III of this order, from acquiring, directly or indirectly, without the prior approval of the Federal Trade Commission any interest in any concern, corporate or noncorpo- Initial Decision gy BTC.

rate, engaged i in. any State of the United States or any territory thereof or the District of Columbia in the institutional dry grocery wholesale business. Within thirty (30) days following’ the effective date of this . order, and annually thereafter, Beatrice shall submit a verified report in writing to the Federal Trade Commission setting forth in detail the manner and form in which it intends to comply, is complying or. r-has complied with this prohibition on acquisitions. . Appenpix A ;

: Beatrice 1967 Sales to Institutional Trade ' Lo Estimated Value of Product. - vo ‘percent. shipménts, , institutional ‘institutional Canned meats . 8.5 $564, 000 Canned dry beans__ - -3 9, 402 Canned specialties and canned nationality foods. nas 7.5 1, 105, 300 ‘Canned frui . LO 47, ‘Canned vegetables. ; 7.3 684, 010 Cc d fruit juices. . — : : ---- 2.8 159, 740 . Jams, jellies, etc. : 27 200, 718 Pickles_ : 2124 2,634, 008 Méat sauces. 2.5 43, Mayonnaise,.salad dressings ‘ erde nace - 38.0. 1,157,480 Frozen specialties_-. - : . 6.3 594, 783 Flour mixes, etc. . ~ 20:0 19,600 ‘Cookies ey 71, 169 Bar: goods (candy) - 16.8 3, 000, 112 Packaged goods Yeandy) 21 326, 1 Bulk goods (candy) 7.6 109, 516 wenenneee 1.2 420, 720 Sott “arinks. 2.0 10, 100 Flavorings, extracts, ete. 2.3 26, 956 Flavoring agents-_ 1.5 13, 455 Shortening, oils_ 3.8 9, 880 Margarine. 1.0 423, 900 Chips (potato sie) wanes -8 83, 936 Chocolate and cocoa products 75.0 1,714, 109 (CX 14D-F) BEATRICE’ FOODS CO. °° 509° 481 _ Initial. Decision Appendix B - Products Manufactured and Sold by Sexton 1968 and 1967 {Dollars in thousands] 1963 trans- 1967 trans- Product description BIC code fer. value to fer value to . sales branches branches * Canned meats. : : 20138 $465 $1, 297 Canned poultry. - . 20154 90 233 Cc eafood: 20310 194 258 Canned soup. --- 20322 1, 357 2, 084 Canned dry beans. 20323 , 116 138 Canned specialties 20324 114 573 Canned fruits. 20331 384 342 Canned vegetables. 20332 : 9 - 22 Canned fruit juices.... 20334 .2..-.-----.-- 60 Tomato 20336 314 297 Jams, se and preserves... 20338 408 532.

Soup mixes . : 20342 480° 781 Pickles and other pickled products 20352 430 1,165 and ma: raise , Flour dresal ¥ . 20455 3-22 eee ee Salted nuts__ 20716 12-222 ele Flavoring extracts__. : 20871 33 64 Beverage bases, except syrups and concentrated trait juices..._. 20872 455g - 525 Other flavoring agents. 20874 34 .22.2...- +2. Roasted coffee, 20951 1,448 © 1, 421 Cooking oil: : 20961 -----------2-- 2 Desserts ready to mix. ‘ 20991 800 1,118 Sweetening TUDS. ; 20993 4 46° Baking powder-. ‘ 20994 17 20 Vinegar. 20996 9 .22----------- Chocolate and cocoa products. 20998 © 49 Weel Other food preparations (tea, spices and miscellaneous items)... 20999 2, 265 1, 869 Alkaline detergents___--------.--.--- 28411 153 198 Synthetic organic detergents, bulk-.._...----.---...-.-- Saceeeee 28416 263 480 Specialty cleaners. -- 28423 30 68 Bath essence. 28445 50 28 Total_. - : 10, 907 15, 742 (CX 6) A ‘510. FEDERAL TRADE ‘COMMISSION ‘DECISIONS | . ‘ Initial “Deciston So ‘81 FTC.

Apprnprx C.

— Institutional Dry. Grocery’ Wholesale: Sales and: Market: Shares ‘and Company Rank : an the Chicas, SMB8A Puig 1968 Sales of ‘Ace ecumu- ; By Source of... -. dry grocery, Market lative Rank’ and company: data’ ‘products to’ share market cg institutional: (percent) share . customers ‘percent) 1 Bia. Railton Ca RETESET ob 90 oe Perens age Ie oF Is 94. (2. ‘John Se Sexton (Subs. of Beatrice Foods as of Dec. 20, “CX134 3. Holleb & Co-._.

_ COXA 4, 519, 477 14.81; °. 49.93 : ‘4. Consolidated. Foods- - C1734 - rs 576, 515 9.01. 58.94, 5. Obee Institutional Food Serviee Co. (Subs. of Na- CX162°° oe 78, 497, 0 029° «| «6.89 2 tional Tea Co.).

6. Kraftco Corp: ORITIAGB “2,783, 010° 7. R.F.B., Inc... 2 ses 2198" 731 8. Wm. B. Snyder Foods, In; E ae 518 po, ) as of Tune 9, 1970).

ise; 10. Ryser Brothers. .

7. . J. D. Rich Co. - +305,0 517 i. 12. Trapp Brothers, Inc__ *"848, 273 i 13.’ Lawrence’ Foods, Tne . 759, 484 1 i. -Cambridge | Coffee Co.---.: - : 742,100, 2 poy 15. Diamond Distributors. ---._- . - . 569, 2b A j 16.: Tentiéy Sales, Inc._..- ’ . ~TR1358°~ 7 : - 569, 015° '* i 17. South Side Marquette- Lol, wetit: 2 TRIQ5 4 512, 946"- : ' 18.. Fox River Foods. 2: Ll.it “CX G12, 054. Be 19. M. L. Morgan & Co._----2- witenn: “CXI38,"° 448, 924 : 20. 1 Phillip: Borash & Sons: “TRIALS 390, 694: 21. Ferness: 22.222. 8. “CX142° 317, 283 22. Commissary Supply-- TR459 232, 429 23.. Gage Food Products Co____. R506 178, 221 24. Geoghegan’s Wholesale Grocery TR518 © 90, 226 25. Bit O’Gold Foods. -.-...- Those, 38, 749 Others 310, 000 50, 775, 326. . 100.00 -.-...---..

i Average between 1967-68 sales and Nov. 30, 1970 sales. 2 As corrected by subsequent stipulation.

Jen Sees in SMSA in 1968—$975,017.43. Two percent of total deducted because they were produce Sales 1298).

4 Fifty-five percent of total sales since 45 percent were cash-and-carry. (TR189). § Sixty percent of total sales s since 40 percent Were cash-and-carry. (TR1242). “BEATRICE FOODS’ CO.) 51L:

491°. Initial ‘Decision AppPENnDIx C Institutional Dry Grocery Wholesale Sales and Market Shares and Company Rank an the Chicago SMSA during 1969 Lo; Sales of © Accumuoo Se “Source of dry grocery Market lative Rank andcompany © °° data . products to share market : Ts ' : wy . institutional (percent) share customers (percent) . B. A. Railton Co.

$9, 958, 715 «18.59 18, 59 2: Holleb & Co__-..

c134B. 93,683 15.30 33.89 CX1Y | “sass, 400 15.28 49,12 : “= ORY ot, vt 4, 447, 321 18,31 57. 43 bee Tnstitutional Food Service Co, ‘Subs. of . te ios 4 © Nationa Tea: Co.).. ._.- bane ce ee neon ce nee ee eee CX162 ) aa 3, 959, 506 7.39. 64. 82 8. Kraftco_-.--2-2-.-22- ++ 35216, 982 6. 01 70. 83 R.F. 3. Ine... 2-222. 2 .-- 2, 087, 874 3.88 74,71 Wn. B. Snyder Foods, “the, wa---- 2, 001, 391 3.74 78, 45 9. E. J. Byman & Co. (Subs. of outinent ' as of June 9, 1970)._.... 4, 828, 444 3.41 81. 86 10. Ryser Brothers. wise - 1,450, 248 2.71 84.57 11. Trapp Brothers, Inc_ -, 1,002, 378 1.87 86.44 12. Cambridge Coffee. Co. _ a 2 ’ 1.57 88. 01 13. Lawrence Foods, tne. wane cence we ee eee ee 13 : 835, 696 1.56 89. 57 14, J. D. Rich Co... 798, 568 1,49 91.06 15. Fox River Foods_ 767, 468 . 1.43 92, 49 16. Tenney Sales, Inc__ 600,945 ..- 1.12 93. 61 17. South Side Marquette 578, 030 * 1.07 94. 68 18. Diamond Distributors - 567, 236 1,06 95.74 9, M. L. Morgan & Co_.-: 529, 588 :.. 99 96. 73 20. Phillip Borash & Sons. :- 434,208 = +81 97. 54 21, Ferness_______.--.--- 361, 047 675 1 12 3 14 6 1897 1651 31 20 87.765656 98,5 1 12 3 14 7 1936 1651 22 20 89.100578 214 1 12 3 15 0 636 1660 1324 41 -1 5 1 12 3 15 1 636 1674 30 20 80.181931 22.5 1 12 3 15 2 681 1674 155 24 94.866425 Commissary5 1 12 3 15 3 847 1660 102 39 57.091976 Supply.5 1 12 3 15 4 1613 1677 43 24 60.198200 249,5 1 12 3 15 5 1663 1677 36 24 96.205376 4495 1 12 3 15 6 1786 1677 37 20 53.714508 AT5 1 12 3 15 7 1897 1677 31 19 95.252869 98.5 1 12 3 15 8 1936 1677 24 19 95.582954 684 1 12 3 16 0 635 1699 1324 26 -1 5 1 12 3 16 1 635 1700 32 19 92.376625 23.5 1 12 3 16 2 683 1699 62 25 96.243309 Gages 1 12 3 16 3 754 1700 64 20 93.301094 Foods 1 12 3 16 4 827 1701 111 23 92.133301 Products5 1 12 3 16 5 949 1701 19 20 40.378380 C.5 1 12 3 16 6 1614 1702 86 23 87.900414 175,1825 1 12 3 16 7 1737 1704 2 3 10.003891 ©5 1 12 3 16 8 1787 1702 37 20 66.310905 .335 1 12 3 16 9 1897 1702 31 20 86.787857 99.5 1 12 3 16 10 1935 1702 24 20 62.884064 OL4 1 12 3 17 0 635 1725 1325 26 -1 5 1 12 3 17 1 635 1725 32 19 85.669289 24,5 1 12 3 17 2 680 1725 41 20 93.216354 Bits 1 12 3 17 3 730 1725 28 19 83.599724 O’5 1 12 3 17 4 771 1725 59 21 96.289124 Gold5 1 12 3 17 5 839 1722 75 24 76.801247 Foods.5 1 12 3 17 6 916 1743 58 3 21.816788 ..--5 1 12 3 17 7 1614 1727 43 24 70.319923 123;5 1 12 3 17 8 1663 1728 37 20 74.365509 8235 1 12 3 17 9 1720 1739 2 2 74.365509 -5 1 12 3 17 10 1781 1727 43 20 38.750259 +0235 1 12 3 17 11 1897 1727 31 19 91.817535 99.5 1 12 3 17 12 1936 1727 24 19 92.853897 244 1 12 3 18 0 636 1743 1324 57 -1 5 1 12 3 18 1 636 1750 31 20 83.566132 25.5 1 12 3 18 2 681 1745 143 55 46.247349 Geoghegan’5 1 12 3 18 3 822 1747 14 32 62.345203 Ss5 1 12 3 18 4 844 1751 81 40 22.088684 Whise.5 1 12 3 18 5 929 1743 68 49 24.631470 Groce5 1 12 3 18 6 1535 1765 3 6 35.813400 45 1 12 3 18 7 1626 1752 30 24 88.103508 94,5 1 12 3 18 8 1663 1752 37 20 87.721558 6565 1 12 3 18 9 1715 1762 2 2 85.838425 -5 1 12 3 18 10 1781 1752 43 20 58.395927 4185 1 12 3 18 11 1897 1752 31 20 93.562874 99,5 1 12 3 18 12 1935 1752 25 19 96.270592 424 1 12 3 19 0 1613 1776 347 27 -1 5 1 12 3 19 1 1613 1776 87 27 75.819145 310,0005 1 12 3 19 2 1735 1787 4 15 21.293747 =.5 1 12 3 19 3 1786 1778 38 19 0.978867 6.585 1 12 3 19 4 1885 1778 43 19 95.415726 100.5 1 12 3 19 5 1935 1778 25 19 95.380692 002 1 13 0 0 0 1312 1837 647 4 -1 3 1 13 1 0 0 1312 1837 647 4 -1 4 1 13 1 1 0 1312 1837 647 4 -1 5 1 13 1 1 1 1312 1837 647 4 95.000000 2 1 14 0 0 0 753 1777 757 97 -1 3 1 14 1 0 0 753 1777 757 97 -1 4 1 14 1 1 0 753 1777 757 97 -1 5 1 14 1 1 1 753 1777 757 97 95.000000 2 1 15 0 0 0 631 1901 1328 9 -1 3 1 15 1 0 0 631 1901 1328 9 -1 4 1 15 1 1 0 631 1901 1328 9 -1 5 1 15 1 1 1 631 1901 1328 9 95.000000 2 1 16 0 0 0 633 1907 1324 249 -1 3 1 16 1 0 0 661 1907 346 50 -1 4 1 16 1 1 0 661 1907 346 50 -1 5 1 16 1 1 1 661 1928 6 14 92.622765 15 1 16 1 1 2 679 1927 114 21 95.108879 Rounded5 1 16 1 1 3 800 1932 32 19 93.251884 up5 1 16 1 1 4 844 1925 28 23 71.332474 .015 1 16 1 1 5 882 1907 99 50 92.429970 percent:5 1 16 1 1 6 1004 1934 3 13 53.676529 :3 1 16 2 0 0 660 1934 1025 44 -1 4 1 16 2 1 0 660 1934 1025 44 -1 5 1 16 2 1 1 660 1953 8 14 83.854538 25 1 16 2 1 2 677 1953 150 19 95.742493 Transcribed5 1 16 2 1 3 834 1953 133 24 93.213615 incorrectly5 1 16 2 1 4 976 1948 102 30 86.792526 as:$2,1395 1 16 2 1 5 1081 1934 50 44 22.733833 020.5 1 16 2 1 6 1156 1974 104 4 0.000000 Soi5 1 16 2 1 7 1684 1975 1 3 64.864700 :3 1 16 3 0 0 658 1965 510 44 -1 4 1 16 3 1 0 658 1965 510 44 -1 5 1 16 3 1 1 658 1977 8 15 66.373184 25 1 16 3 1 2 676 1977 32 21 88.940247 As5 1 16 3 1 3 718 1978 112 20 96.615898 corrected5 1 16 3 1 4 838 1977 32 25 82.577873 by5 1 16 3 1 5 879 1978 140 30 94.138611 subsequent5 1 16 3 1 6 1027 1965 141 44 94.610657 stipulation.3 1 16 4 0 0 633 1982 1324 70 -1 4 1 16 4 1 0 659 1982 1298 63 -1 5 1 16 4 1 1 659 2004 8 13 69.608459 45 1 16 4 1 2 676 2002 68 21 69.608459 Totals 1 16 4 1 3 755 2002 55 21 96.007835 sales5 1 16 4 1 4 821 2004 26 19 96.007835 in5 1 16 4 1 5 859 2003 79 34 90.859772 SMSA5 1 16 4 1 6 949 2004 32 33 82.562485 in.5 1 16 4 1 7 986 2004 48 20 96.798485 19695 1 16 4 1 8 1047 2000 57 41 96.703987 were5 1 16 4 1 9 1111 1999 59 46 94.210403 $814,5 1 16 4 1 10 1172 2004 77 25 85.491241 864.94,5 1 16 4 1 11 1258 1997 16 27 95.142090 25 1 16 4 1 12 1282 1982 94 60 38.080353 percent5 1 16 4 1 13 1389 2004 23 21 96.739563 of5 1 16 4 1 14 1421 2004 58 21 96.568977 totals 1 16 4 1 15 1492 2004 113 21 96.235596 deducted5 1 16 4 1 16 1616 1983 100 51 63.786079 becatise5 1 16 4 1 17 1721 1983 57 45 96.981163 they5 1 16 4 1 18 1789 2009 58 15 91.241562 were5 1 16 4 1 19 1858 2003 99 25 94.218674 produce4 1 16 4 2 0 633 2028 1054 24 -1 5 1 16 4 2 1 633 2028 63 20 96.359505 sales.5 1 16 4 2 2 707 2028 55 24 39.264877 (TR,5 1 16 4 2 3 772 2028 56 24 94.980156 1298)5 1 16 4 2 4 1684 2038 3 19 36.662479 ;3 1 16 5 0 0 660 2039 890 45 -1 4 1 16 5 1 0 660 2039 890 45 -1 5 1 16 5 1 1 660 2054 39 19 77.382309 5555 1 16 5 1 2 709 2055 91 22 91.004234 percent5 1 16 5 1 3 808 2054 22 20 91.004234 of5 1 16 5 1 4 838 2054 58 20 96.903809 totals 1 16 5 1 5 905 2053 56 21 96.784149 sales5 1 16 5 1 6 969 2047 62 28 96.206139 since5 1 16 5 1 7 1038 2047 24 27 95.915955 455 1 16 5 1 8 1071 2039 91 45 94.380440 percent5 1 16 5 1 9 1171 2044 58 39 93.719475 were5 1 16 5 1 10 1233 2039 191 44 82.431183 cash-and-vairy5 1 16 5 1 11 1430 2055 55 24 90.335136 (TR5 1 16 5 1 12 1495 2055 55 30 95.665161 189).3 1 16 6 0 0 661 2060 1110 70 -1 4 1 16 6 1 0 661 2060 1110 70 -1 5 1 16 6 1 1 661 2079 7 14 82.445206 85 1 16 6 1 2 676 2079 25 19 95.537323 605 1 16 6 1 3 709 2080 91 23 96.733185 percent5 1 16 6 1 4 808 2079 23 20 96.835533 of5 1 16 6 1 5 838 2079 58 20 96.305916 totals 1 16 6 1 6 904 2079 64 24 96.305916 sales;5 1 16 6 1 7 978 2080 26 20 96.779999 305 1 16 6 1 8 1011 2082 92 22 93.213905 percent5 1 16 6 1 9 1112 2080 19 20 90.177605 is5 1 16 6 1 10 1139 2080 24 22 90.177605 in5 1 16 6 1 11 1173 2080 64 20 96.350220 Foods 1 16 6 1 12 1247 2080 55 24 76.110924 (TR5 1 16 6 1 13 1310 2080 56 24 96.589012 378);5 1 16 6 1 14 1376 2081 26 20 96.838066 305 1 16 6 1 15 1410 2081 91 23 96.838066 percent5 1 16 6 1 16 1510 2081 19 19 96.536743 is5 1 16 6 1 17 1538 2080 24 20 96.504860 in5 1 16 6 1 18 1570 2085 70 19 96.914215 papers 1 16 6 1 19 1651 2060 55 70 76.513420 (TR5 1 16 6 1 20 1714 2079 57 25 80.231682 332).3 1 16 7 0 0 659 2090 909 66 -1 4 1 16 7 1 0 659 2090 909 66 -1 5 1 16 7 1 1 659 2103 42 21 77.376610 7605 1 16 7 1 2 709 2106 91 22 96.348488 percent5 1 16 7 1 3 808 2104 23 21 96.887749 of5 1 16 7 1 4 841 2104 62 21 87.095306 total;5 1 16 7 1 5 901 2090 66 63 81.082123 sales5 1 16 7 1 6 971 2105 61 30 94.223061 since5 1 16 7 1 7 1040 2106 26 19 96.955376 405 1 16 7 1 8 1074 2100 91 50 77.421509 percent5 1 16 7 1 9 1174 2101 58 38 95.447777 were5 1 16 7 1 10 1237 2101 186 55 85.404312 cash-and-carry5 1 16 7 1 11 1434 2106 55 23 94.747795 (TR5 1 16 7 1 12 1500 2104 68 25 93.172691 1242),2 1 17 0 0 0 1357 2655 35 10 -1 3 1 17 1 0 0 1357 2655 35 10 -1 4 1 17 1 1 0 1357 2655 35 10 -1 5 1 17 1 1 1 1357 2655 35 10 95.000000 2 1 18 0 0 0 797 2747 76 51 -1 3 1 18 1 0 0 797 2747 76 51 -1 4 1 18 1 1 0 797 2747 76 51 -1 5 1 18 1 1 1 797 2747 76 51 95.000000 FEDERAL TRADE. COMMISSION: DECISIONS 512:

81-F.T:C:

“Ynitial Decision * “410del Jo TJMOW ¢ *IBAOALLIBO [BNUUB ‘SEsBO g/ZT JO SUIIO4 UT ; e10 ‘182 ‘T 62% TF ‘6 nroree BOT Tsar arrears rrr rrr rrre rere recse eres tec er ccerceeeee worece sooyejod Jooag GL" 80, TUTTI, 80 Ft “-ysejooong 96% B09 ee ros rrr rrrrsrrrrssrorererrtree 7" Sip PRT “qneIyIENneg oo 'F BIT 99. Tarr re rrreee woseresers worerereee OLB “SEB Trt trate rccr ctr rc reece ener eens ere e ccna eeenere voeee warererreeserce se0jeq0d ey It's 9968 OTe PTO GOL errr arte r rr erence re rere reese ecr cere cc newer ee we eeecnens ewer nena e crrrrteee 7 7S}O1IB0 PUB SBOg 88° . 899 'T peneennanant pecaninans er4O 0°} 98F- TE “oT SITT7""Sa1qB4I9Z9A POXI] : oh isqueUTysnfpse AIOJUSAUT JNOUITA So[qeI10T0 A. Lb $93 (2B PLO 129 G6 ‘TIT £e8 ‘909 £92 ‘OT TEI TI (Aye) cones WUD 08 'T 846 ‘28 Ser ‘899 “ PIL ‘SLL ‘T TOL ‘60% ‘2 BERLQQ rrr stron sr onescecerserrnsrerccsccere rarer wecewerwecore (yng) dnsieg 18% 990 ‘sot TOT ‘849.‘9 T68 ‘Ig2 ‘T GIT (988 2 OG OT TITS TIT IDTI TIT rrretrrgergrrrrrrree cree rec rrr . eee $00}8Uli0]; 6L°8 O8T ‘sh 16S ‘set ‘I 6¥9 ‘609 029 *T9% T Ose rrr rere ~~ (yore) Youuydg S21 O8F ‘OT 986 ‘S88 09% ZB £07 (992 | . £86 OT ~(Aqnp) ysenbs pus uyydwng 18°8 6&7 ‘E9T 286 ‘88 610 “692 ‘T 206 a8 9 PPL ‘908 (euns) seed ueeip 16°8 070 ‘sor 962 ‘O1Z *F Sz ‘HO 620 ‘S92 “F 686 SOL TTT ryyirittrrrrr re I" Qsnany) wI09 19°8 026 ‘98 808 ‘698 % 469 ‘F748 269 “66% % 052 22 77 GTD syoareg oL"g 080 ‘80T 189 ‘020 9F9 ‘979 628 “6ZT BEB IAT HTT rm ttn rnscocccecectener sacra rececnccne cece ecereneneca wen en ---"" (Ayn) syoog, 9L°% + 800 ‘FE 808 ‘209 962 ‘69%. O9T “BL | Wee rrr mrrrrrrrrrrrrrrcretrrtrerr terete Qsngny) suveq ewyT vLF 260 ‘218 LTt ‘826 ‘8 289 ‘$49 7% 029.268 ‘OT 628 ‘089 ~77" (Af) suveq x8M pus usely eo"g 68882 118 ‘8G 190 26 . 61S ‘287 - BIL BL g TTT rocom ene errenererccenacenccencceearencoccenc tec cn cnn (yore) snseredsy (queor0d) (seseo) (seseo) ~- (seseo) (seseo) (soso) g nuINjoo g SHUTUI g 4q peplaIp = - 68 XO snd tumnog g6t XO € XO youd 961 XO BI8p Jo somMog g uumnjo9 queulesouL goueivedds JeAOALIBO 89-L96T TOAOALIIO OreYs'S,uopxeg. —S,Woyxeg - “SID 1210. 896T i 2961 (2) 9) @)° @) (8) '@ (69) 1 91qQ0}aB00 poaqoajas hppowmumog— py q xIaqnqddy BEATRICE FOODS CO.

‘Initial Decision 0€ ‘OT 009 woseserrrrerrersrrsses 97g be ee TTT rrr tars ress es Sora a rrr rats sree (qoeyq) sepeqdsey 99 'Z 986 (221 WOTTT IDET ITE T TTT TTT 7 896 626 Brrr rrr rrr erence ere cree eee eee eee orrrrrrsrrrsror ts -grddeanrg SI OT 198 (FT SOT FOr 68 TrrTTTtT rr rr rrr rrr seqoved peoidg ¥ FT Tig 6% TUTTI TTT OAT 20 Torterrron= =a peXT AL 29 ‘OT 819 OT coresrrarrrrrrrr rrr rrr rrr ot ores gg egt 7775 1 15 1 5 14 1529 2543 36 9 0.000000 T5 1 15 1 5 15 1536 2567 22 81 0.000000 pees Joy sy 9L °F 221 68 ereemenennes 826 ‘218 ‘T ed ~"[reqy000 AMAT 1°6 862 9 ~ 060 ‘29 iabeeneeeet S:) (| 6L°8 999 ‘9 woreeeecercerece 790 ‘E11 ~~" SoLloqyoRlg ; ; . SJUSMTISN[ps AIOJWOAUT JNOUITA FMT 0L'e 699 2 £40 ZT9 | 998 ‘622 LL ‘00L TS9 ‘OFT cermerrescr scars ececes (unr) somyd odmg 9 894 FCI 9F8 ‘660 % 964 ‘EF S40 ‘T6F ‘T 2169 ‘ZT ‘T crrrtrretrtefe-="== une) sreag 86'S 902 BAA 621 289 “9 SST 60 'T £02 ‘988 ‘9 829 ‘688 ‘T woreeeeerreseer-=" (aun) soyoveg 60°9 poe ‘eT 6E8 ‘99 886 ‘EF 268 ‘16Z 9€2 ‘8T TTT777T 77 (euNL) J9OMS ‘soTIIEYO 69'S 9€0‘8T TIT 209 | £29 ‘FZ 9€8 ‘ESP 862 ‘CF Torrrrerrt >" (Ayn) Mos-per ‘sopeyd 79'S Td ‘09 622. “F68 ‘T 962 ‘gay £96 ‘F6e ‘T T9Q ‘G9 rr mann nnn rere rrceece corer ecceee ener ere wrroreeerees""="""= (aun) sjoody 12°F 289 ‘021 Sb ‘928 7 $26 ‘p99 280 ‘TS0 ‘8 18 ‘Og? 77 lequreydog) soneselddy T's 862 ‘20T 006 ‘sg ‘g 602 ‘F46 QLL ‘919 ‘8 PEBBZQ Tn rere ecco ener enee nnn ron Tooseeereseeerercrees---"(aqure}deg) selddy (queo1ed) (seseo) - WUINyoo (seseo) g snuypor z said (soso) (soso) (seseo) . Aq peprayp 68 XO T uurnyoo 961 XO 8X0 s6I XO 87ep Jo somog g unInOD YUEUsACTE =~ sDUBIBEddeSIp JOAOATIBO SOGT yWoed Bo-2961 IOAOAIICO LO6T eIBYS 8,U0}x9g s,uojdeg 1840,.L (2) (9) (9) 2) (8) @) @ Appowmog— gq 614 FEDERAL TRADE; COMMISSION: ; DECISIONS Initial, Decision 81 FE.F.G.

» “C.--Commodity ‘ : Total School lunch Comniercial Sexton’s Sexton’s a i Source of data i disappearance donation disappearance ~ movement share a: : from A to.B CX 197 ? :(eases) ~ : CX 39 (percent) | (cases) (cases) . ; (cases) - wet . . ¢ _ Green peas_....--.-.2-2-- °° 4, 838, 932 y 4, 413, 932 163, 439 3.70. Green and wax beans: - 8,978,417 392, 000 7, 618, 063 372, 092 4,89 Sweet potatoes - -_-- weest elle eee 345, 820. -/.-.-2-.------- 29,415 -.---2---2----- Tomatoes___-...-- 6, 548, 161 578, 535 5, 969, 626 155, 056 2. 60 ‘Pineapple. --.------i2 22-2. eee 372,000 .2.---2-222-22-- 127, 285 -----2222------- Peaches. ----..-.- 5, 632, 129 633, 200 4,998, 929 ; 224, 205 4.48 Purple plums__..------.-- 0 | | 12, 043 204, 800 407, 243 22, 659 \. Applesauce. - . * 12,826,425 195,200 | 2,631, 225 120, 587 4, 58 et; ‘esvo rod 08'g$ JO. onyeA ese1eae WE TO Posed St SesBo OOO'TEG JO OEUITIS LOGI OL + “Ge208 pus “9106 ‘ep106 ‘e106 ‘26006 ‘qompoad daqpnpour y 8 . *(% 8400400} UI SB seseq OUTS) OT XO es “quooIEd OOT/T Wei]y Sse'T ¢ “ZU ZTOM PUB SUIMIOA Y40q Uy ‘SZO SOT JO SIsVq OY} WO PepNpoUy o18 SUB OT IEQUUNN “UoTTes *seZ1S 1OtIeyUOd [feVAS. Jo SesBd ey} Jo ENTeA L96T ou} Supeupso JO}S7U90,9¢ 0} PepTpPoUr SBA ted °SZO BZ] Jo SIseq et] WO SUOT[es pus puNnod ey} 0} *SZO OT JO sTseq oN} UO pepeauoo esvo.ted.syme0 1E-Jo SoUELEHIP OUL “28°01$ poss19as JOB.1B] O44 “LOGT UY ‘OF OTS peseieas O19M SPUNCT “SOL XO UT pesn syyun peoisAyd ey} Jo sjseq oq} uo > paynduroo 8 XOz (°20, QT. 04, T°9): OBIVT ON} ‘QP'gs. peseiese (SS0L 40°20. 9): sroupeqaoo serTeurs 24} “e96t Ul 801T5 1 26 1 5 18 1684 2728 21 44 85.479881 XO5 1 26 1 5 19 1685 2782 15 8 85.479881 14 1 26 1 6 0 1600 768 46 2045 -1 5 1 26 1 6 1 1615 768 20 48 0.000000 Ttt5 1 26 1 6 2 1614 916 20 50 52.101025 FITS 1 26 1 6 3 1613 1066 33 53 33.969467 ozr*5 1 26 1 6 4 1613 1241 20 37 38.920753 45 1 26 1 6 5 1627 1285 6 7 25.864502 ae5 1 26 1 6 6 1612 1416 21 12 24.632324 85 1 26 1 6 7 1612 1435 20 30 24.632324 ‘OL5 1 26 1 6 8 1619 1554 3 2 62.495136 :5 1 26 1 6 9 1606 1701 14 26 46.585808 in5 1 26 1 6 10 1625 1992 5 33 23.332924 7" Te-pgeog TTT5 1 26 1 6 13 1625 2231 4 69 0.000000 TTT5 1 26 1 6 14 1624 2304 5 97 0.000000 worecere5 1 26 1 6 15 1625 2404 4 47 0.000000 ress5 1 26 1 6 16 1624 2454 5 97 0.000000 weereees5 1 26 1 6 17 1624 2554 5 58 0.966827 T77775 1 26 1 6 18 1596 2616 42 99 0.966827 Suysserp5 1 26 1 6 19 1606 2725 22 88 6.194168 Youes,T4 1 26 1 7 0 1582 671 28 2144 -1 5 1 26 1 7 1 1589 671 5 47 33.756935 ce5 1 26 1 7 2 1589 767 21 49 22.186310 BOT,5 1 26 1 7 3 1590 917 19 37 63.808182 Tr’5 1 26 1 7 4 1588 1055 22 62 24.622849 |5 1 26 1 7 5 1588 1118 2 51 26.425133 Se5 1 26 1 7 6 1587 1229 21 62 19.041740 Se5 1 26 1 7 7 1586 1416 21 51 65.369354 0°6L5 1 26 1 7 8 1594 1554 13 34 46.986309 or5 1 26 1 7 9 1586 1660 2 7 0.000000 wrrere espeuuo ORAL ar 19° 280° cor ¥ 69 - SUSseIp pRreg $0°CS 00:1 = ese. 910° 9T - There rescrcs er cceeccrcewcs wroterrerrrcne="<990n1Bs AG 09°8. . sjonpold eTyxojd peysyuy 10430 S: 98 °9. SeTHod WoVd YsSoy requmong 2 IL'8 SOTHII YOOMS JoquInony - Q GF “soTyoJd IMos xequinono hy a. 28°01 : weererteeten=--soryord TIC DQ - Qa ee 0%.'9 nena: , 1077NG FOI Oo. 4. 91's: SOpepeULIBy ooo 8: 08°. wonreeersecsoescrrrs ress scesas Taf 18T30 BR A ya. meecsess wore Tonresersasccewseeecr crs ~~ ATjof edeip 7 OL'T TT Te""""""=sS9a resold pus suref 10710 a OL°T srteseo+---spunod jo suon uz TI-8880Z “77 TT TTT 7777 *searosord pus uref Ariequeng -: gt" TrrrrT7 7777777 (SezI8 10440) Sesed OQOT ~er*"OCT = 18°9 S 478 1) ZT JO Ses QOOT ~-gomnf eum ee: 5) 6s 2 S| RO 4°70) 22 2 eee) © aR 2 47 (Arr course ~sepqeyesea peuued 10310 b: zee (iCTOO'G. = «| BOSS (iti«ioo.CCiCTTGL. treme een eenn eo -=--"g9ge9 QNOT CELTeRg? ~ocrn cree cece there cece cee eneecnneee Doce tee 64°9.

£081 ee°9 Bee 2, - +. ....,g WOHONpOId zg UoPONpoid . 11810} peurqui0n SoLneog Uo}Keg .. ~sdpeog W0}x0g go - 7 Spun peorscAyg yaequinu — ors syonpoid peqoojeg (jueosed): ‘oponposd 296T Jo 0 ores: bee -wononpord5 1 26 1 32 9 930 1584 20 48 89.584198 L96T2 1 27 0 0 0 894 601 13 2212 -1 3 1 27 1 0 0 894 601 13 2212 -1 4 1 27 1 1 0 894 601 13 2212 -1 5 1 27 1 1 1 894 601 13 2212 95.000000 2 1 28 0 0 0 779 600 138 2209 -1 3 1 28 1 0 0 808 600 109 2206 -1 4 1 28 1 1 0 843 1005 74 1378 -1 5 1 28 1 1 1 850 1005 27 44 0.000000 45 1 28 1 1 2 849 1058 47 58 0.000000 96r5 1 28 1 1 3 910 1105 3 2 7.118256 -5 1 28 1 1 4 843 1131 74 95 10.865211 Busanp5 1 28 1 1 5 847 1239 65 90 15.887039 ‘sypun5 1 28 1 1 6 845 1337 66 137 6.812103 pposhyd5 1 28 1 1 7 846 1482 27 67 84.087036 pun5 1 28 1 1 8 845 1553 27 114 50.222206 saqunu5 1 28 1 1 9 844 1678 28 68 47.743088 OTS5 1 28 1 1 10 844 1758 33 101 0.000000 nbp-25 1 28 1 1 11 844 1873 28 57 59.285492 pun5 1 28 1 1 12 853 1944 17 80 33.139107 suou5 1 28 1 1 13 844 2037 32 34 54.130802 fig5 1 28 1 1 14 843 2085 34 144 36.738091 payfuyuapr5 1 28 1 1 15 843 2244 33 139 50.407799 ‘sponposd4 1 28 1 2 0 779 600 99 2209 -1 5 1 28 1 2 1 786 600 57 117 0.000000 panes5 1 28 1 2 2 876 692 2 2 56.360798 85 1 28 1 2 3 793 726 85 31 74.646118 fo5 1 28 1 2 4 787 767 91 161 0.000000 worrmpout5 1 28 1 2 5 788 945 54 67 0.000000 1105 1 28 1 2 6 797 1024 51 31 96.821915 fo5 1 28 1 2 7 790 1061 51 84 11.847183 aanys5 1 28 1 2 8 794 1156 47 70 11.213676 “oy5 1 28 1 2 9 797 1237 43 57 83.004189 pup5 1 28 1 2 10 785 1307 56 47 58.969429 05 1 28 1 2 11 790 1367 50 91 33.932526 SP0od5 1 28 1 2 12 790 1469 53 129 0.000000 eoquyoag5 1 28 1 2 13 811 1606 34 34 59.039268 hq5 1 28 1 2 14 811 1651 27 57 59.039268 pup5 1 28 1 2 15 810 1722 28 46 45.093849 095 1 28 1 2 16 811 1782 27 102 12.408485 uojxag5 1 28 1 2 17 810 1896 28 77 89.477791 uyor5 1 28 1 2 18 810 1985 33 34 70.493729 fq5 1 28 1 2 19 781 2033 62 123 0.000000 ‘soqond5 1 28 1 2 20 809 2168 27 128 4.810577 ausamop5 1 28 1 2 21 809 2307 27 40 22.067062 7105 1 28 1 2 22 808 2358 34 34 69.528648 fig5 1 28 1 2 23 809 2404 33 107 26.289017 payond5 1 28 1 2 24 809 2521 27 79 86.803986 spun5 1 28 1 2 25 808 2611 34 129 50.412907 qooishyd5 1 28 1 2 26 779 2750 56 59 42.164059 md2 1 29 0 0 0 0 2496 0 47 -1 3 1 29 1 0 0 0 2496 0 47 -1 4 1 29 1 1 0 0 2496 0 47 -1 5 1 29 1 1 1 0 2496 0 47 95.000000 2 1 30 0 0 0 752 1209 29 594 -1 3 1 30 1 0 0 752 1209 29 594 -1 4 1 30 1 1 0 752 1209 29 594 -1 5 1 30 1 1 1 760 1209 31 62 41.748253 a5 1 30 1 1 2 754 1572 2 2 37.277023 _5 1 30 1 1 3 747 1602 46 24 38.209576 Wf5 1 30 1 1 4 752 1641 28 162 18.094032 xlangaay2 1 31 0 0 0 642 537 62 35 -1 3 1 31 1 0 0 642 537 62 35 -1 4 1 31 1 1 0 642 537 62 35 -1 5 1 31 1 1 1 642 537 62 35 81.699051 481. FEDERAL TRADE COMMISSION ‘DECISIONS ision 81 E.T.C.

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‘Goponpoad Jo syueurdyys yo onyea 1961 “s1oqUINU JO SUTPUNOI 94} 0} enp [8303 Jou Avur [ye70 5 “qu9070d.001/T UBU4,S59'T.¢- “9XOz “yueored 26°90 Jueseider “6L XO1 OT's =» 6 o5 1 24 1 4 5 1796 1084 21 38 23.445076 eo5 1 24 1 4 6 1795 1129 25 43 44.965729 GOT5 1 24 1 4 7 1795 1309 21 37 78.345070 9965 1 24 1 4 8 1795 1354 25 29 45.424267 ‘FT5 1 24 1 4 9 1786 1469 29 52 24.360970 9995 1 24 1 4 10 1794 1528 25 31 72.149834 ‘885 1 24 1 4 11 1792 1659 25 102 22.769806 6989695 1 24 1 4 12 1809 1897 5 146 0.000000 wororseeesns5 1 24 1 4 13 1808 2047 5 9 1.465416 winds 1 24 1 4 14 1809 2096 4 22 0.000000 ho5 1 24 1 4 15 1809 2122 4 43 0.000000 rere5 1 24 1 4 16 1809 2172 4 109 0.000000 eserec5 1 24 1 4 17 1779 2247 43 37 0.000000 ens5 1 24 1 4 18 1800 2280 2 51 0.000000 ores 1 24 1 4 19 1809 2336 5 83 0.000000 reece5 1 24 1 4 20 1809 2424 4 20 9.526779 es5 1 24 1 4 21 1808 2449 5 83 0.000000 woseerc5 1 24 1 4 22 1808 2537 4 47 0.000000 ene5 1 24 1 4 23 1796 2588 20 39 2.967514 OBB5 1 24 1 4 24 1789 2629 25 131 2.967514 10A8/[BIO,3 1 24 2 0 0 1679 772 90 2063 -1 4 1 24 2 1 0 1736 772 33 2063 -1 5 1 24 2 1 1 1736 772 31 52 23.172318 “LL”5 1 24 2 1 2 1737 898 29 123 0.000000 -68'T5 1 24 2 1 3 1737 1062 18 9 0.000000 .5 1 24 2 1 4 1745 1085 24 75 0.000000 L0L‘9T5 1 24 2 1 5 1744 1310 20 38 75.310471 6985 1 24 2 1 6 1743 1354 25 21 68.157402 ‘T:5 1 24 2 1 7 1744 1485 19 37 42.985683 8685 1 24 2 1 8 1743 1529 24 31 42.985683 ‘FE5 1 24 2 1 9 1751 1579 2 5 77.079620 -5 1 24 2 1 10 1742 1659 24 86 2.667496 Scot5 1 24 2 1 11 1742 1941 23 57 3.249580 Std5 1 24 2 1 12 1741 2008 25 43 51.864471 FITS 1 24 2 1 13 1741 2061 20 45 51.864471 XO5 1 24 2 1 14 1742 2133 19 61 44.676811 666085 1 24 2 1 15 1758 2248 4 159 0.000000 27777777775 1 24 2 1 16 1757 2412 6 121 33.510544 SIE5 1 24 2 1 17 1741 2536 22 156 57.361549 Suoperedeid5 1 24 2 1 18 1739 2701 20 53 0.000000 pooy5 1 24 2 1 19 1737 2762 22 73 66.298462 104304 1 24 2 2 0 1702 785 45 2050 -1 5 1 24 2 2 1 1711 785 31 37 0.000000 @05 1 24 2 2 2 1724 870 2 2 0.000000 .5 1 24 2 2 3 1712 987 4 72 0.000000 TTITIT5 1 24 2 2 4 1702 1081 45 35 72.839615 08.5 1 24 2 2 5 1720 1310 19 25 65.523453 45 1 24 2 2 6 1731 1461 9 185 0.000000 vrerrstesseso75 1 24 2 2 7 1717 1659 20 50 7.121399 06h5 1 24 2 2 8 1733 1823 5 101 0.000000 scores 1 24 2 2 9 1717 1929 20 36 9.076721 “PE5 1 24 2 2 10 1717 2008 24 44 71.529007 FITS 1 24 2 2 11 1715 2061 21 45 71.662880 KO5 1 24 2 2 12 1717 2132 19 62 0.000000 ¥O00Z5 1 24 2 2 13 1733 2361 4 109 32.582748 TTT5 1 24 2 2 14 1732 2475 5 165 0.000000 wavrarseseene5 1 24 2 2 15 1714 2643 24 92 0.000000 opaod5 1 24 2 2 16 1714 2744 25 91 0.000000 Supyeg4 1 24 2 3 0 1679 785 38 2050 -1 5 1 24 2 3 1 1696 785 21 25 92.313370 £05 1 24 2 3 2 1687 954 4 34 0.000000 75 1 24 2 3 3 1691 1061 24 10 23.297493 75 1 24 2 3 4 1695 1081 20 32 69.280121 OF5 1 24 2 3 5 1694 1309 20 27 33.298172 OH5 1 24 2 3 6 1679 1416 43 165 16.209343 ST5 1 24 2 3 7 1679 1666 43 66 35.523834 BRT5 1 24 2 3 8 1692 1941 19 24 0.000000 PI5 1 24 2 3 9 1696 1976 19 23 0.000000 d5 1 24 2 3 10 1692 2008 24 44 66.645065 IT5 1 24 2 3 11 1690 2062 22 44 66.645065 XO5 1 24 2 3 12 1691 2133 21 62 35.652428 906085 1 24 2 3 13 1695 2601 19 82 74.628548 Sdnids5 1 24 2 3 14 1679 2693 35 142 0.000000 surueqoeag3 1 24 3 0 0 1660 766 33 2068 -1 4 1 24 3 1 0 1660 766 33 2068 -1 5 1 24 3 1 1 1671 766 21 73 45.624847 TG5 1 24 3 1 2 1670 908 21 155 0.000000 STITT5 1 24 3 1 3 1666 1079 27 61 41.693062 BELTS 1 24 3 1 4 1668 1316 24 64 33.087456 SITS 1 24 3 1 5 1667 1861 24 133 0.000000 “77"HL'd SIT XO 16608 03 Apead ‘syr0ssoqy m0) _. 8% , z - gtd5 1 24 4 1 8 1641 2009 24 44 0.000000 ‘TT5 1 24 4 1 9 1639 2062 22 45 76.027863 XO5 1 24 4 1 10 1641 2134 20 62 66.517380 196085 1 24 4 1 11 1656 2639 4 33 9.290253 ~~ 7T10 BupHooD, Or" TrrrT7 Tee 'T , Ter Trier d SIE XO 1960z {7778eg09 peysvoy Oo . TT gee . 4, 92 rroeerere SI “a ‘ZIT XO 22802 ; eaengnrenenes s101390q . o AUPIp Hos Aq sn 10} you ‘soseq ebe19aog pmnbyy 19°00 rrteeeeetaes #9 CM nmereresticenre gras rrrerootts SI d SIE KO Ug0y ee SJOBI}XE SUPOABLT Tg" 806R .: &66 'T ~77779z °'d ‘BOT KO F980) TTT *""OS[BUUOABU PUB BUISSeIP PByEg 06° cone 66, egos 04BUIO Jdeoxe Seones. 7eOTAT oF * 06% SB Q9T 'T 2902 ““sponpoid pepyojd Jeyjo pus sepyoT Z0'L Cttetatad bhheiaiell: |-74 T8h mmmeresrrrrrr gegy treed BOT KO BROT Te Reena Soxyar dnog Faced 906 ‘2, - BBS POPE. 8. BGR Tos dd “BOT XO gegom TTT Searlesoid pus ‘sepjef ‘arer 90° Ts L600 BIS LOD. THEA BOL KO gees ore erent SeONBS 0}BUIOT, To" 989 09 saofnt yay peuusn (2) 022 ‘6 GO BB... GUS TTT ee A ‘BOT XO seeoy Tt r cere cree SeTquiesoa pomusy ¥0" 960 ‘9 Ss LG. BIB | TTT TTT A ‘VOT KO «reeds sya peuued 90° 266 ‘8 88 -"sub0q Ap peuuep . . ‘ . ‘ -""sor[sIoeds peuus:

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(spussnoy}) . . onyeA 2848p Jo eomog peuyqmioo Uojxeg (spuBsnoy}) (spussnoq}) ~ yequmu uoyxeg = aDTIGBog pues copqveg.-. .,U0Jxeg. =. , edpWwog SIosseod01d [[® [810.1 qtstp-g syonpoid A100013 AIC. - ois - ‘LOGT bulinp uojxzag pun 20100 hq poss200ad 1010) ay} {0 aLDYS PUD aNjDA ay} YZ pud ssossaz0Ld oUsamop 770 fo INIA 10407 OY2 YIM “OD uotag uYyoOLr fq passovoud.aq DIS 726up-9 D UO payissnjo ‘sjonpodd fi1200L6 Aap fo (woronposd 40) syuamudrys fo anjoa ayy BEATRICE FOODS CO. 517 481... : Opinion OPINION OF THE COMMISSION By Dennison, Commissioner:

This matter is before the Commission on cross- -appeals by both the respondent and counsel supporting the complaint from the initial decision of the hearing examiner finding a violation of Section.7 of the Clayton Act and ordering divestiture.

. The complaint in this matter was issued on April 380, 1970, and alleges that respondent Beatrice Foods Company (“Beatrice”) violated Section 7 of the Clayton Act? when it acquired the. assets. of John Sexton & Co. (“Sexton”) on December 20, 1968, The complaint, although referring to alleged anticompetitive effects in institutional frozen food wholesaling, focuses primarily on “institutional dry grocery wholesaling” as the line of commerce affected by the merger. The complaint states that. Sexton was a food wholesaler distributing dry groceries. to institutions which prepare and. serve meals away from home to the consuming public. Such institutions include res- . .taurants, clubs, hospitals, schools, colleges, industrial feeding concerns, airlines, hotels and other purveyors of prepared food services. Sexton did not distribute to the retail grocery trade, ze., supermarkets or other grocery store outlets.

The complaint alleges that Sexton sold dry groceries to institutions located in a large number of Standard Metropolitan Statistical Areas (SMSA/’s), and alleges that as a result of the acquisition competition in the “institutional dry grocery wholesale industry and/or in the institutional frozen food wholesale industry” would be substantially © lessened in various ways including the elimination of potential competition between the companies in these industries. Hearings on the complaint were held in Chicago, Illinois, and on May 17, 1971, the hearing examiner filed his initial decision finding a violation of Section 7 and ordering divestiture by respondent of the assets and business obtained as a result of the Sexton acquisition. The following salient facts are essentially undisputed by the parties. The Acquiring Company Beatrice is a large, diversified corporation which had its origins in the dairy business. In Beatrice Foods Co., FTC Docket No. 6653 (April 26, 1965) [67 F.T.C. 473], the Commission found based on 1959-1960 data, that Beatrice was the third largest dairy company in the United States. During its fiscal year ending February 29, 1968, 1The complaint also alleges that Section 5 of the Federal Trade Commission Act was violated by the acquisition, but none of the issues in.the case depends upon the inclusion . of that count in addition to the Section 7 count. 518 FEDERAL TRADE COMMISSION ‘DECISIONS .

. Opinion st FC.

about 45 percent of ‘its net sales were derived from sales of dairy products, about 37 percent from grocery and confectionary products (sold mostly to the retail grocery trade) and about 10 percent represented rentals from its public refrigerated warehouses. “It also engages in the agri-products business and has’ chemical, manufacturing, and ‘international divisions which by 1970 accounted for over 30 percent of its sales. Non-food products now sold’ by Beatrice — range from house trailers to skis. Beatrice’s net sales for fiscal year ending February. 29, 1968 were $1,052,431,480 with total assets of $343,- 446,290. Beatrice was ranked 83d in‘a list of 500 largest industrial corporations in“1969 in terms of sales and 203d in terms of assets. “The Beatrice Grocery Products Division was created by acquiring over the years'a large number of relatively” small “specialty food” processors, ‘A list of these acquisitions is set forth in the Initial Decision at p. 490 n.2. These “specialty foods” include such diverse items as Chinese foods, Mexican foods, pickles, mints, candy, nuts, and other products. Most of these products are processed and sold directly ‘to the retail grocery trade. However, it sells some of these products to the institutional trade either through’ its brokers or through. institutional grocery wholesalers. These sales in 1967 amounted to approximately $18 million and represented less than 2 percent of its dry foods business. It also sells bakery products and frozen foods to the ‘institutional trade in Chicago with total sales of about $12 to $13 million.

The Acquired Company Sexton had been distributing processed dry foods to the food service industry for many years prior to the acquisition. Sexton was originally established in 1883 in Chicago, Illinois. Its principal place of business -is in Chicago. Prior to the merger it operated 13 warehouses which served as distribution centers throughout most of the United States. These warehouses were located in the following cities: Atlanta, Boston, Chicago, Cincinnati, Dallas,. Detroit, Los Angeles, New York, Orlando, Philadelphia, Pittsburgh, St. Louis, and San Francisco. The St. Louis warehouse was opened in 1968. Nearly all of the products distributed by Sexton were sold under its own trade names and labels. About 25 percent of the products it distributed in 1968 were manu- ‘factured or processed (packed, bottled or canned) by Sexton in its ‘own plants. It does not handle any frozen or fresh products. During its fiscal year ending June 28, 1968, Sexton had sales of $91 million. Its assets amounted to $28 million. Net earnings that “year amounted to $2 million. .

““BHATRICE' FOODS0. 519 4810 - Opinion Prior to the merger the amount of sales made ‘by Beatrice’s dry _ food processing plants to Sexton was about: $1 million ‘a. year or: less. Subsequent to:the | acquisition Sexton:has. remained a separate division within’ Beatrice. The examiner found and the record indicates’ that sales. by” Beatrice-owned plants to Sexton have remained relatively ~ small; that Beatrice processors continue to sell primarily to the retail grocery trade and only incidentally to the institutional trade. Dry foods. for the institutional trade are generally packed in much larger size cans (#¢10 cans) than those supplied to the retail grocery trade, and the record indicates that different canning: machinery 1 is: used i in ‘such Gperations. | The Acquisition: Ba On or about December . 20, 1968, Beatrice soquited the business assets of Sexton, paying approximately $37,500,000 in preferred. con- -yertible shares of Beatrice capital stock for common stock of Sexton. ‘The president of Beatrice testified that among the reasons which interested Beatrice. in. the acquisition was that Beatrice wanted to. get into the wholesaling business of the ‘rapidly growing multi-unit. food service organizations, believing’ ‘there was, tremendous, growth in this type of account. He stated :

As we looked around, we saw other “food companies, the Krafts and the General Foods and Consolidated Foods and many others that had established ‘the institutional business over the years. They had products where they were branded. They had the Kraft brand or they had the General Foods brand and they were accepted. They had sold some of these over the years through distributors but now were in this fast growth of the multi-unit accounts which would become almost a national type of selling crossing geographic lines. They had gone direct to their own sales force and gone beyond the distributor and developed their own direct business with their own sales force. We just felt that if we didn’t get into this and get a foothold. that we were passing up a very important segment of the food business. ‘He further explained :

Here we are, a food business. We had been oriented to, as I say, supermarkets and the retail. Here is a fast growing part of the business with more of the food dollar being spent away from home year after year and we were not init.

He stated that another reason which prompted the acquisition was © that it would increase Beatrice’s earnings per share about four or five percent aided by “pooling of interest” accounting.” 4It has frequently been noted that one of the incentives for acquisitions by diversified companies is to increase earnings per share on common stock. This occurs when the company which is being acquired has a lower price-to-earnings ratio than the acquiring company. Simply through acquisition of such a corporation the first company can immediately increase its earnings per share and usually the value of its stock on the market. See, e.g., Scherer, Industrial Market Structure and Economic Performance 114 (1970) ; Staff Report to the FTC, Economic Report on Corporate Mergers 122-138 (1969). 520. FEDERAL TRADE: COMMISSION - DECISIONS Opinion . 81 F.T.C.

The Institutional Distributor -- The institutional distributor isa. distributor of food and: other sundry products to institutional food purveyors. The distributor provides an often necessary link between food manufacturers and eating institutions, warehousing the goods purchased from. the former and redistributing them to the latter.

The: institutional wholesale industry has been. recognized asa separate and distinct industry. It has its own trade publications and is the subject of at. least three trade directories, one in preparation at the time of the hearing. Institutional wholesalers have different. margins than wholesalers selling to food stores and provide different, specialized services. As previously noted, this industry. deals with special institutional packs, commonly the #10 can in. fruits, juices, and vegetables, to. the virtual exclusion of consumer size packs. Some institutional wholesalers ‘specialize i in selling only dry grocery. products and. others specialize in selling only frozen. or ‘fresh food prod- “ucts, Others distribute both frozen and dry products. In recent years ‘there. has been a. tendency for dry product distributors to diversify into. frozen products and frozen food distributors to handle some - types of dry products.

I RELEVANT PRODUCT MARKET DEFINITIONS ASSERTED As previously noted, Sexton specialized in distribution of “dry” groceries to institutions. Dry grocery products are processed, packaged foods, including all foods canned in tins or glass or preserved in a dry state, but excluding fresh or frozen products, such as fresh or frozen meat, fruit, vegetables, fluid milk, and bread. Dry food products distributed by Sexton include canned fruit, vegetables and fruit juices, which account for about 32 percent of total sales, canned meat, canned fish, coffee, tea, fountain supplies, jams and jellies, cookies and crackers, fats, oils and shortenings, pie fillings, mayonnaise, and other ‘salad dressings, Chinese foods, sauces, soups, and soup bases, nuts and paste products. The parties have also included within dry food sales other items which are commonly distributed by such wholesalers such as detergents, disinfectants, and paper products. Institutional wholesaling can be sub-categorized in various ways, such as “full line institutional wholesaling,” “cash-and-carry operations,” and specialty wholesaling such as to Italian restaurants and ‘pizza parlors. Furthermore, the record shows that a new type of selling has grown in recent years: wholesaling to “multi-unit food service organizations,” known as “MUFSO” in the trade (and hereinafter BEATRICE. FOODS: CO. 521 481 . Opinion .

so referred to). Examples of MUFSO accounts would be chain restaurants, fast-food franchising systems, airlines, ete. Respondent contends that customer preferences between dry, frozen, and fresh forms of foods have virtually disappeared in MUFSO accounts so that dry, frozen and fresh foods should be considered a as one “product market” in wholesale sales to these institutions.

In alleging full line institutional dry grocery -wholesaling as the line of commerce primarily affected by the acquisition, the complaint defines this industry “as characterized, on the whole, by (a) the solicitations of orders by a street salesman, (b) the extension of credit by the wholesaler, and (c) the delivery of dry groceries to the premises of the purchaser, either by common carrier or in the truck of the. seller.” Oo .

_ During the hearings it became evident that the above definition refers to only one particular (but nevertheless substantial) segment of institutional wholesaling. This segment, as the definition suggests, centers around the solicitations and activities of street salesmen on the premises of customers:in local markets and.is sometimes. referred. to as “traditional” wholesaling operations.

On the other hand, sales to MUFSO accounts do not generally involve the use of street salesmen. Trained salesmen, more sophisticated than the usual street salesmen, are required, orders are generally larger in volume, and sales are made directly with the home office of the MUFSO account, sometimes on a competitive bid basis and sometimes in competition with food manufacturers. These accounts often require a different distribution system, such as deliveries to central kitchens or commissaries. Some wholesalers sell exclusively to MUFSO accounts and therefore do not employ street salesmen. The record shows that MUFSO-type wholesaling commenced around 1958 and has grown rapidly. A 1970 analysis of MUFSO expansion by a trade publication estimates that retail sales from 1965 to 1970 by the top 400 MUFSO accounts increased from $8.7 billion to $17.4 billion (CX 71). In 1958 Sexton had less than 3 percent of its sales to multiple chain businesses. By 1970, MUFSO sales represented one-third of all the company’s business. Data suggests that at the time of the hearing nearly 50 percent of sales by all institutional wholesalers were to MUFSO accounts (RX 29J). The distinction between the traditional business and the MUFSO business has been emphasized throughout this case by respondent, which concedes that although it was a potential entrant into the 494-841—73 34 522 FEDERAL TRADE COMMISSION : DECISIONS Opinion 81 FTC.

MUFSO wholesaling. business, it was not interested in the “tradi> tional” line of wholesaling.* push ce IL ASSERTED GEOGRAPHIC: MARKETS On the question of the relevant. geographic market complaint counsel presented figures as to Sexton’s market shares in dry institutional sales, first as to the Chicago Standard Metropolitan Statistical Area (SMSA),.which consists of the six Tllinois counties of Cook, DuPage, Kane, Lake, McHenry, and Will. Second, complaint counsel submitted proposed findings as to Sexton’s.share of national sales of ‘dry grocery products by institutional wholesalers. co The hearing examiner rejected. complaint counsel’s calculations of marketshare figures as to the Chicago SMSA. He noted that they had included the sales of only 25 institutional dry food wholesalers doing - ‘business in Chicago, whereas respondent had presented evidence. indi- ‘cating that there are about 80 such wholesalers and 75'to 100 frozen food institutional distributors in Chicago, some of which appear to sell dry groceries.* In the examiner’s view, complaint counsel had failed to establish by reliable evidence a complete universe of sales in the Chicago area and that any conclusion as to market share or concentration ratios for Chicago was not possible on the evidence presented.

As to Sexton’s share of a “national market,” the parties offered conflicting calculations. Not finding either set fully persuasive, the examiner averaged the calculations and found that Sexton was probably selling somewhere in the neighborhood of 1 to 4 percent of the total dry grocery institutional wholesale sales in the United States 3 The hearing examiner’s findings on this point are inconsistent, or at least ambiguous, Accepting the testimony of Beatrice’s president, the examiner expressly found “that the real reason for the merger with Sexton was to get into the rapidly growing MUFSO business * * * and that had Sexton been only in the traditional street salesman type of wholesaling, Beatrice would not have peen interested in the acquisition” (I.D., p. 14 Ip. 498, herein]). In other parts of his decision he construes the line of commerce in the ‘ease as limited to the traditional street salesman type of wholesaling as defined in the complaint (I.D., p. 13 [p. 497, herein]). Yet he ultimately concludes without elaboration or explanation that Beatrice was a potential entrant into this line of business as well as the MUFSO business (I.D., p. 23 [p. 504, herein]). He also agreed with respondent that frozen and fresh foods fully compete with dry foods in sales to MUFSO accounts and dry foods should not, in that segment of wholesaling, be considered a separate product market. Yet he based his final conclusion of violation on national market data entirely limited to dry products. : : .

4 Respondent also argued, inter alia, that complaint counsel’s market was tailored geographically to “traditional” wholesaling. Respondent contends that sales and deliveries to MUFSO accounts take place from a large area surrounding Chicago that is not limited to the SMSA.

‘BEATRICE FOODS -CO. — oe 523 481 Opinion at the time of the acquisition and that it was the largest institutional dry wholesaler in the United States.* 5 1 ULTIMATE CONCLUSIONS: BY THE HEARING EXAMINER . nee hearing. examiner concluded that the record showed that: . “The institutional wholesaling business is substantially . fragmnenied with active competition for the institutional.trade, both the traditional trade and the more recently developing Mufso organizations” (Initial Decision, p. 22 [p. 504, herein ]). 2: “The institutional wholesaling trade is not characterized as: ‘being conventrated in the hands of. any few large organizations” (p. 22 2 [P. an herein]).

. “The record does not permit a - finding that Beatrice has conferred upon Sexton any advantages so significant as substantially to lessen competition in the institutional dry wholesale trade” (p..23: [p. 504, herein]).

- 4, Beatrice and Sexton were. not competitors at the. time ofthe acquisition (pp. 3-6 [pp. 489-92, herein] ).’ Notwithstanding the above findings, the hearing. examiner held. - there was a violation of Section 7 resulting from the merger, based on the finding that Beatrice was a “likely or potential entrant” 1 in institutional dry wholesaling and that Sexton was a leading firm in that trade (Initial Decision, p. 24 [p. 505, herein]). The hearing examiner was apparently of the view that these two factors alone constitute a basis for finding a violation of Section 7 despite his findings that institutional wholesaling is “substantially fragmented” and there is “active competition” in that business.

Iv ISSUES ON APPEAL ‘A. Removal of Beatrice as a Potential Competitor in Institutional Dry Food Wholesaling Both parties have appealed. Respondent argues that the hearing examiner, in addition to erring in not confining the case to MUFSO wholesaling, has erroneously adopted a per se standard for potential competition cases that is even more stringent than the standard applied in mergers between actual competitors; that a merger between 5 We find no evidence in the record to support the hearing examiner’s conclusion that Sexton was in fact the largest institutional dry wholesaler in the United States and respondent disputes it. It appears, for instance, that Consolidated Foods Corporation may have greater dry food wholesale sales to institutions than Sexton. There is no dispute, however, that Sexton is one of the largest institutional dry food wholesalers in terms of national sales, 524. _ FEDERAL ‘TRADE. COMMISSION . DECISIONS, Opinion 81 FT-C..

a potential entrant and a firm having 1 to 4 percent of sales in an. industry which is characterized by low concentration and ease of entry does not substantially lessen competition.

Complaint counsel, conceding that, national sales are not concentrated, have appealed also, urging the Commission to supplement the examiner’s findings on the basis of higher concentration figures which they proferred as to various Standard: Metropolitan Statistical Areas in the country.° Although proposed caleulations as to Sexton’s market shares’ in many of those areas are submitted by complaint counsel, the. respond- - ent disputes the priority of using SMSA’s as geographic markets for the institutional wholesaling industry (as well as Sexton’s purported market shares in these areas). It further objects to arguments based on any local markets outside of the Chicago area and points out that early in the hearing the examiner confined complaint counsel to the Chicago SMSA. Complaint, counsel themselves stated: “Because of the large size of its eating place sales, the Chicago SMSA. was chosen by complaint counsel'as the one area of the country in which the impact of the Beatrice-Sexton merger would:be presented through the introduction of detailed statistics showing the sales of all dry grocery wholesalers operating within the market” (Proposed Findings, p. 36). It seems clear that to examine any other market areas would require a remand since the respondent, relying on the examiner’s ruling, has not had opportunity to present any evidence in defense concerning areas of the country other than that surrounding and serving the Chicago area. Also, we note that complaint counsel’s calculations of. the universe of dry product sales in these other SMSA’s rest ultimately on the correctness of their universe figure for Chicago. The latter was rejected by the hearing examiner, as noted below. Accordingly, we will confine our analysis to the evidence relating to the Chicago area. There is, furthermore, no reason to believe that conditions in other urban markets would be substantially different than the Chicago market.

Chicago SUSA Complaint counsel subpoenaed some 25 institutional dry wholesale grocers, including Sexton, who sell in the Chicago area and obtained from each company the portion of their sales to customers located * Complaint counsel also concede.on appeal that since wholesale deliveries are local or regional in scope little is gained by looking at concentration figures on a national level in this case since they obviously. understate the degree of concentration in true economic markets. For an illuminating discussion on the need to adhere to meaningful and consistent geographic market definitions, see Elzinga & Hogarty, ““‘The Problem of Geographic Market Delineation in Antimerger Suits” (Paper delivered before the Southern Economic Association, November 1971).

“BEATRICE FOODS CO: 525 ‘481° ° : Opinion within the Chicago‘ SMSA for 1968 and 1969. According to these latter figures Sexton had 16.18 percent of the sales of dry groceries in 1968 and 15.23 percent.in 1969 in the Chicago SMSA. In 1968 it. was the second largest seller and in 1969 it was the third largest. 7 If these companies’ sales are accepted as the universe for this market area, they would establish a four-firm concentration ratio of about . 59 percent and 57 percent and an eight-firm concentration ratio of about 79 percent and 78 percent for 1968 and 1969, respectively. As indicated, however, the examiner refused to accept these figures as representing a complete universe of sales for the Chicago SMSA. He noted, among other things, that respondent-had presented evidence to the effect that there are about 50 or so additional institutional wholesale food distributors in Chicago not called by complaint counsel and that there were 75 to 100 frozen food institutional distributors which were never called, some of which probably sell dry groceries. In. addition, he noted ‘that respondent claims that there are other wholesalers outside of Chicago who come into the Chicago SMSA and make sales. He found that complaint counsel had failed to’show that they made an exhaustive listing of distributors in the Chicago area and that the evidence brought forward by respondent, and not refuted by complaint counsel, compelled a finding that sales by these 25 wholesalers was not a complete universe: “Consequently any conclusion as to market shares of concentration in the Chicago SMSA as requested by complaint counsel is not possible” (Initial Decision, p. 17 [p. 500, herein]).

Complaint counsel challenge this refusal of the hearing examiner to accept their market share. statistics. They note that the 50 or so. additional Chicago institutional distributors cited by the examiner are simply listed by name in a trade directory of institutional distributors placed in the record by respondent and the directory does not indicate whether they sell dry, frozen, or fresh grocery products. They further contend that the reason they were not called as witnesses or otherwise included in the market statistics was that none of the wholesale distributors who were called to the witness stand referred to these 7In 1968, Sexton was outsold by B. A. Railton Co., which had 18.94 percent of complaint counsel’s view of the market. Holieb & Company was third with 14.81 percent and Consolidated Foods ranked fourth with 9.01 percent. In 1969, Railton was still first (with ‘18.59 percent). Holleb was second (15.30 percent) and Consolidated Foods fourth (8.31 percent). Total dry food sales of the firms listed by complaint counsel were $50,775,326 for 1968 . and $53,552,784 for 1969. See Appendix C to the Initial Decision. It should be noted that these figures (in accordance with complaint counsel’s view of the market) exclude sales made by these wholesalers to institutions outside the SMS'A; and sales made on a cashand-carry basis, sales by “specialty” wholesalers, and any dry food sales by firms classified as predominantly frozen food wholesalers. . . 526 FEDERAL TRADE... COMMISSION. . DECISIONS Opinion 81 FTC.

. others. when asked to name their competitors. Since they. were not named, complaint counsel argue that they should not be considered “significant” competitors.

On the other hand, in further support of the hearing. examiner’s rejection:of complaint counsel’s market share figures, respondent cites testimony by economists whom it called. They presented calculations based: in part. on, Census Bureau statistics which they claim indicate that nearly twice as many dry grocery sales were made by Chicagobased institutional wholesalers than. what.is represented by purchases by all institutions within the SMSA. From this respondent contends thatthe. Chicago. SMSA is too small an area to measure the Chicago wholesale market. Respondent: also. contends many wholesalers sell to customers. within Chicago but. have warehouses outside the SMSA area-and these. have not all been accounted for. _ If complaint counsel’s 25 wholesale. witnesses are accepted as representing the total. number of. significant competitors in the Chicago SMSA market (and if the ‘six- county SMSA. area is accepted as a “ proper geographic market) it: is clear that. this. market should be classified as concentrated since the top four firms would have aggregate sales approaching 60 percent of all sales in the market. On the other hand, if respondent’s calculations of the. probable universe of the relevant market—nearly double that of complaint counsel’s—is accepted, the top four would probably have 30 percent or less with no one firm having more than 10 percent. Ordinarily this would be considered as low in concentration.® While in some industries the difference between such disparate sets of figures as to number and size distribution of firms could be critical in determining whether an acquisition substantially lessened competition, we do not think it is necessary to decide in this case which, if any, of these two conflicting pictures of the market should be adopted. We find that complaint counsel have not shown that entry conditions in this industry are such that injury to competition can be inferred from elimination of Beatrice as a potential entrant. Ease of Entry as an Important Aspect of Market Structure in Evaluating Loss of a Potential Competitor ' Complaint counsel in essence attempt to rest their case on the existence of concentration ratios alone. The test for finding injury due to elimination of a potential competitor is not simple. Additional factors enter into any analysis of the loss of a potential competitor. Among 8 Bain, Industrial Organization 14-41 (2d.ed. 1968) ; Kaysen & Turner, Antitrust Policy 72 (1959).

“BEATRICE FOODS. CO; 2.2.) 527 ABL foe Opinion thése are: trends toward concentration in the market; extensive entry barriers; high probability that the lost. potential competitor would have. actually entered the market; whether the lost. potential competi; tor was one of only a few such potential competitors and whether, if he had entered ‘the market, his. new compétition would. have had.a - significant impact on price and. quality. Although the number. of competing firms or trends toward concentration may be enough without more to condemn many horizontal mergers between existing rivals in a market, thé condition of entry by new firms as well as these other factors mentioned above must be considered when dealing with elim-. ination of a potential .competitor.° Even though elimination of a potential competitor may. have’ substantial. anticompetitive’ effects, unlike a merger between actual competitors, it does not increase-one firni’s existing share of the market or eliminate actual competition. The distinction between the two types of competition—actual and potential competition—must not be lost sight of.7° eee Injury to competition solely by removal of a potential entrant comes about by one or both of two ways. First, the existence of a potential competitor may bea significant competitive force in itself éven though actual entry never dccurs. Leading firms in a concentrated market may limit their prices and profit, margins so as to deter entry’ by other | ® Professor Bain, who has pioneered much of the economic study in the area of potential competition, considers the condition of entry into the market, not simply the ‘degree of concentration in the market, as determining the influence potential competitors will have on market behavior:

“Both seller concentration and product differentiation among established sellers in an industry presumably influence the market relationships among these sellers. The condition of entry into an industry, on the other hand, determines the competitive relationship between established sellers and potential entrant sellers, and thus in a sense the force of potential or latent competition by new entrants.” Industrial Organization 251 (2d ed. 1968) (emphasis in the original.) ' (he fact that a market may be characterized as concentrated is not necessarily inconsistent with low entry barriers. In his study of 20 concentrated industries in which entry barriers ranged from “‘moderate-tolow” to “very high” Bain found evidence suggesting ‘that firms in the lower-barrier concentrated industries were limiting their prices and profits to that near a competitive level. He concluded “* * * that seller concentration alone is not an adequate indicator of the probable incidence of extremes of excess profits and monopolistic output restriction. The concurrent influence of the condition of entry should clearly be taken into account.” Barriers to New Competition 201 (1956) (emphasis added). See also Mann, Seller Concentration, Barriers to Entry, and Rates of Return in ‘Thirty Industries, 1950-1960, 48 Review of Economics and Statistics 296 (1966). 10 Ag this Commission stated in an earlier case against the same respondent involved here: “[B]elimination of a substantial competitor may still be undesirable from the standpoint of maintaining competition, for it can bring the market structure closer to a condition of such concentration that anticompetitive effects become foreseeable. * * * But the absorption of a potential competitor in such a market is likely to have much less competitive significance. If the market is competitive in structure, prices are likely to be at a ‘competitive level. * * *’ Beatrice Foods Co., 67 F.T.C. at 716-17 (1965)..In that case, involving the dairy industry, the Commission found substantial barriers to entry as well as a trend toward concentration. See also American Brake Shoe [1967-1969 Transfer Binder] Trade Reg Rep. ,18,339 (1968) at: 20,716: “Actual and potential competition are not * * * interchangeable concepts.”

528 FEDERAL TRADE COMMISSION - DECISIONS Opinion 81 FVE-C.

firms. Where it is known that entry barriers are high and the number of probable entrants few, removalof a likely entrant may seriously dilute this only competitive check on monopolistic pricing. United States v. Penn-Olin Co., 378 US. 158 (1964). Second, elimination of a potential competitor would eliminate the chance that the firm might have entered the market de novo, adding greater pressure for competition. Ford Motor Co. v. United. States, 405: U.S. 562, 567-68 (1972). It is clear, however, that the evidence in this record fails to meet the conditions of a potential competition test: in the instant case the number of potential competitors besides Beatrice was sufficiently large and ‘entry sufficiently easy in the institutional dry grocery -market that loss of Beatrice as a potential competitor could not be considered to have had a significant effect on. competition. The condition of entry into the market has been clearly recognized. in the decided cases under Section 7 as a highly important structural variable when dealing with the market effects arising from the merger between potential competitors. In United States v. Penn-Olin Co., supra, 378 U.S. at 164, 175. (1964), the Court noted the existence of entry-barriers: Other than Pennsalt and Olin Mathieson who had entered by joint venture into the manufacture of sodium chlorate in the heavily concentrated Southeastern United States market, “few other corporations had the inclination, resources, and know-how to enter this market” * * * “During the previous decade no new firms had entered the sodium chlorate industry. * * *” + In United States v. El Paso Natural Gas Co., 876 U.S. 651 (1964), it was apparent that considerable resources were needed to build expensive interstate pipelines and the Court noted that after long-term distributing contracts were entered into with wholesale customers, market areas were effectively withdrawn from further entry (376 U.S. at 660, 662). See also Ford Motor Co. v. United States, supra, 405 U.S. at 571 (acquisition of manufacturer of spark plugs eliminated, inter alia, potential entry of Ford into aftermarket having “virtually insurmountable barriers to entry”).

Barriers to new entry were found in Commission cases which involved loss of potential competition. In Procter & Gamble, 63 ¥F.T.C. 1465 (1963), the Commission found that prior to the merger, requirements of national distribution and advertising which “make for dominance by Clorox of its rivals also make formidable barriers to new 11 (Sentence order reversed.) Following remand and upon submission of additional evidence on the question of whether either company would have entered the market by building a plant, while the other would have remained a significant potential competitor, the district court dismissed the complaint, 246 F. Supp. 917 (1965). This was affirmed by an equally divided Supreme Court, 389 U.S. 308 (1967). BEATRICE FOODS CO: . 529 481 : Opinion entry * * * The conclusion. seems inescapable that at the'time of the merger, the industry was concentrated, and barricaded to new entry, _ to a degree inconsistent with effectively competitive conditions” (pp. 1562-63). Entry barriers were noted in the Supreme Court's: affirniance, which concluded that Procter: was the “mest likely entrant” and’ “the number of potential entrants was not so large that: the elimination of one would ‘be insignificant, ” 386 U.S. 568, 579, 581: (1967).? See also Justice Harlan’s concurring opinion in that ease in which he reviewed at length the importance of barriers to entry in assessing the competitive impact resulting from the removal of a potential entrant. _ In the market-extension cases in the dairy industry, the Commission found barriers to entry due to economies of scale from new costsaving technologies that could be- utilized only by: a few: larger dairy firms. In Foremost Dairies, Inc.; 60 F.T.C. 944, 1088-89 (1962), the Commission found :

The decline in fluid milk distributors, the increasingly harsh technological and market factors confronting small businesses, the advantages going to firms with large financial resources, all indicate that small dairies are having an incréasingly .difficult time. This speaks ill for the prospects of new entrants in this industry. As pointed out above, in decades past new competitors could enter this industry relatively easily. But, today, technology.and other factors have created substantial barriers to prospective entranis. Technological barriers to entry in the dairy industry were detailed in even greater length in Beatrice Foods Co., 67 F.T.C. 4738, 709-714 (1965), where it was observed that “Barriers to entry have reached a point. where, it would appear, only a substantial firm.can.be-reckoned a real competitive factor in this industry—and, as we have noted, after the big eight there are very few substantial firms.” (Jd. at 712 and see p. 714.) In Kennecott Copper Corp., 8 Trade Reg. Rep. J 19,619 (1971), afd 467 F.2d 67 (10th Cir. 1972), the Commission determined that in the industry under consideration high barriers to entry existed and this was cited as a factor co-equal with the rapid trend toward concentration found in that case (p. 21,667). See also Papercraft Corp., 8 Trade Reg. Rep. § 19,725 at 21,770 (1971) [78 F.T.C. 1352]; The Stanley Works, 3 Trade Reg. Rep. 19,646, at 21,698-99 (1971) [78 F.T.C. 1023]; and Bendix Corp., 3.Trade Reg.. Rep. 12-'The Court also upheld the Commission’s order. on. the: ground. that. Clorox:,was: entrenched as the dominant seller of liquid bleach by the acquisition, even aside-from the elimination of Procter as a potential entrant. See General Foods Corp. v. Federal Trade Commission, 386 I, 24 986, 945 (3d Cir. 1967). In a later part of this opinion we deal with complaint counsel’s contentions that, aside from removal of Beatrice as a potential entrant, the Beatrice-Sexton merger injured competition by “entrenchment” effects. 530: FEDERAL TRADE “COMMISSION “DECISIONS Opinion’ 81 F.T.C.

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2010 38 19 96.145439 2484 1 13 2 15 0 1399 2030 701 28 -1 5 1 13 2 15 1 1399 2030 12 19 96.997505 25 1 13 2 15 2 1984 2034 17 24 94.611420 2,5 1 13 2 15 3 2008 2034 42 24 90.835342 087,5 1 13 2 15 4 2056 2034 44 22 72.463089 874.4 1 13 2 16 0 1397 2056 696 27 -1 5 1 13 2 16 1 1397 2056 12 19 96.912506 35 1 13 2 16 2 1982 2060 17 23 96.074852 1,5 1 13 2 16 3 2006 2060 42 23 96.074852 828,5 1 13 2 16 4 2054 2060 39 19 96.684387 4444 1 13 2 17 0 769 2074 1324 35 -1 5 1 13 2 17 1 769 2074 137 25 93.283455 Cambridge5 1 13 2 17 2 913 2075 76 22 89.789780 Coffeé5 1 13 2 17 3 995 2093 8 2 24.447639 -5 1 13 2 17 4 1397 2081 10 19 87.762680 15 1 13 2 17 5 2005 2085 88 24 79.894493 841,0004 1 13 2 18 0 767 2099 1327 35 -1 5 1 13 2 18 1 767 2099 86 20 92.780365 Borash5 1 13 2 18 2 859 2117 36 3 47.055939 --_5 1 13 2 18 3 1398 2106 12 19 96.973022 25 1 13 2 18 4 2005 2111 43 23 94.372917 434,5 1 13 2 18 5 2056 2110 38 20 94.372917 2044 1 13 2 19 0 767 2122 1333 44 -1 5 1 13 2 19 1 767 2122 56 24 78.094086 Fox:5 1 13 2 19 2 829 2122 60 29 52.945938 River5 1 13 2 19 3 962 2125 3 3 0.000000 c5 1 13 2 19 4 1400 2132 10 18 96.061844 15 1 13 2 19 5 1969 2158 2 3 0.000000 .5 1 13 2 19 6 1986 2128 11 42 25.660629 ,5 1 13 2 19 7 2006 2136 94 30 75.937317 767,468,4 1 13 2 20 0 766 2147 1333 59 -1 5 1 13 2 20 1 766 2147 68 44 61.772800 Johns 1 13 2 20 2 843 2150 98 38 17.337105 Sexton.5 1 13 2 20 3 1399 2157 9 19 95.382072 15 1 13 2 20 4 1981 2160 18 33 84.576202 8,5 1 13 2 20 5 2007 2150 41 46 95.309013 158,5 1 13 2 20 6 2050 2156 49 50 76.367691 400°2 1 14 0 0 0 1430 1967 492 227 -1 3 1 14 1 0 0 1430 1967 492 227 -1 4 1 14 1 1 0 1430 1967 492 227 -1 5 1 14 1 1 1 1430 1967 492 227 95.000000 2 1 15 0 0 0 763 2197 1333 22 -1 3 1 15 1 0 0 763 2197 1333 22 -1 4 1 15 1 1 0 763 2197 1333 22 -1 5 1 15 1 1 1 763 2197 1333 22 95.000000 2 1 16 0 0 0 775 2222 309 50 -1 3 1 16 1 0 0 775 2222 309 50 -1 4 1 16 1 1 0 775 2222 309 28 -1 5 1 16 1 1 1 775 2222 2 2 75.103745 -5 1 16 1 1 2 790 2226 5 14 90.026398 15 1 16 1 1 3 802 2226 112 24 90.026398 Adjacent5 1 16 1 1 4 920 2228 24 20 95.922012 to5 1 16 1 1 5 951 2228 54 20 93.254509 each5 1 16 1 1 6 1011 2228 73 21 90.774338 cther.4 1 16 1 2 0 788 2251 161 21 -1 5 1 16 1 2 1 788 2251 9 15 93.746666 25 1 16 1 2 2 805 2252 49 20 93.746666 Not5 1 16 1 2 3 863 2252 86 20 91.247749 shown.2 1 17 0 0 0 763 2277 1331 127 -1 3 1 17 1 0 0 763 2277 1331 100 -1 4 1 17 1 1 0 788 2277 1306 53 -1 5 1 17 1 1 1 788 2286 79 26 69.610146 Note:5 1 17 1 1 2 876 2293 38 21 96.153587 No5 1 17 1 1 3 922 2277 146 47 96.725380 information5 1 17 1 1 4 1076 2295 88 20 34.176300 shown5 1 17 1 1 5 1162 2301 26 15 34.176300 as5 1 17 1 1 6 1197 2282 30 35 49.390633 to5 1 17 1 1 7 1228 2286 100 31 91.494202 numbers 1 17 1 1 8 1336 2294 22 24 97.004234 of5 1 17 1 1 9 1366 2289 139 31 87.022629 warehotises5 1 17 1 1 10 1513 2299 47 21 96.297241 ands 1 17 1 1 11 1566 2282 80 48 89.884216 trucks5 1 17 1 1 12 1654 2287 33 33 96.786354 for5 1 17 1 1 13 1693 2301 42 20 96.133064 thes 1 17 1 1 14 1743 2300 113 25 96.459312 following5 1 17 1 1 15 1864 2300 62 21 93.298920 firms5 1 17 1 1 16 1938 2301 95 23 91.778168 (SMSA5 1 17 1 1 17 2035 2301 59 22 69.527885 sales4 1 17 1 2 0 763 2318 1328 35 -1 5 1 17 1 2 1 763 2317 25 19 97.007912 in5 1 17 1 2 2 799 2318 161 24 96.209785 parentheses):5 1 17 1 2 3 973 2319 163 23 96.587326 Consolidated5 1 17 1 2 4 1148 2321 73 20 96.946564 Foods5 1 17 1 2 5 1234 2321 142 27 95.190269 ($4,447,321),5 1 17 1 2 6 1391 2324 93 25 92.211090 Kraftco5 1 17 1 2 7 1496 2324 142 25 0.000000 ($3,216,982),5 1 17 1 2 8 1650 2325 21 20 92.442017 J.5 1 17 1 2 9 1685 2326 30 20 91.380249 D.5 1 17 1 2 10 1730 2325 57 21 96.752151 Rich5 1 17 1 2 11 1801 2325 41 21 95.765594 Co.5 1 17 1 2 12 1857 2325 125 27 96.021515 ($798,568),5 1 17 1 2 13 1993 2328 98 25 96.021515 Tenney4 1 17 1 3 0 763 2338 1288 66 -1 5 1 17 1 3 1 763 2338 59 33 96.214668 Sales5 1 17 1 3 2 829 2339 72 52 43.327904 (8600,5 1 17 1 3 3 902 2343 56 52 0.000000 45),5 1 17 1 3 4 973 2344 66 50 95.733704 Gages 1 17 1 3 5 1048 2345 64 21 96.837685 Foods 1 17 1 3 6 1124 2346 111 22 96.907631 Products5 1 17 1 3 7 1249 2338 42 30 96.769928 Co.5 1 17 1 3 8 1305 2338 64 35 87.522797 ($175,5 1 17 1 3 9 1372 2339 58 35 0.000000 182);5 1 17 1 3 10 1440 2349 40 22 96.413261 Bits 1 17 1 3 11 1492 2349 28 28 67.397125 0’5 1 17 1 3 12 1532 2340 70 31 0.000000 Gold5 1 17 1 3 13 1612 2342 74 29 96.633720 Foods5 1 17 1 3 14 1701 2350 122 25 93.988625 ($123,823),5 1 17 1 3 15 1837 2352 76 19 96.717224 others5 1 17 1 3 16 1907 2392 2 2 0.000000 s5 1 17 1 3 17 1928 2339 60 61 64.493668 ($3105 1 17 1 3 18 1989 2348 62 56 18.886444 000).2 1 18 0 0 0 760 2429 1329 173 -1 3 1 18 1 0 0 760 2429 1329 151 -1 4 1 18 1 1 0 779 2429 1310 52 -1 5 1 18 1 1 1 779 2440 5 6 25.087936 *5 1 18 1 1 2 797 2443 19 24 34.770523 385 1 18 1 1 3 823 2429 64 37 88.095406 For-5 1 18 1 1 4 890 2432 125 36 53.583431 ‘instance’5 1 18 1 1 5 1029 2443 26 25 96.240097 in5 1 18 1 1 6 1075 2448 71 25 96.150902 1968,5 1 18 1 1 7 1166 2448 96 27 96.700897 Sexton5 1 18 1 1 8 1277 2437 120 39 41.102676 Shipped:5 1 18 1 1 9 1403 2446 39 35 94.839836 $5,5 1 18 1 1 10 1443 2440 58 38 67.520348 211,5 1 18 1 1 11 1504 2452 49 22 89.823723 7135 1 18 1 1 12 1571 2452 28 22 94.783073 of5 1 18 1 1 13 1614 2454 48 24 92.635216 dry5 1 18 1 1 14 1678 2453 190 26 90.821449 groceries.outs 1 18 1 1 15 1876 2445 36 30 87.509758 ‘of5 1 18 1 1 16 1926 2454 36 22 96.037048 its5 1 18 1 1 17 1975 2446 114 34 74.352722 ‘Atlanta4 1 18 1 2 0 764 2454 1325 59 -1 5 1 18 1 2 1 764 2454 148 47 96.681221 warehouses 1 18 1 2 2 928 2480 43 21 96.813210 via5 1 18 1 2 3 985 2486 115 17 96.580849 common5 1 18 1 2 4 1113 2483 99 21 95.630463 carriers 1 18 1 2 5 1225 2484 52 21 96.240219 ands 1 18 1 2 6 1293 2484 149 26 95.787399 $2,920,7565 1 18 1 2 7 1457 2486 42 21 96.447578 via5 1 18 1 2 8 1514 2487 36 22 96.447578 its5 1 18 1 2 9 1565 2493 55 16 96.735405 owns 1 18 1 2 10 1636 2487 94 22 96.308777 trucks.5 1 18 1 2 11 1747 2488 76 21 96.786011 Totals 1 18 1 2 12 1838 2488 144 25 96.643227 shipments5 1 18 1 2 13 1995 2491 43 20 96.643227 for5 1 18 1 2 14 2046 2491 43 21 96.660042 all4 1 18 1 3 0 760 2513 1328 61 -1 5 1 18 1 3 1 760 2509 148 27 96.127434 warehouses 1 18 1 3 2 931 2515 88 24 96.353409 plants5 1 18 1 3 3 1048 2515 101 26 96.371002 (excepts 1 18 1 3 4 1174 2517 103 22 96.326546 Detroit5 1 18 1 3 5 1300 2520 57 20 95.248230 ands 1 18 1 3 6 1373 2518 51 23 95.934723 Loss 1 18 1 3 7 1446 2520 130 54 96.358322 Angeles)5 1 18 1 3 8 1596 2522 99 46 96.795273 totaled5 1 18 1 3 9 1715 2521 60 47 60.084476 $34.5 1 18 1 3 10 1776 2518 51 33 74.230721 688.5 1 18 1 3 11 1822 2522 62 47 49.699150 4305 1 18 1 3 12 1899 2524 51 21 35.459648 ‘via’5 1 18 1 3 13 1974 2530 114 16 95.457527 common4 1 18 1 4 0 763 2544 1136 58 -1 5 1 18 1 4 1 763 2548 96 42 95.635880 carriers 1 18 1 4 2 870 2548 50 42 93.579437 ands 1 18 1 4 3 915 2593 12 6 52.189564 15 1 18 1 4 4 936 2548 73 54 52.189564 $48,55 1 18 1 4 5 991 2544 55 53 76.522293 578;5 1 18 1 4 6 1051 2550 47 22 66.077225 7785 1 18 1 4 7 1112 2551 45 38 95.184677 via5 1 18 1 4 8 1168 2551 118 22 92.639046 Sexton’s5 1 18 1 4 9 1297 2553 110 24 93.250244 trucks.5 1 18 1 4 10 1398 2547 12 36 80.457047 :5 1 18 1 4 11 1591 2575 6 3 50.136929 45 1 18 1 4 12 1681 2575 11 3 43.120201 a5 1 18 1 4 13 1769 2572 36 8 23.479172 a5 1 18 1 4 14 1860 2573 39 2 5.499916 so2 1 19 0 0 0 897 2645 320 63 -1 3 1 19 1 0 0 897 2645 320 63 -1 4 1 19 1 1 0 897 2645 320 63 -1 5 1 19 1 1 1 897 2645 320 63 95.000000 -BEATRICE. FOODS CO.) 20. 7. E 531 481 0 2° Opinion:

~ Sources of supply at nondiseriminatory prices appear to be readily: obtainable, at. least no evidence was presented showing this ‘tobe a problem: Economies of scale do not: appear to be substantial." Although some differentiation undoubtedly arises from. established: customer relations and .good will associated with brands, there’is no: evidence that this is substantial. Witnesses testified that advertising . plays an insignificant part of this industry.** In contrast to retailers and-others. who sell to the public, wholesalers are more likely to compete in terms of price, quality, and service since they face more knowl-: edgeable customers.'This is particularly true ‘with. respect to the e sophisticated buyers for large MUFSO accounts. es 7. In addition; we note that for similar reasons wholesaling i in 1 general has been viewed by observers of American business as one of the most: competitively structured segments of industry..See, ¢.g:, Bain; Industrial Organization 277 (1968) ; Holton, “Competition and “Monopoly in Distribution,” in Competition, Cartels and Their Regulation (Miller, ed. 1962). One leading study of grocery wholesaling in Los Ange-' les concluded that ‘competition had: intensified over the: years: and that. institutional: grocety ‘wholesaling was the:most competitive segment of grocery’ wholesaling—a fact: that. was attributed: ‘to ‘ease’ ‘of entry. 16 That entry is relatively easy in institutional “wholesaling i is further indicated by the fact there have been recent and successful entrants in the Chicago area as well as other areas. Among complaint counsel’s 25 “significant” wholesalers in the Chicago area, several entered the 144A certain minimum sales volume is probably required to support an economical warehousing operation, but all indications are that this is not a high figureé. Evidence in the record does suggest that,’as in most industries, financial economies of Scale exist to some degree. One small wholesaler testified that he had trouble borrowing money to exercise the purchase option he had on the warehouse he leased. He testified that he had to pay higher than the prime rate of. interest, whereas it is probable that: large companies obtain capital at a cheaper rate. It does not appear, however, that the advantages of size due to imperfections in the capital market are competitively very important since this is an industry of low capital intensity. . % See also Heonomic Inquiry into Food Marketing, Part: IIT (Canned Fruit, Juice and . Vegetable Industry) (Staff Report to the FTC, 1965) at p. 44: “The two markets, retail and nonretail [institutional], represent essentially different outlets’ for canned’ products. | In the retail market, advertising, distinctive ldbels, * and promotional activities are employed to stimulate consumer ‘demand ' ‘and to: ‘differentiate, between products of different canners. In the nonretail market [institutiovial}, Product differentiation is slight; and sales often are made on the basis of content spécifications.”* : ' 16 “Rase of entry seems to have been a strong factor in the increased number of operators in this class of wholesaling. * * * [O]nly.a relatively’ small amount of capital’ is. required’ to become.a limited-custom [institutional] wholesaler.’ Those in the trade complain bitterly that the entry of the ‘fly-by-nights’ has caused highly disorganized competitive conditions in this area. * * *” Cassady & Jones, The Changing Competitive Structure in the Wholesale Trade 47-48 (1949).

532 FEDERAL TRADE. COMMISSION. DECISIONS Opinion 81. F.1.C.

market within the recent: past and have survived as profitable companies with respectable sales volume."* Finally, witnesses familiar with the institutional food service pusiness on a nationwide basis testified that there has been a steady influx of companies’into dry grocery institutional wholesaling. These en-- ‘trants include not only many small and middle-size: companies but. large national-companies such as. National Tea and Kraftco. Additional major food companies which already have interests in some aspect of the institutional food industry were named by one industry. consultant as being likely. candidates into institutional wholesaling. These include the Canteen Corporation, Swift & Co., Armour, General Foods, Borden, Ralston-Purina, Ogden. Corporation, Carnation, Standard. Brands, Norton-Simon, General Mills, H.. J. Heinz, Del Monte, and others (Tr. 2078-88).

- The record indicates that many ’ ‘wholesalers who previously specialized’ in distribution to retail grocery stores have gone into institutional wholesaling as have some grocery. chains. A trade publication put in the record by complaint counsel. further predicts that during _ the 1970’, 50 percent or more of supermarket chains expect to enter the food service industry. In addition, there has been a trend by frozen food institutional distributors to enter into. dry grocery lines. While it may be true that some entries into local markets have been by acquisition and horizontal mergers have occurred in some (non- Chicago) markets, there is no evidence that a trend of increased concentration has set in. Mr. Donald Karas, an experienced consultant to the industry-and president of a company that has-published an institutional wholesale directory as well as a trade journal for the industry, testified, and his trade directory shows, that the number of institutional distributors in the nation has grown from 1,500 to about 2,500 between 1964 and 1970. Seventy percent of these he estimates ‘are dry grocery wholesalers. Even though this may include a number of small fringe operators, this increase, nevertheless indicates that the number of new entries has out-paced any exists via merger or other-. 17 Commissary Supply Co. (1961); M. L. Morgan & Co. (“3 years ago”); R.F.B., Inc.. (“12 years ago”) ; Gage Foods (1955) ; Fox River Foods (1956) ; Ferness (1962). R.F.B., Inc.’s total sales in 1968 were $2,411,000, which placed it number seven in complaint counsel’s ranking, just below Kraftco Corporation. The record also shows that frozen food, distributors have increased in number in recent years and it appears that some of these are now selling some dry grocery products. One food.broker witness: testified that 30 to 40 Chicago frozen food distributors have gone into dry products in the last 10 years.. BEATRICE FOODS Co.” 533 “481 ; Opinion wise.** Although this increase does not necessarily portend deconcentration, we cannot presume in light of the large number of new entrants that concentration is on the increase. - We conclude for the above reasons that there is insufficient basis in the record to find that loss of Beatrice as a potential entrant. to the industry will substantially lessen competition. We emphasize, ‘however, that our decision in this case is limited to the evidence presently before us. Should later investigations disclose facts. indi- ‘eating that barriers to entry or other crucial market factors affecting competition are or may be developing, future acquisitions of a similar type would of course present more serious questions of legality under Section 7. Our decision in this caseshould therefore not be construed as:any indication that mergers | in this. industry will not continue to be scrutinized.

B. Alleged Entry Barriers and Entrenchment of Sexton as a Result of the Acquisition Complaint. counsel contend that even aside from potential competi- 7 tion arguments, the substitution of Beatrice for Sexton itself has altered the competitive structure of the industry and:will deter new firms from entering and. established. firms from competing aggressively. We have examined the record carefully but cannot agree that there is evidence to support this view.

Complaint counsel argued during the hearing that (1) the merger would enhance Sexton’s ability to service MUFSO accounts to the detriment of locally based accounts, (2) the financial resources of Beatrice would enable Sexton to expand its resources and promote and advertise the Sexton label, (3) that Beatrice-Sexton would have the advantages of available storage facilities in view of Beatrice’s own warehouses, and access to Beatrice’s distribution network and overall guidance from Beatrice’s management, and (4) that Sexton would now be put in a position of offering a full line of Beatrice’s dairy products.and would be able to institute “one-stop” wholesaling programs in which it would deliver all food needs of customers—dry, fresh, and frozen foods and meat and dairy products.’ 38 Mr, Karas identified the sources. of new entries (Tr. 2090) : “* * * There are more companies in dry, but with the elevation in convenience and frozen foods, and the demise of distributors serving supermarkets, we inherited a large number of distributors in the last five, six, seven. years, with supermarkets developing commissaries of their own, and the distributors have headed toward the booming food Service industry that is going on. This is where the additional distributors came from, and also the attraction of a new industry.”

This view was confirmed by other witnesses (Tr. 2397-2399, 1701, 2181-2186). 1°Complaint counsel also argue that the ability of Beatrice to supply some dry food products from its own processing plants gives Sexton a decisive competitive advantage over ofher wholesalers. The evidence does not support this, as noted later in part of this opinion dealing with vertical aspects of the merger. 534. — FEDERAL , TRADE” COMMISSION; DECISIONS Opinion . : ; 81 F.T.C.

The evidence, however, did not tend to support the above assertions. Respondent denied thatthe union of Beatrice and, Sexton gave it.a conipetitive advantage in selling to. MUFSO accounts since the record ;Showed- that: Séxton--was. already. an: established national wholesaler ‘and Beatrice’s experience was ‘in selling products to the retail grocery trade. As to the expected use of the “one-stop” concept, Beatrice presented.-evidence that Beatrice’s frozen and fresh dairy and bakery -productscannot as a practical matter be delivered with the dry prod- -ucts sold: by Sexton and there-is-no trend in that: direction by Beatrice or other members of the industry.?° . The héaring examiner found. that “the record does not permit a ‘fnd- ‘ing that. Beatrice has conferred. upon Sexton any advantages so sigchificant as, substantially to lessen: competition in the institutional dry wholesale trade” (Initial Decision, p. 504). -On- appeal, complaint, counsel rely principally on a “deep pockets” ‘argument, contending that Beatrice’s financial strength will enable Sexton to outstrip all rivals in expanding its warehousing 1 facilities to “meet new and increasing deniand. It is argued that “the merger ‘has ‘opened: up a new possibility for Sexton, the interest-free transfer: of “capital funds from its parent.” :

Itis not shown, however, that prior to the merger Sexton needed the “tesources of a “rich parent” to expand its operations to meet new demand.” Secondly, it is not shown that the rate at which investible ' funds are borrowed has substantial competitive significance i in | this industry.

Although the Commission is concerned about the advantages that a large conglomerate entrant may have over smaller competitors, “something more definite than absolute size must be shown to strike ‘down an acquisition on ‘the asserted advantage of “a deeper pocket. ” Congress did not declare that acquisitions by large companies are illegal as: such, It must be shown specifically how the size of the ac- » Testimony by an institutional. distributor called by complaint counsel tendea to coxroborate respondent’s evidence that one-stop wholesaling is impractical. State and local -health laws: and regulations, union problems, conflicting delivery schedules, the difficulty of mixing product loads and the vagaries of the buyers relating to frequency and time of delivery were cited by this witness and others as factors mitigating against one-stop wholesaling (Tr. 245, et seq. See also, Tr. 2024~28, Tr. 2048-54). : . 71 Sexton’s financial statements in the record would indicate otherwise. Ta 1968, its working capital amounted to $15, 441,629. (of which $1, 338, 177 was cash). Long-term debt equalled $2, 389, 000 and the’ ratio of current assets to current liabilities was 3. 34 to 1. Complaint counsel themselves ‘characterized Sexton as having “substantially and consistently’ expanded its volume *— ‘* * [and] in recent years proceeded. with modernization “of “warehouse facilities” (Proposed Findings, p. 6). quiring firm will probably bring about an adverse change in the structure or practices of the particular industry under consideration.” As we have previously noted, this is an industry of low capital in- , tensity. Small. companies. have been.able to enter and remain in this -business, andthe record shows.that many have managed to. grow and ‘expand despite the presence of well-endowed firms in the industry. __ Nor is this an “advertising-intensive” industry as. was: involved in Procter & Gamble (liquid bleach) and General Foods, supra (household steel wool) where prior to the acquisitions the leading companies were relatively small and the entry by acquisition of the nation’s leading advertisers destroyed any competitive balance and threatened to ‘deter. new entry.?? Here, although there are small institutional whole- -salers, the industry. is:not composed exclusively of small businesses, but includes large wholesalers and “conglomerate” food companies -that are equal to Beatrice in terms of financial strength such .as Kraftco, Consolidated Foods and National Tea. These companies. with their vast resources are not likely to take a back seat to Beatrice or-be hesitant to compete with it. No evidence was introduced that.com- ‘petitive vigor has in fact lessened or that entry barriers have been . ‘Taised as a result of this acquisition.”* Pook C. Alleged Elimination of Competition in Institutional Frozen Food Wholesaling Complaint counsel argue that there is a violation of Section 7 on the ground that the acquisition removed Sexton as a potential entrant into the institutional distribution of frozen foods. The record shows that although Beatrice did not engage in institutional wholesaling 24 See Procter € Gamble, 63 F.T.C. at 1548: “# * * In every Section 7 proceeding, the burden is on the complainant to prove that the merger will create a reasonable probability of a substantial lessening of competition _or tendency to create.a monopoly. This burden is not met, in any case, by invocation of a talismanie per se rule by which to dispense with the need for adducing evidence of probable anti-competitive effect. Congress declared neither that all mergers, nor that mergers of a particular size or type, are per se unlawful. In every case the determination of illegality, if made, must rest upon specific facts. * * *” 23 Compare Procter ¢€ Gamble; supra, and General Foods: Corp. [1965-1967 “Transfer Binder], Trade Reg. Rep. { 17,465 (FTC 1966), af’d 386 F.2d. 936 (3d Cir. 1967), where Procter & Gamble and General Foods each spent more than $80 million annually on consumer-oriented grocery store products, which amounts could be used to: advertise jointly the product-lines acquired.

%In Reynolds Metals Co., 56 F.T.C. 748, aff'd 309 F2a 223 (D.C. 1962), also relied upon by counsel, it was shown that as a direct result of the acquisition by a large ‘aluminum company, a previously small manufacturer of florist foil engaged in below-cost pricing which injured the other small manufacturers of florist foil (56 F.T.C..at 775). See also Ekco Products Co. v. Federal Trade Commission, 347 F.2d 745, 751-752 (7th Cir. 1965) (evidence showed that the acquisition enabled acquiring firm to eliminate a competi- .tor which, but for the acquisition, it would not have been able to do). 536 FEDERAL ‘TRADE. COMMISSION: DECISIONS Opinion 81 FEC.

of frozen foods outside of Chicago, it did operate two institutional frozen food distributors in Chicago at the time of the merger. There is no data in the record, however, as to market shares, degree ‘of concentration, or conditions of entry in this line of commerce. The hearing examiner made no findings on this aspect of complaint counsel’s case. In the absence of such market. facts we cannot infer that competition will be adversely affected in this line of commerce. D. Other Arguments of Complaint Counsel on Appeal Vertical Aspects Complaint counsel argue that the hearing examiner disregarded . evidence that “the Beatrice-Sexton merger may adversely affect competition among suppliers to wholesalers of institutional dry groceries -in an industry where there is an increasing trend toward. concentra- | tion.” They point to evidence in the record showing that two Wisconsin canners of vegetables. who had made sales to Sexton for a number of years were dropped by Sexton right after the acquisition as.suppliers, and it appears that Sexton started purchasing at least one of the items from “Aunt Nellie’s Foods,” a division. of. Beatrice which processes and sells canned vegetables.

Respondent points out, ‘however, as it has done throughout the proceeding, that the Commission’ s complaint in this matter alleges only that competition will be adversely affected in institutional wholesaling. It has not been shown by complaint counsel how possible foreclosure of food manufacturing companies from ability to sell to Sexton will adversely affect competitive processes in institutional wholesaling. Nevertheless, we have examined the record from the point of view of determining whether there is sufficient basis upon which to infer that entry barriers into institutional dry foods wholesaling have arisen ‘from vertical aspects of this merger and/or whether possible foreclosure of Beatrice as a source of supply has injured competition in that line of commerce.

Less than $1 million in dry groceries was sold to Sexton by Beatrice ‘divisions prior to the merger and most of this amount was by its Aunt Nellie’s Foods Division. This division does most of its business in supplying consumer packs of canned vegetables and fruit juices to the retail grocery trade (7.¢., grocery stores), and the record shows that they recently: discontinued all institutional production at one of their main plants and have informed Sexton that they are no longer ‘interested in supplying institutional packs (Tr. 1467-69). Although other acquisitions between food processing companies and institutional wholesalers are cited by complaint counsel, it is not shown ” BEATRICE FOODS “CO.

481 “Opinion. “ whether and to what extent these food processors engage in packing to the institutional trade and what impact.on market foreclosure these acquisitions may have had if any. No independent wholesaler testified that he has not been able to buy needed sources of supply because of this acquisition or other acquisitions. In fact, after this.acquisition . took place some institutional wholesalers on their own stopped buying from Beatrice, switching their purchases to other food. suppliers:: because they preferred not. to buy from a “competitor” (7.c., Beatrice- Sexton). This would indicate:that wholesalers: have had no: trouble getting supplies of comparable dry food institutional packs from other . sources. That this-is the case is further supported by. brokers ‘who testified. that distributors have adequate sources of supply to’ turn. to: - (Tr. 1881-82, 1948-49, 1959).

Even if, contrary to what has happened so far after the 1 merger, Beatrice’s entire annual production of institutional packs ($13 million per year in 1968) were nevertheless a// channeled through Sexton, this would probably represent about 1 percent of total sales by dry ‘food - processors to the institutional market. We cannot. find « on the basis. of such a dé minimis foreclosure effect alone that sources of. supply. to. . the institutional trade will be lessened by sales between Beatrice s food divisions and Sexton.

Elimination of Competition in Manufacturing Dry Foods Finally, complaint counsel argue that the Beatrice-Sexton merger eliminated significant competition in the manufacture of institutional dry g groceries. Again, however, we are confronted with the fact there is no allegation in the complaint that competition in manufacturing or processing of foods as a line of commerce has been adversely affected by this acquisition. Although respondent noted this variance and consistently objected to this line of argument throughout the proceeding on that basis, complaint counsel did not seek to have the complaint amended. The hearing examiner, after reviewing complaint counsel’s proposed tabulations concerning canning statistics, held that “even if these figures are accepted, the examiner is at a loss to know what finding of adverse effect could be made to the dry grocery wholesale trade.” We have not been presented with any reasons to disagree with that view.”® % Accordingly, we do not need to reach complaint counsel’s assertion that the hearing examiner erred in his alternative holding that “Beatrice and Sexton were not really competitors at the time of the acquisition, although both manufactured a few of the same products, each sold to a separate and distinct market, and were not seeking any of the same customers” (I.D., p. 21 [p. 502, herein]). However, we note that it is undisputed that what items Sexton did manufacture, it did so only for sale to its own institutional customers, whereas Beatrice was oriented to the supermarket trade with about 2 percent of its total processed foods packed for the institutional market (Tr. 1861). 494-841—73 35 538 FEDERAL TRADE COMMISSION | DECISIONS . inal Order 81 FTC.

Motion for Remand “During: oral argument before the. Commission, complaint counsel © renewed a motion, previously denied without prejudice, to remand this casé to the hearing examiner for.the purpose. of considering the admission of newly available evidence. The motion states that: the evidence: will consist: of a recently available survey of the Department of Agriculture on the food service industry for 1969 that focuses on: food costs and related matters and will corroborate complaint coun-— sel’s projections of the growth of institutional food purchases and their estimates of total dry food sales in national and Chicago SMSA markets for 1969. Since our decision in this matter-does not turn. on the validity of those original estimates and projections, no purpose would be served by a remand and the motion will be denied. - ¥. CONCLUSION | We find that the evidence is insufficient to support the hearing examiner’s finding that a violation of Section 7 has been shown in the “national market” of institutional dry foods wholesaling. We further find that alternative grounds for finding a violation, as submitted in complaint counsel’s appeal, are either not supported by the evidence or are outside the scope of the complaint in this matter. Accordingly, the initial decision in this respect will be vacated and the complaint dismissed. An appropriate order accompanies this opinion. Frnau Orper This matter having been heard by the Commission upon briefs and oral argument in support of and in opposition to (1) the appeal of respondent from the hearing examiner’s initial decision finding a violation of Section 7 of the Clayton Act and Section 5 of the Federal Trade Commission Act, and (2) the cross-appeal by counsel supporting the complaint from failure of the hearing examiner to enter certain findings of fact and conclusions of law in further support of a finding of violation of law; and the Commission, for the reasons stated in the accompanying opinion, having concluded that the respondent’s appeal should be granted and complaint counsel’s cross-appeal should be denied and that the hearing examiner’s initial decision should be modified to conform with the views expressed i in said opinion: It is ordered, That the hearing examiner’s initial decision as so modified: be, and it hereby i is, adopted as the decision of the Commission, and “RASTMAN KODAK CO. > | 539 4gt Cotipiaint It is further ordered, That the motion of counsel supporting the complaint to remand this matter to the hearing examiner for the purpose of considering further evidence be, and it hereby is, denied, and It is further ordered, That the complaint in this matter be, and it hereby i 18, dismissed.

In Tar. Marrer or