United Brands Company

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IN THE MATTER OF UNITED BRANDS COMPANY ORDERS, OPINION, ETC., INREGARD TO THE ALLEGED VIOLATION OF SEC. 7 OF THE CLAYTON ACT AND/OR SEC. 5 OF THE FEDERAL TRADE COMMISSION ACT Docket 8835. Complaint, Feb. 11, 1971—Orders & Opinion, May 14, 1974. Order dismissing a complaint against a diversified New York City based company with decided interests in the food industry. The complaint challenged respondent’s acquisition of the stock or assets of six California and Arizona farming operations producing lettuce and other vegetables.

Order requiring the filing of a special report and periodic subsequent reports informing the Commission of any increase since Feb. 11, 1971, or future increase in access to land commercially suitable for the production of lettuce. Appearances For the Commission: Carl J. Batter and Lewis F. Parker. For the respondent: Howrey, Simon, Baker & Murchison, Washington, D.C. M. Paul Gallop and Paul H. Farrell, New York, N.Y.

COMPLAINT The Federal Trade Commission, having reason to believe that AMK Corporation has acquired United Fruit Company, and subsequently consolidated AMK into United Fruit Company and changed its name to United Brands Company, and that United Brands Company, then the United Fruit Company, has acquired Nunes Bros. of California, Inc., as well as other similar concerns and corporations, in violation of Section 7 of 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:

I DEFINITIONS PARAGRAPH 1. For the purposes of this complaint the following defintions shall apply:

(a) Fresh Produce includes each and every vegetable and fruit specifically grown in the United States for sale at retail in fresh form, 7.e., sve ava UU. aviv 1614 : Complaint not canned, not frozen, or otherwise preserved except for normal refrigeration, such as lettuce, celery, broccoli, cantaloupe, etc. (b) Carlot is an actual rail car shipment, and actual truck shipments converted to a carlot unit (e.g., for lettuce on the basis of 1,000 cartons per carlot).

Ii RESPONDENT PAR. 2. United Brands Company (United Brands), the respondent herein, is a corporation organized and existing under the laws of the State of New Jersey, with its offices and principal place of business at 245 Park Avenue, New York, N.Y.

PAR. 3. On or about June 30, 1970, United Brands, Inc. became a successor corporation to AMK Corporation (AMK) which was formed in 1928 under the name American Seal-Kap Corporation. It then, and for many years thereafter, primarily provided the dairy industry with milk bottle capping materials and machinery. In May of 1965, the name of the corporation was changed to AMK Corporation and subsequently AMK acquired John Morrell and Company, a wholly owned subsidiary. John Morrell & Co. ranks among the four largest meat packers in the United States, with annual sales in excess of $800,000,000. AMK was a corporation organized and existing under the laws of the State of Delaware, with its offices and principal place of business at 245 Park Avenue, New York, N.Y.

PAR. 4. For its fiscal year ending October 31, 1969, AMK had net sales and other income of almost $1,500,000,000, a net income of over $26,000,000, and total assets of over $1 billion. On the basis of the October 31, 1969 financial statements, the 1970 Fortune Directory listed AMK Corporation as the 70th largest industrial corporation in the United States.

PAR. 5. At all times relevent herein, AMK and its successor corporation, United Brands Company, sold and shipped, and is now selling and shipping, products in interstate commerce throughout the United States; hence AMK was at the time of each of the acquisitions challenged herein, and United Brands is now, engaged in commerce as “commerce” is defined in the Clayton Act and in the Federal Trade Commission Act.

PAR. 6. John Morrell & Company ranks among the four largest meat packers in the United States and is particularly strong in hog slaughtering and in processed or cured pork products (not canned or made into sausage) made in meatpacking plants, sausage and similar products (not canned) made in meatpacking plants, and canned meats (except dog and Complaint 83 F.T.C.

cat food) containing 20 percent or more meat and made in meatpacking plants, all of which products are or may be branded products carrying United Brand Company labels.

PAR. 7. United Fruit Company, (United Fruit), whose name was changed to United Brands Company, was a corporation organized and existing under the laws of the State of New Jersey with its head office and principal place of business in the Prudential Center, Boston, Mass. PAR. 8. United Fruit was primarily a grower of bananas in Central and South America, and a seller and distributor of bananas in ‘Europe, North America and Japan. United Brands, its successor corporation, has approximately 50 percent of the banana market in the United States. For the domestic distribution of bananas, United Brands maintains over 35 branch offices and has a network of distributors covering the entire United States. In recent years, it has diversified through acquisition, including (a) the acquisition in 1966 of J. Hungerford Smith Co., Ine., a syrup and flavoring concern, and its subsidiary, A & W International Inc., a root beer, restaurant and franchise operation, (b) the acquisition in 1967 of Baskin-Robbins, Inc., an ice cream and candy franchise operation, (c) the acquisition in 1968 of Nunes Bros. of California, Inc., and various other fresh produce grower-shippers in 1968 and 1969, and (d) the acquisition in 1969 of Cape Farms, Inc., and various other potted plants grower-shippers, among others. PAR. 9. In 1968, United Fruit had total sales of $464;297,000, net earnings of $31,157,000, and total assets as of December 31, 1968, of $439,799,000.

PAR. 10. Since 1960, United Fruit and United Brands have attempted to establish, and have on a region by region basis established, a brand differentiated banana under the trade mark “Chiquita.” The Chiquita banana sells, throughout the United States and in particular regions, both at wholesale and at retail, generally at price levels in excess of the prices at which other bananas sell, differentiated or undifferentiated by brand. Brand differentiation was attained and is maintained in the banana market by United Fruit by means of substantial advertising, promotional and packaging expenditures. PAR. 11. United Fruit was, and United Brands is, among the leading firms in the fast foods industry and the leading firm in the production and sale of root beer and root beer syrup, as well as a leading supplier of fruit flavors and extracts to the institutional market and the largest grower-shipper of fresh lettuce, fresh celery and potted plants in the United States.

PAR. 12. At all times relevant herein, United Fruit and its successor corporation, United Brands, sold, and shipped, and United Brands is now selling and shipping, products in interstate commerce throughout UNITED BRANDS CO. 1617 1614 Complaint the United States; hence United Fruit was at the time of the acquisitions challenged herein, and United Brands is now, engaged in commerce as “commerce” is defined in the Clayton Act and the Federal Trade Commission Act.

TI NUNES BROS. OF CALIFORNIA, INC., etc.

PAR. 13. Prior to October 15, 1968, Earle Myers Co. and Demco Farms, Inc., corporations organized and existing under the laws of the State of California with their principal places of business located at Salinas, Calif., were engaged in one or more phases of the fresh produce industry, particularly lettuce and/or celery, namely the growing, shipping and marketing of fresh produce or the providing of supplies or services to growers, shippers or marketers of fresh produce. PAR. 14. Prior to November 7, 1968, Nunes Bros. of California, Inc., a corporation organized and existing under the laws of the State of California with its principal place of business located at Salinas, Calif., was engaged in one or more phases of the fresh produce industry, particularly lettuce and/or celery, namely the growing, shipping and marketing of fresh produce or the providing of supplies or services to growers, shippers or marketers of fresh produce. PAR. 15. Prior to November 1, 1968, Toro Farms, a partnership of Thomas P. Nunes, Robert F. Nunes and Thomas Nunes, Jr., located at Salinas, Calif., was engaged in one or more phases of the fresh produce industry, particularly lettuce and/or celery, namely the growing, shipping and marketing of fresh produce or the providing of supplies or services to growers, shippers or marketers of fresh produce. PAR. 16. Prior to February 14, 1969, Peter A. Stollich Co., Inc., a corporation organized and existing under the laws of the State of California with its principal place of business located at Salinas, Calif., was engaged in one or more phases of the fresh produce industry, particularly lettuce and/or celery, namely the growing, shipping and marketing of fresh produce or the providing of supplies or services to growers, shippers or marketers of fresh produce. PAR. 17. Prior to February 14, 1969, Monterey County Ice and Development Company, a corporation organized and existing under the laws of the State of California with its principal place of business located at Salinas, Calif., was engaged in one or more phases of the fresh produce industry, particularly lettuce and/or celery, namely the growing, shipping and marketing of fresh produce or the providing of supplies or services to growers, shippers or marketers of fresh produce. PAR. 18. Prior to March 18, 1969, Jerome Kantro Enterprises, a corporation organized and existing under the laws of the State of Complaint 83 F.T.C.

California with its principal place of business located at Salinas, Calif., was engaged in one or more phases of the fresh produce industry, particularly lettuce and/or celery, namely the growing, shipping and — marketing of fresh produce or the providing of supplies or services to growers, shippers or marketers of fresh produce. PAR. 19. Prior to March 15, 1969, the Salinas Valley Vegetable Exchange, a partnership of Miyoko Yuki, Thomas M. Bunn, and the administration of the estate of Takeo Yuki, with its principal place of business located at Salinas, Calif., was engaged in one or more phases of the fresh produce industry, particularly lettuce and/or celery, namely the growing, shipping and marketing of fresh produce or the providing of supplies or services to growers, shippers or marketers of fresh produce.

- PAR. 20. Prior to July 2, 1969, Consolidated Growers, Inc., a corporation organized and existing under the laws of the State of California with its principal place of business located at Salinas, Calif., was engaged in one or more phases of the fresh produce industry, particularly lettuce and/or celery, namely the growing, shipping and marketing of fresh produce or the providing of supplies or services to growers, shippers or marketers of fresh produce.

PAR. 21. At all times relevant herein, the corporations and concerns ' listed in Paragraph 138 through 21 hereinabove, sold and shipped products in interstate commerce throughout the United States, and were, at the time each such business was acquired as described herein, engaged in commerce as “commerce” is defined in the Clayton Act and the Federal Trade Commission Act.

Iv TRADE AND COMMERCE PAR. 22. The lettuce and celery segments of the fresh produce industry consist primarily of a number of small independent concerns operating as grower-shippers and/or in some cases providing services, vacuum cooling for example, to themselves and/or other grower-shippers. No such concern was a large publicly held company with other non-related businesses. Each such concern was entirely dependent on its commercial farming operations, on local banks for credit, and upon local service companies for services and supplies.

PAR, 28. Since 1967 a merger trend has been developing in the lettuce and celery segments of the fresh produce industry. In addition to the AMK-United Fruit acquisitions, another company has acquired one or more such concerns.

PAR. 24. In 1967 and in 1968 no firm possessed more than a 10 percent UNITED BRANDS CO. 1619 1614 Complaint — .

market share in terms of daily shipments, or in terms of acreage controlled in the California and Arizona growing areas, or in terms of shipments in any particular season and/or from any such growing area. PAR. 25. Prior to 1968, the grower-shipper of lettuce and/or celery -marketed his fresh produce in a substantially competitive market. In that market there were constant changes in prices in response to hourly, daily or weekly changes in the fresh produce market or in the retailing of fresh lettuce and celery, nor were there any long term supply arrangements, fora week or a month or a year, stabilizing prices and removing fresh lettuce and celery from the daily competitive market pricing. Each carlot was virtually a separate sale. PAR. 26. Both AMK and United Fruit operated and United Brands operates primarily in oligopolistic industries, namely the banana industry, among others.

Vv ACQUISITIONS PAR. 27. On or about October 25, 1968, United Fruit acquired Earle Myers Co. and Demco Farms, Inc., by the purchase of all the outstanding shares of stock of these two corporations for approximately $2,537,500.

PAR. 28. On or about November 7, 1968, United Fruit acquired Nunes Bros. of California, by the purchase of all the outstanding shares of stock of that corporation for approximately $2,500,000. PAR. 29. On or about November 1, 1968, United Fruit acquired the business and specified assets of Toro Farms by purchase for approximately $1,500,000, and pursuant to other arrangements. PAR. 30. On or about February 1, 1969, United Fruit and/or AMK- United Fruit acquired the business and specified assets of Peter A. Stollich Co., Inc. by purchase for approximately $2,042,000, and pursuant to other arrangements.

PAR. 31. On or about February 14, 1969, United Fruit and/or AMK-United Fruit acquired Monterey Ice and Development Company by the purchase of all the outstanding shares of stock of this corporation for approximately $2,537,500.

PAR. 32. On or about March 18, 1969, United Fruit and/or AMK- United Fruit acquired the business and specified assets of Jerome Kantro Enterprises by purchase for approximately $395,000, and pursuant to other arrangements.

PAR. 33. On or about March 15, 1969, United Fruit and/or AMK-— United Fruit acquired the business and specified assets of Salinas Valley Vegetable Exchange for approximately $395,000, and pursuant to other arrangements. , Complaint 83 F.T.C.

PAR. 34. On or about July 2, 1969, AMK—United Fruit acquired the business and specified assets of Consolidated Growers, Inc. for approximately $3,490,000, and pursuant to other arrangements. PAR. 35. United Fruit and/or AMK-United Fruit have, or may have, made additional acquisitions, the identity of which presently are not known, by means of purchase, lease, joint venture, full supply agreement, etc., in the fresh produce industry.

VI EFFECTS OF THE ACQUISITIONS PAR. 36. The effect of the acquisitions by United Fruit and/or AMK-United Fruit, or United Brands, their successor corporation, of Earle Myers Co., Demco Farms, Inc., Nunes Bros. of California, Inc., Toro Farms, Peter A. Stollich Co., Inc., Monterey Ice and Development Company, Jerome Kantro Enterprises, Salinas Valley Vegetable Exchange, Consolidated Growers, Inc., and of others, individually and collectively, may be to lessen competition substantially or to tend to create a monopoly or to restrain competition in the fresh lettuce industry, the fresh celery industry, and in the fresh produce industry in the United States, or sections thereof, in the following ways, among others: (1) Potential competition between AMK-United Fruit, or United Brands, and the acquired concerns in the growing, shipping and marketing of fresh lettuce and of fresh celery and other fresh produce has been, or may be, eliminated. :

(2) Concentration has been increased in the fresh lettuce, in the fresh celery industry, and in the fresh produce industry generally. (8) The substitution of United Fruit and AMK-United Fruit or - United Brands, for the numerous small firms acquired by them has given United Fruit, AMK-United Fruit, and United Brands decisive competitive advantages over the remaining firms in the industry due to, but not limited to, (a) subsidization of financial losses in one product line by numerous other products and over long periods of time, (b) selling through nationwide organizations, national advertising, long term contracts, and special pricing, (c) sources of credit, (d) size of company, (e) dominant market share and position, and (f) opportunities for reciprocity.

(4) The structure of the fresh lettuce industry and the celery industry has been transformed or is being transformed, from industries of small independent profitable concerns selling in a competitive market at prices determined by the short term balance of supply and demand into industries dominated by large conglomerate companies selling at stable prices arrived at outside the competitive market by means of such UNITED BRANDS CO. 1621 1614 Complaint control mechanisms as brand differentiation, pre-selling of consumers, long term quotes or supply arrangements, and other means. (5) Barriers to entry into the fresh lettuce industry and the fresh celery industry have been, or may be, heightened as a result of United Fruit’s and AMK-United Fruit’s or United Brands (a) substantial financial resources, (b) advertising and promotional capabilities, (c) nationwide selling and distribution organizations, (d) brand differentiation, (e) long term leases in major growing areas, (f) ability to borrow money at a lower interest rate than others, (g) ability to purchase inputs directly from the manufacturer at lower prices than others, (h) reciprocity, and (i) large market share, absolutely and relative to competitors, among other things, or any one or more of these factors. (6) AMK’s and United Fruit’s, or United Brands’ non-competitive pricing practices characteristic of their participation in oligopolistic industries are being, or may be, transferred to the lettuce industry, the celery industry, and the fresh produce industry. VII VIOLATIONS PAR. 37. The acquisition of Earle Myers Co., of Demco Farms, Inc., of Nunes Bros. of California, Inc., of Toro Farms, of Peter A. Stollich Co., Inc., of Monterey County Ice and Development Company, of Jerome Kantro Enterprises, of Salinas Valley Vegetable Exchange, of Consolidated Growers, Inc., and of others, as alleged above, constitute separately and collectively, 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. INITIAL DECISION BY DONALD R. MOORE, ADMINISTRATIVE LAW JUDGE MARCH 19, 1973 _ CONTENTS Page PRELIMINARY STATEMENT __________---------------- +--+ 1622 FINDINGS OF FACT _____-____________--------------------------------- 1623 United Brands Company___-------------------------------------- a 1623' The Challenged Acquisitions ____-_------------------------------------ 1625 Relevant Market____.______________-_--------------------------------- 1629 Product Market _____________-__---------------------------------- 1629 Geographic Markets _________-.__--------------------------------- 1631 The Lettuce Industry ___.-.__-.__.._--------------------------------- 1633 Production and Distribution _-___---------------------------------- 1636 Competitive Climate _____.---_----------------------------------- 1639 Initial Decision 83 F.T.C.

Competitive Effects ___--_-_-__----__.-2-e eee 1642 Reciprocity _____-_____-----------2 2 eee 1642 Potential Competition _____-.________-_-----ee 1642 Competitive Advantages_______.--.--_-- 1644 Concentration __.__--_----------- 1651 Barriers to Entry .--_----..---_--- 1656 Industry Restructuring _--______--__--e eee 1666 Respondent’s Special Defenses ___...____-.------- 1667 CONCLUSIONS -~_.--------_- 2-2-8 1669 Rationale of the Order________---___-_ eee 1671 ORDER -_____-_-_--_ een 1675 PRELIMINARY STATEMENT The complaint in this proceeding, charging violation of Section 7 of the Clayton Act and of Section 5 of the Federal Trade Commission Act, was issued on Feb. 11, 1971, and was duly served on respondent. The complaint challenged respondent’s acquisitions of corporations and other enterprises engaged in the fresh produce industry in Calif. and Ariz. Respondent filed answer on Mar. 29, 1971, admitting certain of the factual allegations of the complaint but denying generally any violation of law and also pleading certain affirmative defenses. After extensive prehearing procedures, hearings were held between April 18 and July 11, 1972, in Wash., D.C., Boston, Mass., San Francisco, Calif., and Phoenix, Ariz.

At these hearings, testimony and other evidence were offered in support of and in opposition to the allegations of the complaint. The testimony and evidence presented—agegregating 4106 pages of transcript and thousands of pages of documentary exhibits—have been duly recorded and filed.

The parties were represented by counsel and were afforded full opportunity to be heard, to examine and to cross-examine witnesses, and to introduce evidence bearing on the issues. After the presentation of evidence, proposed findings of fact and conclusions of law and a proposed form of order were filed by counsel supporting the complaint and by counsel for respondent, together with supporting briefs and reply briefs. The proposed findings of the parties not adopted, either in the form proposed or in substance, have been rejected as lacking support in the record or as involving immaterial matters.

Having heard and observed the witnesses and having carefully reviewed the entire record in this proceeding, together with the proposed findings and briefs filed by the parties, the administrative law judge makes the following findings of fact, enters his resulting conclusions, and issues an appropriate order.

UNITED BRANDS CO. 1623 1614 Initial Decision As required by Section 3.51(b)(1) of the Commission’s Rules of Practice, the findings of fact include references to the principal supporting items of evidence in the record. Such references are intended to serve as convenient guides to the testimony and to the exhibits supporting the findings of fact, but they do not necessarily represent complete summaries of the evidence considered in arriving at such findings. Where references are made to proposed findings submitted by the parties, such references are intended to include their citations to the record unless otherwise indicated.

References to the record are made in parentheses, and certain abbreviations are used as follows:

CPF—Proposed Findings of Fact and Conclusions of Law filed by counsel supporting the complaint.

CRB—Reply Brief of complaint counsel.

CX—Commission Exhibit.

RPF—Respondent’s Proposed Findings of Fact and Conclusions. RRB—Respondent’s Reply Brief.

RX—Respondent’s Exhibit.

Tr.—Transcript. (References to testimony sometimes cite the name of the witness and the transcript page number without the abbreviation “Tr.”—-for example, Bradshaw 3868.) FINDINGS OF FACT United Brands Company Respondent United Brands Company (“United Brands” or “respondent”) is a corporation organized and existing under the laws of the State of New Jersey, with its office and principal place of business at 245 Park Avenue, New York, N.Y. ! Respondent United Brands is a successor corporation to AMK Corporation (AMK). : AMK was a corporation organized and existing under the laws of the State of Delaware, with its office and principal place of business at 245 Park Avenue, New York, N.Y. AMK had been organized in 1928 under the name American Seal-Kap Corporation, which then and for many years thereafter was a supplier to the dairy industry of materials and machinery for the capping of milk bottles. Its name was changed to AMK in May 1965, and it subsequently acquired John Morrell & Company, one of the largest meat pakers in the United States, with annual sales in excess of $800 million. Total annual sales of AMK before its acquisition of United Fruit Company were approximately $850 million. ‘The term “respondent” may be used interchangeably to refer to the present corporation or to its predecessor corporations, AMK and United Fruit, as well as subsidiaries or divisions thereof. Initial Decision 88 F.T.C, In 1969 AMK acquired a controlling interest in United Fruit Company. On or about June 30, 1970, the two corporations were merged, and the corporate name was changed to United Brands Company. ” United Fruit Company was a corporation organized and existing under the laws of the State of New Jersey, with its principal office in Boston, Mass. United Fruit was primarily a grower of bananas in Central and South America and a seller and distributor of bananas in Europe, North America and Japan. :

Prior to its acquisition by AMK, United Fruit had embarked on a program of diversification through acquisition, including the acquisitions challenged by the complaint herein (infra). Acquisitions other than those that are the subject of this proceeding included: (1) The acquisition in 1966 of J. Hungerford Smith Co., Inc., a syrup and flavoring concern, and its subsidiary, A&W Root Beer Co., a root beer, restaurant, and franchise operation;

(2) The acquisition in 1967 of Baskin-Robbins, Inc., an ice cream and candy franchise operation;

(3) The acquisition in 1969 of various grower-shippers of potted plants, including Cape Farms, Inc.

In 1968, United Fruit had total sales of $464.3 million, net earnings of $31.2 million, and total assets (as of December 31, 1968) of $439.8 million. In that year, United Fruit had virtually no debt; it had more than $70 million in cash; and it had a capability of borrowing up to $150 million on the basis of its net worth.

For its fiscal year ended October 31, 1969 (after the acquisition of United Fruit), AMK had net sales and other income of about $1.5 billion, a net income of more than $26 million, and total assets of more than $1 billion. It was ranked 70th in the 1969 Fortune Directory of the 500 largest industrial corporations in the United States. At the end of 1971, United Brands, as the successor corporation to AMK and United Fruit, had some $70 million in cash and marketable securities. At all times relevant to this proceeding, AMK, United Fruit, and United Brands sold and shipped, and United Brands is now selling and shipping, products in interstate commerce throughout the United States; hence, AMK and United Fruit were, and United Brands was and now is, engaged in commerce, as “commerce” is defined in the Clayton Act and in the Federal Trade Commission Act. (The foregoing facts about respondent and its corporate predecessors are essentially undisputed. Salient record references include the following: Complaint and Answer, Pars. 2-5, 7-9, 12; CX 200, pp. 2-3; CX 226; * The proposed complaint issued under the Commission’s consent order procedure in April 1970 contained a count challenging the AMK-United Fruit merger, but that count had been eliminated when the instant complaint was issued in 1971 (CPF, Par. 2, p. 1).

UNITED BRANDS CO. 1625 1614 Initial Decision CX 396, p. 82; CX 224, p. 9; CX 199, p. 14; Black 1720-23; Fox 1450, 1466-67.) The Challenged Acquisitions The acqusitions under challenge were the outgrowth of a diversification program instituted by United Fruit in 1960, when it announced its intention “to enter the general field of food and food processing” as an area “best suited to the Company’s potentialities” (CX 152, pp. 2, 8; Fox 1451-52). By 1965, a modest beginning in diversification had been made, concentrating on the food industry in the United States and on nonbanana activities in Latin American (CX 228, p. 8). During 1968, * * * the Produce Group took several steps toward its objective of establishing a multinational, diversified fresh fruit and produce business which will take full advantage of the Company’s strengths in the production, distribution and marketing of fresh and perishable products (CX 200, p. 10).

The plan called for an increase of tropical production, and new production in other areas of the world, while making wider use of United Fruit’s shipping abilities. The 1968 Annual Report characterized as “{o]ne of the most significant steps in the Company’s pursuit of a broader line of produce items” the acquisition of Nunes Bros. of California, Ine., Earle Myers Company, and Demco Farms, Inc., “firms engaged primarily in growing and marketing lettuce, celery and other produce” (CX 200, p. 10). The report emphasized that: Finally, but most important, the plan will open up a wider range of produce items to which the CHIQUITA marketing strategy, the most outstanding branding success in produce history, can be applied. :

At the time of respondent’s diversification into the fresh vegetables business, it was dependent for its income principally on one product, 1.e., bananas. The management of respondent felt that it should stabilize its revenues and income by diversifying into other business areas so that respondent would not be completely exposed to the ups and downs of the banana business. Bananas are grown commercially, for the most part, in Central American countries, and their production is subject to the vagaries of the weather—sometimes violent—and the vagaries of the political climate in such countries—also sometimes violent. Bananas must be transported by ships to markets, with attendant shipping difficulties. Another significant factor that created the desire of respondent to diversify was the fact that statistics indicated a continually increasing over-production of bananas world-wide which, in respondent’s opinion, limited the potential growth of its profits from the banana business. (Fox 1451-52, 1480) After extensive studies of the fresh vegetables industry and Initial Decision 83 F.T.C.

market—primarily lettuce—in 1967 and early 1968 (CPF, Pars 36-48, pp. 15-21), United Fruit’s board of directors on July 22, 1968, authorized negotiations “for the purchase of the production facilities and related activities of one or more companies or partnerships [engaged in] the production, packaging, distribution, and sale of vegetable crops at an estimated price of $20,000,000 * * *” (CX 158 A). Basic facts respecting the acquisitions challenged by the complaint are as follows:

Earle Myers Co. and Demco Farms, Inc.

The purchase of these companies was the first acquisition made by United Fruit in the vegetable crops industry. In October 1968 United Fruit purchased all the capital stock of these companies for $2,537,500. Both companies were California corporations engaged in the growing, harvesting, packing, and selling of various fresh vegetables, including celery and cauliflower. In effect, the two corporations were one entity engaged in the production and sale of fresh vegetables. Demco Farms conducted the growing operation, and Earle Myers Co. handled packing and selling. , The Myers companies grew their crops on leased land in the Salinas Valley of California. Celery was the primary crop, but the farm land was capable of producing other vegetable crops. United Fruit considered that it was acquiring through these acquisitions a “strong organization with expertise in growing, processing, quality control and marketing of vegetable crops.” Purchase arrangements included a five-year noncompetition agreement on the part of David E. Myers. (Record references: Complaint and Answer, Pars. 18, 27; CX 167 A-E; CX 173 A-O) Nunes Brothers of California, Inc., and Toro Farms In November 1968 respondent purchased the capital stock of Nunes Brothers of California, Inc. (a California corporation) and selected assets of Toro Farms (a partnership) for $4 million. Both the Nunes Brothers corporation and the Toro Farms partnership were owned and operated by the Nunes family (primarily two brothers). Many of the vegetable crops harvested and sold by Nunes Brothers were grown by Toro Farms. In essence, Toro Farms was a part of the Nunes Brothers’ farming entity.

The Nunes companies were engaged in the growing, harvesting, packing, and selling of a wide variety of vegetable crops. Although their major crops were lettuce (1.8 million cartons in 1967), celery (312,000 cartons), and cauliflower (268,000 cartons), Nunes Brothers also grew and sold broccoli, beans, carrots, sugar beets, potatoes, onions, garlic, . 6M = on Initial Decision tomatoes, and cabbage. Production was s from leased land « or from Joint deals with. other growers.

~The Nunes operations. were primarily located | in the Salinas and : Hee Imperial Valleys of California, with additional leased land in. Arizona... -- Certain of the principals in the Nunes enterprise were subject to covenants not to.compete with respondent for five years. _.. (Record references: Complaint and Answer, Pars. 14, 15, 28, 29; cx eo 166 A-W; CX ‘174 A-M; cx 175 AG CXs 8 182-185) PES ee : Peter A. Stolich Co., 1 ne.

In February 1969 respondent purchased ‘the business and selected assets of Peter: A. ‘Stolich. Co., Ine. (a California corporation) for ~ $2,042,000.. Stolich was engaged in the growing, harvesting, packing. and selling of various vegetable. crops, primarily lettuce, both on owned - _ land and_ leased land, and through joint deals. with other growers. - Stolich produced crops in Salinas, Brentwood, ‘and El Centro (Imperial mes Valley). Its lettuce volume was about one million cartons a year and ~--aecounted for 85 percent of revenues. About 48 percent of Stolich’s ; lettuce volume was grown by it, and the remainder came from joint: oe deals. Stolich lettuce was sold through Mutual Vegetable Sales, a grow: ers’ agent: © (Record references: Complaint and Answer, Pars. 16, 30; CX 170 At; CX 176 A-T) wt Jerome Kantro Enterprises Respondent's board of directors: approved. in February 1969 the “ purchase of the business and certain assets of Jerome Kantro Enterprises, a California corporation in which Jerome Kantro was the sole stockholder. Kantro Enterprises was the successor to a sole proprietorship formerly conducted as the Jerome Kantro Company. The acquisi- ~ tion was accomplished in March 1969 for a purchase price of $395,000. _ Kantro was engaged in the growing, packing and shipping of lettuce _ and other vegetable crops. Kantro had an annual volume of 1.3 million cartons of lettuce produced in Salinas and Brentwood, Calif., and . Phoenix and Yuma, Ariz. Respondent acquired, among other things, leases on land owned by Kantro, as well as the right tor use the Kantro ». Name..

: (Record references: Complaint and Answer, Pars. 18, 32; cx 172 — A-K; CX 178 A-S) wee Monterey County Ice & Development Company - “Respondent also purchased in February 1969 for $2,287, 299 all of the — stock of Monterey County Ice & Development Company, a California - corporation that owned and operated vacuum and cooling facilities in Initial Decision 83 F.T.C.

Salinas and in El Centro for the cooling of fresh vegetables. This company was primarily owned by individual and corporate shareholders. associated with the Stolich and Kantro enterprises, who had sold their businesses to United Fruit.

(Record references: Complaint and Answer, Pars. 17, 31; CX 171 A; CX 177 A-Q) Salinas Valley Vegetable Exchange Pursuant to action of the board of directors in February 1969, respondent purchased for $3,490,000 the business and selected assets of Salinas Valley Vegetable Exchange, a partnership engaged in the growing, harvesting, packing, and selling of fresh vegetables, including lettuce and celery, in the Salinas Valley, the Imperial Valley, and the Phoenix, Ariz., area. Its lettuce volume was then 2.2 million cartons. Respondent brought the farming organization and business, including goodwill, but leased crop land owned by the individual partners. One partner executed a covenant not to compete, and the other became a consultant to respondent.

(Record references: Complaint and Answer, Pars. 19, 33; CX 169 A-J; CX 172 D-F; CX 179 A-R; CX 190) Consolidated Growers, Inc.

Pursuant to authorization by the board of directors, respondent purchased in July 1969, the business and selected assets of Consoldiated Growers, Inc., for approximately $2.4 million. Consolidated was engaged in growing, harvesting, packing and selling vegetable crops produced on owned and leased land located in Salinas and Brentwood. Its crop land aggregated 1,594 acres, and it had annual lettuce sales of 890,000 cartons.

Respondent acquired virtually all of Consolidated’s business assets, including those of Reliable Trucking Company, and the goodwill associated with both of these companies.

The principals of Consolidated signed covenants not to compete. (Record references: Complaint and Answer, Pars. 20, 34; CX 168 A-J; CX 180 A~P; CX 192 A-C; CXs 198, 194 A—M) In summary, during 1968 and 1969 respondent purchased, for an aggregate price of about $17 million, the capital stock or selected assets of six fresh vegetable farm operations in California and Arizona and one cooler operation. The six farm enterprises grew and shipped several varieties of vegetables—predominantly lettuce, with one exception. Total annual lettuce shipments of the acquired companies were more than 7 million cartons in the year prior to acquisition: UNITED BRANDS CO. 1629 1614 Initial Decision Nunes Bros. 1,800,000 cartons Stolich 1,000,000”

Kantro 1,300,000”

Salinas Veg. Exchange 2,200,000 =”

Consolidated Growers 890,000 ”

TOTAL 7,190,000 ”

The lettuce shipped by the acquired companies was in excess of 7 percent of the total national lettuce shipments in 1968 (Bradshaw 3907, CX 364, p. 11). 3 Assets acquired by respondent included trucks, tractors, and other farm equipment, buses, sheds, and sales offices. The primary assets acquired were rights to the unexpired leases of land, experienced personnel, and farm equipment (RPF, Par. 18, p. 9). At all relevant times, each of the corporations or other entities acquired by respondent sold and shipped products in interstate commerce throughout the United States, and their operations were in the flow of such commerce; hence, at the time of acquisition, each was engaged in commerce as “commerce” is defined in the Clayton Act and in the Federal Trade Commission Act. Although respondent initially denied the “commerce” allegation (Answer, Par. 21), it now appears to have conceded the point. In any event, the record references cited (mostly from respondent’s own documents), as well as other evidence, leave no doubt that the acquired companies were in commerce. The operations of the acquired companies were ultimately consolidated in a United Fruit subsidiary, Inter Harvest, Inc., although it appears that the names United Fruit Sales Corp. and United Fruit Produce, Inc., had also been used (CX 396, p. 18; Bradshaw 3906-07; Gibbons 1777; CX 309 C; CX 340).

Relevant Market Product Market At the outset, there remains a dispute as to the line of commerce or product line within which the legality of the challenged acquisitions is to be tested. The complaint (Par. 36) alleges that the effect of the acquisitions “may be to lessen competition substantially or to tend to create a monopoly or to restrain competition in the fresh lettuce industry, the fresh celery industry, and in the fresh produce industry * * * ” Fresh produce is defined in the complaint (Par. 1) as including “each and every vegetable and fruit specifically grown in the United States for sale at retail in fresh form, i.e., not canned, not frozen, or otherwise preserved except for normal refrigeration, such as lettuce, celery, broccoli, cantaloupe, etc.” , 4 For a tabulation of the total cartons of lettuce shipped annually, 1967-71, see p. 16 [p. 1633 herein], infra. Initial Decision 83 F.T.C.

In describing the business of the acquired companies, the complaint Pars. 13-20) states that they were “engaged in one or more phases of the fresh produce industry, particularly lettuce and/or celery, namely, the growing, shipping and marketing of fresh produce or the providing of supplies or services to growers, shippers or marketers of fresh produce.”

Elsewhere in the complaint (Pars. 22, 23), reference is made to the “lettuce and celery segments of the fresh produce industry.” At another point, in describing the market in which the growershipper of lettuce and/or celery operated, reference is made to the “fresh produce market” (Complaint, Par. 25). In listing the specific effects allegedly stemming from the challenged acquisitions, the complaint refers to the “growing, shipping and marketing of fresh lettuce and of fresh celery and other fresh produce” and otherwise makes reference to the fresh lettuce industry, the fresh celery industry, and the fresh produce industry (Complaint Par. 36 (1)+(2), (4)-(6)).

Complaint counsel acknowledge that the “major thrust of the testimony related to the lettuce industry,” but add that other evidence related to cauliflower * and celery, and to some extent to other crops grown in the particular geographic areas involved, 7.e., artichokes, carrots, garlic, broccoli, cantaloupes, and tomatoes (CPF, Par. 65, p. 28). The proposed findings go on to cite evidence tending to show that each commodity constitutes a separate product market (CPF, Pars. 66-70, pp. 28-30). Finally, they propose a conclusory finding that “each item of fresh produce—lettuce, celery, cauliflower, carrots—is a separate and distinct relevant market for antitrust purposes” (CPF, Par. 198, p. 125).

There is substantial evidence in the record to support the following conclusory findings: .

1. Each fresh produce item is regarded by the industry and by State and Federal Governments as a separate market. 2. There is little or no cross-elasticity of demand between the various items.

3. End uses are often different.

4, Grower-shippers specialize in one item or another of fresh produce.

5. Even where grower-shippers do not specialize, they often have specialized personnel assigned to just one item (CPF Pars. 65-70, pp. 28-30; Par. 197, p. 124).

* Complaint counsel erroneously state that the “cauliflower industry” was pleaded as a relevant market in the complaint (CRB, Par. 261, p. 2).

UNLLED BRANDS CU. 1631 1614 Initial Decision On the authority of the leading cases dealing with the definition of a “line of commerce” °, it is found and concluded that within the fresh produce market, there is a fresh vegetables submarket, which, in turn, breaks down into a multiplicity of individual product submarkets, such as lettuce, celery, and cauliflower.

The fact that individual growers produce various crops and may shift their planting and production from season to season does not require, as respondent urges (RPF, Pars. 21-31, pp. 11-21; RRB, pp. 70-75), that the relevant line of commerce be broader than a single crop and embrace the entire fresh vegetables industry. True enough, to the degree that there is some interchangeability of production facilities, this poses some problems in determining market share, concentration, and other factors necessarily taken into account in assessing the legality of the acquisitions in this case, and this will be considered infra. Nevertheless, the record clearly establishes a line of commerce in lettuce, celery, and cauliflower, as well as in other fresh produce commodities. The difficulty is not in the delineation of lettuce, celery, and cauliflower as submarkets within a broader fresh vegetables market or produce market. The question is whether the evidence is sufficient to determine the competitive effect in each of those submarkets. Careful review of this record has persuaded the administrative law judge that complaint counsel have presented adequate evidence only as to the lettuce submarket.

The evidence concerning celery and cauliflower is so fragmentary, and much of it is of such dubious reliability (CPF, Pars. 80-85, 105-06, 119-20, 149-50, pp. 36-87, 45, 64, 98-99; compare RRB, pp. 39-47), that the record does not permit definitive findings. As to the broader lines of fresh produce and fresh vegetables, there is only generalized information (CPF, Par. 71, pp. 80-81) that again precludes definitive findings. Accordingly, the specific findings herein are limited to the lettuce industry as a submarket within the fresh vegetables line of commerce. Lettuce is the line of commerce to be analyzed. (This limitation does not preclude the drawing of proper inferences as to the fresh produce industry or the fresh vegetables industry on the basis of the facts developed concerning the important lettuce segment. See Conclusions, infra, p. 60. [p. 1669 herein. ] Geographic Markets The parties are in agreement, and the record confirms, that there is a national market for lettuce, as well as for other products included in the category of fresh vegetables or fresh produce (CPF, Par. 200, pp. 125-26; RPF, Pars. 51-72, pp. 45-62; RRB, pp. 75-76). Although there 5 Brown Shoe Co. v. U.S. 370 U.S. 294, 325 (1962); General Foods Corp. v. FTC, 386 F.2d 936, 940-43 (3rd Cir. 1967); Reynolds Metals Co. v. FTC, 309 F.2d 223 (D.C. Cir. 1962); U.S. v. E. I. dupont de Nemours & Co., 353 U.S. 586, 593-95 (1957); U.S. v. Aluminum Company of America, 377 U.S. 271, 273-77 (1964). Initial Decision 83 F.T.C.

are, of course, sales for resale and consumption within each of the ‘growing areas, it is clear that of the lettuce grown, harvested, and packed in the principal production areas (California, Arizona, Colorado, New Mexico, and part of Texas)— * * * [Vjirtually any given lot may be, and often is, sold or transported to any market in the United States. The industry’s domestic market for lettuce is the entire United States and its members are in daily contact with buyers across the Nation. (RX 1 I). Thus, lettuce from the designated production areas “is shipped to virtually every city in the United States” @d.; see also CX 269, p. 31). Despite complaint counsel’s concession as to the existence of a national market, the evidence as to market shares in such national market is limited to data for respondent and for a few other grower-shippers, including the acquired companies.

The national market, in turn, subdivides into a series of terminal markets in major cities throughout the country (CPF, Par. 201, p. 126). However, although the record contains references to such terminal markets and their impact on shipments, prices, etc., complaint counsel have not sought any finding respecting their relationship to the instant case.

For assessing the impact of the challenged acquisitions, complaint counsel have elected to rely on data concerning the principal shipping areas, or shipping point markets, in California and Arizona, which account for more than 80 percent of the Nation’s lettuce (CPF, Pars. 202-03, p. 126). Despite respondent’s attack on complaint counsel’s analysis of these markets and the resulting “concentration” tabulations, respondent does not, in terms, deny that they constitute relevant markets.

The nature and significance of these “shipping point markets” are spelled out in one of respondent’s exhibits (RX 4, p. 38): The fresh fruit and vegetable industry can be divided into three sectors: production, wholesale, and retail sectors. The wholesale sector can be further divided into shipping point wholesale markets and receiving or terminal wholesale markets * * *, The principal difference between the two wholesale sectors is proximity to producers and consumers. Shipping point wholesale markets are comprised of wholesale-distributors located in or adjacent to the major fresh fruit and vegetable producing areas. The primary function of these firms is to provide the marketing services necessary for transferring fresh fruits and vegetables from producing areas to consuming markets. Wholesale terminal markets are concerned with the receiving and break-bulk marketing functions. A fresh fruit and vegetable shipping point market is distinguished by volume shipments _ beyond local markets and the performance of attendant marketing services required by such shipments.

* * + - ae * * Fresh fruit and vegetable shipping point’ markets are an important segment of the industry. As the assemblers and first handlers of producers’ crops, these markets are instrumental in determining farm prices, the number and quality of initial marketing UNITED BRANDS. CO. 1055 1614 Initial Decision services, and interregional shipment patterns. In addition, the frequent integration of the production and shipping point marketing functions provides the marketing sector a direct influence on the industry supply response and results in a portion of farm income deriving from the efficient organization and profitable operation of shipping point marketing firms. Finally, trends in the marketing and production of fresh fruits and vegetables such as geographic specialization, direct marketing, larger farm units, and improved transportation facilities indicate a more important future role for shipping point markets. In any event, there can be no question that each of the major producing and shipping areas constitute, within the meaning of Section 7 of the Clayton Act, a “section of the country” in which it is appropriate to measure the competitive effects of the acquisitions under scrutiny (U.S. v. Pabst Brewing Co., 384 U.S. 546, 549 (1966); Brown Shoe Co. v. U.S., 370 U.S. 294, 336-87 (1962). The location and characteristics of these California and Arizona areas are described infra. The Lettuce Industry Before analyzing the competitive impact of the acquisitions, it is necessary to outline the industry setting in which the acquisitions took place. For the most part, the facts herein recited are not subject to serious dispute.

Lettuce is the Nation’s most important fresh vegetable crop in terms of volume and total value, with an average annual farm value of more than $220 million (RX 1 I). Its retail dollar value in 1967 was $667.5 million (CX 158 C).

Lettuce is commercially grown in and shipped from each major area of the United States—the West (primarily California, Arizona, Colorado, New Mexico, and Washington); the Midwest (primarily Michigan, Ohio, and Wisconsin); the South (primarily Texas and Florida) and the East (principally New Jersey and New York). (CX 364, p. 11) Total U.S. shipments of lettuce during the five-year period 1967-1971 were as follows:

No. of carlots or Year carlot equivalents Cartons § 1967 95,602 94,049,925 1968 98,445 97,167,850 1969 99,500 98,250,850 1970 101,596 100,381,150 1971 101,536 100,280,725 (CX 364, p. 11) 5 1 9 1 1 2 624 2291 43 18 97.003662 Thes 1 9 1 1 3 674 2291 110 19 96.319740 differences 1 9 1 1 4 791 2291 92 20 96.641380 between5 1 9 1 1 5 892 2292 34 19 97.009819 thes 1 9 1 1 6 934 2292 85 19 97.003723 numbers 1 9 1 1 7 1026 2292 21 19 97.006905 of5 1 9 1 1 8 1053 2294 80 17 96.356972 cartons5 1 9 1 1 9 1140 2292 68 19 96.829308 shown5 1 9 1 1 10 1218 2292 48 19 96.666183 here5 1 9 1 1 11 1273 2292 39 19 96.817177 ands 1 9 1 1 12 1320 2292 107 24 93.261093 complaints 1 9 1 1 13 1433 2291 97 19 91.444847 counsel’s5 1 9 1 1 14 1539 2291 109 19 96.598587 tabulations 1 9 1 1 15 1657 2290 67 23 91.666367 (CPF,5 1 9 1 1 16 1732 2291 46 19 96.459740 Par.5 1 9 1 1 17 1786 2292 31 21 93.253662 73,5 1 9 1 1 18 1826 2297 19 18 92.487564 p.5 1 9 1 1 19 1853 2292 33 21 96.299179 32)5 1 9 1 1 20 1894 2291 16 19 96.935013 is4 1 9 1 2 0 581 2325 1331 26 -1 5 1 9 1 2 1 581 2326 38 19 96.435432 dues 1 9 1 2 2 628 2329 22 17 95.852295 to5 1 9 1 2 3 660 2327 33 19 95.852295 thes 1 9 1 2 4 703 2327 39 19 96.998344 facts 1 9 1 2 5 751 2327 44 19 96.646805 that5 1 9 1 2 6 805 2327 103 24 96.495636 complaints 1 9 1 2 7 918 2327 77 19 96.346001 counsels 1 9 1 2 8 1006 2327 48 19 96.304932 used5 1 9 1 2 9 1064 2334 12 12 96.753632 a5 1 9 1 2 10 1085 2328 114 18 96.165344 conversion5 1 9 1 2 11 1209 2327 63 19 96.165344 factors 1 9 1 2 12 1281 2327 21 19 96.635658 of5 1 9 1 2 13 1311 2327 53 23 96.695702 1,0005 1 9 1 2 14 1374 2329 77 17 96.925835 cartons5 1 9 1 2 15 1462 2332 35 18 96.943748 pers 1 9 1 2 16 1506 2332 33 13 96.803116 cars 1 9 1 2 17 1548 2332 22 13 93.305824 or5 1 9 1 2 18 1579 2326 61 19 93.252541 carlot5 1 9 1 2 19 1649 2325 118 25 96.901604 equivalent,5 1 9 1 2 20 1780 2325 88 19 96.864502 whereas5 1 9 1 2 21 1878 2325 34 19 96.917175 thea 1 9 1 3 0 585 2355 1323 26 -1 5 1 9 1 3 1 585 2355 133 22 87.196175 1,000-cartons 1 9 1 3 2 727 2357 117 18 96.265778 conversion5 1 9 1 3 3 853 2357 64 18 96.459778 factors 1 9 1 3 4 925 2357 16 18 95.432976 is5 1 9 1 3 5 949 2356 110 24 95.432976 applicable5 1 9 1 3 6 1068 2357 44 24 96.262001 only5 1 9 1 3 7 1120 2359 22 17 96.815811 to5 1 9 1 3 8 1149 2357 35 19 96.815811 thes 1 9 1 3 9 1192 2357 69 19 96.807739 States5 1 9 1 3 10 1269 2357 22 19 96.895775 of5 1 9 1 3 11 1297 2357 115 22 88.692352 California,5 1 9 1 3 12 1421 2357 92 21 96.574059 Arizona,5 1 9 1 3 13 1522 2356 106 23 96.937737 Colorado,5 1 9 1 3 14 1638 2356 50 19 96.851372 News 1 9 1 3 15 1696 2356 85 22 96.869667 Mexico,5 1 9 1 3 16 1789 2356 40 19 96.915565 ands 1 9 1 3 17 1836 2356 72 19 96.856377 Texas.4 1 9 1 4 0 584 2388 1325 26 -1 5 1 9 1 4 1 584 2388 124 24 96.072968 Elsewhere,5 1 9 1 4 2 718 2390 33 18 97.016708 thes 1 9 1 4 3 761 2390 84 19 96.375504 numbers 1 9 1 4 4 853 2391 21 18 96.709152 of5 1 9 1 4 5 880 2392 80 17 96.403702 cartons5 1 9 1 4 6 967 2396 37 18 96.635757 pers 1 9 1 4 7 1012 2396 33 13 96.387184 cars 1 9 1 4 8 1053 2396 23 13 93.240746 or5 1 9 1 4 9 1083 2391 62 19 93.017441 carlot5 1 9 1 4 10 1153 2391 116 23 96.826294 equivalents 1 9 1 4 11 1278 2391 15 19 96.505844 is5 1 9 1 4 12 1301 2391 36 19 96.751312 8255 1 9 1 4 13 1345 2393 86 17 96.834236 cartons.5 1 9 1 4 14 1441 2390 42 21 96.770988 (CX5 1 9 1 4 15 1493 2391 42 21 91.721962 364,5 1 9 1 4 16 1546 2397 18 17 91.721962 p.5 1 9 1 4 17 1575 2391 29 22 95.982712 11,5 1 9 1 4 18 1614 2390 90 19 93.263290 footnotes 1 9 1 4 19 1712 2396 15 17 77.334877 ¢;5 1 9 1 4 20 1738 2390 70 23 96.642799 Saylor5 1 9 1 4 21 1817 2391 92 21 87.748428 1309-11,4 1 9 1 5 0 584 2422 93 22 -1 5 1 9 1 5 1 584 2422 93 22 94.928940 1323-24) Initial Decision 83 F.T.C.

California and Arizona constitute the principal lettuce-producing areas. In recent years, the combined production of California and Arizona has approximated 85 percent of total United States production, with California accounting for more than 60 percent and Arizona, from 20 percent to 25 percent (CX 246, pp. 77-78; CX 158 D, N; CX 133 Z-6). The percentages vary by growing season, but the overall dominance of California and Arizona is plain. In 1969, for example, on the basis of harvested acres and total value, California and Arizona lettuce production accounted for the following percentages of total production: ARIZONA- California Arizona CALIFORNIA YEAR Harvested Harvested Harvested SEASON Acreage Value Acreage Value Acreage Value Winter | 64% 61% 18% 27% 82% 88% Spring 38% 38- 47% 58% 85% 91% Summer 10% T4% — — 10% T4% Fall 63% 54% 23% 31% 86% 85% (CPF, Par. 72, p. 31) ;

The following tabulation (CX 374 A, C, E) shows the percentages of total U.S. shipments of lettuce accounted for by California and Arizona for each month during 1968, 1969 and 1970:

1968 1969 1970 Calif. Ariz. Total Calif. Ariz. Total Calif. Ariz. Total January 77.4% 18.4% 95.8% 12.9% 18.9% 91.8% 76.8% 15.6% 92.4% February 79.0 15.8 94.8 7.1 15.6 90.7 81.4 10.8 92.2 March 42.7 51.9 94.6 53.7 36.0 89.7 51.1 41.4 92.5 April 48.7 46.7 95.4 30.8 62.4 93.2 44.6 53.7 98.3 May 15.2 3.4 78.6 65.9 14.8 80.7 79.6 9.9 89.5 June 86.1 1.5 87.6 84.9 2.6 87.5 86.3 1.8 88.1 July 80.5 - 80.5 79.2 - 79.2 78.2 - 78.2 August 14.2 - 74.2 76.0 — 76.0 B.5 - 73.5 September 79.3 0.6 79.2 85.3 0.3 85.6 82.0 0.4 82.4 October 55.9 1A 63.3 61.2 6.5 67.7 72.4 4.1 76.5 November 30.6 54.2 84.8 32.9 59.6 92.5 38.1 52.5 90.6 December 53.8 37.6 91.4 49.0 45.4 94.4 50.6 40.9 91.5 These data demonstrate California’s domination of winter and sum- | mer lettuce and also the strong position of California lettuce during the rest of the year.

Within California, Monterey County is the principal lettuce producing area in summer, spring, and fall, while Imperial County is the principal lettuce-producing area in the winter (CX 380; CXs 295-305). Lettuce shipments from Monterey County during each of the years 1968—1971 were as follows:

Year Cartons 1968 28,326,492 1969 27,331,631 UANE A bay asvacene.— w 1614 Initial Decision 1970 28,327,177 1971 29,098,468 (CX 309 B—-E; CX 367 A-D) Imperial County lettuce shipments were as follows: Year Cartons 1968-69 17,808,962 1969-70 19,418,611 1970-71 18,888,375 1971-72 19,654,528 (CXs 306 J-K, 307 B-C, 308 B, 368 A-D, 395 A-B; Taylor 2985-92) (There are some discrepancies in some of the totals shown for each county in the cited exhibits, but the differences are negligible.) California’s next largest producing area is the Santa Maria-Guadalupe District (Santa Barbara and San Luis Obispo Counties), with between 7 million and 8 million cartons in 1971 (CX 364, p. 18; CX 414 A). Another major area is the Blythe District (Riverside County), which shipped 4.7 million cartons of winter lettuce in 1971 (CX 364, p. 13). The San Joaquin Valley, embracing 8 counties (CX 247), accounted for 5.9 million cartons in 1971, the bulk of it comprising fall lettuce (CX 364, p. 18). Other lettuce-producing areas include Santa Cruz County, Kern County, and Santa Clara County, but their production of less than 3 million cartons annually is dwarfed by the totals for Monterey County and Imperial County (CXs 298-300, 295-297, 305, 312; see also CX 380; CPF, Pars. 75-77, p. 34; RPF, Pars. 55-72, pp. 48,62; RRB, pp. 26-39). In Arizona, the major lettuce-growing areas are as follows: Salt River Valley (Phoenix area), with 4.4 million cartons in 1971. Marana-Red Rock-Maricopa-Eloy (southeast of Phoenix), with 5.6 million cartons in 1971.

Yuma area, with 7.6 million cartons in 1971. (CX 324) Other lettuce-producing areas include Willcox (eastern Arizona), Parker-Poston (western Arizona), Aquila-Date Creek, and Harquahala (both in central Arizona). They account for less than 3 million cartons annually, with Parker-Poston shipping about half this total (CX 324). Except for Yuma, Arizona’s production is limited to spring and fall lettuce. Yuma is in production through the winter at the same time as the Imperial Valley of California, but it has also developed spring and fall seasons that overlap with the other Arizona areas. The Salt River Valley and the Marana area, both in central Arizona, are the major source of spring and fall lettuce in Arizona, while Yuma provides the only Arizona winter lettuce, as well as some spring and fall lettuce. (CXs 248-250, 264-265, 289-291, 324) Total Arizona lettuce shipments in recent years have been as follows: Initial Decision 83 F.T.C.

Year Cartons 1968 19,481,000 1969 22,227,000 1970 20,016,000 1971 20,682,000 (CX 364, p. 11) Accordingly, except for generalized statistics as to other lettuceproducing areas, the evidence in this case has been essentially limited to California and Arizona. Moreover, within California, “concentration” indices have been limited to Monterey County and Imperial County. Production and Distribution The lettuce industry consists of a combination of growers, growershippers, and shippers, together with brokers and buyers located at the various shipping points. The shipping points vary during the year. Starting with spring shipments, the Salinas-Watsonville-King City area (Monterey County and Santa Cruz County) furnishes the major share of the lettuce during the period May through October. In November, the largest share comes from Arizona. From December through March, the largest share of the shipments comes from California (the Imperial Valley plus—especially in March—the Blythe District). During April, ‘as in November, the largest share comes from Arizona. In addition, there are other smaller shipments originating from other areas throughout the year. (CX 374 E; Faris 3413) As outlined in this record, with little or no dispute between the parties (CPF, Pars. 86-111, pp. 38-47; RPF, Pars. 73-74, pp. 62-63; Pars. 94-101, pp. 79-83), the harvesting, shipping, and sale of lettuce is substantially as follows:

Lettuce is usually sold the same day it is harvested. Once the lettuce ripens, it must be harvested within a relatively short period—within three or four days (CX 246 M). The lettuce is cut, packed, and inspected in the field (Garner 1893). It is normally packed 24 heads to a cardboard carton and then trucked to a vacuum cooler, where the temperature is lowered to about 34 degrees. From the vacuum cooler the cartons are shipped by rail or truck to destinations throughout the United States. (Derdivanis 2052) As a perishable product, lettuce must be cut, packed, and shipped daily or, at the latest, the succeeding day. Most lettuce is shipped “naked” in the carton; the heads are not individually wrapped. The clear plastic film in which lettuce is displayed in retail stores is ordinarily added by the store after the lettuce head is cut and trimmed of any discoloration that may have taken place in transit. However, some retailers prefer the plastic film to be applied by UNITED BRANDS CO. 1637 1614 Initial Decision the shipper, and from 5 percent to 15 percent of lettuce shipments involve shipper-wrapped lettuce. This involves an extra cost for the grower-shipper of from 45¢ to 60¢ a carton. Wrapped lettuce accordingly is normally sold at premium prices to at least cover this cost. The major shipper of wrapped lettuce is Bud Antle, Inc., which has wrapped approximately 40 percent of its lettuce. The imprinting of a brand name on these wrappers is minimal, and the brands are not otherwise advertised to the consumer. (CX 157 C; Sherwin 4053-54; Bradshaw 3940-42; Antle 2721.) Harvesting decisions are made on a day-to-day basis and depend on a variety of factors, including the volume shipped and the prices received on the preceding day, information as to the unloads and prices in major terminal markets, local weather conditions, weather conditions in terminal markets, and the condition of the crop (CX 246). Growers, grower-shippers, and shippers keep abreast of the market by contacts with one another and through the services offered by the Federal-State Market News Service. By personal contact, by telephone, and by publications—some of them daily—both sellers and buyers have available a wide range of information concerning the market for lettuce. This includes information on unloads and on prices in terminal markets, on weather conditions in such markets, as well as in other producing areas; the shipping volume and prices for the preceding day; and also the current day’s volume and pricing. Market News Reporters seek and disseminate information on both the selling and buying side of the market. This is done through contacts with shippers and with purchasers. .

All concerned may obtain from the Market News Service the latest available information as to prices and shipping volumes. Such information is double-checked and published the following day. As indicated, lettuce is sold on a day-to-day market basis. Negotiations over any particular sale begin in the morning and terminate in the afternoon after each party has had the opportunity of informing himself fully on the day’s market, both through the Market News Service and by contacts with the trade. The purchasers are represented by brokers or by their own representatives.

Buyers and buyer representatives have an opportunity to inspect the lettuce at the vacuum cooling plant or even in the field. Inspection normally takes place before a final purchase is made. Buyers have an opportunity to compare quality as between different grower-shippers or between the lettuce produced in different fields but handled by the same shipper or grower-shipper. Quality is an important factor in pricing and accounts in significant measure for the range of lettuce prices at each shipping point.

Initial Decision 83 F.T.C.

Most lettuce is sold f.o.b. at the shipping point. However, some lettuce is sold on a consignment basis. This usually represents an established relationship between a particular terminal market wholesaler and grower-shipper, with a consequent sharing of the profits or losses involved in resale at the terminal market.

At times, consignments are made on a distress basis—that is, cars that could not be sold at the shipping point are consigned to a wholesaler or another representative who will undertake to sell the contents at the terminal market for the best price he can get. In other words, the car has a “home,” where a designated representative will undertake to sell it.

In the absence of either a shipping point sale or a consignment, a grower-shipper may “roll” the car and endeavor to sell it while it is en route toward eastern markets. Otherwise, he may “no-bill” the car— -that is, provide no bill of lading for that day but hold the car over for another day for possible sale or consignment at that time. To the extent that the existence of any substantial volume of no-bills, rollers, and distress consignments is known in the trade—as it frequently is—this tends to depress the market since such cars are surplus at the going prices.

The seasonal lettuce crops in California and in Arizona are produced and sold pursuant to a variety of arrangements. There are several integrated operations that directly own or lease farm land and engage in the complete operation from production of the crop through harvesting and packing to sale (Garin 2839; Hansen 2301-02; Derdivanis 2028; Hart 3017, Schultz 3086). United Brands functions in this manner, producing and selling its own crops (Dale 2150-51; Willis 2138; Mohamed 2694— 2718). Some lettuce producers sell through cooperatives (Lumsden 2212; Bertelsman 2507). Under this type of arrangement, the individual or the company takes all the risks and accordingly reaps all the profits or suffers all the losses (Bertelsman 2508). At the other extreme, there are instances when the shipper takes the full risk by contracting for a farmer to grow his requirements of lettuce, paying the farmer a flat fee per acre of lettuce, for example, with the farmer receiving his full compensation whether or not the crop was harvested. In this type of arrangement, the farmer takes no risk but his profit is generally minimal. (Lee 2331-33.) This record indicates that much of the lettuce grown in California and Arizona is produced by joint ventures between the farmer and the shipper, with the latter denominated as a grower-shipper. These “joints,” as they are known in the trade, involve a sharing of risks and profits between the farmer and the shipper. The exact arrangemennts vary, with the details subject to bargaining between farmer and ship- UNITED BRANDS UU. LuVvv 1614 Initial Decision per. Under many of these arrangements, the farming operation is basically allocated to the farmer, with some supervision by the shipper; and production costs, such as seed, fertilizer, irrigation water, etc., are shared under some agreed ratio. The expenses of harvesting and packing are incurred by the shipper. Upon sale of the crop, the profits, if any, are allocated between the two parties according to their contractual agreement, subject to the deduction of at least the harvesting and packing costs. (Derdivanis 2017; Bertelsman 2542-44; Martin 2804; Senini 3231-32) 7 Competitive Climate At the time of respondent’s entry, the lettuce industry was basically a small company industry, consisting essentially of privately-held or family-held corporations, cooperatives, partnerships, and proprietorships (Crossetti 2339-40; Laine 2197; Lumsden 2211; Bertelsman 2507; Morris 2891). With the exception of Bud Antle, Inc., which had annual sales of about $27 million (Tr. 2722), these companies had annual sales ranging from $500,000 to $8 million (CPF, Par. 104, pp. 44-45). The enterprises acquired by respondent were fairly typical; their annual sales in the year prior to acquisition ranged from $1 million to $6 million (CX 233 F). Many of the grower-shippers specialized in lettuce, while others had related agricultural operations (CPF. Pars. 66-67, pp. 28-29; Par. 103, p. 44; Par. 197, p. 124). None were publicly held companies 8 or conglomerate enterprises. For the most part each was dependent on iocal banks for financing and on local concerns for services and supplies. (CPF, Pars. 109-110, p. 46.) As a generalization, most of the growers and grower-shippers have grown up in the business. They have tended to begin as small producers; if they had ability in management and skill and experience in production (plus a little luck), they grew and accumulated resources until they became one of the larger firms in the industry. (Faris 3422-23; CRB Par. 281, p. 10.) The entry into or exit from the lettuce industry was primarily on the basis of the ability of the individual (Derdivanis 2015- 16).

This competitive climate is not disputed by respondent. In its preliminary consideration of the lettuce industry, respondent recognized that the industry was “fragmented” and consisted mainly of “small producers.” (CX 158 C) And it now concedes that— 7 For an analysis of the various grower-shipper relationships, see CX 274, pp. 15-17. ® At the time of trial, Bud Antle, Inc., was in the process of registering with the Securities and Exchange Commission for the public sale of its stock (Tr. 2727, 2033). Initial Decision 83 F.T.C.

The fresh vegetable industry is fragmented and is lacking in any concentration or oligopolistic characteristics to such extent that it approaches, as much as in any other industry in the United States, the concept of pure competition* * * . (RPF, Par. 3 (8), p. 2).

Although phrased in the present tense, this is a concession as to the state of the industry before respondent’s entry. Whether it is an accurate characterization today is the question to be resolved. Respondent’s entry into the industry was not the only change in the picture. At about the same time that respondent began its acquisitions, a similar program was undertaken by Purex Corporation, a conglomerate with annual sales of about $300 million. This company made several — acquisitions of lettuce enterprises and other agricultural operations and operated them through a subsidiary, Freshpict Foods, Inc. Indications were, however, that Purex, at the time of trial, was in the process of de-emphasizing its agricultural activities, particularly in the lettuce business, possibly because the Commission had issued a complaint challenging the acquisitions. (Leach 2443-54) Traditionally, the industry has been characterized by considerable price uncertainty. Because of the perishable character of lettuce, huge volumes must be moved to market in a brief period of time. Supplies are highly variable, not only from area to area and from season to season, but also from year to year. Both the vagaries of weather and the uncoordinated production of many growers may result in sudden shortages or unanticipated surpluses. (RX 3, p. 49; CXs 246, 247, 274) Moreover, the price elasticity of demand is inelastic for the industry. This means that a small change in quantity will generate an opposite but relatively larger change in the prevailing market price. On the one hand, if shipments are reduced by a given percentage, there is an opposite and more than proportional increase in price, resulting in greater total grower-shipper returns. On the other hand, if shipments are increased by given percentage, there is an opposite and more than proportional decrease in price, with a resultant decrease in total revenue for the industry. (CXs 246, 281; Blaich 1827-38; Faris 3411-15; Lumsden 2218; RX 1) In addition, the record shows that weather conditions in consuming markets have a marked impact on consumer demand and consequently on the prices in terminal markets.

With the industry subject to so many variables on both the supply side and the demand side, prices tend to fluctuate widely and wildly. . Prices may drop or rise by as much as 300 percent in a week’s time—from $5.50 to $1.50 or the converse (RX 74, p. 31; CX 251, p. 25; see RPF, Pars. 98-101, pp. 81-838).

In its review of lettuce prices (RPF, Pars. 80-101, pp. 68-83), re- UNITED BRANDS CO. 1641 1614 Initial Decision spondent has emphasized the periods of depressed prices, with consequent industry losses. But the statistics also show periods of prosperity for the grower and shipper of lettuce (CRB, Pars. 269-277, pp. 7-9). The situation of the lettuce industry was aptly described in a California Department of Agriculture study (CX 246, pp. 5-6) as follows:

[TJhe lettuce industry often will be faced with average annual prices over a two or three-year period which do not cover total costs of production and harvesting. For this reason, well-established grower-shippers and shippers plan their schedules and evaluate financial performance over relatively long periods of operation of up to four to five years, with the expectancy that losses in one year will be offset by income gains in others. As would be expected, successful shippers and grower-shippers require sufficient cash reserves to carry them through possible years of low return. During periods of oversupply and resultant low prices, lettuce may be sold at prices below the cost of production, harvesting, and sale. Or the lettuce may be left in the field unharvested—plowed up. As a rough rule of thumb, it is considered that the return on a carton of lettuce should exceed $1.75 to show a profit to the grower. However, since the fixed costs of production have already been incurred once the lettuce is in the ground, grower-shippers will harvest and sell lettuce at any price that will exceed the cost of harvesting, packing, and selling, so as to contribute some revenue to the “land”—that is, toward the fixed or sunken costs. The record indicates that the costs of harvesting, packing, and shipping a carton have ranged in recent years between $1.00 and $1.25. (CPF, Par. 98, pp. 42-43; CRB, Pars. 311-313, pp. 23-27; RPF, Pars. 98-99, pp. 81-82) In the face of the price volatility that characterizes the lettuce industry, resulting in periodic low prices and consequent losses, there has been an increasing trend for the larger grower-shippers to develop year-round operations. Not only does this spread the risks in both time and space, but it also provides a continuing source of supply to customers and results as well in certain economies in the utilization of manpower and facilities. However, there are limitations on the availability of land suitable for lease or development for profitable year-round production. oo Such limitations constitute a barrier to entry into the lettuce industry and were recognized as such by respondent when it decided on entry by acquisitions rather than on de novo entry (CX 158 P). (This will be considered in more detail infra.) The picture that emerges from this record shows a fragmented, substantially competitive industry, consisting of many sellers, with even the largest grower-shippers having relatively small market shares. There was no brand differentiation of product. The market was from day to day, with the daily pricing of lettuce dependent on actual Initial Decision 83 F.T.C.

supply and demand factors. Price was determined by market forces and was not subject to the conscious control of any individual seller. In respondent’s words, prices have been “dictated by supply and demand,” and the industry approached “pure competition” (RPF, Par. 3 (8) (4), p. 2).

Competitive Effects Such, in brief, was the state of the lettuce industry before respondent became a grower-shipper in 1968-69. The question for decision is whether respondent’s entry by acquisition has had or may have the effect of substantially lessening competition or tending to create a monopoly in the lettuce industry (Complaint and Answer, Par. 36). This is a case involving the entry by a giant corporate conglomerate into a traditionally small-enterprise industry. The case has some unique aspects, but despite the protestations of respondent, the problem posed is amenable to the application of traditional antitrust concepts. The parties are in agreement, and the record confirms, that the fresh vegetables industry, including the lettuce segment, has been atomistic in structure and vigorously competitive, with prices determined by supply and demand. Essentially, they part company on the question whether the entry of United Brands by acquisition has resulted or may reasonably result in such a change in these characteristics as to bring the acquisitions within the ambit of Section 7 of the Clayton Act or of Section 5 of the Federal Trade Commission Act. In this section, we shall examine a variety of competitive factors that are important in arriving at a proper answer to this question.

Reciprocity At the outset, we can dispose of two of the allegations of the complaint. First, the Government offered no proof concerning reciprocity (Complaint, Par. 36(3) (F) ). Respondent’s lettuce customers are brokers, fresh produce wholesalers, and chain stores. The uncontradicted testimony is that respondent buys nothing from these customers and therefore has no buying power to use in forcing lettuce sales (Fox 1484; Mason 3870-71).

Potential. Competition Second, complaint counsel appear to have abandoned the potential competition charge of the complaint (Par. 36(1)) to the effect that the acquisitions are actionable under Section 7 of the Clayton Act or Section 5 of the Federal Trade Commission Act because potential competition between respondent United Brands and the acquired companies in the growing, shipping, and marketing of fresh lettuce and of fresh celery Vartewaene 1614 Initial Decision and of other fresh produce has been, or may be, eliminated. Complaint counsel state:

Although plainly a potential entrant into fresh produce, as a potential entrant United Brands probably had no real effect upon the competitive climate, since it was already one approaching pure competition (CPF, Par. 140, p. 92). In any event, not only is there an absence of proof that respondent had considered entry by internal expansion, but the evidence is to the contrary (Fox 1472). There is likewise no proof that respondent was considered by industry members to have been threatening entry, with a consequent impact on the competitive climate. Moreover, the position of the Government is ambivalent on the subject of respondent as a potential entrant. While the complaint alleges that respondent’s removal as a potential competitor had or might have an adverse effect on competition, the proposed order contained in the complaint would prohibit respondent from entering the industry by internal expansion as well as by acquisition, and complaint counsel continue to press for such an order.

As an alternative theory, complaint counsel would extend the orthodox concept of potential competition by focusing on the acquired companies as possible sources of new competition in the relevant industry or industires. They propose a finding as follows: * * * [Tn making its several acquisitions, United Brands extracted from the principals of the concerns acquired consulting agreements or agreements not to compete of some five years duration. * * * Since the actual source of new entrants into the shipping of lettuce, celery and/or cauliflower are on the whole individuals associated with fresh produce as farmers, shippers, brokers, buyers, etc. * * * , and since the skills, knowledge and know-how associated with fresh produce constitute barriers which this group is uniquely qualified to overcome, the United Brands acquisitions * * * [have] systematically eliminated an important portion of the possible entrants into lettuce, celery and cauliflower. (CPF, Par. 140, pp. 92-98) In their proposals for conclusory findings of fact and conclusions of law, complaint counsel repeat in substance this proposed finding and contend that “the elimination of the acquired concerns as active competitors in the fresh produce industry, and the elimination of the owner-managers of these enterprises as possible competitors through the use of consulting agreements and noncompeting agreements is of considerable significance and importance” (CPF, Par. 204, p. 127). Accordingly, they propose a conclusion that, for these reasons, the acquisitions are an “unreasonable restraint of trade in violation of Section 5 of the Federal Trade Commission Act” (CPF Par. 205, p. 127). In the opinion of the undersigned, this attempted transformation of the potential competition theory of the complaint must be rejected. The legality of the acquisitions must be determined as such. The consulting Initial Decision 83 F.T.C.

arrangements and the covenants not to compete were ancillary to the acquisitions and are, by their terms, of limited duration. Their legality was not put in issue by the complaint. Accordingly, this aspect of the matter does not afford a basis for a determination that the acquisitions, as such, are unlawful under either the Clayton Act or the Federal Trade Commission Act.? At any rate, the elimination of actual competition between and among the acquired companies is of greater significance. Competitive Advantages One of the primary questions in a Section 7 case is whether the advantages over competitors resulting or likely to result from corporate acquisitions threaten to be “decisive” (H.R. Rep. No. 1191, 81st Cong., Ist Sess. 8). This record affords numerous examples of advantages enjoyed by the acquired enterprises once they were integrated into the United Brands corporate family.

“Deep Pocket”

The “power of the ‘deep pocket’ or ‘rich parent’ * * * in a competitive group when previously no company was very large and all were relatively small” is an advantage that has been found sufficiently decisive to outlaw an acquisition, Reynolds Metals Co. v. F.T.C., 309 F.2d 223, 229-30 (D.C. Dir. 1962; opinion by Judge (now Chief Justice) Burger). The Court focused on the “possibility and power” that the “rich parent” afforded its subsidiary “to sell at prices approximating cost or below and thus to undercut and ravage the less affluent competition.” This record affords a classic example of the competitive advantage enjoyed by an enterprise as a result of the “deep pocket” of the parent corporation. Respondent’s farming subsidiary (Inter Harvest) suffered in 1970 an operating loss of $8,287,000 (CXs 401, 403 Z-7, 409 F, 417 7,-8; Gibbons 1789). As a result, respondent’s corporate headquarters transferred funds totaling $7,608,000 to Inter Harvest (CX 410 B; Gibbons 1804). Without this transfusion of funds, Inter Harvest would have been out of business (Gibbons 1806-07). Despite respondent’s rationalization as to the reasons for the $8 million loss in 1970 and the adjustments that should be made in the financial statement to reduce it to $2,804,951 or even to $1,274,543 (RPF, Pars. 202-205, pp. 154-70; RRB, pp. 7-8), the stubborn fact remains that Inter Harvest suffered an $8 million loss and was bailed out by the parent company. It ® Neither party has pointed to any record evidence as to the present or future status of the individuals involved in the consulting arrangements and in the covenants not to compete, but it appears that by the time this case is finally decided, the terms of such agreements will either have expired or will be approaching their expiration dates. Depending on the eventual outcome of this litigation, the question of the legal status of any renewals of such restrictions on re-entry into the business may be left for later determination. : » UNITED BRANDS CO.) 6 66. avae | eee we Initial Decision ee ds apparent t that Inter Harvest enjoyed a ‘unique advantage by. virtue of : ~its parent’s deep pocket (Gibbons 1802-03; CX 410 A).?0 Support from the parent treasury extended beyond the immediate ~ needs of cash flow. or the inability. to meet current’ obligations from © he earnings. ‘Subsidization extended as well to capital expenditures. ‘For ea eS example, respondent financed the following i in- 1970-71 es aS, $376,600 for a vacuum cooler and other items (CX. 408 A-C). 2. $409, 000 to lease tractors (CX 408 I-J). me Bs $118; 800.to purchase trucks (CX 408 SU)... Although United. Brands followed. the practice of transferring ther: = ae profits of a subsidiary to corporate headquarters (CX 410 A), profits” . from the Inter Harvest operation before 1970 were entirely inadequate to compensate for the losses incurred in 1970 or ‘to provide funds for: _ capital expenses. (CXs 397 A, 398A, 409 B). . Ina high-risk industry like lettuce, where low prices may: create : losses year after year, the availability of respondent’s deep pocket i isa “decisive advantage over competitors with limited capital resources."? For’ this advantage to. be recognized, it is not necessary that re- : spondent be found guilty. of predatory pricing, as in the Reynolds ‘Metals case, supra. As a matter of fact, complaint counsel disclaim any .. issue.of predatory pricing in this case (CRB, Par. 311, p. 23). But, as a ~ noted in Reynolds Metals, supra, it is the‘ ‘possibility and power” of » thus undercutting and ravaging competitors that is to-be considered. - | Aside from any possibility of intentional depression of prices to drive ~ eompetitors out of business, respondent is simply better equipped to. cope with the risks inherent in lettuce production. For others:in the. business, limited funds have required a reduction in the intensity of lettuce production on either leased: or owned land. High risk forces growers to limit their production. Banks demand other crops, contracts, “or assets in order to finance lettuce production when a grower’s funds . I become depleted. Growers owning land but. with only limited capital can _ plant but.a relatively small percentage of their acreage to lettuce. It i is _ only as available funds increase that the grower can plant as. much as 30 percent of his land into a high-risk crop like lettuce. (CX 274; Faris 3429) 7 Respondent recognized that its financial power. permitted it to “maximize the use of the land for growing lettuce rather than grow a - diversified product line solely to minimize risk as is the practice of many ~~ ~ smaller farmers” (CX. 158 E):

- Respondent has demonstrated its capability of expanding production toward its goal of controlling 15 percent to 25 percent of the market (CX 10 Although Inter Harvest wound up in the black for the year 1971 (CXs 405 Z 17, 417 2-8), it was in a loss position for. the first 9 months of the year (CX 405 .Z-3 5). The extent of respondent’s fi nancial. resources and borrowing power. is outlined supra, pp. 4-5 ip. 1624 herein]. Initial Decision 83 F.T.C.

158 F; Fox 1498; CPF, Par. 168, p. 109). Likewise, it was and is able to spend substantial amounts on advertising and promotion (CXs 317 A-B, 128 A—W).

Finally, in contrast to the limitations imposed on other industry members by their small size and their limited capital resources, United Brands was able to announce in February 1970 * * * plans on a long-range basis to diversify into a wide variety of agricultural and fruit related products and services. These would be distributed through mass outlets, and would utilize the consolidated company skills in handling perishable products from their source to their ultimate consumers * * * (Black 1727-1728) That plan envisioned the establishment of a network of regional coldstorage warehouses for the distribution of lettuce and other fresh produce directly to chain stores and others (CX 124 B). Clearly, the disparity in size and power between United Brands and its competitors gives United Brands decisive advantages. As one of the grower-shipper witnesses put it, the lettuce industry is a “gamble game” like poker. Formerly, there were “table stakes” that all participants could afford. With United Brands’ entry as a “new guy” in the game, the picture changed; United Brands can raise the ante to the point that the “game * * * will break up.” He added: The same entities will no longer be playing poker. It will be a big game for big money. And using this simile is what I feel, in my opinion, of how we are going to be pushed out of the produce business. (Garin 2871-2873) The validity of the simile is not destroyed by the fact that the witness quoted had been able, prior to respondent’s entry, to invest $1 million in leasing and developing for lettuce production 2,000 acres near Parker, Arizona (Garin 2841-43; RRB, p. 10).

Economies of Scale, Ete.

Complaint counsel are ambivalent as to economies of scale that respondent may enjoy by virtue of the size and scope of its farming operations. While asserting that respondent does or may enjoy lower costs in the purchase of “inputs” (fertilizer, etc.) at “substantial cost reductions” (CPF, Pars. 154-156, pp. 101-02), they also state that “at the farm level United Brands’ size does not bring with it any significant cost benefits” (CPF, Par. 154, p. 101) and that “farming has severe built-in limitations on size in terms of diseconomies of scale * * * ” (CPF, Pars. 255-256, pp. 147-48).

On one element of input—fertilizer—the evidence is at most suggestive. The evidence shows only that respondent enjoyed price advantages from one fertilizer supplier, as compared with certain competitors, but that other competitors enjoyed better prices than did respondent. Some of the low prices cited as showing respondent’s buy- UNITED BRANDS CQO. 1041 1614 Initial Decision ing power were the same as those charged one of the acquired companies. Complaint counsel also rely on testimony to the effect that respondent ceased doing business with one fertilizer supplier that had formerly sold to several of the acquired companies and that this was on the basis of inability to meet competitive prices." (CPF, Pars. 156-161, pp. 102-106; RPF, Pars. 229-231, pp. 180-182; RRB, pp. 8-9, 49-51) Thus, the record does not contain substantial evidence that respondent either induced or obtained discriminatory prices in its fertilizer purchases by virtue of its size and massive purchasing power. Another effort to show the likelihood of respondent’s enjoying lower costs by virtue of the size and scope of its farming operations also proved abortive. This was a treatise authored by complaint counsel’s economic expert on the general subject of economies of scale in farming but not directly related to the lettuce industry. In the light of certain concessions made in the treatise itself, as well as concessions made by the expert in the course of cross-examination, the treatise hardly constitutes substantial evidence of the point contended for. (CX 276; Faris 3620-29; Bradshaw 3916-28; CPF, Par. 154, p. 101; Pars. 255-256, pp. 147-48) , This is not to say that there does not exist a potential for respondent to enjoy such price advantages in the purchase of inputs such as seed, fertilizer, etc. Respondent’s management clearly contemplated the likelihood of such cost. savings on a substantial scale in respondent's integrated farming operations (CXs 113 A, 157 D-E, 146 D, 158 E-F, 167 B).

Moreover, despite the skepticism and indignation of respondent’s chief executive officer (Fox 1497) and its counsel (RPF, Par. 44, p. 33; RBB, p. 9), it is relevant that consideration was given to the possibility of extensive cost savings through respondent’s own manufacture of the cartons in which lettuce is shipped (CXs 10, 17, 158 F; Morris 2902-03; _Senini 3233). Respondent already operates box plants in the tropics in connection with its banana business and also had been a joint owner of a plant manufacturing kraft linerboard used in the production of boxes (Fox 1458). The fact that the box plant proposal had not been considered by “top management” does not rule it out as a reasonable possibility. Although respondent’s initial efforts to bypass the lettuce brokers and to sell lettuce through its regional banana sales offices (CXs 86 B-C, 133 Z-50, 186 B, 183 B; Service 1595-98; Dale 2152) was soon abandoned, the cost savings that might thereby be realized—about $300,000 Complaints 1 5 1 1 2 719 2359 80 21 96.356720 counsels 1 5 1 1 3 808 2360 50 18 96.901169 here5 1 5 1 1 4 867 2358 42 25 96.646469 rely5 1 5 1 1 5 919 2364 24 14 96.972946 on5 1 5 1 1 6 953 2364 24 14 96.830513 an5 1 5 1 1 7 986 2358 77 19 96.830513 exhibits 1 5 1 1 8 1072 2357 43 22 93.080101 (CX5 1 5 1 1 9 1126 2356 90 22 75.116577 328-Id.)5 1 5 1 1 10 1225 2356 45 19 94.902740 that5 1 5 1 1 11 1280 2362 40 13 94.902740 was5 1 5 1 1 12 1330 2355 90 24 96.503288 rejected5 1 5 1 1 13 1430 2354 57 20 96.918037 when5 1 5 1 1 14 1497 2354 16 19 96.329559 it5 1 5 1 1 15 1522 2359 42 13 96.850334 was5 1 5 1 1 16 1573 2352 78 20 95.641907 offered5 1 5 1 1 17 1660 2352 31 19 97.011185 for5 1 5 1 1 18 1700 2351 85 20 96.455154 another5 1 5 1 1 19 1794 2355 87 20 96.372551 purpose4 1 5 1 2 0 555 2384 1327 34 -1 5 1 5 1 2 1 555 2396 41 21 78.848755 (Tr,5 1 5 1 2 2 606 2395 64 21 74.141052 2682).5 1 5 1 2 3 680 2394 42 19 96.995438 Thes 1 5 1 2 4 733 2393 135 25 96.350777 undersigned5 1 5 1 2 5 877 2398 46 14 95.564056 sees5 1 5 1 2 6 931 2398 26 13 96.689095 no5 1 5 1 2 7 966 2392 53 19 96.328331 basis5 1 5 1 2 8 1027 2392 33 18 96.910149 for5 1 5 1 2 9 1068 2391 106 24 96.970268 reversing5 1 5 1 2 10 1182 2391 35 19 96.809807 thes 1 5 1 2 11 1226 2390 72 24 96.546783 ruling.5 1 5 1 2 12 1310 2389 106 22 96.879318 Likewise,5 1 5 1 2 13 1426 2388 35 19 96.931892 thes 1 5 1 2 14 1471 2386 136 25 95.566666 undersigned5 1 5 1 2 15 1616 2386 75 24 96.908905 rejects5 1 5 1 2 16 1701 2385 33 19 96.974365 thes 1 5 1 2 17 1742 2384 86 26 96.998177 petitions 1 5 1 2 18 1838 2384 44 19 96.977272 that4 1 5 1 3 0 555 2418 1246 34 -1 5 1 5 1 3 1 555 2427 76 25 96.182098 rulings5 1 5 1 3 2 641 2427 87 24 96.320328 relating5 1 5 1 3 3 736 2426 22 20 87.224167 to5 1 5 1 3 4 768 2426 59 19 96.985008 others 1 5 1 3 5 836 2425 93 22 95.628235 exhibits,5 1 5 1 3 6 941 2431 23 13 96.981293 as5 1 5 1 3 7 975 2424 43 19 96.738106 wells 1 5 1 3 8 1027 2430 23 13 96.996857 as5 1 5 1 3 9 1060 2425 21 18 96.962814 to5 1 5 1 3 10 1090 2424 109 23 95.226463 testimony5 1 5 1 3 11 1210 2423 39 19 96.268394 ands 1 5 1 3 12 1258 2422 136 25 96.952858 stipulations,5 1 5 1 3 13 1405 2421 26 19 96.171082 be5 1 5 1 3 14 1441 2420 96 20 96.472565 reversed5 1 5 1 3 15 1548 2419 67 23 96.026970 (CPF,5 1 5 1 3 16 1627 2418 131 20 93.262917 Attachments 1 5 1 3 17 1769 2418 32 22 91.080948 E). Initial Decision 83 F.T.C.

in 1970 and 1971 (CXs 408 Z-7, 405 Z-20)—remains a potential advantage to be reckoned with. As in the case of product differentiation through branding (infra), respondent has repudiated all the management studies tending to show the feasibility and the advantages of direct selling and has indicated its intention of conforming to previous customs of the trade (RPF, Pars. 42-50, pp. 24-45; RRB, p. 15). Nevertheless, once respondent became better established and built up its market share, it conceivably might successfully eliminate or substantially reduce the cost of brokerage.

Irrespective of the possibility of direct selling, respondent’s regional representatives give it an advantage in on-the-spot handling of complaints as to lettuce quality, etc. (CPF, Par. 163, p. 107). In addition, the company enjoys direct access to top officials of the major retail chains (Bull 1576-77; Schultz 3095-96).

Price Leadership Respondent clearly envisioned for itself the role of “price leader” in the lettuce industry. Its objectives were:

1. To fill the “leadership vacuum in the lettuce industry”—to establish itself as the “non-preemptable leader in fresh vegetable marketing.” 2. To stabilize “erratic’ market prices—to “subdue the historical variations of the fresh vegetable market, especially in terms of price fluctuations * * * .”

3. To achieve a premium price for branded lettuce. These goals were to be accomplished by product differentiation (branding), by direct sales, and by advance-order selling. CXs 85 A-D, 86 D-E, 136 A-B, 1387 A-C, 158 D) No matter that this did not work out as planned. It provides a fair basis for not only assessing certain post-acquisition developments, but for assessing as well the probable effects on competition if respondent were allowed to keep the business that it acquired and were granted the opportunity to try to overcome the obstacles that stood in the way of its game plan.

Despite all the testimony and the great volume of exhibits related to post-acquisition pricing, the most that can be concluded is that: 1. With the volume of lettuce produced and sold by respondent, its pricing policies and practices had a substantial impact on the shippingpoint markets where it operated.

2. During periods of low prices, respondent was blamed for the depressed state of the market—sometimes with justification, sometimes not.

3. Complaint counsel do not contend that respondent engaged in predatory pricing—deliberate selling at low prices with the purpose or UINLLINY DINAINDS UU. 1b4y 1614 Initial Decision effect of driving competitors out of business. Complaint counsel refer to predatory pricing as an “issue which has not been pleaded or raised in any form” (CRB, Par. 311, p. 238; but see CPF, Par. 232, p. 137; CRB, Par. 298, p. 18).

Even competitors critical of respondent’s practices acknowledged that its 1970 pricing was an error in judgment or the result of poor coordination between the production department and the sales department (Derdivanis 2124, 2184).

During the 4-month period July-October 1969, a respondent rather consistently followed the industry pattern of infrequent rollers or distress consignments, selling f.0.b. shipping point between 95 percent and 99 percent of its lettuce (CXs 1, 356 A~F). Beginning in November 1969, respondent greatly increased its rollers and consignments, so that in the’ next several months, it sold only from 76 percent to 85 percent of its lettuce f.0.b. shipping point (CXs 1, 356 G—J). During January 1970, the rollers and consignments from the Imperial Valley (El Centro) included a substantial volume of “30's,” which consist of small heads of lettuce packed 80 to a carton rather than the usual pack of 24. This took place on a declining market, with the result that the price for the 30’s declined to $1.10 per carton. Respondent’s volume of rollers and consignments, including the 30’s, had a depressing effect on a depressed market. (CXs 1, 407 A-K, CX 258, (p. 22); Derdivanis 2096-2106, 2114-30; Lumsden 2206-09) Respondent was blamed by several witnesses for the “disastrous” season in the Imperial Valley during 1969-70 (Derdivanis 2096-2106, 2114-30; Garin 2873-75; Schultz 3089-3098; CX 407). Respondent was accused of increasing its acreage and production and offering its lettuce at prices as low as 85 cents. However, the record shows no 85-cent f.o.b. prices for respondent in the Imperial Valley during that season and only a relatively small percentage (less than one-half of 1 percent) under $1.00. One of the complaining witnesses (Garin) sold a higher percentage of its shipments at less than $1 net than did respondent. (RX 115 A-E) .

Moreover, there is no reliable evidence that respondent increased its planting over that formerly controlled by some of the companies that it acquired. Out of a total Imperial Valley increase of 1.6 million cartons,. - 1969-70 compared to 1968-69, respondent’s increase in shipments totaled only 40,000 cartons over those of its acquired companies in 1968- 69.'3 As a matter of fact, respondent left an estimated 25 percent of its lettuce unharvested in this season, while other shippers were increasing 5 1 4 1 1 2 580 2396 112 24 96.243607 Complaints 1 4 1 1 3 700 2397 81 19 95.230476 counsels 1 4 1 1 4 790 2397 106 24 96.859154 computed5 1 4 1 1 5 905 2397 35 19 97.016701 thes 1 4 1 1 6 949 2397 90 19 96.874619 increases 1 4 1 1 7 1046 2399 22 17 96.001831 at5 1 4 1 1 8 1076 2398 81 22 96.831299 549,8545 1 4 1 1 9 1165 2401 88 21 96.910294 cartons,5 1 4 1 1 10 1264 2400 35 19 96.921234 but5 1 4 1 1 11 1309 2400 39 19 96.921234 this5 1 4 1 1 12 1357 2406 41 13 96.925713 was5 1 4 1 1 13 1407 2406 116 15 96.931198 erroneous.5 1 4 1 1 14 1533 2401 108 25 96.971771 (Compares 1 4 1 1 15 1650 2402 58 23 96.566673 CPF,5 1 4 1 1 16 1718 2403 44 19 89.382675 Par.5 1 4 1 1 17 1774 2403 40 22 96.965973 142,5 1 4 1 1 18 1824 2409 32 18 96.088066 pp.4 1 4 1 2 0 529 2429 897 29 -1 5 1 4 1 2 1 529 2430 66 22 78.586800 93-94;5 1 4 1 2 2 607 2429 45 20 93.202515 Par.5 1 4 1 2 3 665 2430 41 22 93.282555 175,5 1 4 1 2 4 718 2436 18 18 91.565857 p.5 1 4 1 2 5 750 2430 41 23 70.939941 118;5 1 4 1 2 6 803 2430 46 19 93.217659 with5 1 4 1 2 7 862 2430 58 23 92.681938 RPF,5 1 4 1 2 8 933 2431 44 19 96.365364 Par.5 1 4 1 2 9 990 2431 92 23 90.797615 184-185,5 1 4 1 2 10 1091 2437 35 19 96.122528 pp.5 1 4 1 2 11 1140 2433 77 22 96.122528 140-42;5 1 4 1 2 12 1230 2433 61 23 96.772919 RRB,5 1 4 1 2 13 1303 2440 33 18 96.233047 pp.5 1 4 1 2 14 1348 2434 78 22 93.467857 59-61.) Initial Decision 83 F.T.C.

shipments, including at least one who complained of “dumping” on the part of respondent (Schultz 113; Bradshaw 3932). During the spring season in Salinas Valley in 1972, one growershipper complained that respondent had forced prices down to $1.10 (CX 416). The manager of Inter Harvest testified without contradiction that other shippers were the first to go to $1.10 (Bradshaw 395455). Although there is considerable testimony that respondent was the first to quote low prices, such testimony was admittedly on a hearsay basis, and there is little or no reliable evidence that this was the fact. Nevertheless, whether or not respondent actually exercised price leadership by being the first to quote a price lower than the going range, there is no doubt that with the volume of lettuce that it was moving,'* its prices tended to set the market price or, at least, to have a strong influence thereon.

Large-volume shippers are under pressure to cut prices in order to move their production, and, during periods of depressed markets, are blamed, rightly or wrongly, for low prices. This follows from the inelastic demand for lettuce at the industry level. The larger the quantity under the control of a firm, the more inelastic the demand facing the firm. The firm selling larger quantities of lettuce must lower price more percentagewise to sell its shipments or else stop harvesting. The largest volume company makes the price on a depressed or slow market because the buyers use that price to “whipsaw” the sellers. (Derdivanis 2086-94; Lumsden 2206-28; Garin 2874, 2855-56; Martori 3206-07; Senini 3239-40, 3249-50, 3262-68; Blaich 1333-34; Faris 3403, 3417-18, 3434-35, 3509, 3513, 3561-63) When this state of affairs is coupled with industry recognition of respondent’s deep pocket—its greater financial ability to withstand a period of low prices—the result is that the nature of the day-to-day market at the various. shipping points is altered. Among other things, the presence in the market of a company like respondent must have its impact on the “psychology of the market.” According to a study made under the auspices of the California Department of Agriculture in 1966, next to supply factors as a determinant of ' price, the psychology of the market may be the primary determinant of the “level of and the variability in the ‘mostly’ range of prices in any one season or region * * *.” The study states:

The degree of pessimism or optimism on the part of buyers and shippers contributes to the combination of other factors which affect price and therefore may be the decisive factor which determines whether or not growers and shippers have a financially profitable season.

* * * * * * * “ For a sampling of the lettuce volume sold by respondent at various shipping points on a weekly basis during 1969 and 1970, see CPF, Appendix C.

we eee eee ON aves 1614 Initial Decision Probably the most unpredictable element contributing to the determination of price is the general attitude of buyers and sellers. Not infrequently unusually high or low prices are unexplainable except by reference to this one factor alone. (CX 246 J, L; see Derdivanis 2072, 2118-19) That respondent sold below cost is not disputed, but it was by no means unique in this respect. And, as we have seen, there is neither claim nor proof of predatory pricing. Moreover, while there have been depressed prices since respondent’s entry, the record clearly establishes that this is a historic pattern in the lettuce industry (RPF,. Pars. 80-101, pp. 68-83; Pars. 174-187, pp. 182-45). The extent to which respondent was responsible for low prices is not clear, but there is no doubt that-it contributed substantially to such downward swings since 1969. .

Although complaint counsel introduced exhibits comparing prices realized by respondent on “rollers” and consignments and comparing these prices with the “mostly” prices '* reported by Market News (CXs 357 A-D, 361 A—F), their proposed findings do not include any reference to these tabulations. In any event, respondent presented evidence showing that in many instances, respondent’s prices were not as low as those of the complaining witnesses and that these witnesses had previously priced not only under the “mostly” price but under the lowest prices reported in the range. (RPF, Pars. 188-200, pp. 146-53; Pars. 159-173, pp. 120-82; RRB, pp. 11-12, 53-54) Thus, there is no basis for a charge that respondent was selling at unreasonably low prices, and complaint counsel do not so contend.

‘For what it may be worth, the record shows that respondent stopped using rollers and consignments '* in January 1971 and, as of the time of trial in mid-1972, had not sold below $1.25 since that date (Dale 2157; Ronan 2430-31; Bradshaw 3976-77, 4005). One ironical footnote is that whereas most witnesses roundly condemned respondent for its former use of consignments (supra), one witness was critical of respondent’s 1971 decision to sell essentially on an f.o.b. basis (Lumsden 2203, 2210- 11, 2222-23, 2249-51). His objection was that a strict f.0.b. policy could result in depressing the f.o.b. market.

Despite the somewhat cloudy picture on pricing, the evidence shows nevertheless that respondent had and has both the intent and the power to exercise price leadership. Such power plainly constitutes a competitive advantage and also serves as a barrier to new entry. Concentration Respondent agrees that over the past decade there has been a decline 'S The “mostly” price is that reflected in 55 percent to 90 percent of sales (RX 5, p. 42). '6 Except for what is known as a “guarantee,” whereby the consignee pays a minimum price that may be as much as 25 cents under the “mostly” price (Dale 2157-58; Bradshaw 4005-06). Initial Decision 83 F.T.C.

in the number of growers and shippers of lettuce (RRB, pp. 6, 25).'” It is not surprising, therefore, that concentration has increased, both nationally and in the growing-shipping areas with which this case is primarily concerned.

National Concentration Information as to national concentration is at best sketchy. Either by reason of the unavailability of published data showing the breakdown by shipper of total lettuce shipments or the staggering magnitude of collecting such data, the record does not contain precise total shipment figures for any shipper except respondent (CPF, Par. 112, p. 47, Par. 118, p. 63). However, in its pre-acquisition studies of the lettuce industry in 1968, respondent estimated that Bud Antle, Inc., accounted for about 7 million cartons annually and was the industry leader with from 6.5 percent to 7 percent total shipments and that the second largest shipper (Bruce Church, Inc.) accounted for about 5 million cartons or from 4.5 percent to 5 percent of the industry total (CXs 157 C, 158 D). The estimated volume of the lettuce shipments of the companies that respondent acquired in 1968-69 was 7.2 percent of the industry total (supra, p. 10 [p. 1629, herein)]).

On the basis of the foregoing approximations, “top-two” concentration increased from about 12 percent to about 14 percent or an increase of between 17 percent and 21 percent, depending on the figures used. Since then, respondent’s shipments have increased, so that in 1971 it had a market share nationally of 10.8 percent (RX 117 A-B; Bradshaw 3909). On the assumption that Bud Antle’s shipments remained constant, even though there is evidence of increased shipments,’*® “top-two” concentration has increased to more than 17 percent in 1971, or by approximately 40 percent or 50 percent since 1968, again depending on which figures are used for 1968.

Although it seems strange that such crucial figures should have been developed on the basis of estimates, the estimates appear to be reasonably reliable. Thus, they constitute substantial evidence of the facts. In addition, other witnesses appeared to be satisfied that respondent and Bud Antle, Inc., were the two largest shippers of lettuce, and nothing appears to the contrary. The record contains no total shipment figures for any other shipper.

'T No definitive overall figures were developed in this record, but there is no doubt as to the downward trend (CX 278, pp. 102-04; Faris 3416-17). For area breakdowns, see CPF, Par 143, p. 95; Par 146, p. 97; CPF, Attachment D, p. 115. compare RRB, pp. 21-27.

'* The president of Bud Antle, Inc., was a witness, but he was not asked about his total shipments for 1968 or for any other year. However, after acknowledging sales of approximately $27 million in 1967 and 1968, he did express the belief that Antle was the largest lettuce shipper from 1965 to 1968 (Tr. 2722-23). UNITED BRANDS Coo. 1693 1614 Initial Decision Regional Concentration With only limited data on a national scale, complaint counsel have focused on concentration analyses for Monterey County and Imperial County in California and all of the lettuce-producing areas in Arizona. Monterey County and Imperial County were selected for analysis because they constitute the two major lettuce-growing areas in California and because lettuce shipments of individual firms were available from official records. Similarly, the record contains data respecting individual lettuce shipments from all the growing-shipping areas in Arizona, and concentration analyses were prepared for (1) the Salt River Valley, (2) Yuma, and (8) all other Arizona shipping points combined. These data (CXs 367 A-D, 368 A-D, 370 A-E, 371 A-E, 372 A-E, and 373 A—E) are attached in an appendix. Statistics cited earlier (supra, p. 17) [p.—herein] show that Monterey County produces approximately 30 percent of the nation’s lettuce. At the peak of its season, it accounts for 60 percent of the lettuce then being shipped. The Imperial Valley produces over a 4-month period approximately 20 percent of the nation’s annual production of lettuce (supra, p. 18) [p.—herein]. During the peak of its season (January and February), the Imperial Valley produces from 70 percent to 80 percent of total United States lettuce shipments during that period. Arizona accounts for approximately 20 percent of U.S. shipments (supra, p. 19) [p.—herein] and is the dominant factor in spring lettuce (supra, p. 16) [p.—herein]. Thus, the areas covered in the exhibits account for some 70 percent of the total U.S. shipments of lettuce and, on a seasonal basis, are of particularly vital significance. CXs 367 A-D (Appendix) show the following: Concentration in Monterey County increased from 28.95 percent for the top 4 in 1968, just prior to United Brands’ acquisitions, to 39.61 percent in 1969, when all of its acquisitions were completed, to 40.87 percent in 1970, and to 41.05 percent in 1971. For the top 4, this is an increase in concentraton of 41.8 percent in just four years, most of it in the very first year as an immediate result of the acquisitions, which combined the 5th, 8th, 14th, 15th, and 25th ranked lettuce producers in that county (CX 309). For the top 8, concentration was 47.52 percent in 1968, 57.78 percent in 1969, 58.12 percent in 1970, and 58.34 percent in 1971. This is an increase in top 8 concentraton of 22.8 percent in just four years. As a result of the acquisitions, respondent was the no. 1 shipper in 1969, 1970, and 1971, with 15 percent to 17 percent of total Monterey County shipments.

For Imperial County, CXs 368 A-D (Appendix) show top 4 and top 8 concentration as follows:

Initial Decision 83 F.T.C.

Top 4. Top 8 1968-69 22.5% 85.7% 1969-70 23.07% 38.33% 1970-71 30.51% 44.63% 1971-72 29.25% 44.57% Respondent became the top shipper in 1969-70 by its consolidation of firms not in the top 4 in 1968-69, thereby attaining nearly 8 percent of Imperial County shipments. Its share of shipments in the next two seasons approximated 10 percent. Over the four seasons, top 4 concentration rose nearly 30 percent, and top 8 concentration, about 25 percent. The concentration picture in Arizona is mixed, showing a marked increase in the Salt River Valley but a decline in the other areas. The date may be summarized as follows:

1967-68* 1968-69* 1969-70 —_1970-71* A-Central Arizona:

1) Salt River Valley—Fall Top 4 27.00% 30.26% 42.56% 52.86% Top 8 47.63 52.23 66.55 72.96 2) All others—Fall Top 4 47.33% 40.71% 39.23% 39.69% Top 8 72.02 65.10 62.57 60.31 8) Salt River Valley—Spring Top 4 28.83% 37.48% 49.66% 54.15% Top 8 51.20 57.88 73.09 81.81 4) All others—Spring , Top 4 42.72% 43.17% 36.86% 40.97% Top 8 66.50 - 62.48 56.77 60.83 B-Yuma (Winter) Top 4 49.04% 47.15% 43.13% 38.26% Top 8 71.07 71.27 68.83 65.21 *Shipments from Sept. 1 through August 30. Sources: CXs 370-373 (Appendix). This concentration analysis is not without its flaws, as respondent has noted at considerable length (RPF, Pars. 55-72, pp. 48-62; Pars. 152- 156, pp. 115-18; RRB, pp. 4-6, 17-39). Respondent’s basic objections may be summarized as follows:

1. Despite the large volume of shipments originating in each of the areas analyzed, the tabulations fail to take into account the competition from other areas, including immediately adjoining counties, where some of the same shippers, as well as others, are shipping lettuce to the same markets at the same time. For example, the economic expert who prepared the tabulations agreed that areas shipping at the same time should be “lumped together” (Walker 3324).

2. As for Arizona, the tabulations carve out the Salt River Valley in Central Arizona as a separate area and then lump together all the other 1614 Initial Decision areas (Central Arizona, Eastern Arizona, and part of Western Arizona) where spring and fall lettuce is grown.

3. Because growers shift their lettuce planting from area to area and' from year to year and because shippers likewise move in and out of particular growing areas from year to year, an analysis of a limited number of separate growing areas fails to give a complete or accurate picture. Aside from specific figures for respondent’s total shipments and an estimate of those of Bud Antle, Inc., the record is silent as to the annual totals for any grower-shipper, many of whom ship not only from the areas analyzed, but from other areas as well. Although there ‘is testimony that the grouping of the areas in the Arizona tabulations was occasioned by lack of consistency in area definitions in the State market reports and by other statistical difficulties (Walker 3319-24), it is probably true that the Salt River Valley was analyzed separately because respondent had “staked out a strong position” there (CPF, Par. 145, p: 95), becoming the No. 1 shipper in 1969-70, with 17 percent of the fall shipments and 20.6 percent of the spring shipments; and increasing these percentages to 22 percent and 23 ' percent, respectively, in 1970-71. Here there was a clear increase in concentration in which respondent played a significant role. The fact that other factors contributed to this concentration—a downward trend in lettuce production in the Salt River Valley (RRB, pp. 19-24, 32)- ~does not erase the fact of increased concentration. Nor does the fact that in nearby competing areas, other shippers had higher shipment percentages than respondent did in the Salt River Valley (RRB, pp. 35-36) overcome the fact of respondent’s dominance there. Although respondent’s criticisms have some merit, the fact remains that the analyses deal with areas accounting for a major part of the lettuce crop; and the impact of concentration within each such area at any given time constitutes a valid antitrust consideration. For example, conceding the existence of competition between Monterey County shippers of spring and fall lettuce, on the one hand, and Arizona shippers on the other, the existence of concentration in either area is a factor affecting supply and price not only within that area but also in the competing area. Notwithstanding their deficiencies, the analyses are sufficient to indicate that respondent’s acquisitions have contributed to a concentration trend in several of the principal growing-shipping areas in the West.

In an effort to meet some of respondent’s criticisms of the foregoing concentration analyses, complaint counsel have presented a series of alternative analyses (CPF, Par. 147, pp. 97-98)'* as follows: ” A few errors in the percentages shown have been corrected. Initial Decision 83 F.T.C.

CONCENTRATION Percentage 1968-69 1970-71 Increase (1) Arizona Fall lettuce: Top 4 25.10% 80.48% 21% (excluding Yuma) Top 8 41.61 49,27 18 (2) Arizona Spring lettuce: Top 4 30.52% 34.47% 13% (excluding Yuma) Top 8 45.38 51.12 13 (8) .All Arizona lettuce: Top 4 24.39% 28.87% 18% (including Yuma) Top 8 39.33% 43.38 10 (4) Winter lettuce: Top 4 20.42% 27.97% 37% (Yuma & Imperial County) Top 8 32.25 39.63 23 (5) Arizona & California: Top 4 22.09% 32.36% 46% (Monterey & Imperial Top 8 32.86 43.14 31% Counties only) (CXs 306-309, 389-391, 324) The foregoing tabulation goes a long way toward meeting respondent’s objections, but is still subject to some critical analysis. It essentially combines the Arizona areas that ship at the same time and analyzes total Arizona shipments as well. It combines two of the principal producing areas of winter lettuce (Yuma, Arizona, and Imperial County, California). Finally, it takes account of the competition between the two principal lettuce counties in California, on the one hand, and all of Arizona, on the other. Although other producing areas in California and elsewhere are omitted, the final analysis (No. 5) covers substantially all the areas where the record contains data on individual shipments. (The calculations for this analysis are contained in CPF, Attachment D.) — Plainly, concentration is up in all alternative markets that may be considered. And for the largest market (No. 5 above), covering more than 65 percent of U.S. shipments, concentration has been greatly increased. In 1970-71, moreover, respondent was the leader in Arizona fall lettuce, with 10 percent; in total Arizona shipments, with 9 percent; in winter lettuce (Yuma and Imperial County), with 9 percent; in winter lettuce (Yuma and Imperial County), with 9 percent; and in the combined shipments for Arizona plus Monterey and Imperial Counties, with 18 percent. In Arizona spring lettuce, it was No. 2, with 10 percent; Bud Antle, Inc., had 13 percent. (CPF, Appendix D, pp. 1-5) Barriers to Entry One of the factors to be considered in testing the legality of mergers and acquisitions is barriers to entry into the industry under scrutiny—either the creation of new barriers or the raising of existing barriers. In this section we shall consider such barriers as availability of suitable lettuce land, product differentiation, “know-how,” price inelas- UNLLED BKANUS CU. , 10d 1614 Initial Decision ticity of demand, financing, etc., on each of which respondent’s acquisitions have had an impact.

Respondent’s protestations that there are no barriers to entry in the lettuce industry—that there is complete ease of entry—are belied by its own documents. Just before respondent entered the fresh vegetables industry in general, and the lettuce industry in particular, in 1968, its management identified three barriers to entry that impelled it to take the acquisition route rather than to enter de novo: 1. There was “not sufficient land available for lease or development in the areas required for year-round production,” all “suitable land” being then under lease (up to five years) to existing growers. 2. There was “no practical method of developing ‘know-how’ or for training the personnel required to produce lettuce,” these skills being “available only in the organizations * * * [then] growing lettuce.” 7° 3. Finally “experienced professional vegetable type management” was required but was “not available” except in conjunction with the properties then owned and operated by such management; such management personnel were essential because they were familiar with other growers and had the required detailed knowledge of the land and of leasing arrangements. (CX 158 O-P, F) These barriers and others will be the next subject for discussion. Availability of Lettuce Land Despite the foregoing admission by respondent that even a corporate giant such as United Fruit found the de novo acquisition of suitable lettuce land a barrier to proper entry. respondent now insists (RPF, Pars. 124-180, pp. 103-06; Pars. 189-152, pp. 110-15; RRB, pp. 13-14) that there is ample land throughout the nation for the production of lettuce, so that availability of land is not a barrier to entry. However, the concept that respondent embraces is more theoretical than real. Respondent quotes at length testimony and documents to the effect that there is land in California, Arizona, Texas, and elsewhere that could be converted to lettuce production if the demand and the price warranted such a shift. Although that is a big “if,” the argument has some validity because the record shows that farmers do shift from lettuce to other crops and vice versa. But there are obvious natural and economic reasons why so much of the production of lettuce is concentrated in California and Arizona. Respondent recognized at the outset of its exploration of entry into the lettuce industry that the Salinas Valley *” The record confirms that entry into the industry as a new and separate entity has generally come only from individuals closely associated with the industry—individuals who were born and raised in the frowing areas, or who were growers, handlers, or brokers, or who sold to or provided services to the industry (CPF, Par. 127, p. 86; CRB, Par. 281, p. 10).

Initial Decision 83 F.T.C.

of California was a “vital source of supply for a fairly extended period of the year,” so that it was essential for respondent to have supplies in that area (Fox 1454-55). Moreover, the short answer to respondent’s contentions regarding the availability of lettuce land is found in the management report quoted supra (p. 44) [p. 1657 herein] as to the problem of obtaining “suitable” lettuce land.

If any further answer be needed, the absurdity of respondent’s position, as a practical matter, was demonstrated when an agricultural economist commented that if the price of lettuce were high enough, it would be grown at the North Pole if this were physically possible (Blaich 1355). Similarly, another witness conceded that land not now used for lettuce in the Salinas Valley could be used for lettuce production even though it might not be feasible to harvest a lettuce crop (Garner 1929).

The record makes abundantly clear that of all the land now in lettuce production or capable of being used for this purpose, some areas are clearly superior to others for a variety of reasons. It has already been noted that there is a trend to year-round-production in order to supply customers on a year-round basis and to spread the risks inherent in lettuce production. As far as the Western producer is concerned, this necessitates land in the Salinas Valley, particularly in the Blanco area. Such land is difficult to obtain at reasonable cost. (Hansen 2307-09; Crosetti 2342-49; Jackson 2495-98; Bertelsman 2520-25; 2550-52; Hart 3025-29; Derdivanis 2024-31; Decker 2282, 2288; Mello 2458-63, Finerman 2467-70, 2477-78; Morris 2894-97; Schultz 3103; Mayberry 3172- 76; Garner 1926-29) By acquiring access to extensive acreage of suitable lettuce land through its acquisitions, and by its ability to obtain renewals of its leases as well as to acquire access to additional land at higher costs than can be afforded by most of its competitors or any would-be entrants into the lettuce industry, respondent’s entry by acquisition has in fact raised the barrier to entry represented by the difficulty of obtaining suitable lettuce land at reasonable cost.

Product Differentiation The ability to brand-differentiate a product and, through advertising and promotion, to achieve a consumer preference and a premium price for such product is a competitive advantage that may also constitute a barrier to new entry (Faris 3406). Because of respondent’s efforts to differentiate its lettuce through the use of the “Chiquita” trademark, product differentiation is an issue in this case. Regarding product differentiation, the parties agree, and the record confirms, that:

UNITED BRANDS Coo. 65D ; 1614 , . Initial Decision “Before respondent's entry, the lettuce industry was an industry i in. : which product differentiation was minimal. Approximately 5 percent of ' the lettuce was shipper-wrapped, which is a form of product differentiation. Three grower-shippers did most of the lettuce wrapping. There » was no consumer advertising to promote a particular brand; interest was in promoting western lettuce. There was little or no awareness ‘on. the part of consumers. concerning the brand names. of particular — - E grower-shippers. (CXs 70 B, 89 M, 157 C, 158 D, 246; Houseberg bes -, 1860-62; Derdivanis :2086; Faris 3421-22) - ~ Respondent entered the fresh vegetables market with the avowed - intention of establishing a national “consumer franchise” through the development of a branded line of produce items. Respondent intended to market a line of fresh vegetables identified by the name “Chiquita.”... ~ These vegetables were to be of “premium quality” and marketed at a - “premium price.” It was the goal of the branding program to “subdue the historical variations. of the fresh vegetable market, especially in terms of price fluctuations, and to elevate [respondent’s] products from the commodity category by establishing a consumer demand for the » Brand.” Consumer demand was to be created and the premium price justified by means of advertising “designed to register the product superiority of the Brand.” (CXs 187 B, 147 A) . ; Respondent, planned to package and brand lettuce, celery, celery hearts, and cauliflower and also to develop a package for broccoli (CX 70 A). Its objective was to market a line of branded produce, modify. or alter existing distribution channels to fit this requirement, and to con-- ‘vey to the consumer and the trade a plausible justification of this action (CX 85 A). Branding was designed to provide respondent more “freedom in price determination than would otherwise be possible.” Company literature for employees pointed out: : Without brands or other distinguishing marks on products, the market determines the oe price * * * . There i is little or no opportunity for one firm to sella at higher prices than other firms... :

Exercising some degree of control over the market and prices is valuable i ‘in-assuring a. continuing profitable market for a product and justifying. the capital invested:in production facilities. (Cx 111 Z-82; see also CXs 137 B, 147 A; Fox (1457-58) — Lettuce was to be the first step in establishing respondent a as a i leader in perishable product marketing (CX 117 A). An extensive—and expensive— marketing test was initiated and enjoyed a degree of success. A’ price. differential was established between wrapped Chiquita lettuce . and both other wrapped lettuce and unwrapped lettuce. (Cs 128 B, 317 A; Bull 1527-31; Faris 3427-28) 74 iad ‘Respondent's extensive research and market-test activities are outlined in CPF, Pars. 36-48, pp. 15-21, Pars. 59-64, pp. 25-28.

oe 1660 FEDERAL TRADE COMMISSION DECISIONS “Initial Decision RE me 88 FT. C.

From respondent's own documents it is clear that the branding prog- - ram was designed to establish for respondent: an impregnable position of Le leadership in the lettuce market and thereafter i in markets. for other S S fresh vegetables. 4 The branding program - was. abandoned i in 1970, and respondent's oe officials have testified that there i is no intention of renewing i it. Respon- a dent's explanation J is nonce ‘that at because of differing wcither, soil; growing, harvesting, packing and shipping: conditions, it, proved impossible to. produce and sell lettuce that had a consistent year-round |” quality; that after a short test program in certain: test. markets; respondent decided its |. Chiquita lettuce branding program was a commercial failure, and abandoned same for the ‘following reasons: (a) a consistent quality could not be mairitained throughout the year nor... - guaranteed on any given day: or for any period of time; (b) the consumer housewife who: a can see.and feel the lettuce at the retail market made her own decision as to quality and . oa placed no dependence or reliance on:the brand name;.(c) buyers of lettuce for resale also. made their own determination of lettuce quality and placed.no dependerice or reliance on . the Chiquita brand insofar as ‘quality was coricerned, and found there was no consumer. meee ‘demand for a particular | lettuce brand. (RPF, Par. 210, PP. 112-18) However, there is substantial suppott i in the record fora finding that - : there remains a potentiality, if not a likelihood, that respondent may renew its branding program. Despite the remarkably abject confession by respondent’s officials of the failure of the branding program and — related marketing plans (RPF, Pars. 43-50, pp. 24-45), the factors that may have motivated abandonment in 1970 may be overcome in the future.

Although there i is no evidence that the pendency of this proceeding motivated the abandonment of the Chiquita branding program for let-. tuce, the fact is that abondonment took place after respondent was on notice that the Commission intended to issue a complaint challenging the. acquisitions. Thus, evidence of this post-acquistion change of marketing strategy may properly be viewed with some skepticism. In addition, respondent concedes that asa result of the contract Signed in mid-1970 with the Chavez union, respondent encountered difficulty in os controlling the harvesting crews and, consequently, the quality of the lettuce that. was packed (Mason 3882-83). This is not necessarily a permanent disability. of One major factor that led to the abandonment of the branditig prog- “ram in 1970 was the lack of-a ‘sufficient market share to support the © advertising and promotion program required for successful brand differentiation (CX 158 F-G, P-Q; Fox 1498). Obviously, if respondent is. permitted to retain the acquired companies, there remains areasonable. possibility that the handicap of limited market share may likewise be: UINIL EY DNAINUD UYU. 1001 1614 Initial Decision overcome.” As a matter of fact, respondent has materially increased its market share since the acquisitions (supra, p. 39) [p. 1652 herein]. Still another factor that influenced the decision to abandon the Chiquita branding program for lettuce involved questions both as to the appropriateness of such a brand name for non-tropical produce and also the possible adverse effect on the Chiquita brand for bananas if poorquality lettuce were sold under that brand name (RPF, Pars. 40-41, pp. 23-24).

Despite respondent’s emphasis on problems associated with sourcewrapped lettuce, the fact remains that not only respondent, but also a growing number of its competitors, continue to ship source-wrapped lettuce. Moreover, the record shows that at least five lettuce shippers not only wrap their lettuce before shipment but also identify it by brand name, although they do not advertise such brands to the consumer. (Sherwin 4053-54; CX 291 F-G, J-K; Bradshaw 3941-42, 3985-86; CXs 291 F-G, J-K, 403 Z-8) Assuming, as respondent insists, that a successful branding program depends on sufficient quantities of consistently high-quality lettuce (compare CRB, Par. 308, pp. 22-28), these shippers presumably have been able to do this to the point that they do not consider it a business risk for their lettuce to bear a brand name. There is no reason to believe that respondent cannot achieve the same results. (See CX 88 A-B.) Thus, it is clear that the problems encountered by respondent, in its program of branding lettuce and seeking a consumer franchise for it are by no means insurmountable. In assessing the likelihood of a renewal of the branding program, it is fair to examine respondent’s experience with the Chiquita branding program for bananas. The record demonstrates that respondent encountered and continues to encounter difficulties in maintaining a consistent quality of bananas, but the program has nevertheless been successful in the banana industry (Mason 3888-95; see CX 44A-B).?3 One of respondent’s officials recognized that some of the problems associated with wrapped and branded produce might be overcome by the establishment of “cold storage warehouses _ adjacent to major markets or clusters of major markets,” to which produce might be shipped in bulk and then held and wrapped on order from local chains (CX 124 A-B).

On the witness stand, respondent’s officials, for the most part, summarily repudiated the validity of all the research that preceded the 22 A management memorandum in September 1968 referred to a market share of 25 percent as “needed in order to support an adequate national advertising program” but this volume was “considerably reduced * * * because of anti-trust considerations” (CX 158 Q).

*! The branding program and related practices in respondent’s banana business are summarized in CPF, Pars. 15-38, pp. 6-13. These proposed findings have not been challenged by respondent. Initial Decision 83 F.T.C.

initial adoption of the branding program, but it is nevertheless clear that brand differentiation remains a course of action open to respondent. Despite the problems associated with the source-wrapping of lettuce, respondent continues to engage in pre-wrapping, and it is but a short step to add a brand name and to accompany such branding by extensive advertising and promotion. Moreover, the testimony that respondent has no intention of resuming the branding program must be discounted in the light of the fact that the chairman and chief executive officer of United Fruit Company, in November 1970, advised all employees as follows:

The Chiquita branded program will be pursued vigorously with a re-emphasis on many of our old strengths and a concentration on new approaches that will keep United Fruit in front—ahead of its competitors in the marketplace. We will never go back to the old commodity approach in our business. (CX 234 B) And, as noted elsewhere, branding is emphasized in respondent’s meat business. Respondent is clearly consumer-brand oriented. Respondent’s argument that product differentiation through branding is not likely to constitute a barrier to entry in the lettuce industry must accordingly be rejected.

Price Inelasticity of Demand Reference has been made previously to the price inelasticity of demand‘that characterizes the lettuce industry (supra, p. 24) [p. 1640 herein], and it need not be repeated here. Similarly, the fact that such inelasticity constitutes an entry barrier requires no citation of either legal authority or economic authority. It is apparent that with respondent having displaced six relatively small, independent grower-shipping enterprises, the entry barrier of price-demand inelasticity has been raised. Would-be entrants would be aware of respondent’s share of the market, of its price leadership, of its power to cause market gluts, and of its deep-pocket capability to withstand the resulting low-price markets (Faris 3411-15, 3432-35). The fact that the inelasticity of demand for lettuce does constitute a barrier to entry was recognized by respondent at the same time that it was arguing otherwise. If respondent had been able to enter the lettuce industry de novo by growing lettuce on land not now in lettuce that it contends is available and if it had done so on the same scale represented - by its acquisitions (annual production of 7 million cartons), respondent notes:

Such incremental or excess volume superimposed on top of an already existing oversupply situation would have been disastrous (Bradshaw 3950), that is, it would have caused further depressed prices and losses (RPF, Par. 132, p. 107; see Faris 3607-10). UNITED BRANDS CO. ~ 1663 1614 Initial Decision Thus, with respondent obviously in a position to create or aggravate an “oversupply situation,” the prospects would not appear favorable to a would-be entrant.

Risk and Financing Two of the other principal barriers to entry that have been raised by the challenged acquisitions are so closely related that they may be treated together. These are (1) risk and (2) financing problems. Both, in turn, are related to the price inelasticity of demand just outlined. If there is one aspect of this case that respondent does not dispute, it is that lettuce is a high-risk crop** because both supply and price are extremely variable, so that the industry has been periodically plagued by oversupply, low prices, and either low profits or losses. Hardly an attractive prospect for a would-be entrant unless he were blessed with eternal optimism or a deep pocket or both.

Thus, we begin with an existing barrier to entry. Add to this the presence in the industry of a giant corporate conglomerate, with both market power and a deep pocket, and the result is obvious: The existing entry barrier is raised appreciably. Prospective entrants, whether already engaged in some phase of the lettuce industry or looking in from the outside, are not likely to find the prospect inviting. There is an obvious relationship between this risk factor and the matter of financing in the lettuce business. Complaint counsel’s economic expert outlined the problem this way: Commercial credit sources recognize the riskiness of a crop such as lettuce. A typical credit institution restraint was that at least half of the farmer’s acreage must be in field crops which are characterized by relatively stable prices. This serves as security against low prices for fresh vegetables such as lettuce * * * . Commercial credit institutions prefer to make loans based on the physical assets. Consequently, larger shippers are more able to obtain larger amounts of production credit than are the small growers. The grower-shippers can enter into various contracts with the growers and will provide some of the production capital and inputs needed. Thus, for the same amount of available funds, a grower-shipper can ship more lettuce as well as spread some of the risk associated with uncertain prices. The financial limitations placed on the growers and grower-shippers serve as a barrier to large annual expansions of vegetable crops such as lettuce. (Faris 3420-21; see also pp. 24-25, supra; CX 274, pp. 6, 8) Complaint counsel have cited little or no definitive record information as to the cost of entry into the lettuce business but contend that capital requirements constitute a relatively high entry barrier (CPF, Par. 129, p. 88). Their economic expert testified that to become a grower-shipper requires a “considerable amount of capital;” but obviously fatigued at the end of two days of cross-examination, he was unable to give either a 24 “The element of economic risk in lettuce production is among the highest in agriculture” (RX 1 I). Initial Decision — 83 F.T.C.

specific amount or a range of amounts (Faris 3632-33). One witness estimated $100,000 for entry in a “very small way,” but acknowledged that this was a “kind of a guess” (Crosetti 2345-46, 2349). Land costs and growing costs have increased, but packing costs may be lower than they were before the advent of vacuum cooling (Crosetti 2349-50; see Derdivanis 2020-21; Antle 2723-24). Because of financing, this witness viewed the entry of United Brands with “some concern” (Crosetti 2351). With the financing of a high-risk crop like lettuce already a problem, there is evidence that the presence of respondent in the industry injected a further risk factor for bankers to take into account. An Arizona shipper, now out of the business, testified that “It’s almost impossible to go to a bank to get financed on speculative crops such as produce.” The company did not have the funds to continue in the produce business any longer. This shipper attributed his exit from lettuce and from fresh produce at the door of the conglomerates generally. He stated: * * * T feel that is the farming business as a whole, conglomerates are going to end up in the field of agriculture, and I don’t think there’s room for the small farmer. They seem to be able to fund themselves in a better manner than we can * * * I know we can’t bump heads with them if we stay in business. That’s why we’re getting out. (Eaton 3277-79) Another former lettuce operator, with production in both California and Arizona, indicated that his bank was concerned about conglomerates getting into lettuce and possibly causing low markets in which the small operator could not survive. This witness indicated his bank was concerned “with large corporations getting involved in [the] lettuce business and ultimately creating long periods of low market because of their high volume and for a small operator such as myself, that didn’t have the financial resources to carry through long periods of low market * * * ” (Henning 3041-44). Complaint counsel claim too much, however, when they propose a finding that respondent’s activities were the cause of his exit from the industry (CPF, Par. 177, p. 114). Henning was in a loss position before the entry of United Brands (RX 25). Obviously, however, the injection of this new element of risk was a factor. For those already in the industry with land or land-leases, or joint deals, with “know-how,” and with management expertise, capital requirements and current financing requirements pose the principal barrier to their expansion or their entry as new entities (see CRB, Pars. 281-283, pp. 10-11). The difficulty of obtaining new or additional land suitable for lettuce may likewise be a problem (supra). To these existing problems respondent has added a new dimension. Respondent emphasizes (RRB, pp. 14-15) that some of the larger operators, such as Bud Antle, Inc., and Hansen Farms, had substantial indebtedness (RX 35; Hansen 2307); that interest paid both by respondent and by grower-shipper witnesses was slightly above the prime UNITED BRANDS CU. LUUU 1614 Initial Decision rate (Henning 3041; Hansen 2307; Derdivanis 2035, Bertelsman 2518); and that some were able to operate without substantial borrowing (Crosetti 2348).

But this does not refute the fact that financing in the lettuce industry, whether for an established enterprise or for a newcomer,. is a problem—a barrier either to entry or to expansion (Huffman 2926-27). On the basis of this record, it is found that capital costs and the requirements for continued financing do constitute a barrier—a barrier that has been raised by the entry-by-acquisition of United Brands. Transfer of Oligopolistic Practices The record not only demonstrates respondent’s size, the diversity of its operations, and its financial strength (“deep pocket”), but it also reflects certain oligopolistic practices on the part of respondent that are characteristic of its participation in oligopolistic industries—practices that are being transferred or that may be transferred to the lettuce industry or, more broadly, to the fresh vegetables industry. First, in the banana industry,”> respondent has enjoyed a dominant position, holding a national market share in excess of 50 percent while another company (Standard Fruit) has held a national market share in excess of 30 percent and all others have aggregated a market share of from 9 percent to 15 percent.”* Respondent’s market position and price leadership have been due in part to product differentiation—the de- - velopment of “Chiquita” brand bananas that have commanded a substantial price difference as compared with both branded bananas of competitors and unbranded bananas. Respondent’s market power in the banana industry, including that brought about through product dif ferentiation, also permitted it to introduce a system of advance-order selling, which was coupled with the use of rollers. Second, product differentiation through branding and advertising continues to be emphasized in the meatpacking segment of respondent’s business (John Morrell & Co.) (CX 396, pp. 6-7, 24-25). It is worth noting also that respondent, through its J. Hungerford Smith subsidiary, is a leading manufacturer of beverage bases, fruits, and flavors to the institutional food service and ice cream manufacturing fields and, through its ownership of A & W, holds a major position in the fast food service business, while its subsidiary, Baskin-Robbins Ice Cream Company, enjoys ice cream sales in excess of Howard Johnson (CXs 215 B, 213 A). Respondent’s leadership in these fields is due in major part to 25 These findings are based essentially on the facts and record citations set forth in CPF, Pars. 14-34, pp. 5-13; Par. 189, p. 120, which have not been challenged by respondent. 28 Although respondent stated in its answer (Par. 8) that under the terms of a final Federal court judgment, its estimated share of the domestic market in the importation and sale of bananas will be only approximately 35 percent, the record is otherwise silent as to this development. In any event, this change in market share does not detract from the impact of the historical background of respondent's position in the banana industry. Initial Decision 83 F.T.C.

aggressive advertising and promotional activities (CX 396, pp. 15-16). It is fair to consider this background in assessing respondent’s entry into the lettuce and other fresh vegetables industries. Respondent has undertaken to transfer to the lettuce industry these same oligopolistic practices, and there is a reasonable probability of their renewal and eventual success (Faris 3428, 3436-37).

Industry Restructuring The complaint alleges (Par. 36(4)) that The structure of the fresh lettuce industry * * * has been transformed or is being transformed, from* * * [an industry] of small independent profitable concerns selling ina competitive market at prices determined by the short term balance of supply and demand into [an industry] dominated by large conglomerate companies selling at stable prices arrived at outside the competitive market by means of such control mechanisms as brand differentiation, preselling of consumers, long term quotes or supply arrangements, and other means.

The findings in the foregoing sections essentially support these allegations. If they are not actualities in all respects, there is at least a dangerous potentiality of anticompetitive restructuring of the lettuce industry along the lines alleged.

This case strongly parallels the situation in Reynolds Metals Co., 56 F.T.C. 743, 774 (1960), 309 F.2d 273 (D.C. Cir. 1962). Here, as in Reynolds, all of the enterprises in the lettuce industry were of a roughly equivalent competitive status, if looked at on a broad scale. In other words, no company was very big and all were relatively small. Some had advantages not shared by all, but they each had about the same competitive capabilities. Also, they were active and aggressive competitors.

Now the balance of power has shifted decisively to respondent, largely due to its overall size, its deep pocket, its competitive advantages, its growing market share, and its price leadership—all this coupled with a reduction in the number of sellers and a consequent increase in concentration ratios, as well as a rise in barriers to entry. These factors are particularly acute in a high-risk industry like lettuce in which there is price inelasticity of demand. Language used by the Commission in the Procter & Gamble Co. case, 63 F.T.C. 1465, 1579 (1963), with appropriate substitutions as to the parties and the industry, is applicable to the “psychological response” of the members of the lettuce industry to respondent as a competitor: To the extent that [United Brands] is thought by them to be not only a large and affluent firm, but also, a powerful firm, in terms of market power enjoyed in related markets and possibly transferable into the [lettuce] market, its prowess as a competitor gains an added and even sinister dimension in the eyes of its * * * rivals—a factor of considerable importance to the impact of the merger on competition in the [lettuce] industry.

UNITED BRANDS CO. 1667 1614 Initial Decision The Supreme Court agreed that there was danger that the substitution of the powerful acquiring firm* * * may substantially reduce the competitive structure of the industry by raising entry barriers and by dissuading the smaller firms from aggressively competing * * * . FTC v. The Procter & Gamble Co., 386 U.S. 568, 578 (1967).

Thanks to its diversification and its financial resources, United Brands is not as sensitive to market pressures as its competitors. It wants to be insulated from the impact on prices of the law of supply and demand. It wants to “administer” lettuce prices and to avoid being subject to the daily play of market forces. And it has the power to achieve these ends.

It is not necessary to spell out the consequences that are likely to ensue if United Brands is permitted to retain its acquisitions (but see CPF, Pars. 242-245, pp. 141-48). Suffice it to say here that the substitution of United Brands for six relatively small independent enterprises threatens to restructure the lettuce industry in ways that bode ill for its competitive health.

Respondent’s Special Defenses In addition to contending that the evidence fails to support the allegations of the complaint as to the probability of competitive injury, respondent also undertakes to defend its acquisitions and its postacquisition practices on various legal and factual grounds. In its answer (Par. 40) respondent pleaded as an affirmative defense that “Certain of the alleged acquisitions were of non-corporations and cannot be challenged under Section 7 of the Clayton Act.” The reference is to the partnerships known as Toro Farms and Salinas Valley Vegetable Exchange. Respondent ignores the fact that a violation of Section 5 was also pleaded both conjunctively and disjunctively. Respondent has made no issue of this jurisdictional question in its proposed findings and briefs, but it can be briefly resolved by reference to controlling case law. See, for example, Beatrice Foods Co., 67 F.T.C. 478, 724-27 (1965);?" Foremost Dairies, Inc., 52 F.T.C. 1480 (1956) (Section 5 charges dismissed on other grounds, 60 F.T.C. 944, 1090-92 (1962)). Moreover, it is well settled that actions that conflict with the policy of the Clayton Act, whether or not within its letter, may constitute a violation of Section 5 of the Federal Trade Commission Act, FTC v. Brown Shoe Co., 384 U.S. 316 (1966); Atlantic Refining Co. v. FTC, 381 U.S. 357, 369-70 (1965); FTC v. Motion Picture Advertising Service Co., 344 U.S. 392, 394-95 (1953). And the Commission has ordered divestiture under Section 5, L.G. Balfour Co., Docket 3435 (Final Order, July 29, 1968), 27 Order to cease and desist issued December 10, 1965, 68 F.T.C. 1008; modified June 7, 1967, 71 F.T.C. 797, pursuant to consent decree, 1967 Trade Cases Par. 72, 124 (9th Cir.). Initial Decision 83 F.T.C.

affirmed in part and reversed in part (on other grounds), 442 F.2d 1 (7th Cir. 1971).

Respondent seems to suggest that the various State and Federal laws permitting farmers to engage in cooperative marketing activities somehow immunize from the antitrust laws respondent’s creation, through a series of acquisitions, of an integrated growing and marketing enterprise in the lettuce and fresh vegetables industry (Answer, Par. 43; RPF, Par. 138, p. 109; p. 186 (Par. 10); RRB, pp. 82-83). This argument is so fallacious as to require no explanation of its rejection. A related contention is that the growing concentration on the selling side of the lettuce industry, including respondent’s market power, is a healthy antidote to the concentration on the buying side of the market—that is, the market power of the chain grocery stores (RPF, Pars. 157-158, pp. 118-20). The record contains conflicting viewpoints as to the existence of oligopsony power (CX 278, cited in CPF, Par. 133, p. 90, and RX 8, cited in RPF, Par. 158, pp. 118-20). Assuming, without _ deciding, that oligopsony is present in the lettuce market, this nevertheless does not invoke the law’s blessing on consolidations, corporate or noncorporate, that are otherwise illegal. The concept of “countervailing . power” is not a valid defense in this case. Respondent further contends that the the complaints of its competitors concerning the effect of respondent’s entry into the lettuce industry by acquisition were prompted because of respondent’s refusal to engage in violations of the antitrust laws (CPF, Par. 3(8), pp. 3-4, Pars. 102-119, pp. 88-101; Answer, Par. 42). According to respondent, it refused to join in concerted price-fixing or such price-fixing arrangements as agreed limitations on lettuce production. There is no substantial evidence in this record to permit such a finding—either as to the existence of such combinations and conspiracies or the existence of such motivation on the part of the complaining witnesses (see CRB, Pars. 288-298, pp. 14-18). At most, there is testimony suggestive of occasional effort of some lettuce sellers to halt a price decline by limitations on harvesting or on shipments. Even if the record supported or tended to support the existence of price-fixing activities, this would not justify a series of acquisitions that are violative of Section 7 of the Clayton Act or Section 5 of the Federal Trade Commission Act.”8 2* Respondent complains of the “hostility” of some of the grower-shippers who testified. [t attributes such hostility to their resentment because of respondent's refusal to join in certain allegedly illegal practices and also because respondent had signed a contract with the Cesar Chavez farm workers’ union (RRB, p. 54; RPF, Par. 203, pp. 162-65). Whatever hostility there may have been on the part of some witnesses, the undersigned finds no basis for rejecting their testimony generally. To the extent that some of the testimony as to respondent’s pricing was based on hearsay, it has been considered in the light of the circumstances and in the context of the entire record. Respondent has not pointed to any specific testimony that should be. discredited. Such a generalized objection must be rejected. VANE LIU DIVAINDOD UYU. LUVUY 1614 Initial Decision On a related subject, respondent contends that its former practice of announcing to the trade that it was “rolling” and consigning lettuce unsold at the shipping point was required by the provisions of the Robinson-Patman Act (RPF, Par. 3(8), pp. 3-4; Pars. 102-110, pp. 83-89). There is no occasion for the undersigned to make any definitive determination as to the applicability of the Robinson-Patman Act to rollers or consignments. It may be noted in passing, however, that the terms of the statute are such as to make questionable respondent’s argument (CRB, Pars. 285-286, pp. 12-18). But this is not an issue in this case as such and need not be resolved.?9 CONCLUSIONS 1. The Federal Trade Commission has jurisdiction of the subject matter of this proceeding and of respondent United Brands Company (“United Brands” or “respondent”.

2. The complaint states a cause of action, and this proceeding is in the public interest.

3. During 1968 and 1969, United Brands acquired all of the capital stock of the following corporations:

Earle Myers Co.

Demco Farms, Inc.

Nunes Brothers of California, Inc.

Monterey County Ice & Development Company and the business and certain assets of the following corporations: Peter A. Stolich Co., Ine.

Jerome Kantro Enterprises Consolidated Growers, Inc.

Since both United Brands and each of the listed corporations were in commerce, the acquisitions, whether of stock or of assets, are subject to Section 7 of the Clayton Act.

4. In addition, United Brands purchased certain assets of the following partnerships: :

Toro Farms Salinas Valley Vegetable Exchange Since United Brands and these partnerships were engaged in commerce, the asset acquisitions are subject to Section 5 of the Federal Trade Commission Act.

5. For purposes of assessing the legality of these acquisitions, the line of commerce (the product market) that has been analyzed is the production and sale of lettuce. Although the findings have been limited *" If respondent were charged with predatory pricing through its former practice of announcing to the trade the availability of rollers and consignments, a showing of a good-faith belief that the practices were required by the Robinson-Patman Act might conceivably be a defense. But we have already seen that complaint counsel have disclaimed any intent to charge respondent with predatory pricing. Initial Decision, 83 F.T.C.

to lettuce, this limitation does not preclude the drawing of inferences as to a corresponding impact on the growing and shipping of other vegetables associated with the production and sale of lettuce, such as celery and cauliflower, and thus on the fresh vegetables industry generally. Respondent has insisted that it is engaged in the fresh vegetables industry and that there is a relationship between lettuce and each of the other crops that it and its competitors produce and sell. Thus, the effects here found in the lettuce industry may be translatable to the fresh vegetables industry as a whole. In other words, the findings as to the impact of respondent’s acquisitions on the lettuce industry warrant an order dealing with the broader segment of the market of which lettuce in a part. The lettuce industry is the microcosm from which the macrocosm may be deduced.

6. The relevant geographic markets include the United States as a whole and the principal producing-shipping areas in California and Arizona.

7. At the time of its first acquisition, United Brands was not a competitor of any of the acquired companies. Once it was in the business, subsequent acquisitions technically involved competitors. But neither the complaint nor complaint counsel have viewed this situation as creating a series of “horizontal” acquisitions. 8. United Brands was a potential competitor in the fresh vegetables industry, including its lettuce segment, but it did not constitute a substantial competitive factor in those lines of commerce. There is no evidence that United Brands had the intent of entering the lettuce industry or the fresh vegetables industry other than by acquisition; in fact, the evidence is to the contrary.

9. By its acquisitions, United Brands eliminated competition among the grower-shippers that it acquired and substituted for them and for a formerly independent cooler operation a giant conglomerate corporation which, because of its deep pocket and its ability to subsidize its lettuce operations out of a corporate treasury drawn from a variety of other business operations, gave the new integrated operation (Inter Harvest, Inc.) decisive competitive advantages over competitors. In an industry with a declining number of sellers, the acquisitions further reduced the number of competitors. , 10. Whereas the lettuce segment of the fresh vegetables industry has been a traditionally small-business operation, atomistic in structure, with prices determined by supply and demand, the entry of United Brands has contributed and may contribute to increasing concentration and a restructuring of the industry, with a dominant United Brands exercising price leadership and otherwise impeding competition. The record makes clear its aim to escape the rigors of competition. The . _. UNITED BRANDS CO. | 1671 ~ 1614 Initial Decision oe a record thiakés clear its aim to. escape: the rigors of competition—to. stabilize prices—to subdue price fluctuations. And this is’ reflected throughout its briefs,;. with numerous.references to an “over-abundance ny of competition” (e.g., RPF, Par. 3(4); p. 2; Par..184, p. 108).and to ~~ “ruinous” or “destructive” competition (RRB, pp: 78, 81-83). _.- 11. Barriers to entry have been and may be raised through United - . Brands’ present control over a substantial acreage of lettuce-producing — land and its ability to obtain control over additional acreage; its capability for and its exercise of price leadership; its opportunities to enjoy certain economies in operations and in purchasing: ‘supplies:and services as a result of its size and power; its potentiality for achieving product differentiation; and its power to introduce into the lettuce industry . oligopolistic: practices from the oligopolistic banana industry. United Brands’ entry raised existing entry barriers such as the price inelasticity of demand and the high risks and uncertainty that characterize the — lettuce industry; with corresponding limitations on financing. 7 12. In summary, United Brands has become the dominant company in ~- shipping lettuce throughout the year. With United Brands accounting for nearly 11 percent of total U.S. lettuce shipments, its entry substantially raised “top-two” concentration on a national basis. Concentration has likewise increased in each of the.areas in California and Arizona where United Brands is one of the four largest grower-shippers. 13. The effect of respondent’s acquisitions, individually and collectively, has been or may be substantially to lessen competition or to tend to create a monopoly or to restrain competition in the fresh lettuce industry and in the fresh vegetables industry, in violation of Section 7 of the Clayton Act, (to the extent applicable) ‘and also in violation of Section 5 of the Federal Trade Commission Act. : Rationale of the Order The undersigned has adopted in substance the form of order* that the Commission indicated “should issue if the facts are. found to be as alleged i in the complaint” (Complaint, p. 12). The order is designed to implement the “congressional judgment in| favor of atomized markets reflected in the Celler-Kefauver Antimerger Act’?° (Ford Motor Co. v. United States, 405 U.S. 562, 578, n. 12 (1972). *The proposed order issued with the complaint is not published herein. However, it is available for inspection at Legal : and Public Records, Federal Trade Commission, Washington, D.C. _. : ae Respondent scoffs at the “nostalgic desire to see a market composed of many small companies, ‘each with less than 1 percent of the market,” and argues that “that structure cannot survive against a buyer market that is composed of fewer and fewer companies with larger and larger market shares” (Answer, Par. 49). “For these reasons,” respondent says, “the complaint is contrary to economic theory in alleging the benefits of a lettuce market composed of numerous small farmers who all are at the mercy of the buyers, and in attempting to retard the natural trend towards larger farms because of efficiency demands.”

This affirmative defense advanced by respondent has three major flaws. Fi ‘rst, of course, it flies in the face. of the “congressional judgment” quoted in the text. (Continued) ontinues oe 1672 FEDERAL TRADE ‘COMMISSION DECISIONS . Thitial: Decision ee re ae 83 REC.

; The divestiture: requirement does not provide for simply: divesting the stock and. assets. acquired. Since the land leases are the basis for re- S & spondent’s participation i in the lettuce industry and other segments of the fresh produce industry, the order requires that respondent. “effec- ‘tively terminate each and every lease of land that has been used, is” used, or is intended to be used for the production of fresh produce” or, in the alternative, “assign such leases, subject to the prior approval of the Federal Trade Commission, to at least seven unaffiliated individuals or ~~ concerns, each having less than $20,000,000 of business sales annually.” In requiring distribution of the leases to entities that do not enjoy _annual. sales of more than $20 million, the order is. designed to exclude _ all concerns of such a size as to possess the competitive advantages that United Brands holds in the industry. By providing for. plural distribu-tion to. the approximate number of the companies that respondent . acquired, such divestiture would reverse the increase in concentration. at. major shipping points, increase the number of sellers there, and generally reduce barriers to entry.

-.. United Brands is required also to “divest each and every acquired facility providing supplies or services to the fresh produce industry (including post-acquisition additions or improvements); subject: to the prior approval of the Federal Trade Commission,” and is barred for ten — years from participating in any manner in the fresh produce industry j in| relation to the divested lands and facilities. Paragraph I of the order is orthodox in providing for divestiture, the customary remedy in merger cases, although the manner of divestiture has its novel aspects.

- However, Paragraph II of. the order appears to be unprecedented in Federal Trade Commission merger proceedings in prohibiting United Brands, for a period of ten years, “from engaging in the United States, directly or indirectly, in the fresh vegetables?! industry, without the prior approval of the Federal Trade Commission.” There is, however, strong recent precedent for such an extraordinary (Continued).

Second, although there may be indications of oligopsony power in the fresh vegetables industry (supra, p. 58) {p. 1668 herein], this doctrine’ of “countervailing power” cannot overcome the public policy in favor of preserving atomistic markets. The answer is not to promote additional bigness and concentration through the introduction of corporate farming but to apply the antitrust laws to the fullest extent against oligopsony power where it exists. ' Finally, respondent's argument concerning the “natural trend towards larger farms because of efficiency demands” is belied, interestingly enough, by’ its defense against allegations that it enjoyed economies of scale and low. prices on supplies and services because of its mass purchasing power: According to respondent, its “overall costs were higher than those of smaller grower-shippers,” including overhead and labor costs (RPF; Par. 231, p. 181; see CPF, Pars. 255-257, pp. 147-49).

** The notice order contained in the complaint would have made the prohibition applicable to the “fresh produce industry.” However, complaint counsel requested that the term “fresh vegetables” be substituted for “fresh produce” in this part of the order (CPF, p. 149). They have made no explanation for the change. It appears to be in recognition of the fact that the record is essentially limited to vegetables. 1614 Initial Decision remedy. In the Ford Motor Co. case, supra, the Supreme Court upheld a District Court decision that not only required Ford to divest assets constituting the domestic spark plug business of Electric Autolite Co., but also prohibited Ford, for a period of ten years, from entering the spark plug business on its own. This ancillary relief was upheld by the Supreme Court on the ground that is was necessary to correct the anticompetitive effects of Ford’s unlawful acquisition. It was designed primarily to restore, to the extent possible, the status quo ante—to give the divested spark plug enterprise an opportunity to re-establish its competitive position.

The prohibition contained in Paragraph II of the instant order may be justified on the same basis as in the Ford case—that is, to insure the viability of the enterprises that acquire from United Brands the assets here ordered to be divested.

However, complaint counsel go beyond this rationale and forthrightly recognize that a “prohibition on acquisitions would not be sufficient, because the numerous competitive advantages 4* * * enjoyed by United Brands over other grower-shippers in the Salinas Valley, the Imperial Valley and Arizona derive not from the means of entry into the industry but from United Brands’ presence in the industry” (CPF, Par. 254, pp. 146-47). That is to say that, given the structural element of inelasticity of demand that marks the lettuce industry, coupled with high risks and uncertainty, the anticompettive effects attributable to United Brands “exist independent of the means of entry” (id.). Thus, it is not sufficient simply to require divestiture and to prohibit similar acquisitions in the future. If United Brands entered the industry de novo in any major way, the probable result would be the same as that occasioned by its entry by acquisition. The probabilities are that United Brands would still enjoy the competitive advantages outlined herein; that barriers to entry would be raised; that the industry would be or might reasonably be expected to be restructured; and that United Brands would have the power and the opportunity to transfer from the oligopolistic banana industry the oligopolistic practices there existing. A prohibition against de novo entry, or entry by internal expansion, flies in the face of the established view that this is not illegal even though, as here, the anticompetitive effects might be the same, United States v. Ford Motor Co., 286 F. Supp. 407, 441 (D.C.E.D. Mich. 1968). In determining that the relief in this case should include not only divestiture but a prohibition against any entry by United Brands into the fresh vegetables market (Complaint, p. 12), the Commission evidently recognized that divestitiure is only a start toward restoring the pre-acquisition situation. The relief here ordered is designed to be “effective to redress the violations” and “to restore competition” Initial Decision 83 F.T.C.

(United States v. dupont & Co., 366 U.S. 316, 326, (1961)). Just as the District Court is clothed with “large discretion” to fit the decree to the special needs of the individual case,” as the Supreme Court said in the Ford Motor case, supra, 405 U.S., at 578, the Commission likewise is vested with a large measure of discretion in fashioning its orders in the public interest.

The ban on any entry for ten years without advance Commission approval is necessarily founded on a determination that in the light of the findings herein, it would be an unfair method of competition and an unfair act or practice, in violation of Section 5 of the Federal Trade Commission Act, for United Brands to inject its power into the traditionally small-business fresh vegetables industry, as exemplified by the lettuce segment thereof.

In FTC v. Sperry & Hutchinson Co., 405 U.S. 233, 244 (1872), the Supreme Court gave an expansive reading of the Commission’s discretion in defining the unfairness standard. It emphasized that the Commission has the same broad discretion as a court of equity in determining what is “unfair.” At the least, the Commission is bound to consider the public values “enshrined in the letter or encompassed in the spirit of the antitrust laws.” Both the letter and the spirit of the amended Section 7 reflect a public policy in favor of our traditionally smallcompany competitive economy. This was a “congressional judgment in favor of atomized markets” and demonstrated the congressional intent “to promote competition through the protection of viable, small, locally owned businesses.” Moreover, “Congress appreciated that occasional higher costs and prices might result from the maintenance of fragmented industries and markets. It resolved these competing considerations in favor of decentralization” (Ford Motor Co. v. United States, supra, 405 U.S., at 578, citing and quoting from Brown Shoe Co. v. United States, 370 U.S. 294, 344 (1962)).

In the Ford case, supra, the majority, responding to the dissent of Chief Justice Burger, stated that the “suggestion that antitrust ‘violators may not be required to do more than return the market to the status quo ante’ * * * is not a correct statement of the law” (405 U.S., at 573, n. 8). The Court emphasized that the relief that can be afforded under the antitrust laws “is not limited to the restoration of the status quo ante” but “must be directed to that which is ‘necessary and appropriate in the public interest to eliminate the effects of the acquisition offensive to the statute,’ United States v. Dupont & Co., 353 U.S. 586, - 607 * * * or which will ‘cure the ill effects of the illegal conduct, and assure the public freedom from its continuance.’ United States v. United States Gypsum Company, 340 U.S. 76, 88” [emphasis added by the Ford court].

UNITED BRANDS CO. 1675 1614 Initial Decision In a case in which the removal of respondent as a potential competitor was part of the original theory of the case, it is admittedly anomalous to fashion an order that prevents United Brands from exercising the role of a potential competitor. However, even aside from the fact that complaint counsel have receded from that initial position (supra, pp. 26-27) [p. herein], such an anomaly did not deter the District Court and the Supreme Court from enjoining Ford from the role of a potential competitor, despite the fact that the potential competition aspect was one of the key elements of that case.

This is not a case where the Commission, by arbitrary fiat, determines that a company should not be permitted to enter a given industry de novo. Here we have a record establishing a basis for a determination of the anticompetitive effects flowing from the presence in the lettuce industry, or more broadly, the fresh vegetables industry, of a giant corporate complex like United Brands. This record has demonstrated the power of United Brands to restrain commerce and to suppress competition. This power was exercised by means of an unlawful combination of previously competing enterprises. But to permit United Brands to re-enter the industry by internal expansion would be to permit the same anticompetitive effects achieved by the acquisitions. Cf. Northern Securities Co. v. United States, 193 U.S. 197, 357 (1904). Even under the Gratz doctrine (FTC v. Gratz, 253 U.S. 421, 427 (1920)), ‘such a result is actionable because it involves practices “against public policy because of their dangerous tendency unduly to hinder competition or create monopoly.” For United Brands to re-enter the lettuce industry or the fresh vegetables industry would have such a dangerous tendency and would, therefore, constitute an unfair method of competition and an unfair act or practice, in violation of Section 5 of the Federal Trade Commission Act.

Finally, “it is well settled that once the Government has successfully borne the considerable burden of establishing a violation of law, all doubts as to the remedy are to be resolved in its favor” (Ford Motor Co., supra, 405 U.S., at'575; dupont, supra, 366 U.S., at 334). The order follows:

ORDER I It is ordered, that within ninety (90) days from the effective date of this order, United Brands Company shall:

(a) Effectively terminate each and every lease of land that has been used, is used, or is intended to be used for the production of Initial Decision 83 F.T.C.

fresh produce * or, alternatively, assign such leases, subject to the prior approval of the Federal Trade Commission, to at least seven unaffiliated individuals or concerns, each having less than $20 million of business sales annually;

(b) Divest each and every acquired facility providing supplies or services to the fresh produce industry (including post-acquisition additions or improvements), subject to the prior approval of the Federal Trade Commission; and (c) Cease and desist for ten years from growing, shipping, marketing, or otherwise participating in the fresh produce industry or any phase thereof in relation to the lands and facilities subject to subsections (a) and (b).

II It is further ordered, That United Brands Company shall cease and desist for ten (10) years from engaging in the United States, directly or indirectly, in the fresh vegetables ** industry, without the prior approval of the Federal Trade Commission.

HI It is further ordered, That within thirty (30) days following the effective date of this order, and annually thereafter, United Brands Company 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 has complied with the provisions of this order.

IV It is further ordered, That United Brands Company shall notify the Commission at least thirty (80) days prior to any proposed change in its corporate status, such as dissolution, assignment, or sale, resulting in the emergence of a successor corporation, the creation or dissolution of subsidiaries, or any other change in the corporation that may affect compliance obligations arising out of this order. APPENDIX This Appendix contains Commission exhibits showing concentration ratios for the major producing-shipping areas in California and Arizona. CXs 367 A—-D cover Monterey Coun- ™ For the purposes of this order, “fresh produce” shall include each and every vegetable and fruit specifically grown in the United States for sale at retail in fresh form, i.e., not canned, not frozen, or otherwise preserved except for normal refrigeration, such as lettuce, celery, broccoli, cantaloupe, ete. (Complaint, Par. 1) ™ For the purposes of this order, “fresh vegetables” shall include each and every vegetable specifically grown in the United States for sale at retail in fresh form, i.e., not canned, not frozen, or otherwise preserved except for normal refrigeration, such as lettuce, celery, broccoli, etc. (Complaint, Par. 1) ee ee Ue aver 1614 Initial Decision ty, while CXs 368 A-D are for Imperial County, both in California. The exhibits for each of the Arizona areas are scattered under four exhibit numbers (CXs 370-373). To facilitate comparison, these exhibits have been rearranged in a sequence that brings together the yearly reports for each area and season. For example, the shipment reports for fall lettuce and spring lettuce from the Salt River Valley are grouped together as follows: Season Fall Lettuce Spring Lettuce 1967-68 CX 370 A CX 370 C 1968-69 CX 871 A CX 371C 1969-70 CX 372 A CX 372 C 1970-71 CX 373 A CX 373 C Similarly, the matching alphabetical sub-designations (B, D, E) under each of the same exhibit numbers have been placed together for the other areas. Lettuce Shipments—Monterey County—1968 Cartons Share of : shipped shipments ! Rank Company (number) (percent) 1 Bud Antle, Inc. 8,031,178 10.70 2 Bruce Church, Inc. 2,235,937 7.89 3 West Coast Farms. 1,502,388 5.30 4 Calif. Coastal Farms 1,432,036 5.05 Subtotal 8,201,539 28.95 5 Nunes Bros. of Calif. 1,403,839 4.95 6 D’Arrigo Bros. of Calif. 1,397,379 4.93 7 Merrill Farms; 1,238,121 4.37 8 Salinas Valley Veg. Exchange 1,221,769 4.31 Subtotal 13,462,647 47.52 9 Admiral Pkg. Co. 1,218,771 4.28 10 Salinas Marketing Co-op 1,184,434 4.18 Subtotal 15,860,852 55.99 Total—All 40 companies 28 326,492 100.00 ' Figures are rounded and will not necessarily add to totals. Source: CX 309 Lettuce Shipments—Monterey County—1969 Cartons Share of shipped shipments ? Rank Company (number) (percent) 1 United Fruit Produce, Inc. 4,266,400 15.60 2 Bud Antle, Inc. 8,049,341 11.15 3 Bruce Church, Ine. 2,096,807 7.67 4 D’Arrigo Bros. of Calif. 1,414,359 5.17 . Subtotal 10,826,907 39.61 5 West Coast Farms, Inc. 1,330,372 4.86 6 Calif. Coastal Farms, Ine. 1,278.750 _ 4.67 7 Admiral Packing Co. 1,256,388 4.59 Initial Decision 83 F.T.C.

Cartons Share of shipped shipments ! Rank Company (number) (percent) 8 Merrill Farms 1,102,695 4.03 Subtotal 15,795,112 57.78 9 Salinas Marketing Co-op 1,073,476 3.92 10 Salinas Lettuce Farmers Co-op 1,037,850 3.79 Subtotal 17,906,438 65.51 Total—All 37 companies 27,331,631 100.00 ' Figures are rounded and will not necessarily add to totals. Source: CX 309 Lettuce Shipments—Monterey County—1970 Cartons Share of shipped shipments ' Rank Company (number) (percent) 1 . Inter-Harvest, Inc. 4,805,638 16.96 2 Bud Antle, Inc. 3,006,393 10.61 3 Bruce Church, Inc. 2,297,434 8.10 4 D’Arrigo Brothers of Calif. 1,470,318 5.19 Subtotal 11,579,783 40.87 5 West Coast Farms 1,294,085 4.56 6 California Coastal Farms 1,276,208 4.50 7 Hansen Farms 1,152,892 4.07 8 Freshpick Foods, Inc. 1,152,566 4.07 Subtotal 16,455,534 58.12 9 Admiral Packing Co. 1,180,716 3.99 10 Merrill Farms 1,123,368 3.96 Subtotal 18,709,618 66.05 Total—All 34 companies 28,327,177 100.00 ' Figures are rounded and will not necessarily add to totals. Source: CX 309 Lettuce Shipments—Monterey County—1971 Cartons Share of shipped shipments ! Rank Company (number) (percent) 1 Inter Harvest, Inc. 4,745,140 16.31 2 Bud Antle, Inc. 3,614,000 12.42 3 Bruce Church, Inc. 2,236,044 7.68 4 Admiral Packing Co. 1,349,345 4.64 Sub-total 11,944,529 41.05 5 California Coastal Farms 1,324,630 4.55 6 West Coast Farms 1,298,513 4.46 Wave aes SPAVSLINEO UU 1614 Initial Decision Cartons Share of _ shipped shipments ! Rank Company (number) (percent) 7 D’Arrigo Brothers of Calif. 1,251,862 4.30 8 Hansen Farms 1,157,465 3.98 Sub-total 16,976,999 58.34 9 Merrill Farms 1,081,046 3.71 10 The Garin Co. 1,011,300 3.48 Sub-total 19,069,345 65.53 Total—all 38 companies 29,099,661 100.00 ' Figures are rounded and will not necessarily add to totals. Source: CX 309 Lettuce Shipments—Imperial County—1968-69 Season Cartons Share of shipped shipments ! Rank Company (number) (percent) 1 Bud Antle, Inc. 1,528,378 -8-89- 8.58 2 Mario Saikhon 1,041,469 -6-06- 5.84 © * 3 Sam Andrews’ Sons 752,985 4:38 4.23 4 William B. Hubbard 682,190 BF 3.83 Subtotal 4,005,022 Bab2- 22.5 5 Bruce Church, Inc. 662,695 86 3.72 6. Nunes Bros. 590,994 o44- 3.32 7 Danny Danenberg 544,365 B-A6- 3.06 8 Ralph Samsel 544,183 346- 3.06 Subtotal 6,347,259 36-96 35.7 9 J. J. Crosetti Co. 517,949 30+ «2.91 10 Salinas Valley Veg. Exchange 509,641 256 2.86 Subtotal 7,374,849 42:94 41.42 Total all 64 companies #4, 566- 100.00 63 17,803,962 ' Figures are rounded and will not necessarily add to totals. Source: Commissioner of Agriculture Desert Produce 610,325 3.43 Villalobos 22,082 Lettuce Shipments—Imperial County—1969-70 Season Cartons Share of shipped Shipments * Rank Company. (number) (percent) 1 Inter Harvest, Inc. 1,508,540 480 7.76 2 Bud Antle, Inc. 1,177,780 6:09- 6.06 3 Mario Saikhon; -924,780- 927,780 4-78- 4.78 4 Desert Produce Co. 868,124 4:49- 4,47 Subtotal 4479474- 4,482,174 -23-44— 23.07 5 Sam Andrews’ Sons 476,662- 778,391 4-02 4.01 6 Royal Packing Co. 730;H8- 729,102 3-78- 3.75 7 Admiral Packing Co. 729,442 BAF 3.75 Initial Decision 83 F.T.C.

Cartons Share of shipped Shipments ! Rank Company (number) (percent) 8 Bruce Church, Inc. 728,242 oT 3.75 Subtotal ~75448;688- 7,447,351 38-60- 38.33 9 Ralph Samsel 667,769 e46- 3.44 10 Abatti Produce Co. -579;945- 583,142 3-06- 3.00 Subtotal 8,694,852 8,698,262 44:96- 44.77 Total—all 63: companies 49,335,0146- 100.00 54 19,428,611 1 Figures are rounded and will not necessarily add to totals. Source: Commissioner of Agriculture.

Lettuce Shipments—Imperial County—1970-71 Season Cartons Share of shipped Shipments ! Rank Company (number) (percent) 1 Inter-Harvest, Inc. 1,979.587 10.48 2 Bud Antle, Inc. 1,782,962 9.44 3 Mario Saikhon 1,249,224 6.61 4 Sam Andrews’ Sons 751,173 3.97 Subtotal 5,762,946 30.51 5 Danny Danenberg 745,589 8.95 6 Bruce Church, Inc. 692,142 3.66 q D’Arrigo Brothers of Calif. 622,341 3.29 8 Abatti Produce 605,584 3.20 ~ Subtotal 8,428,602 44.63 9 Joe Maggio, Inc. 583,305 3.08 10 Admiral Packing Co. 561,801 2.97 Subtotal 9,573,708 50.69 Total all 43 companies 18,883,503 100.00 44 18,883,375 ! Figures are rounded and will not necessarily add to totals. Source: Commissioner of Agriculture Lettuce Shipments, Imperial County 1971-1972 Cartons Share of shipped Shipments ! Rank Company (number) (percent) 1 Inter-Harvest, Inc. 1,919,886 9.77 2 Bud Antle, Inc. 1,816,796 9.24 3 Mario Saikhon 1,117,295 5.68 4 Danny Danenberg 895,514 4.56 Subtotal 5,749,491 29.25 5 Bruce Church, Inc. 858,689 4.37 6 Sam Andrews’ Sons 766,702 3.90 qT Abatti Produce, Inc. 752,700 3.83 8 Mapes Produce 632,873 3.22 UNITED BRANDS CO.

1614 Initial Decision Cartons Share of shipped shipments ! Rank Company (number) (percent) Subtotal 8,760,445 44.57 9 Admiral Packing Co. 617,776 3.14 10 Royal Packing Co. 616,644 3.14 ; Subtotal 9,994,875 50.85 Total—All 45 Cos. 19,654,528 100.00 ' Figures are rounded and will not necessarily add to totals. Source: Commissioner of Agriculture.

Fall Lettuce Shipments—Salt River Valley—1967—’68 Season Cartons Share of . Shipped Shipments ! Rank . Company (Number) (Percent) 1 Wood Co., J.A. 242,193 7.83 2 Admiral Packing Co. 227,804 7.38 3 Martori Bros. Distributors 187,880 6.08 4 Growers Exchange, Ine. 175,641 5.69 Subtotal 833,518 27.00.

5 Salinas Valley Veg. Exchange 172,670 5.60 6 Engebretson-Grupe Co. 165,792 5.37 7 Hubbard, William 150,681 4.88 8 Apache Distributors 148,239 4.79 Subtotal 1,470,900 47.63 9 Mapes Produce Co. 134,969 4.37 10 Eaton Fruit Co., Ine. 182,123 4.27 Subtotal 1,737,992 56.28 Total all 50 companies 3,087,516 100.00 ' Figures are rounded and will not necessarily add to totals. Source: CX 289 Fall Lettuce Shipments—Salt River Valley 1968—’69 Season Cartons Share of shipped shipments ! Rank Company (number) (percent) 1 Wood Co., J. A. 276,170 9.65 2 Growers Exchange, Inc. 203,913 7.18 3 Apache Distributors 200,798 7.03 4 Admiral Packing Co. 184,352 6.43 Subtotal 865,233 30.26 5 Hubbard, William B. 172,272 6.01 6 Englund Co., R. T. 153,038 5.35 7 Eaton Fruit Co. 151,912 5.31 8 Cook Produce, Inc. 150,843 5.28 Subtotal 1,493,298 52.23 9 Antle Inc., Bud 138,697 4.86 Initial Decision 83 F.T.C.

Cartons Share of shipped shipments ' Rank Company (number) (percent) 10 Singh Farms, Rala 119,469 4.16 Subtotal 1,751,464 61.26 Total all 35 companies 2,858,208 100.00 ' Figures are rounded and will not necessarily add to totals. Source: CX 290 Fall Lettuce Shipments—Salt River Valley—1969-70 Season . Cartons Share of Shipped Shipments * Rank Company - (Number) (Percent) 1 United Fruit Prod., Ine. 446,992 17.26 2 Growers Exchange, Inc. 241,243 9.30 3 Engebretson-Grupe Co. 233,312 8.99 4 Admiral Packing Co. 180,200 6.95 Subtotal 1,101,747 42.56 5 Norton Co., John R. 163,466 6.29 6 Englund Co., R.T. 157,108. 6.06 7 Hubbard, William G. 153,039 5.90 8 Cook Produce, Inc. 147,697 5.71 Subtotal 1,723,057 66.55 9 Apache Distributors 146,642 5.67 10 Henning, D.W. 133,231 5.13 Subtotal 2,002,930 77.36 Total all 26 companies 2,589,495 100.00 ' Figures are rounded and will not necessarily add to totals. Source: CX 291 Fall Lettuce Shipments—Salt River Valley—1970-1971 Season Cartons Share of shipped shipments ! Rank Company (number) (percent) 1 Inter-Harvest, Inc. 456,603 22.16 2 Growers Exchange, Inc. 238,282 11.57 3 Wood Co., J.A. 217,996 10.58 4 Engerbretson Grupe Co. 175,970 8.54 Subtotal 1,088,851 52.86 5 Englund Co., R. T. 125,908 6.11 6 Hubbard, William B. 103,970 5.05 7 Apache Distributors 100,776 4.89 8 Singh Farms, Rala 83,435 4.05 Subtotal 1,502,940 72.96 9 Cook Produce, Inc. 78,992 3.83 UNITED BRANDS Co. 1683 1614 Initial Decision Cartons Share of shipped shipments ! Rank Company (number) (percent) 10 Admiral Packing Co. 76,548 38.72 ‘Subtotal 1,658,480 80.51 Total all 26 companies 2,059,889 100.00 ' Figures are rounded and will not necessarily add to totals. Source: CX 324 Spring Lettuce Shipments—Salt River Valley—1967-’68 Season Cartons Share of Shipped Shipments ! Rank Company (Number) (Percent) 1 Wood Co., J. A. 278,872 8.86 2 Hubbard, William B. 237,004 7.53 3 Engebretson-Grupe Co. 203,010 6.45 4 Admiral Packing Co. 187,971 5.97 Subtotal 906,8575 1 13 2 6 3 1696 1190 77 25 92.677620 28.834 1 13 2 7 0 568 1229 1205 34 -1 5 1 13 2 7 1 568 1230 15 24 96.385727 55 1 13 2 7 2 726 1229 125 27 96.477898 Growers5 1 13 2 7 3 865 1230 155 33 96.137131 Exchange,5 1 13 2 7 4 1035 1231 54 25 95.615425 Inc.5 1 13 2 7 5 1400 1231 107 31 96.498680 187,1885 1 13 2 7 6 1714 1232 59 24 96.074699 5.944 1 13 2 8 0 567 1271 1207 32 -1 5 1 13 2 8 1 567 1271 15 25 96.984085 65 1 13 2 8 2 726 1271 80 26 91.459648 Garin5 1 13 2 8 3 820 1271 59 31 91.459648 Co.,5 1 13 2 8 4 893 1272 57 26 96.413635 Thes 1 13 2 8 5 1107 1280 3 2 3.030243 :5 1 13 2 8 6 1400 1273 105 30 43.637848 181,5515 1 13 2 8 7 1714 1273 60 25 96.089409 5.784 1 13 2 9 0 567 1312 1207 32 -1 5 1 13 2 9 1 567 1313 15 24 61.656261 75 1 13 2 9 2 725 1312 102 26 96.316154 Bodine5 1 13 2 9 3 840 1313 120 25 96.570305 Produces 1 13 2 9 4 974 1313 47 26 96.472160 Co.5 1 13 2 9 5 1400 1313 107 31 96.630585 174,8125 1 13 2 9 6 1714 1314 60 25 96.026970 5.564 1 13 2 10 0 566 1354 1208 33 -1 5 1 13 2 10 1 566 1354 15 25 94.793724 85 1 13 2 10 2 724 1355 87 32 96.757027 Wong5 1 13 2 10 3 823 1355 106 31 93.304100 Farms,5 1 13 2 10 4 943 1355 67 31 90.827797 Inc.,5 1 13 2 10 5 1026 1355 54 25 96.909935 Lees 1 13 2 10 6 1399 1355 107 31 96.884476 160,3595 1 13 2 10 7 1714 1356 60 25 96.281754 5.084 1 13 2 11 0 788 1435 985 40 -1 5 1 13 2 11 1 788 1435 126 40 96.517738 Subtotal5 1 13 2 11 2 1372 1440 135 31 94.407898 1,610,7675 1 13 2 11 3 1698 1440 75 25 96.669647 51.204 1 13 2 12 0 566 1479 1208 34 -1 5 1 13 2 12 1 566 1479 15 25 96.640274 95 1 13 2 12 2 725 1479 102 27 96.626953 Salinas5 1 13 2 12 3 841 1480 94 32 96.626595 Valley5 1 13 2 12 4 949 1481 67 32 96.828453 Veg.5 1 13 2 12 5 1034 1481 144 32 96.379951 Exchanges 1 13 2 12 6 1399 1482 107 30 96.689064 158,9165 1 13 2 12 7 1714 1482 60 24 96.542831 5.054 1 13 2 13 0 551 1519 1222 32 -1 5 1 13 2 13 1 551 1519 30 25 96.627838 105 1 13 2 13 2 725 1520 87 25 96.156471 Eaton5 1 13 2 13 3 826 1520 78 25 96.880371 Fruits 1 13 2 13 4 918 1520 46 26 96.517174 Co.5 1 13 2 13 5 1398 1521 108 30 80.131912 158,1985 1 13 2 13 6 1714 1521 59 25 95.698944 5.024 1 13 2 14 0 787 1597 985 43 -1 5 1 13 2 14 1 787 1597 126 43 96.229263 Subtotal5 1 13 2 14 2 1372 1604 132 31 96.765289 1,927,8815 1 13 2 14 3 1696 1604 76 25 96.469406 61.284 1 13 2 15 0 722 1644 1050 33 -1 5 1 13 2 15 1 722 1644 77 26 96.428162 Totals 1 13 2 15 2 812 1645 33 25 96.218201 all5 1 13 2 15 3 858 1646 32 24 96.218201 305 1 13 2 15 4 903 1646 151 31 96.708549 companies5 1 13 2 15 5 1368 1646 137 31 75.063972 3,145,7595 1 13 2 15 6 1682 1646 90 25 96.374161 100.002 1 14 0 0 0 547 1687 1326 4 -1 3 1 14 1 0 0 547 1687 1326 4 -1 4 1 14 1 1 0 547 1687 1326 4 -1 5 1 14 1 1 1 547 1687 1326 4 95.000000 2 1 15 0 0 0 549 1709 702 50 -1 3 1 15 1 0 0 549 1709 702 50 -1 4 1 15 1 1 0 575 1709 676 25 -1 5 1 15 1 1 1 575 1709 3 10 79.126564 '5 1 15 1 1 2 590 1709 85 24 96.850616 Figures5 1 15 1 1 3 686 1715 34 13 96.277420 ares 1 15 1 1 4 730 1710 91 19 96.006477 rounded5 1 15 1 1 5 830 1710 39 18 96.750435 ands 1 15 1 1 6 880 1710 38 19 96.485466 will5 1 15 1 1 7 928 1713 36 16 96.831352 not5 1 15 1 1 8 973 1710 121 24 96.920578 necessarily5 1 15 1 1 9 1105 1710 37 20 96.849808 adds 1 15 1 1 10 1153 1713 21 17 96.305069 to5 1 15 1 1 11 1183 1711 68 19 96.192856 totals.4 1 15 1 2 0 549 1739 173 20 -1 5 1 15 1 2 1 549 1739 80 19 95.950142 Source:5 1 15 1 2 2 640 1740 34 18 96.668579 CX5 1 15 1 2 3 685 1740 37 19 96.784378 2892 1 16 0 0 0 739 1802 941 99 -1 3 1 16 1 0 0 739 1802 941 99 -1 4 1 16 1 1 0 1077 1802 266 25 -1 5 1 16 1 1 1 1077 1802 114 25 87.879318 Arizona5 1 16 1 1 2 1207 1802 136 25 83.181290 1968—’694 1 16 1 2 0 739 1866 941 35 -1 5 1 16 1 2 1 739 1866 98 33 96.585289 Springs 1 16 1 2 2 850 1868 115 25 93.302185 Lettuce5 1 16 1 2 3 979 1868 225 33 92.403938 Shipments-Salts 1 16 1 2 4 1218 1869 83 25 93.270462 River5 1 16 1 2 5 1313 1869 253 31 77.650497 Valley-1968—’695 1 16 1 2 6 1579 1868 101 26 96.454430 Season2 1 17 0 0 0 548 1934 1324 5 -1 3 1 17 1 0 0 548 1934 1324 5 -1 4 1 17 1 1 0 548 1934 1324 5 -1 5 1 17 1 1 1 548 1934 1324 5 95.000000 2 1 18 0 0 0 546 2083 1327 5 -1 3 1 18 1 0 0 546 2083 1327 5 -1 4 1 18 1 1 0 546 2083 1327 5 -1 5 1 18 1 1 1 546 2083 1327 5 95.000000 2 1 19 0 0 0 1697 2292 124 5 -1 3 1 19 1 0 0 1697 2292 124 5 -1 4 1 19 1 1 0 1697 2292 124 5 -1 5 1 19 1 1 1 1697 2292 124 5 95.000000 2 1 20 0 0 0 547 1957 1259 476 -1 3 1 20 1 0 0 1364 1957 442 78 -1 4 1 20 1 1 0 1364 1957 423 41 -1 5 1 20 1 1 1 1364 1957 117 41 96.903648 Cartons5 1 20 1 1 2 1661 1960 84 26 96.833977 Shares 1 20 1 1 3 1759 1961 28 25 96.921822 of4 1 20 1 2 0 1366 2003 440 32 -1 5 1 20 1 2 1 1366 2003 112 32 96.727982 shipped5 1 20 1 2 2 1636 2003 150 32 93.182472 shipments5 1 20 1 2 3 1800 2004 6 13 85.901039 !3 1 20 2 0 0 547 2039 1240 40 -1 4 1 20 2 1 0 547 2039 1240 40 -1 5 1 20 2 1 1 547 2041 77 25 96.532463 Ranks 1 20 2 1 2 928 2039 137 40 96.372910 Company5 1 20 2 1 3 1355 2039 134 40 96.805573 (number)5 1 20 2 1 4 1657 2043 130 32 96.589455 (percent)3 1 20 3 0 0 560 2109 1231 239 -1 4 1 20 3 1 0 565 2109 1226 32 -1 5 1 20 3 1 1 565 2109 10 23 92.883499 15 1 20 3 1 2 721 2109 83 25 92.824333 Woods 1 20 3 1 3 818 2109 59 31 92.194229 Co.,5 1 20 3 1 4 890 2109 24 26 92.783440 J.5 1 20 3 1 5 930 2110 33 25 92.783440 A.5 1 20 3 1 6 1393 2111 111 30 80.177414 387,7525 1 20 3 1 7 1697 2111 72 24 72.335663 11.215 1 20 3 1 8 1789 2117 2 2 0.000000 -4 1 20 3 2 0 562 2150 1210 34 -1 5 1 20 3 2 1 562 2150 16 24 96.933044 25 1 20 3 2 2 721 2150 125 26 96.684967 Growers5 1 20 3 2 3 861 2151 155 33 96.528641 Exchange,5 1 20 3 2 4 1031 2152 54 25 93.853210 Inc.5 1 20 3 2 5 1394 2152 110 31 91.117462 317,7385 1 20 3 2 6 1697 2152 75 25 95.711258 10.554 1 20 3 3 0 562 2189 1209 41 -1 5 1 20 3 3 1 562 2191 14 25 95.159355 35 1 20 3 3 2 721 2192 140 32 96.698212 Hubbard,5 1 20 3 3 3 877 2193 113 26 93.254608 Williams 1 20 3 3 4 1003 2194 30 25 91.811737 B.5 1 20 3 3 5 1394 2189 110 41 96.743431 248,6205 1 20 3 3 6 1711 2194 60 25 93.389427 8.264 1 20 3 4 0 560 2232 1211 32 -1 5 1 20 3 4 1 560 2232 15 23 96.974258 45 1 20 3 4 2 720 2232 86 32 96.411964 Wong5 1 20 3 4 3 818 2232 96 26 91.696350 Farms5 1 20 3 4 4 928 2233 67 31 48.801865 Inc.,5 1 20 3 4 5 1010 2233 55 26 96.983421 Lees 1 20 3 4 6 1393 2234 110 30 90.571243 225,0325 1 20 3 4 7 1711 2234 60 25 85.406967 7.464 1 20 3 5 0 784 2316 986 32 -1 5 1 20 3 5 1 784 2316 124 25 88.855232 Subtotal5 1 20 3 5 2 1368 2317 134 31 94.144463 1,129,1425 1 20 3 5 3 1694 2317 76 25 96.085281 37.483 1 20 4 0 0 561 2357 1215 76 -1 4 1 20 4 1 0 562 2357 1207 34 -1 5 1 20 4 1 1 562 2357 13 24 96.375244 55 1 20 4 1 2 654 2370 3 1 59.819244 -5 1 20 4 1 3 721 2358 294 33 59.819244 Engebretson-Grupe5 1 20 4 1 4 1029 2359 46 26 96.989021 Co.5 1 20 4 1 5 1396 2359 108 30 92.480942 194,0955 1 20 4 1 6 1711 2359 58 26 95.043411 6.434 1 20 4 2 0 561 2397 1215 36 -1 5 1 20 4 2 1 561 2397 14 25 96.758606 65 1 20 4 2 2 719 2398 103 27 96.676964 Salinas5 1 20 4 2 3 836 2399 95 33 96.720215 Valley5 1 20 4 2 4 944 2400 68 33 96.317177 Veg.5 1 20 4 2 5 1029 2400 146 33 96.404282 Exchanges 1 20 4 2 6 1395 2400 107 31 95.062004 143,0105 1 20 4 2 7 1710 2401 66 25 51.796417 4.74.2 1 21 0 0 0 561 2440 1208 33 -1 3 1 21 1 0 0 561 2440 1208 33 -1 4 1 21 1 1 0 561 2440 1208 33 -1 5 1 21 1 1 1 561 2440 14 24 94.783112 75 1 21 1 1 2 718 2440 127 33 96.516518 Henning5 1 21 1 1 3 858 2442 130 31 95.383957 Produce,5 1 21 1 1 4 1003 2443 54 25 94.585091 Inc.5 1 21 1 1 5 1396 2442 107 31 94.737427 139,0995 1 21 1 1 6 1710 2443 59 25 96.114594 4.61 Initial Decision 83 F.T.C.

Cartons Share of ; shipped shipments ! Rank Company (number) (percent) 8 Englund Co., R. T. 188,753 4.61 Subtotal 1,744,099 57.88 9 Garin Co., The 187,109 4,54 10 Singh Farms, Rala 134,597 4.48 Subtotal 2,015,805 66.91 Total 3,013,078 100.00 ' Figures are rounded and will not necessarily add to totals. Source: CX 290 Spring Lettuce Shipments—Salt River Valley—1969-’70 Season Cartons Share of Shipped Shipments ! Rank Company (Number) (Percent) 1 Interharvest, Inc. 461,832 20.61 2 Wood Co., J. A. 245,094 10.93 5) Growers Exchange, Inc. : 206,274 9.19 4 Engerbretson-Grupe Co. 199,474 8.87 Subtotal 1,112,674 49.66 5 Hubbard, William B. 146,272 6.51 6 Englund Co., R. T. . 141,358 6.29 7 Garin Co., The 137,926 6.15 8 Tanita Farms 100, 167 4.46 Subtotal 1,638,397 73.09 9 Cook Produce, Inc. 99,198 4.41 10 Singh Farms, Rala 95,956 4.28 Subtotal 1,833,546 81.83 Total all 28 companies 2,241,443 100.00 ’ Figures are rounded ard will not necessarily add to totals. Source: CX 291 Spring Lettuce Shipments—Salt River Valley—1970-1971 Season Cartons Share of shipped shipments ! Rank Company (number) (percent) 1 Inter-Harvest, Inc. 553,035 23.27 2 Wood Co., J. A. 254,570 10.71 3 Growers, Exchange, Inc. 252,251 10.61 4 Engebretson-Grupe Co. 227,020 9.55 Subtotal 1,286,876 54.15 UNITED BRANDS CO. L050 1614 Initial Decision Cartons Share of shipped shipments ! Rank Company (number) (percent) 5 Church, Inc., Bruce 213,596 8.99 6 Hubbard, William B. 170,672 7.18 vi Englund Co., R. T. 158,660 6.68 8 Apache Distributors 114,455 4,82 Subtotal 1,944,259 81.81 9 Garin Co., The 95,253 4.01 10 Tanita Farms 94,917 38.99 Subtotal 2,134,429 89.81 Total all 25 companies 2,376,670 100.00 ' Figures are rounded and will not necessarily add to totals. Source: CX 324 Fall Lettuce Shipments (Harquahala-Marana-RedRock-Maricopa-Eloy-Aguila-Date Creek- Willcox & Parker-Poston)—1967—’68 Season Cartons Share of shipped shipments ! Rank Company (Number) (Percent) 1 Antle Inc., Bud 421,178 14.45 2 Church Inc., Bruce 389,677 13.88 3 Norton Co., J. R. 298,671 10:26 4 Royal Packing Co. 269,492 9.23 Subtotal 1,379,018 47.33 5 Martori Bros. Distributors 212,478 7.27 6 TRI Produce Co. 172,428 5.90 vi Finerman Co., Inc., Mel 168,375 5.76 8 Arena Co. of Arizona 165,475 5.66 Subtotal 2,097,774 72.02 9 Hi-Life Farms, 8. L. 163,597 5.62 10 Garin Co., The 113,363 3.87 Subtotal 2,374,734 81.53 Total all 22 companies 2,913,099 100.00 ' Figures are rounded and will not necessarily add to totals. Source: CX 289 Initial Decision: 83 F.T.C.

Fall Lettuce Shipments—1968—’69 Season (Harquahala—Marana—Red Rock—Maricopa Eloy—Aquila Date Creek—Willcox & Parker-Poston) Cartons Share of shipped shipments ! Rank Company (number) (percent) 1 Church Inc., Bruce 413,515 13.23 2 Antle Inc., Bud 821,633 10.29 3 Area Co. of Arizona 282,452 9.01 4 Royal Packing Co. 256,289 8.18 Subtotal 1,273,889 40.71 5 Finerman Co., Inc., Mel 218,707 6.99 6 Hogue Produce Co., F. H. 210,891 6.74 7 Norton Co., John R. 209,941 6.71 8 Hi—Life Farms, Inc. 123,607 8.96 Subtotal 2,037,035 65.10 9° Tri Produce Co. 122,362 3.89 10 Arakalian Farms Inc., George 117,478 3.73 Subtotal 2,276,875 72.77 Total all 27 companies 3,128,829 100.00 ' Figures are rounded and will not necessarily add to totals. Source: CX 290 Fall Lettuce Shipments (Harquahala-Marana-RedRock-Maricopa-Eloy-Aguila-Date Creek- Willcox & Parker-Poston)—1969—’70 Season Cartons Share of shipped shipments ! Rank Company (number) (percent) 1 Antle Ine., Bud 603,478 16.53 2 Royal Packing Co. 326,693 8.96 3 Desert Produce Inc. 264,053 7.23 4 Finerman Co., Inc. 236,452 6.47 Subtotal 1,430,676 39.23 5 Church Inc., Bruce 232,166 6.36 6 Norton Co., John R. / 227,148 6.22 q TRI Produce Co. 197,886 5.42 8 Arena Co. of Arizona 194,032 5.31 Subtotal 2,281,903 62.574 1 16 2 12 0 718 2374 1211 33 -1 5 1 16 2 12 1 718 2374 15 24 96.941971 95 1 16 2 12 2 877 2374 107 25 90.529213 Hi-Life5 1 16 2 12 3 998 2374 105 31 96.446060 Farms,5 1 16 2 12 4 1119 2375 53 25 88.919884 Inc.5 1 16 2 12 5 1552 2376 107 31 95.943558 148,2185 1 16 2 12 6 1868 2377 61 25 96.396309 4.054 1 16 2 13 0 704 2414 1224 32 -1 5 1 16 2 13 1 704 2414 29 24 96.089920 105 1 16 2 13 2 877 2414 146 25 92.273178 FreshPict5 1 16 2 13 3 1037 2414 97 31 96.312210 Foods,5 1 16 2 13 4 1150 2415 53 25 93.142159 Inc.5 1 16 2 13 5 1552 2416 107 30 89.898514 137,6385 1 16 2 13 6 1867 2417 61 25 96.538170 3.782 1 17 0 0 0 1854 2476 125 3 -1 3 1 17 1 0 0 1854 2476 125 3 -1 4 1 17 1 1 0 1854 2476 125 3 -1 5 1 17 1 1 1 1854 2476 125 3 95.000000 2 1 18 0 0 0 940 2492 985 41 -1 3 1 18 1 0 0 940 2492 985 41 -1 4 1 18 1 1 0 940 2492 985 41 -1 5 1 18 1 1 1 940 2492 125 41 95.800957 Subtotal5 1 18 1 1 2 1522 2500 137 30 95.004326 2,567,7595 1 18 1 1 3 1852 2501 73 24 96.146843 70.41 UNITED BRANDS Co. Luvs 1614 Initial Decision Cartons Share of shipped shipments ! Rank Company (number) (percent) Total all 25 companies 3,646,696 100.00 ' Figures are rounded and will not necessarily add to totals. Source: CX 291 Fall Lettuce Shipments—(Harquahala-Marana-Red Rock-Maricopa-Eloy- Aquila-Date Creek-Willcox-Parker-Poston—1970-1971 Season. Cartons Share of shipped shipments ! Rank Company (number) (percent) 1 Antle, Ine., Bud 544,851 15.09 2 Church, Inc. 303,941 8.42 3 Royal Packing Co. 292,510 8.10 4 Finerman Co., Ine. 291,931 8.08 Subtotal 1,433,233 39.69 5 Hi-Life Farms 241,216 6.68 6 D’Arrigo Bros. 172,803 4,79 7 Martori Bros. Distributors 165,356 4.58 8 Vessy & Co., Ine. 165,029 4.57 Subtotal 2,177,637 60.31 9 Tri Produce Co. 163,712 4.58 10 Noroian Farms, Nish Lo 159,934 4.43 Subtotal 2,501,283 69.27 Total all 26 companies 3,611,008 100.00 ‘ Figures are rounded and will not necessarily add to totals. Source: CX 324 Spring Lettuce Shipments (Harquahala-Marana-RedRock-Maricopa-Eloy-Aguila-Date Creek-Willcox & Parker-Poston)—1967-——’68 Season Cartons Share of shipped shipments ! Rank Company (number) (percent) 1 Antle Inc., Bud 652,755 15.22 2 Royal Packing Co. 437,642 10.20 5 Church Inc., Bruce 420,337 9.79 4 TRI Produce Company 822,388 7.50 Subtotal 1,833,122 42.72 5 Finerman Co., Inc., Mel 293,628 6.85 6 Hi-Life Farms, Ine. 251,847 5.87 7 Garin Co., The 239,435 5.57 Initial Decision 83 F.T.C.

Cartons . Share of shipped _ shipments ! Rank Company (number) (percent) 8 Arena Co. of Arizona 235,181 5.47 Subtotal 2,853,213 66.50 9 Norton Co., J. R. 225,593 5.26 10 Santa Cruz Farms 221,827 5.17 Subtotal 3,300,633 76.94 Total all 23 companies: 4,290,407 100.00 ' Figures are rounded and will not necessarily add to totals. Source: CX 289 Spring Lettuce Shipments—1968—’69 Season (Harquahala—Marana—Red Rock—Maricopa—Eloy) (Aquila—Date Creek— Wilcox & Parker-Poston) - Cartons Share of shipped shipments ! Rank Company (number) - (percent) 1 Antle Inc., Bud 1,238,996 22.47 2. Royal Packing Co. 496,346 8.99 3 Norton Co. John R. 826,437 5.91 4 Church Ine., Bruce 318,036 5.76 Subtotal 2,379,815 43.17 5 Garin Co., The 286,691 5.20 6 Finerman Co., Inc., Mel 284,746 5.17 qT Hi-Life Farms Inc. 250,344 4.53 8 Arena Co. of Arizona 242,105 4.39 Subtotal 3,443,701 62.48 9 Martori Bros. Distributors 239,837 4.35 10 Tri Produce Co. 236,632 4.29 Subtotal 3,820,170 69.30 Total all 32 companies 5,511,744 100.00 ‘ Figures are rounded and will not necessarily add to totals. Source: CX 290 Spring Lettuce Shipments (Harquahala-Marana-RedRock-Maricopa-Eloy-Aguila-Date Creek-Willcox & Parker-Poston)—1969—’70 Season Cartons Share of shipped shipments ! Rank Company (number) (percent) 1 Antle Inc., Bud 878,100 15.18 2 Royal Packing Co. 491,510 8.50 38 Church Inc., Bruce 412,830 7.14 ; UNITED BRANDS Coo. 1689 1612 Initial Decision Cartons Share of shipped shipments ? Rank Company (number) (percent) 4 Finerman Co., Inc. 349,005 6.08 Subtotal 2,131,445 36.86 5 Inter-Harvest, Inc. 320,006 5.53 6 Norton Co., John 303,924 5.25 vi Anthony & Co., Mr. 273,103 4.72 8 Desert Produce, Inc. 254,091 4.39 Subtotal 3,282,569 56.77 9 Garin Co., The 220,591 3.82 10- Vessey & Co., Inc. 220,494 3.80 Subtotal 3,723,654 64.40 Total all 31 companies 5,781,811 100.00 ' Figures are rounded and will not necessarily add to totals. Source: CX 291 .

Spring Lettuce Shipments—(Marna-Red Rock-Elroy-Maricopa-Harquahala- Aquila-Salome-Willcox-Parker-Poston—1970-1971 Season Cartons Share of shipped shipments ! Rank Company (number) (percent) 1 Antle, Ine., Buo 956,090 19.85 2 Finerman Co., Ince. 366,926 7.62 3 Martori Bros. Distributors 362,686 7.53 4 Norton Co., John 287,953 5.98 Subtotal 1,978,655 40.97 5 Royal Packing Co. 252,955 5.25 6 Admiral Packing Co. 249,648 5.18 7 Hi-Life Farms, Inc. . 240,117 4.98 8 Mapes Produce Co. 213,876 4.44 Subtotal 2,930,251 60.83 9 Inter-Harvest, Inc. 200,982 4.17 10 Church, Inc. Bruce 189,142 3.93 Subtotal: 8,820,325 68.93 Total all 25 companies 4,816,971 - 100.00 ' Figures are rounded and will not necessarily add to totals. Source: CX 824 Initial Decision 83 F.T.C.

Yuma Winter Lettuce Shipments—1967-’68 Season Cartons Share of shipped shipments ' Rank Company (number) (percent) 1 Church Inc., Bruce 983,661 16.47 2 Vukasovich, Ince. 824,169 18.79 3 Pasquinelli, Pete 696,423 11.65 4 Hogue Produce Co., F. H. 425,521 7.13 Subtotal 2,929,774 49.04 5 Valley Packing Co. 411,223 6.87 6 G & S Produce Co., Inc. 313,903 5.25 7 Englund Co., Inc., R. T. 297,206 4.97 8 Woods Co., The 294,324 4.92 Subtotal 4,246,430 71.07 9 Barkley Co. of Arizona 284,824 4.77 10 Consaul Co., Inc., Lee A. 282,887 4.73 Subtotal 4,814,141 80.58 Total all 19 companies 5,973,775 100.00 ' Figures are rounded and will not necessarily add to totals. Source: CX 289 Yuma Winter Lettuce Shipments—1968-69 Season Cartons Share of shipped shipments ! Rank Company (number) (percent) a Church Inc., Bruce 911,839 18.74 2 Pasquinelli, Pete 847,690 12.78 3 Vukasovich, Inc. 836,945 12.61 4 Hogue Produce Co., F. H. 531,998 8.02 Subtotal 3,128,472 47.15 5 Merrill Farms 428,644 6.46 6 Barkley Co. Arizona 421,178 6.34 7 G & S Produce Co., Ine. 392,884 5.92 8 Valley Packing Co. 357,001 5.38 Subtotal 4,728,179 71.27 9 Woods Co., The 333,483 5.02 10 Olberg & Son, J. W. 287,477 4.32 Subtotal 5,349,139 80.64 Total all 22 companies 6,633,122. 100.00 ' Figures are rounded and will not necessarily add to totals. Source: CX 290 VANER EY DAVAINEO UY.

LvVv1 1614 Initial Decision Yuma Winter Lettuce Shipments—1969-’70 Season Cartons Share of shipped shipments ! Rank Company (number) (percent) 1 Church Ine. 845,215 12.73 2 Pasquinelli, Pete 706,681 10.65 3 Vukasovich, Inc. 698,673 10.53 4 Hogue Produce Co., F. H. 610,203 9.19 Sub total 2,860,772 43.18 5 G & S Produce Co., Ine. 528,282 7.96 6 Barkley Co. of Arizona 497,024 7.49 7 FreshPict Foods, Inc. 355,830 5.36 8 Englund Co., Inc., R. T. 324,444 4.88 Subtotal 4,566,352 68.83 9 Consaul Co., Inc., Lee 314,618 4.74 10 Inter Harvest, Inc. 281,222 4,23 Subtotal 5,162,192 77.82 Total all 24 companies 6,633,306 100.00 ' Figures are rounded and will not necessarily add to totals. Source: CX 291 Yuma Winter Lettuce Shipments—1970-1971 Season Cartons Share of shipped shipments ! Rank Company (number) (percent) 1 Church, Inc. 839,682 11.08 2 Pasquinelli, Pete 800,181 10.56 3 G. & S. Produce, Inc. 653,195 8.62 4 Hogue Produce Co., F. H. 605,815 8.00 Subtotal 2,898,873 38.26 5 Barkley Co. of Arizona 596,643 7.88 6 Vukasovich, Ine. 543,069 717 7 Inter-Harvest, Inc. 522,315 6.89 8 Freshpict Foods, Inc. 379,233 5.01 Subtotal 4,940,133 65.21 9 Consaul Co., Lee. A. 371,156 4.89 10 Finerman Co., Inc., Mel 365,229 4.82 Subtotal 5,676,518 74.93 Total all 23 companies 7,575,823 100.00 ' Figures are rounded and will not necessarily add to totals. Source: CX 324 Concurring Opinion 83 F.T.C.

CONCURRING OPINION By THOMPSON, Commissioner:

I share the views of the Commission as expressed in the Chairman’s learned opinion and fully endorse its findings and conclusions, including the order requiring this respondent to file certain reports on its future land acquisitions. My purpose here is thus not to take issue with that opinion but to elaborate briefly on some of the reasons that convince me of its soundness.

I believe very strongly in advertising. As I mentioned in a speech recently: “Just as I think well of the man who has the skill, energy, and imagination to produce something needed and desired by his fellow human beings, so I also think well of the one who has the skill, energy, and imagination to sell it for him. If production is useful and honorable, then distribution— including advertising—is entitled to the same honorable place in our esteem.” ! The purpose of advertising, as I understand it, is to provide information to potential buyers—to tell consumers that a certain product exists, that it has certain properties, that it can be bought at certain times and places, and so forth. This information, in turn, has important effects on the workings of our economic system. First, full information on both the buying and selling sides of the market is essential to what economists call the efficient allocation of resources. A society’s total wealth is obviously increased when consumers, thanks to advertising, learn that a better product can be bought at a lower price from seller A than from seller B and thus cause productive labor and capital to be shifted from a high-cost producer to a low-cost one. Informed consumers are thus a key force in providing producers with both the incentive and the wherewithal to develop new and better products and to offer them at the lowest prices consistent with their continued production.

Secondly, advertising makes it possible for business firms to acquire enough volume to achieve the maximum in what economists call “economies of scale.” At very low levels of output, costs per unit—and thus consumer prices—tend to be very high. As output expands, unit costs—and prices—start to decline. In economic jargon, advertising efficiency on the size scale and thus get consumer prices down to the minimum level permitted by the industry’s existing state of technology. This kindof advertising, however, is not the kind that is before us in the case at bar. Respondent United Brands came to the lettuce industry not to increase efficiency but to impair it. Its plan, briefly put, was this. United Brands, a large firm with considerable expertise in the use of ‘“Advertising and the FTC: The Role of Information in a Free-Enterprise Economy,” Before Western Region Conference, American Advertising Federation, San Diego, California (October 27, 1973), p. 6. UNITED BRANDS CO. -- 1614 Concurring Opinion , advertising to create consumer demand for “brand-name” products (e.g., “Chiquita” bananas), sought to bring that skill to the general “produce” industry, particularly its lettuce sector.? Prior to respondent’s entry, the lettuce industry had been what all concede was a textbook model of “perfect competition.” There were many independent firms in the industry, many of them family-owned, with no one firm or group of firms having a sufficiently large share of the market to influence the national price of lettuce. The product was sold as a “commodity” or essentially homogeneous product with consumers being indifferent as to whether they bought the lettuce of grower A versus grower B. Prices were thus kept at minimum competitive levels and were highly flexible in both an upward and downward direction, responding swiftly and sharply to changes in the key factors of supply and demand in the marketplace.

Respondent United Brands deliberately set about to change all this. It wanted to raise the price of lettuce and it wanted to capture a large share of that higher-priced market for itself. In substance, respondent believed that, if it could get as much as 25 percent of the United States lettuce market for itself—a figure later scaled down to 12 percent because of “antitrust considerations” *—it could generate enough revenue to support un advertising program that would permit it to raise the price of its “Chiquita” brand lettuce from the going market price of about $2 per carton to approximately $3 per carton.* It was not respondent’s purpose to develop a superior head of lettuce or to increase the per-acre yield from the lettuce farms that it bought. On the contrary, United Brands freely concedes that it brought no new “efficiencies” to corporate farming. Its plan was simply to get control of enough lettuce acreage to permit it to “subdue” the short-run forces of supply and demand, i.e., to acquire “some degree of control over the market and prices * * * .”5 The appearance of product superiority that would be needed to justify the “premium” prices it proposed to charge was to be acquired in the straight-forward fashion of simply separating the regular yield from its farms into two parts. The best of the crop would be packaged and sold as “Chiquita” brand lettuce at the 30 percent to 50 percent higher price. The rest of the crop would be left unpackaged and sold at the going market price, the one received by its competitors for their total lettuce crop. Respondent’s average price, in other words, would be substantially higher than its competitors’ prices although its average quality would admittedly be no better than theirs. * Lettuce is the country’s most important fresh vegetable crop, its annual sales at the retail level having been $667.5 million 1967, CX 158C; ID p. 15. {p. 1633 herein} * CX 158F, 158Q.

+ CX 134A.

5 CX 111 Z-82; ID p. 47. [p. 1659 herein} L0v4 FEDERAL TRADE COMMISSION DECISIONS Concurring Opinion 83 F.T.C.

The issue on efficiency here is admirably clear. The object of economic efficiency is of course to produce lower costs and prices, not higher ones. This respondent, however, writing under the heading of “Economies of Scale” in its appeal brief before us, sums up its position on the point this way: “He [the Administrative Law Judge] starts out with concessions, which are compelled by the record, to the effect that ‘farming has severe built-in limitations on size in terms of diseconomies of scale * * *’ (I.D. 31) [p. 1646 herein], that respondent enjoyed no real price advantages in the purchase of inputs, such as fertilizer * * * , that complaint counsel’s ‘effort to show the likelihood of respondent’s enjoying lower costs by virtue of the size and scope of its farming operations also proved abortive’ (I.D. 32) [p. 1647 herein} ” And a similar assurance that respondent had no particular contribution to make in terms of efficient farming was emphasized in its reply brief before this agency.” On the contrary, this respondent’s forte lies in knowing how to raise unit costs at the marketing level and then persuade consumers to go along with a price increase that more than equals that cost hike. The plan, as noted, was to charge $1 per carton more for “Chiquita” brand lettuce ($3 versus $2 for a 24-head carton). In order to get this higher price, each individual head of lettuce had to be wrapped in a piece of cellophane bearing the “Chiquita” brand, an operation that consumed an estimated 40 cents per carton of that $1 price differential.* And then of course there was an advertising bill to be paid (estimated at $1,589,000 for 1970) and one for other “publicity” efforts ($657,000),° for a total. of $2,246,500 to be spent in 1970 convincing consumers that “Chiquita” lettuce was worth the “premium” price being asked for it. I have a deep regard for the dynamic processes of a competitive marketplace, one in which the man with a vision of what a product ought to be like invests his energy and capital in the search for a better way of doing or making things. I believe that the rewards of successful research and development ought to be commensurate with its risks and that truthful advertising designed to inform the consuming public of a product’s real superiority in terms of price and/or quality plays an important role in keeping our economic system strong and competitive. And I believe very strongly that productive and marketing efficiency—getting goods from the land to the consumer at the lowest per-unit cost—deserve a similarly high reward. I can find little in the vay of a redeeming social value, however, in an advertising program lesigned to make something out of nothing or, as the country folks say, ’ Respondent's Appeal Brief (June 4, 1973), p. 23. Respondent’s Reply Brief (August 13, 1973), p. 10: “Complaint counsel concede that respondent did not benefit from - economies of scale in the precise economic sense * * * .” CX 158E.

CX 136L.

UNITED BRANDS CO. L090 1614 Concurring Opinion a “silk purse out of a sow’s ear.” Making an expensive “brand-name” product out of something that has been previously sold in a low-cost “commodity” market is, in my view, a practice that is plainly incompatible with the maintenance of an effectively competitive market economy. The resources of this country’s great corporations should be bent to the task of producing lower costs and prices for the consuming public, not higher ones as this respondent seems intent on doing. Respondent United Brands failed in its efforts to convert the lettuce industry from a competitive to a non-competitive market. For the moment, then, that threat has been removed from this nearly $1 billion industry. It is not clear, however, that it will not return as soon as the Commission’s hand is off respondent’s shoulder, an uncertainty that is of course reflected in the Commission’s order requiring respondent to file periodic reports designed to let us know if it starts to acquire the kind of acreage needed to undergird a new lettuce “branding” program. While I support this requirement, perhaps there is a still more effective way of solving this problem. This respondent could be required, for example, to file a similar report on its future “branding” efforts in the fresh produce industry, if any. Given the admitted diseconomies that flow from farming on too large scale, i.e., the inability of United Brands to grow lettuce any better or cheaper than the smallest of its competitors, the potential threat to competition here lies not in respondent’s acquisition of more ~ farm land but in the way it has been inclined in the past to market the output of its farms. As a farmer, United Brands is a docile and competitively harmless steer. It is destructively bullish only when licensed to use its marketing “horns.”

No drastic operation would be required to limit this respondent’s future “branding” activities. The firm’s executives have foresworn all future attempts to introduce such a program in the fresh produce industry.’ If respondent really has no intention of repeating its effort to introduce product “branding” here, an order to that effect would be no burden on it. I conclude my analysis of this matter with a suggestion for this respondent in its future lettuce farming: Go and brand no more. OPINION OF THE COMMISSION BY ENGMAN, Commissioner:

The Commission’s complaint challenged respondent’s acquisition of the stock or assets of several firms engaged in the fresh produce industry. After conducting hearinngs, the administrative law judge (ALJ) issued an initial decision concluding that the acquisitions were in viola- *° See, e.g., Respondent’s Appeal Brief, p. 9, noting that “the three top executives of respondent testified that the branding program was a plete failure and r dent had no intention of resuming same * * * .” (Emphasis added.) ‘p Opinion 83 F.T.C.

tion of Section 7 of the Clayton Act and Section 5 of the Federal Trade Commission Act. He ordered respondent to divest all acquired assets which provide supplies and services to the fresh produce industry and to terminate all land leases to be used for producing fresh produce. His order also barred respondent from engaging in the fresh vegetable industry for ten years without the prior approval of this Commission. Respondent has appealed.

I. BACKGROUND Respondent United Brands Company (hereinafter sometimes referred to as “United”), which had annual sales of approximately $1.5 billion in 1971, has a decided interest in the food industry. It was formed in 1970 by the merger of United Fruit Company, a major banana producer, and AMK Corporation, which had acquired a controlling interest in United Fruit in 1969.1 The United Brands family presently consists of numerous food-related concerns. In addition to United Fruit’s extensive banana operations, for example, respondent controls a sugar refinery, a producer of food products for the fast-food industry, the Baskin-Robbins ice cream chain, the A & W drive-in restaurant franchisor, a floriculture . operation, John Morrell & Co. (the third largest full-line meat producer in the United States), and Inter Harvest, a lettuce producer. The Acquisitions at Issue United Fruit, which had embarked upon a diversification program long before AMK acquired a controlling interest in it, had acquired many of the firms and assets presently in the United Brands’ organization prior to AMK’s takeover. Such was the case with respect to the assets comprising the Inter Harvest division. After apparently extensive research, respondent commenced a vegetable-firm acquisition program in 1968. In July of 1968, $20 million was authorized for this purpose, and during the next 12 months respondent acquired the stock or selected assets of six farming operations in the fresh vegetable industry.

In October of 1968 respondent acquired the capital stock of Earle Myers Co. and Demco Farms, Inc. These firms were, in effect, “one entity engaged in the production of fresh vegetables.” [I.D. 6] [p. 1626 herein]? The Myers operation produced about $2.6 million worth ‘In this opinion, the term “respondent” will include not only United Brands but also its predecessor corporations. * The following abbreviations will be used for citations: I.D,-Initial Decision of the Administrative Law Judge (ALJ) Tr.-Transcript of Testimony CX-Commission Exhibits RX-Respondent’s Exhibits RPF-Respondent’s Proposed Findings UNITED BRANDS CO. 1697 1614 Opinion of fresh vegetables per year (mainly celery and cauliflower) on several hundred acres of leased land in the Salinas Valley. This land, to which United Fruit gained access via the acquisitions, could produce an estimated 500,000 cartons of lettuce per year.

Respondent next acquired the capital stock of Nunes Bros. of California, Inc. and selected assets of Toro Farms. These firms also constituted one farming entity engaged in growing and shipping fresh vegetables. The acquired assets included leases to land in the Salinas Valley and Imperial Valley, Calif. which could produce an estimated 2.5 million cartons of lettuce per year.

In February of 1969 United Fruit acquired the business and selected assets of Peter A. Stolich Co., Inc.,. primarily a lettuce producer. The purchase agreement included leases on lettuce-producing land in the Salinas Valley, Imperial, and Brentwood areas of Calif. It also acquired in February 1969 all the stock of the Monterey County Ice & Development Company. Unlike the other acquired firms, this firm was not engaged i the growing or shipping of lettuce. Instead, it operated vacuum cooling facilities in Salinas and El Centro, Calif.—tfacilities used in preparing lettuce for shipment. Jerome Kantro Enterprises was next on respondent’s shopping list. In March of 1969 it purchased the business and selected assets of this grower-shipper. In addition, Jerome Kantro agreed to lease his farm land to respondent for ten years. This land is located in Salinas and Brentwood, Calif. and Yuma, Ariz.

In March 1969 United Fruit also acquired the business and selected assets of the Salinas Valley Vegetable Exchange, a partnership en- ._ gaged in growing and shipping fresh vegetables (primarily lettuce). The partners retained title to the vegetable growing land, located in Salinas, Imperial, and Phoenix, and leased it to respondent. In its final acquisition, United Fruit purchased the business and selected assets of Consolidated Growers, Inc., which grew mainly lettuce and garlic. Respondent made this purchase, which included over 1600 acres of owned and leased land in Salinas and Brentwood, in July of 1969.

The ALJ succinctly summarized the scope of these acquisitions: In summary, during 1968 and 1969 respondent purchased, for an aggregate price of about $17 million, the capital stock or selected assets of six fresh vegetable farm operations in California and Arizona and one cooler operation. The six farm enterprises grew and shipped several varieties of vegetables—predominantly lettuce, with one exception. Total annual lettuce shipments of the acquired companies were more than 7 million cartons in the year prior to acquisition * * *. [ID.9] [p. 1628 herein] Why Lettuce? Although respondent had an interest in the fresh vegetable industry L098 FEDERAL TRADE COMMISSION DECISIONS _ : are ~ Opinion: 88 FTC. a in ‘general, it clearly had a penchant: for lettuce, as is: evidenced by. the cee fact that all but one of the. acquired farming enterprises “produced ] considerable amounts of lettuce. It viewed lettuce as an ideal diversifi- oo cation area—a market consisting of: _ ~ many small producers fragmented and. wthout the > opportunity. to provide a cohesive, unified approach to both the retailer and con- ‘sumer. in terms. of: capitalizing on the increased value that: could © : : result due to the Fruit Company’s skills in the brand Presentation oes of a perishable commodity. [CX 158€] In short, respondent considered lettuce ready for its “Chiquita” banana product differentiation techniques which, it hoped, would convince consumers to pay a premium price for Chiquita lettuce. [CX 158D] Although respondent may have viewed lettuce as an ideal product area, it contends that, for purposes of the Clayton Act and the FTC Act, lettuce i is not the relevant market.

I. RELEVANT MARKET The Product Market Complaint counsel and respondent sharply disagree on the correct market definition. Complaint counsel contend that each item of fresh _ produce is an appropriate market. Respondent argues that no single fresh vegetable should be designated a separate market because fresh vegetable farmers can shift from one fresh vegetable to another. The record establishes that some growers and shippers do shift product mix. However, even if we assume easy interchangeability of production facilities, this is but one factor weighing in favor of a broader definition of the market while several other factors tip the scales in favor of singling lettuce out as a submarket. In Brown Shoe Co. v. United States, 370 U.S. 294 (1962), the Supreme Court recognized that well-defined submarkets may constitute product markets for antitrust purposes. The Court explained that the boundaries of the submarkets should be determined by practical indicia such as: industry or public recognition of the submarket as a separate economic entity, the product’s peculiar characteristics and uses, unique production facilities, distinct customers, distinct prices, sensitivity to price changes, and specialized vendors. [At 325] In the instant case, the ALJ, keying his findings to the Brown Shoe criteria, determined that:

within the fresh produce market, there is a fresh vegetables submarket, which, in turn, weaks down into a multiplicity of individual product submarkets, such as lettuce, celery, nd cauliflower. [I.D. 12] [p. 1630-31 herein] In our view, the evidence clearly demonstrates that lettuce satisfies ey Brown Shoe criteria. We agree with the ALJ’s finding that lettuce - “UNITED. BRANDS CO. : . 1699 1614 pe ae SS Opifiion a ds regarded as.a separate market by industry and by government (See; -e.g., CX 883-886, 248-256, 263-268, 269-271, 239-240; 241-242, 289—. 291, 324, 295-305, 312, 393, 394), and the record also. supports his So findings that many grower-shippers specialize in.a particular vegetable ~_ or group of vegetables. [CX 339] Of particular significance, however; is the fact that little or no cross-elasticity. of demand exists between lettuce and other products; i.e., the price of lettuce is unaffected by the -.. price of other vegetables. (Tr. 2080, 1578] Accordingly, lettuce i is an: appropriate submarket. i - We want to emphasize that we shall focus our attention only upon nthe lettuce submarket because a thorough review convinces us, as it did the Ce ALJ, that the record does not contain sufficient evidence to assess the Los competitive effect of the acquisitions on. other product submarkets, or oe the fresh vegetable industry as.a whole. : Geographic Market “The ALJ concluded that a national lettuce market exists which, in turn, subdivides into a series of terminal. submarkets in major cities. He _also, found that each principal shipping point in California and Arizona is ~alsoa relevant market.>. a - We have no simple formula for defining the relevant geographic market or markets. The Supreme Court has repeatedly announced that: the area of effective competition in the known line of commerce must be charted by careful ‘selection of the market area in which the seller operates and to which the purchaser can practicably turn for supplies. [United States v. Philadelphia National Bank, 374 U.S, 821, 359 (1963); United States v. Phillipsburg National Bank and Trust Co., 899 U:S. ~~? 850, 362 (1970); Tampa Electric Co. v. Nashville Coal Co., 365 U.S, 320, 327 (1961)} The record in the instant case amply demonstrates that a national flow of lettuce exists. As the ALJ found: “lettuce is commercially grown -and shipped from each major area of the United States * * *,” {I.D. 16] [p. 1633 herein] Lettuce is grown commercially i in at least 15 states, and substantial amounts are shipped interstate. [CX 248 at 34] In 1972 the Department of Agriculture published a decision with respect to a then - proposed marketing agreement and order on_ lettuce produced in’ California, Arizona, Colorado, New Mexico, and parts of Texas. That decision noted that lettuce grown in this five-state area: oom * * * is so grown, harvested, and packed that virtually any given Jot may be, and often i is, sold or transported to any market in the United States. The industry’s domestic market for lettuce is the entire United States and its members are in daily contact. with buyers across the Nation * * * - With modern communication and transportation systems, lettuce prices or supplies in any one location are promptly known elsewhere and have a direct effect.on lettuce prices and supplies in all other locations: [RX 11] ; * These principal shipping points. are Monterey County, California; Imperial County, Calif.; the Salt River Valley, Ariz.; Marana-Red' Rock~Maricopa—Eloy, Ariz; and Yuma, Ariz. a0 D. 17-18} [pp. 1634-35 herein] 1700 =: FEDERAL TRADE COMMISSION DECISIONS - ‘Opinion a aa 83 FTC.

Moreover, a study by the California Department of Agriculture con-: cluded that “[t]he average price level for any one season will usually depend on total United States supplies available and general arrival) apes quality of those supplies.” [CX 246 at 6] - This evidence establishes that primary supply and demand forces for lettuce are exerted on a nationwide basis. Many producers have, inessence, a national market; and buyers will look: to any part of the country which can ship to the buyer’s locale. Accordingly, we hold that ~ the United States is a market for lettuce. Of course, submarkets for lettuce may exist (e.g., major cities, as the ALJ found).* However, the record in this case lacks substantial evidence of the competitive effects of the acquisitions at these terminal cities and, accordingly, we do not reach the question of the existence of relevant markets at the city level. Although a city, state or multistate area may be a relevant geographic market, we disagree with the ALJ’s conclusion that the major . shipping points in California and Arizona are each a relevant market. These shipping points are, in essence, simply commodity exchanges. - Certainly, if a commodity exchange were the only place at which the sellers operated and hence to which the buyers could turn for supplies, the exchange could qualify as the relevant market; but such is not the case with the shipping points at issue here. The Time Element Generally the relevant market is defined solely in product and geographic terms. In this case, however, commercial realities require that a third dimension—time—also be considered. Lettuce is so perishable that shippers try to sell it the day it is harvested [I.D. 19-20] [pp. 1636-37 herein], and it must be harvested within three or four days before or after the optimum harvest date. [CX 246M] Thus, unlike most products, producers cannot stockpile lettuce or delay the harvest. As a result of the necessarily rapid movement of lettuce once the optimum harvest period is at hand, a head of lettuce which has reached its optimum harvest date can have no effect on the price of a head which reaches its optimum date a short time later. It follows that in assessing supply and demand forces for lettuce harvested in one month, we have no reason to consider the amount and price of lettuce harvested the’ prior month. Accordingly, we must divide the national market into time © segments.

Although an overlap of a few days may exist from one time period to the next (7.e., the potential supply of lettuce which can be harvested on the last day of period 1 could be harvested during the first days of period “ In United States v. Pabst Brewing Co. , 384 U.S. 546 (1966, the Supreme Court held that in additon to a national beer market, a three-state area and even one state constituted relevant geographic markets.” . UNITED BRANDS Cu. meee 1614 Opinion 2) and some degree of fuzziness will exist in the selection of the length of the time period,® we nevertheless can sharpen our evaluation of supply and demand forces by segmenting the market. For example, annually computed statistics may show that Firm X accounts for 8 percent of national lettuce shipments, hardly an indicator of monopoly power. But a breakdown of shipments on a monthly basis may reveal that all of its shipments occur in January and that they account for 90 percent of January lettuce.

After thoroughly reviewing the record, we conclude that we can adequately assess the contours of the lettuce industry by dividing the national harvest into monthly segments. Although it might be possible to isolate an even shorter time period as the relevant market [See Tr. 2185-2185A], we find that to be unnecessary for purposes of the issues raised in this case.

Il. COMPETITIVE EFFECTS At the time of respondent’s entry, the lettuce industry consisted of many relatively small producers operating in a competitive atmosphere. The industry is noted for its high risks, periodic oversupplies and wide price fluctuations (sometimes as high as 300 percent within one week). Major contributors to this situation are unpredictable weather conditions, uncoordinated planting efforts, inelastic demand for the product, and the perishable nature of lettuce which requires that a head of lettuce be harvested and shipped within a short time of its optimum harvest date.

The production of lettuce can be viewed as consisting of two separate processes: growing and shipping. Some firms grow and ship their own lettuce, but often a shipper, in place of or in addition to growing his own lettuce, will enter into a growing contract, called a “joint deal,” with a farmer (who may own the land he farms or lease it from an absentee owner). Under the joint deal, the grower will cultivate the lettuce and the shipper will sell it. The degree to which the shipper will assist in the growing phase and the extent to which risks will be apportioned vary from contract to contract, but generally risks are shared; and often the shipper performs some function in the growing process. When the lettuce is harvested the shipper immediately sends the produce to a vacuum cooler * where it is cooled and prepared for shipment. The shipper sells the lettuce through an elaborate system of brokers and buyers. Some food store chains maintain buyers at the shipping points, and sellers will sell directly to them; but most sales are ~s The Supreme Court has recognized that some fuzziness is inherent in the process of defining markets. See United States v. Philadelphia National Bank, 374 U.S. 321 at 360 n.37. ® This device lowers the temperature of the lettuce to 34° which is the optimal temperature for maintaining its freshness.

Opinion 83 F.T.C.

made through independent brokers. Usually the broker or buyer inspects the lettuce when it arrives at the vacuum cooling plant and places his order after he or his representative inspects the produce. The lettuce is then loaded on a truck or rail car and begins a speedy, refrigerated journey to its destination.

Occasionally the shipper can find no purchaser for his lettuce at the shipping point. Since lettuce is highly perishable, the shipper must either find a consignee at the terminal point or send the lettuce on its way to a terminal with the hope that he will find a purchaser while it is en route.

Although the shipper generally does not wrap each head of lettuce, occasionally a buyer will ask that the lettuce be sealed in a plastic wrapper before it is shipped, a service for which the shipper can achieve a premium price. Source-wrapped lettuce accounts for approximately 5 to 15 percent of total lettuce shipments.

Lettuce is sold as a commodity without any brand differentiation at the consumer level. Some shippers use a particular label for their best lettuce, but these labels have significance only to the trade and appa- rently do not influence a wholesale buyer’s purchasing decisions which are usually based upon visual inspection of the product. Finally, we note that generally those who venture into the lettuce sweepstakes are persons who have “grown up in the business;” and the development and success of a firm often hinge on the ability of the individual in charge. In a nutshell, at the time of respondent’s entry, the lettuce industry was vigorously competitive. The ALJ concluded “* * * the substitution of United Brands for six relatively small independent enterprises threatens to restructure the lettuce industry in ways that bode ill for its competitive health.” [I.D. 57] [p. 1667 herein] In essence, this conclusion is the gravamen of respondent’s challenge, and hence the central question before us is whether the record demonstrates that respondent’s acquisitions are likely to reduce substantially the industry’s competitive vigor. The acquisitions, when viewed as a unit,’ have the characteristics of a conglomerate acquisition. In evaluating the competitive effects of a conglomerate acquisition, we cannot rely upon quantifiable factors (such as concentration ratios and market shares) to the same extent that we can when evaluating horizontal and vertical mergers. As we said in Procter & Gamble, 63 FTC 1465 (1963):

The merger at bar, [a conglomerate product extension merger} because it is not a 7 Upon acquiring the first lettuce firm, respondent may have become a competitor of the other firms. Thus, when viewed individually, all acquisitions subsequent to the first may have horizontal characteristics. However, we will not evaluate the horizontal effects of each acquisition because complaint counsel have tried the case solely on a conglomerate theory, and the ALJ's opinion did not contain a horizontal analysis. UNITED BRANDS CO. 1703 1614 Opinion conventional horizontal or vertical merger, does not afford the tribunal which must decide its legality the ready crutch of percentages. [At 1570] Nor can we focus solely on the size of the acquiring firm, a readily quantifiable characteristic, as “size alone is an insufficient criterion, at least as yet, in the field of conglomerate mergers.” [United States v. Wilson Sporting Goods Co., 288 F. Supp. 548, 554 (N.D. Ill. 1968)] Instead we must carefully evaluate, primarily in nonquantifiable terms, the probable effects of the acquisitons on competitve behavior. Ideally we should measure the probable competitive effects without turning to post-acquisition evidence. However, in the instant case the probable effects, measured at the time of the acquisitions, were so uncertain that we have found it necessary to place considerable emphasis on post-acquisition evidence. (See, United States v. General Dynamics Corp., 42 U.S.L.W. 4368 (March 19, 1974); Federal Trade Commission v. Consolidated Foods Corp., 880 U.S. 592 (1965); United - States v. Pabst Brewing Co., 384 U.S. 546 (1966).) We can best evaluate the probable effects of the acquisitions by focusing on each area which the ALJ considered. Deep Pocket The ALJ concluded that “this record affords a classic example of the competitive advantage enjoyed by an enterprise as the result of the ‘deep pocket’ of the parent corporation.” [I.D. 29] [p. 1644 herein] He based this conclusion on the fact that in 1970 respondent’s lettuce division, Inter Harvest, lost $8,287,000 and was saved by a massive transfusion of funds from the parent. We have no evidence that any other lettuce grower or shipper could take an $8 million drubbing, but the ability to weather large losses does not, in itself, pose a threat to competition.* Had Inter Harvest continued to lose $8 million a year, we doubt that it would have remained a viable entity in the lettuce industry.

As further evidence of the impact of the “deep pocket,” the ALJ found that United made extensive capital expenditures. It purchased or leased nearly $1 million worth of equipment for its lettuce operation, but the record provides no indication that these expenditures had or are likely to have an anticompetitive effect.

Economies and Preferential Prices The ALJ found no substantial evidence that respondent has obtained inputs at preferential prices, but he indicated that the potential exists. [I.D. 32] [p. 1647 herein] The “potential” may exist, but we are con- * Of course, the ability to i los which others -cannot i, coupl ith a pr ry pricing & well pose a serious threat to competition. (See, ¢.g., Reynolds M. Mate Con pound Crests Ccmndesion 309 F. 2d 223(D. C. Cir. 1962) The record contains no evidence of predatory pricing [I.D. 30] [p. 1645 herein}; Inter Harvest’s losses appear to be the result of simply poor business judgments. Opinion . 83 F.T.C.

cerned with probabilities; and the record does not demonstrate a probability that respondent will obtain inputs at special prices. Nor does the record establish that United will probably enjoy any economies of scale. Distribution Network United has a fairly extensive banana sales network through which it intended to sell its lettuce. By so purveying its lettuce, it hoped to break with the traditional industry practice of selling through a broker. This could result in savings of 10 to 15 cents per carton. By all accounts, respondent’s attempts to bypass the brokers failed abysmally. The former vice-president for sales in United’s Eastern Division (covering northeastern United States) testified that his division attempted to sell lettuce for two years, but he could not remember one lettuce sale. [Tr. 1597] John M. Fox, United’s former chairman and chief executive officer, testified that in its attempts to sell lettuce, respondent could not employ the same marketing system and individuals who sold bananas (Tr. 1485] and that the attempt to bypass the broker was a “serious mistake.” [Tr. 1476; see also Mason Tr. 83850-3853] The ALJ concluded that United “conceivably might successfully eliminate or substantially reduce the cost of brokerage.” [I.D. 33 (emphasis added) [p. 1648 herein] As we stated above, we are concerned here only with probabilities, not possibilities, and we find no evidence in the record to indicate that it is probable that respondent will successfully bypass brokers.

In conjunction with its plan to sell direct, respondent also hoped to introduce a system in which the retailer would order lettuce two weeks in advance of shipment. It even considered the prospect of entering into long-term contracts where possible, but we have no evidence that this contemplated system was more than wishful thinking. [CX 186E & F] As part of the envisioned shipping network, some of respondent’s employees considered constructing regional cold storage warehouses (CX 124A & B], but the record does not establish that this idea was ever given serious consideration.

Finally, we note that the ALJ found that the ability of United’s regional representatives to handle complaints on the spot and United’s direct contacts with top officials of major retail chains conferred additional competitive advantages. They may be advantages, but they are, at most, minor.

Price Leadership The ALJ found that “[r]respondent clearly envisioned for itself the role of ‘price leader’ in the lettuce industry” [I.D. 33] [p. 1648 herein] and concluded that it has both the intent and power to exercise price leader- | UNITED BRANDS CO. 1705 1614 Fis Opinion .

ship. Although he found that in many instances United’s prices were not as low as those. of grower-shippers who complained of its pricing practices [I: D. 37] [p..1651 herein], he concluded that “with the volume of lettuce it [respondent] was moving, its prices tended to set the market price or, at least, to have a. strong influence thereon. ” TT. D. 36] [p: 1650 herein] He reasoned:

Large-volume shippers are under pressure to cut prices in order to move their produe- - tion, and, during periods of depressed. markets, are blamed, rightly. or wrongly, for low’ _ prices. This follows from the inelastic demand for lettuce at the industry level. The larger the quantity.under the control of a firm, the more inelastic the demand facing the firm. _. The firm selling larger quantities of lettuce must lower price more percentagewise to sell ~ its shipments or else stop harvesting. The largest volume company makes the price on a depressed or slow market because the buyers use that price to “whipsaw” the sellers. 9 Ud. at 36] [p. 1650 herein] :

Assuming that respondent is is the, largest volume company. and sometimes does sell at a very low price, this “price-setting” phenomenon appears to be the result of United’s response to market conditions—an overabundance of supply. Of course, if it expanded its acreage, respondent could be partially responsible for an overabundance; but given the uncoordinated growing efforts characteristic of the industry and the | effect of weather conditions on the size of the harvest, United cannot accurately predict the price its lettuce will fetch. However, the essence of price leadership is that the dominant firm sets what it views as the optimum price. (See F. M. Scherer, Industrial Market Structure and Economic Performance, 165 (1970).) Generally, in markets subject to dominant firm price leadership, the dominant firm controls at least 50 percent of total industry output—far more than respondent. possesses. Moreover, it does not appear from the record that respondent possesses other leverage which would enable it to dictate the prevailing price. Thus,..we. must. conclude that. although respondent may have demonstrated an intent to establish price leadership, there is little in the _record to indicate it will have a following. ' Availability of Lettuce Land The ALJ determined, in essence, that there is a limited amount of suitable lettuce-growing land which can be obtained at “reasonable” cost and that this limitation poses a barrier to new entry. We agree that some of the best land on which lettuce is grown during the summer - months, the northern area of the Salinas Valley, is difficult to obtain. [Tr. 2307, 2024, 2026] Respondent, itself, provides support for this conclusion. As one reason n for entry by acquisition, a report by a United employee stated:

® Inelasticity of demand is discussed infra, at 18 [p. 1707 herein]. 1706 FEDERAL TRADE COMMISSION DECISIONS — ee UR! Opinion Se eR ‘We cannot profitably engage in the growing of lettuce unless we acquire existing growers: “because there is. not. sufficient Jand available for lease: or: development, in’ the areas “. Yequired for year-round production. All suitable land-is presently under-lease (up to five cee ~ years) to existing growers. [CX 158-0] ~ cee ae ice The author of this report testified that he was referring only to the _ northern areas of the Salinas Valley where the prime land is located. [Tr. 2288) a. SE oe aes _. Although the land in the northern sector of the Salinas Valley may be’: * difficult to obtain, other land in the Valley clearly is available. For’ example, one grower-shipper re-entered the Salinas Valley after an absence of several years and obtained good land simply by “ringing » doorbells” [Tr. 2330]; and several other grower-shippers have entered the Salinas Valley in recent years (apparently their first entry into the Valley). [Tr. 2528] Moreover, we note that 300,000 acres of land in the _ central ‘coastal area of California have been identified by production. specialists as capable of relatively high yields of lettuce with costs similar to those of the Salinas Valley or marginally higher. [Tr. 4087] Thus, growers could shift “new” land into lettuce. eee gt Furthermore, shippers and growers apparently have little difficulty obtaining access to land in other areas. For example, in the Imperial Valley, which produces lettuce in the winter, not all land commercially suitable for lettuce is used every year. Imperial Valley lettuce producers planted over 48,000 acres in lettuce in 1970, but in 1971 they cut back to 34,800 acres. Perhaps in another year that 13,200. acres. will . re-enter, or an additional 20,000 acres will be shifted to lettuce. It is also worth noting that some authorities contend that lettuce can be commercially grown in the Imperial Valley on twice the land presently in lettuce. [Tr. 4088]. Bo We are thus led to conclude that aside from prime lettuce land in the northern sector of the Salinas Valley, land suitable for the commercial production of lettuce is not difficult to obtain: However, the key question is whether respondent’s presence has in any way raised whatever land-availability entry barriers existed prior to its acquisitions. The ALJ concluded:

{b]y acquiring access to extensive acreage of suitable lettuce land through its acquisitions, and by its ability to obtain renewals of its leases as well as to acquire access to additional land at higher costs than can be afforded by most of its competitors or any would-be entrants into the lettuce industry, respondent’s entry by acquisition has in fact raised the barrier to entry represented by the difficulty of obtaining suitable lettuce land at reasonable cost. [I.D. 46} [p. 1658 herein] Respondent took no land out of the supply of available land; it merely took the place of the acquired firms. It follows that respondent’s acquisition of access to this acreage did not, in itself, increase the difficulty of 2 : UNITED BRANDS CO. ——«W‘'Z077 S 1614 be ss © Opinion nae ae .

obtaining land. ‘Nor should its ability. to obtain lease renewals have a restrictive effect on land availability because, presumably, the acquired firms would. have obtained similar renewals. ; This conclusion applies to the land in the northern part of the Salinas _ Valley as well. Some of the acquired firms may have had access to this Ae premium lettuce land, but we have found no evidence that United has ~ taken any action or ‘threatened any action which would further restrict the availability of that land. In fact, the record shows this land is Pare difficult to obtain because it “is pretty well controlled by the old estab: lished shippers. ” (emphasis added) [Tr. 2307] Of course, respondent could restrict availability if it paid an exorbitant price for its renewals. But the record provides no indication that it would pay an abnormal price to renew its present leases. Also, United ~*Glearly could heighten barriers to entry if it acquired access to so much land that the price of the remaining land rose substantially. At this point, we simply note that the acquisition of access to any additional land poses serious entry barrier problems associated with product differentiation attempts discussed infra at 23-28 [pp. 1711-1715 herein]. We conclude that the mere substitution of respondent for the acquired : firms has not, in itself, ‘restricted the availability of land. Price Inelasticity of Demand - At present aggregate production levels, the industry faces an inelastie demand curve. [Tr. 3415] That is, an increase in total output will result in a proportionately. greater decrease in unit price and a consequent decrease in the total industry revenue. We presume that this inelasticity exists in every monthly market. Inelasticity of demand would probably pose a substantial barrier to a large scale entrant. It is noteworthy that respondent carefully consi- - dered this problem—in fact one of its officers admitted that had respondent entered de novo on the same scale as its acquisitions (7 million cartons), the result “would have been disastrous.” [Tr. 3950] On the other hand, industry inelasticity of demand, by itself, poses no more _ than a minimal problem for the small entrant whose market share is too small to have a significant effect. on the market.'° The ALJ concluded that respondent’s presence has raised whatever entry barriers flow from the inelasticity of demand. His theory, in essence, is that respondent’ s entry would heighten perceived risks because would-be entrants would fear that United could glut the market and, given the inelastic aggregate demand, drive prices down. How- ©5 1 9 1 1 2 701 2406 100 20 96.683388 Considers 1 9 1 1 3 813 2412 12 14 96.683388 a5 1 9 1 1 4 835 2407 99 24 94.211044 potential5 1 9 1 1 5 948 2410 83 18 96.419884 entrants 1 9 1 1 6 1042 2409 45 19 96.760307 who5 1 9 1 1 7 1099 2410 65 19 96.967163 would5 1 9 1 1 8 1178 2411 88 24 96.823082 produces 1 9 1 1 9 1279 2412 70 23 96.898315 48,0005 1 9 1 1 10 1361 2414 81 18 96.909760 cartons5 1 9 1 1 11 1455 2413 66 22 93.284348 (4,0005 1 9 1 1 12 1533 2415 82 17 66.242813 carténs5 1 9 1 1 13 1626 2413 20 20 96.260345 in5 1 9 1 1 14 1659 2419 62 18 92.182449 every5 1 9 1 1 15 1734 2414 77 24 92.182449 montly5 1 9 1 1 16 1823 2414 81 20 96.273483 markets 1 9 1 1 17 1915 2415 32 19 96.208649 for5 1 9 1 1 18 1960 2415 24 19 96.921700 124 1 9 1 2 0 649 2439 1335 32 -1 5 1 9 1 2 1 649 2439 171 21 92.307022 months—about5 1 9 1 2 2 835 2440 32 19 86.438065 .055 1 9 1 2 3 880 2443 86 26 45.465576 percent.5 1 9 1 2 4 980 2442 23 19 45.465576 of5 1 9 1 2 5 1015 2442 93 25 66.683762 industry5 1 9 1 2 6 1123 2443 65 23 64.313187 total).5 1 9 1 2 7 1206 2444 47 20 93.141396 This5 1 9 1 2 8 1268 2445 16 19 95.182503 is5 1 9 1 2 9 1300 2445 97 25 96.424721 probably5 1 9 1 2 10 1413 2447 35 18 96.842346 not5 1 9 1 2 11 1462 2451 12 13 96.736382 a5 1 9 1 2 12 1488 2446 56 24 96.736382 large5 1 9 1 2 13 1558 2446 80 25 96.237427 enough5 1 9 1 2 14 1653 2447 94 24 96.712479 quantity5 1 9 1 2 15 1762 2447 22 19 96.988281 of5 1 9 1 2 16 1796 2447 75 20 96.563171 lettuce5 1 9 1 2 17 1885 2450 22 17 96.829956 to5 1 9 1 2 18 1921 2447 63 20 96.829956 affect2 1 10 0 0 0 615 2472 1368 32 -1 3 1 10 1 0 0 615 2472 1368 32 -1 4 1 10 1 1 0 615 2472 1368 32 -1 5 1 10 1 1 1 615 2472 2 2 34.181412 _5 1 10 1 1 2 649 2473 136 24 92.164528 significantly5 1 10 1 1 3 794 2474 36 19 96.821465 thes 1 10 1 1 4 838 2474 57 24 96.821465 prices 1 10 1 1 5 903 2474 23 19 93.305855 of5 1 10 1 1 6 933 2474 117 20 72.249710 lettuee—it5 1 10 1 1 7 1060 2476 64 20 96.969948 would5 1 10 1 1 8 1134 2482 61 15 96.969948 causes 1 10 1 1 9 1205 2478 35 19 96.221481 thes 1 10 1 1 10 1247 2479 57 23 96.906296 prices 1 10 1 1 11 1312 2479 23 19 95.362679 of5 1 10 1 1 12 1341 2479 77 19 95.287750 lettuce5 1 10 1 1 13 1427 2480 21 18 96.682770 to5 1 10 1 1 14 1456 2479 34 19 96.682770 falls 1 10 1 1 15 1499 2479 89 24 96.161278 perhaps5 1 10 1 1 16 1597 2480 27 23 93.285728 by5 1 10 1 1 17 1634 2480 23 23 65.347763 %o5 1 10 1 1 18 1666 2481 22 18 96.771370 of5 1 10 1 1 19 1694 2486 38 14 96.319832 ones 1 10 1 1 20 1741 2482 85 22 73.055618 percent.5 1 10 1 1 21 1834 2481 43 22 81.811447 (Tr.5 1 10 1 1 22 1886 2482 97 21 72.902969 3411-12]2 1 11 0 0 0 649 2506 1084 32 -1 3 1 11 1 0 0 649 2506 1084 32 -1 4 1 11 1 1 0 649 2506 1084 32 -1 5 1 11 1 1 1 649 2507 54 23 81.829384 (e.g.,5 1 11 1 1 2 714 2506 17 20 96.702934 if5 1 11 1 1 3 737 2506 78 20 96.542297 lettuce5 1 11 1 1 4 824 2506 48 21 95.036484 sells5 1 11 1 1 5 881 2508 33 19 96.919624 for5 1 11 1 1 6 922 2507 30 31 89.547356 $2.5 1 11 1 1 7 956 2508 24 19 85.508415 505 1 11 1 1 8 989 2515 12 12 85.508415 a5 1 11 1 1 9 1011 2512 76 20 94.699654 carton,5 1 11 1 1 10 1098 2510 40 20 96.598465 this5 1 11 1 1 11 1148 2511 67 19 96.598465 would5 1 11 1 1 12 1225 2511 108 25 96.068581 represents 1 11 1 1 13 1342 2518 12 13 96.068581 a5 1 11 1 1 14 1363 2512 112 20 96.485657 decreases 1 11 1 1 15 1469 2519 19 13 96.206711 in5 1 11 1 1 16 1499 2513 54 24 96.206711 prices 1 11 1 1 17 1563 2513 22 19 91.927322 of5 1 11 1 1 18 1594 2514 16 19 91.927322 %5 1 11 1 1 19 1621 2514 23 19 96.321815 of5 1 11 1 1 20 1651 2519 11 14 96.321815 a5 1 11 1 1 21 1672 2515 61 21 96.819832 cent). 1708 FEDERAL TRADE COMMISSION DECISIONS | a Opinion gg ever, as is discussed immediately below, the record contains little sup-. port for the assertion that risks, real or perceived, have been significantly altered by United’s presence.

| . . Risk and Financing The ALJ concluded that respondent’s entry heightened the already - - high risks involved in producing lettuce. In support of this conclusion, he cited the statements of two former competitors of United who have left the lettuce industry, one of whom was, as the ALJ noted, in a loss» _ position before respondent entered the industry. The record also shows that a lettuce broker testified that he considered becoming a grower- — shipper in 1970 but was deterred by the presence of the “conglomerates.” [Tr. 2177] 2 . aR ae On the other hand, numerous firms greatly expanded their production after respondent entered, hardly the actions of producers preoccupied with a concern for risks. [Tr. 1935-38, 2316, 2327, 2501-02] The record is thus unclear on the question of risks perceived by industry members and potential entrants, and we can draw no general conclusions. Most grower-shippers rely on commercial financing [Tr. 3429-30], and the amount which the bank will lend a grower-shipper depends, inter alia, on the banker’s perception of riskiness of the crop and the size of the shipper’s physical assets. [Tr. 3420-21] Given the importance of commercial credit and the concern bankers have for risks attendant with the lettuce crop, we could expect a stark limitation on credit (with a consequent adverse effect on the entry of new firms and on the continued existence of firms already in the industry) if bankers percieved respondent’s entry as substantially increasing the risks for other industry members. One grower-shipper testified that his banker experssed concern about the impact that large corporations would have on the lettuce industry [Tr. 3044], but we have no record evidence that respondent’s presence caused any banker to deny credit to any industry member or would-be entrant or caused a banker to charge higher interest rates. Thus, we cannot conclude that respondent’s acquisitions have impeded the ability of new or established producers to obtain commercial financing.

Know-How Complaint counsel contend that know-how is so formidable a barrier to entry that all entrants except respondent were firms or individuals closely associated with the lettuce industry. This assertion may be true, but we fail to see how United’s entry has heightened this barrier. There ‘' However, he added that by 1972 United’s presence no longer served as a deterrent to his entry. [Tr. 2181] UNITED BRANDS Coo. 1709 1614 Opinion appears to be a substantial reservoir of persons who have the requisite know-how to become grower-shippers (or to be hired by others who wish to enter the industry). Moreover, before entering any industry, the successful entrant must obtain some background about the industry and the product; and less homework may be required of the lettuce entrant than of entrants in industries based upon higher technology. Thus, we cannot conclude that know-how constitutes a significant barrier to entry.

Concentration As we stated earlier, market share data does not occupy as determinative a position in analyzing conglomerate acquisitions as it does in analyzing horizontal or vertical acquisitions where an increase in concentration or market foreclosure can readily be measured. Market share data, however, has been a major consideration in assessing the probable competitive effects of numerous conglomerate mergers (¢.g., (1) where the acquired firm was an industry leader [usually in a concentrated market] and it was probable that the acquisition would entrench its leadership position or further rigidify an oligopoly,” (2) where the acquiring firm was a potential entrant into a concentrated industry in which the barriers to entry were high," or (3) where reciprocal buying arrangements involving a substantial share of the market were likely to result from the acquisition.'*) The instant case, however, substantially differs from these cases. Unlike the cases involving entrenchment of a dominant firm or the rigidifying of an oligopoly, in not one of the monthly lettuce markets does an oligopoly exist. Although Inter Harvest is the largest firm in several of those markets, it has neither the market share nor the established leadership role of the acquired firms in the entrenchment cases.

Reciprocity and potential competition also are not considerations in this case. The ALJ concluded that the record is devoid of reciprocal sales arrangements between respondent and its customers; and a potential competition charge, although pursued below, has not been raised on appeal.

Moreover, in the instant case the market share data is too incomplete to be of more than minimal probative value. In very general terms, it ” B.g., Federal Trade Commission v. Proctor & Gamble, 386 U.S. 568 (1967)—acquisition of leading firm in concentrated industry; United States v. General Foods, 386 F. 2d 936 (8rd Cir. 1967)—acquisition of member of duopoly; United States v. Wilson Sporting Goods Co., 288 F. Supp. 543 (N. D. Ill. 1968)—acquisition of leading firm in concentrated industry (order granting preliminary injunction). '! Federal Trade Commission v. Proctor & Gamble, 386 U.S. 568 (1967). 4 Federal Trade Commission v. Consolidated Foods Corp., 380 U.S. 592 (1965). Opinion 83 F.T.C.

appears that after respondent entered, concentration ratios and respondent’s market share increased but that by 1971 they leveled off in several monthly markets (and may even have declined in some). National Monthly Concentration ' Year 4-Firm 8-Firm Respondent January and February 1968 Insufficient Data 1969 18 29 -09 1970 18 29 6.17 1971 24 36 8.51 March Insufficient Data April 1968 Insufficient Data 1969 16 25 oo 1970 19 28 1971 16 23 5 May 1968 21 29 -- 1969 22 32 8 1970 30 42 12 1971 28 40 11 June 1968 24 33 -- 1969 33 48 - 12 1970 34 49 14 1971 35 50 14 July 1968 22 30 -- 1969 30 44 a 1970 31 44 13 1971 30 43 12 August 1968 21 28 -- 1969 30 43 11 1970 29 41 13 1971 32 45 12 September 1968 21 2 -- 1969 32 46 12 1970 31 44 13 1971 33 47 13 October Insufficient Data November 1968 13 19 -- 1969 14 22 4 (Continued) Vartaauy DAVIN UU. Léil 1614 Opinion The record contains even less data on concentration at the growing level. In fact, we can ascertain merely that approximately half of California’s lettuce is grown by a large number of small farmers under contract with shippers. [CX 274, at 3] We also have examined the record to obtain a rough idea of the total number of lettuce growers and shippers, but here, too, the evidence is incomplete (perhaps due to difficulty in obtaining such data). At most we can infer from the record that every monthly market has dozens of shippers but that the number is declining—substantially in some. '¢ Product Differentiation In the early 1960s, United Fruit launched a program to brand differentiate its bananas at the consumer level. It adopted the Chiquita trademark and affixed this mark to its premium bananas. In addition, it engaged in an extensive consumer advertising campaign designed to develop a consumer franchise for Chiquita bananas. The record shows that United Fruit regarded the program as a success and that it wanted to repeat the Chiquita banana story with lettuce. Respondent’s employees felt that a lettuce branding program held great promise as a means by which it could “subdue historical ‘* (Continued from preceding page) Year 4-Firm 8-Firm Respondent 1970 14.5 25 4 1971 Insufficient Data December 1968 18 29 -09 1969 18 29 6.17 1970 24 36 8.51 1971 Insufficient Data These figures have value only in that they provide a rough approximation of national monthly concentration and respondent’s market share. The figures are imprecise because the record contains individual firm shipping information solely for the State of Arizona and a few designated counties in California, and this scant data was presented on a seasonal basis rather than a monthly basis. To obtain an approximation of market shares on a monthly basis, it was necessary to combine, where possible, the production figures for areas shipping at the same time. To arrive at the national monthly figure, we then computed the share of total national production for a given month attributable to the growing areas for which we computed the concentration ratios. The concentration ratios were then multiplied by the percentage which the shipping areas compose of the total national shipments on a monthly basis. The resulting percentage provides a rough approximation of national monthly concentration. This procedure is premised on two assumptions:

1, Shippers tend to ship over an entire growing season so their percentage of the total is evenly distributed; and 2. The largest shippers do not have substantial shipments from other areas for which shipping data is unavailable. To the extent that either assumption is incorrect, concentration figures are understated. ; 'S E.9., approximately 77 firms shipped lettuce in the period covered by the December 1968-January-February 1969 markets. One year later, 34 shippers left these markets, and eight entered for a net decrease of 25. It should be noted that the eight who entered in 1970-71 were strong competitors, accounting for approximately 9 percent of the shipments during December-February. In view of the relative stability of concentration ratios, many of the exiting firms may have been weak fringe competitors. In any event, a substantial number of shippers remain in every monthly market. Opinion 83 F.T.C.

variations of the fresh vegetable market, especially in terms of price fluctuations,” and could establish “a non-pre-emptable position as leader in fresh and semi-processed salad products.” [CX 96A] It is thus apparent that the branding program was a major, if not the major, reason why United Fruit entered the lettuce industry. Soon after respondent made its lettuce firm acquisitions, it embarked upon an ill-fated campaign to test its ability to brand differentiate its best lettuce under the “Chiquita” trademark. This program, which lasted approximately nine months, consisted of media advertising of Chiquita brand lettuce in several selected metropolitan areas. To identify this lettuce, respondent wrapped each head in plastic film carrying the Chiquita trademark.

United’s officials did not share a unanimous view about the degree of success which the program achieved. Barkley Bull, former produce manager and director of marketing services, concluded that the branding experiment indicated that the program should be expanded. [Tr. 1528] However, Mr. Bull’s enthusiasm for the program may be partly attributable to the fact that he was responsible for its development. In support of his view that the program should be expanded, Mr. Bull noted that respondent obtained 70 to 90 cents more per carton for its branded lettuce than it did for its unbranded lettuce. [Tr. 1529] However, the fact that it obtained more for branded lettuce does not establish the program’s success: United affixed its best lettuce with the Chiquita trademark, and it is possible that even without the Chiquita mark, its best lettuce would have fetched a higher price on the market than its lesser quality lettuce. If we had evidence that respondent obtained a higher price for Chiquita lettuce than its competitors obtained for their best lettuce, we could attribute some measure of success to the experiment, but the record lacks such evidence. John M. Fox, former chief executive officer, had little praise for the branding experiment. He testified that “it was a complete mistake” to think they could brand lettuce [Tr. 1472-73] and he felt that entering the lettuce industry was his “biggest mistake.” [Tr. 1497] Eli Black, chairman of the board and president, also concluded that the program failed [Tr. 1728-30] as did William Mason, head of the diversified products group [RX 89, Tr. 3863] and M. William Decker, nianager of lettuce harvesting for Inter Harvest. [Tr. 2291] Of course, one could hypothesize that respondent discontinued the program in response to the investigation then underway by the Commission’s staff and that, as the ALJ pointed out, one could view United’s action with some skepticism. However, we need not attribute this motive to respondent as there appear to be numerous market factors UNITED BRANDS CO. 1718 1614 Opinion which contributed to the program’s failure. First, consumers select lettuce on the basis of its appearance and feel, and the buyers of lettuce for resale do likewise. [RPF Par. 210, pp. 172-73; Tr. 1729, 4040-41] Secondly, United discovered it could not sufficiently differentiate its lettuce to make its brand attractive to the housewife. [Tr. 1474, 3859] In particular, it failed to exercise adequate quality control. An official of a large food: chain, Carlyle Sherwin, contended that a grower-shipper cannot control the quality of lettuce so well that it can consistently supply his chain with good quality lettuce [Tr. 4042]; and respondent’s own officials echoed this same concern. [Tr. 1492-93, 1478, 1478, 1728- 29; RX 89] Although quality control poses a major problem, United may be able to reduce this problem somewhat. For example, the ALJ noted that temporary labor difficulties may have contributed to lack of quality control. [I.D. 49] [p. 1660 herein] Also, quality control may be improved if respondent were to build a network of cold storage warehouses, but the record contains no proof that United has given this proposal serious consideration.

Probably the most crucial factor which led to the failure of the brand differentiation program was insufficient quantities of raw product. Respondent simply did not produce enough lettuce to glean a sufficient quantity ofhigh quality lettuce (1) to provide retailers with a continuous supply and (2) to pay the advertising costs essential for a branding program—a problem recognized by respondent’s officials. [Tr. 1491-2, 1534; CX 158 F-G, P-Q] Prior to entering the market, United Fruit’s employees estimated that a successful national branding program would not be financially feasible unless they shipped approximately 25 million cartons annually (due to the need to generate sufficient sales to pay for the advertising campaign). [CX 158Q] They also computed that United would have to ship 15 million cartons a year in order to provide customers with high quality lettuce on a consistent basis. However, they recommended that this goal be scaled down to 10 to 12 million cartons “because of antitrust considerations.” [CX 158Q] They estimated that at the ten-million-carton level respondent might be able to mount an effective regional branding program. Later, the estimate of the number of lettuce shipments required to support a national branding effort was revised to 12 million cartons. [CX 136C] The record shows that United produced 9,231,000 cartons in 1970, the year that the branding experiment was in high gear. [CX 403 Z8] In view of respondent’s inability to ship adequate amounts of high quality lettuce to selected regional testing points during this period,'’ it ap- '7 There were substantial periods in 1970 when United shipped no Chiquita lettuce. {CX 1] (See also Tr. 3860] Opinion © 83 F.T.C.

pears that at the 9-10 million carton level United does not consistently have sufficient high quality lettuce to support a regional or national product differentiation campaign; and thus it needs a larger share of the market before it can succeed with even a regional product differentiation program.

We have no proof that respondent could produce 12 to 15 million cartons on the land to which it had access as of the date of this complaint. In fact, in a financial study made in connection with the acquisitions, respondent estimated it could produce only 10,500,000 cartons on the acquired lands [CX 171C; Tr. 1744-46]; and its 1971 production was close to that figure—10,811,000 cartons. [CX 405 Z20] We note that one witness, Dr. Edwin J. Faris, an agricultural economist, estimated that respondent could achieve the 15 million carton level on its “current land or through leases” [Tr. 3431, emphasis added], but he did not testify that it could reach this figure solely by using the land to which it acquired access via the acquisitions in issue here. We thus are led to conclude that as long as United does not acquire access to additional land, it probably cannot achieve a successful branding program. On the other hand, if respondent continues to acquire more land suitable for the commercial production of lettuce, it is probable that, at some point, it will have the capability of producing sufficient amounts of high quality lettuce to support a branding program. The introduction of a successful branding program into an industry in which brand differentiation is non-existent could pose a grave threat to competition. For this reason, we would view in the most serious light further attempts by United to expand its access to lettuce-producing land.

Accordingly, we today are requiring respondent, pursuant to our authority under Section 6 of the Federal Trade Commission Act, to notify the Commission of any increases, commending from the date of the issuance of the Complaint in this matter, February 11, 1971, of its access,!® or the access of any subsidiary corporation, to land commercially suitable for the production of lettuce. Although additional acquisitions by respondent may pose a threat to competition, we cannot conclude, on the basis of the record before us, that the acquisitions in issue violated Section 7 of the Clayton Act or Section 5 of the Federal Trade Commission Act. An appropriate order will be entered vacating the order issued by the administrative law judge and dismissing the complaint.

'* “Access” may exist by virtue of various transactions, including but not necessarily limited to, purchasing land, acquiring the stock of a firm which is the owner or lessee of land, acquiring a lease of land, or contracting with a grower for the production of lettuce.

ae Cee UNITED BRANDS Co. aS VIB 1614 : . 7 RSE gn Order . = a “ORDER REQUIRING FILING OF » SPECIAL REPORT Pursuant to. the opinion of the Commission i in the matter. of: United ~ Brands Company, Docket No: 8835, attached. herewith and made a part hereof, you, United Brands Company, are required to file with the - Commission, within sixty (60) days of receipt of this order, a Special : Report informing the Commission of any increase, since February 11,- 1971, in the access of United Brands or any. subsidiary corporation, to land commercially suitable for the production of lettuce. You are further ~. required to file with the Commission every six months, commencing six. months after the filing of the initial Special Report, a Special Report - informing the Commission of any future increase in access sto land ele - commercially. suitable for the production of lettuce. Please note that “access” to land may exist by virtue of various a _ transactions, such as, but not necessarily limited to, purchasing land, ae acquiring the capital stock of a firm which is the owner or lessee of land, ~ acquiring a lease of land, or contracting v with a grower for the produe- ~ tion of lettuce.

- Said reports must be subseribed and sworn 1 to bya an p official of the cap reporting company.

You are advised that penalties may’ be imposed under: - applicable provisions of Federal law for failure to file Special reports or r for the : filing of false reports.

F INAL ORDER This matter having been heard by the Commission upon the appeal of respondent ‘from .the administrative law judge’s initial decision, and upon briefs and oral argument: in support thereof and in. opposition thereto, and the Commission, for the reasons stated in the accompany-. ing opinion, having concluded that the administrative law judge’s initial decision should be set aside and that the complaint should be dismissed: It is ordered, That the administrative law judge's initial decision be, and it hereby is, set aside, It is further ordered, That the complaint be, and it hereby i is, ,dismis - sed. a whe Commissioner Hanford not participating. — TT6 FEDERAL TRADE COMMISSION DECISIONS | . aa Pe Se oe Order’ ee oe ae ee IN: THE MATTER | OF woe PEPSI CO, IN C.:

‘Docket & 8856. Interlocutory Order, May u, 19%. : Order ‘denying resporident’s motions for dismissal or withdrawal of complaint for reasons 1 5 1 1 14 1952 681 2 2 75.581169 :4 1 5 1 2 0 662 703 1263 71 -1 5 1 5 1 2 1 662 712 59 26 96.791656 that5 1 5 1 2 2 732 714 95 24 96.483948 events5 1 5 1 2 3 838 710 169 43 96.772919 subsequent5 1 5 1 2 4 1012 703 32 55 96.991470 to5 1 5 1 2 5 1054 713 54 26 91.927361 its5 1 5 1 2 6 1106 709 119 29 91.927361 issuance5 1 5 1 2 7 1235 713 69 38 95.183098 have5 1 5 1 2 8 1315 704 155 36 96.577095 eliminated5 1 5 1 2 9 1480 714 54 26 94.685806 thes 1 5 1 2 10 1538 710 88 64 92.155708 public5 1 5 1 2 11 1635 708 103 57 93.610237 interests 1 5 1 2 12 1754 715 14 46 76.486168 i5 1 5 1 2 13 1761 723 28 38 96.909348 in5 1 5 1 2 14 1792 716 133 32 49.889488 -continu-:4 1 5 1 3 0 626 753 993 60 -1 5 1 5 1 3 1 626 768 2 2 0.000000 .5 1 5 1 3 2 661 753 46 32 64.725471 ings 1 5 1 3 3 717 753 196 60 52.548004 Proceedings.5 1 5 1 3 4 1487 769 2 2 61.287407 :5 1 5 1 3 5 1617 770 2 2 26.740906 ;2 1 6 0 0 0 1109 800 260 83 -1 3 1 6 1 0 0 1109 800 260 83 -1 4 1 6 1 1 0 1109 800 260 83 -1 5 1 6 1 1 1 1109 800 260 83 71.803299 Appearances2 1 7 0 0 0 628 864 1287 97 -1 3 1 7 1 0 0 628 864 1287 97 -1 4 1 7 1 1 0 628 864 1287 97 -1 5 1 7 1 1 1 628 887 68 40 96.974136 For5 1 7 1 1 2 712 871 58 56 96.980186 thes 1 7 1 1 3 783 864 235 80 93.840981 Commission:5 1 7 1 1 4 1023 884 162 53 70.682129 Thomas5 1 7 1 1 5 1200 898 42 31 92.344856 R.5 1 7 1 1 6 1262 885 123 53 96.918846 Hefty,5 1 7 1 1 7 1398 881 160 80 63.812511 Williams 1 7 1 1 8 1566 899 42 42 61.537193 D.5 1 7 1 1 9 1623 866 218 91 95.841873 Henderson5 1 7 1 1 10 1849 896 66 53 97.013039 and2 1 8 0 0 0 580 946 1415 129 -1 3 1 8 1 0 0 580 946 1418 92 -1 4 1 8 1 1 0 580 946 1369 51 -1 5 1 8 1 1 1 580 946 238 40 93.136993 Raymond5 1 8 1 1 2 778 938 46 54 92.093330 L.5 1 8 1 1 3 836 942 115 45 87.739555 Hays.5 1 8 1 1 4 1947 974 51 23 0.000000 -4 1 8 1 2 0 626 968 1369 107 -1 5 1 8 1 2 1 626 994 70 32 95.788506 For5 1 8 1 2 2 707 995 63 35 95.788506 thes 1 8 1 2 3 774 985 221 83 4.622887 Fespondent:5 1 8 1 2 4 1005 996 114 79 62.642780 Have,5 1 8 1 2 5 1129 978 151 86 76.792282 Scholer,5 1 8 1 2 6 1293 985 178 79 91.209991 Fierman,5 1 8 1 2 7 1486 968 114 105 65.291992 Hays.5 1 8 1 2 8 1597 982 28 48 92.126060 &5 1 8 1 2 9 1649 968 160 88 96.677376 Handler,5 1 8 1 2 10 1829 984 87 65 96.956512 News 1 8 1 2 11 1940 999 55 38 21.743073 Cee2 1 9 0 0 0 585 1044 215 39 -1 3 1 9 1 0 0 514 1041 286 42 -1 4 1 9 1 1 0 585 1044 215 39 -1 5 1 9 1 1 1 514 1041 40 41 16.741699 -»5 1 9 1 1 2 585 1044 105 47 96.763084 York,5 1 9 1 1 3 710 1045 96 44 59.631584 N.Y.2 1 10 0 0 0 592 1088 1406 95 -1 3 1 10 1 0 0 592 1088 1406 95 -1 4 1 10 1 1 0 592 1088 1406 95 -1 5 1 10 1 1 1 592 1101 142 73 96.191093 ORDERS 1 10 1 1 2 744 1104 187 66 96.749207 DENYING5 1 10 1 1 3 938 1098 164 76 29.976959 Motions 1 10 1 1 4 1114 1121 51 33 96.048286 TO5 1 10 1 1 5 1178 1090 163 83 69.972488 DISMISS5 1 10 1 1 6 1353 1127 53 27 96.523651 OR5 1 10 1 1 7 1407 1089 247 89 60.114941 WITHDRAWS 1 10 1 1 8 1666 1088 247 95 85.661179 COMPLAINTS 1 10 1 1 9 1928 1120 70 32 23.450333 caer2 1 11 0 0 0 627 1168 1316 72 -1 3 1 11 1 0 0 627 1168 1363 72 -1 4 1 11 1 1 0 627 1168 1316 72 -1 5 1 11 1 1 1 627 1168 218 72 96.724625 Respondents 1 11 1 1 2 868 1181 116 47 96.845306 moves5 1 11 1 1 3 1000 1178 83 50 96.104553 that5 1 11 1 1 4 1106 1183 59 46 96.104553 thes 1 11 1 1 5 1186 1186 228 54 90.349113 Commissions 1 11 1 1 6 1435 1176 144 54 95.322426 dismiss5 1 11 1 1 7 1595 1209 38 21 96.672874 or5 1 11 1 1 8 1655 1194 177 38 96.338676 withdraws 1 11 1 1 9 1854 1178 59 54 97.015274 thes 1 11 1 1 10 1937 1182 53 35 29.014801 —2 1 12 0 0 0 553 1231 1380 69 -1 3 1 12 1 0 0 553 1231 1380 69 -1 4 1 12 1 1 0 553 1231 1380 69 -1 5 1 12 1 1 1 553 1231 2 2 12.982010 .5 1 12 1 1 2 584 1244 164 56 96.933052 complaints 1 12 1 1 3 766 1245 20 32 96.786964 i5 1 12 1 1 4 777 1255 35 22 96.204063 in5 1 12 1 1 5 826 1245 58 32 93.264336 thes 1 12 1 1 6 899 1246 121 32 91.600105 above-5 1 12 1 1 7 1008 1240 191 52 92.209656 -captioned5 1 12 1 1 8 1216 1238 127 40 96.433144 matters 1 12 1 1 9 1357 1239 145 46 95.958122 because5 1 12 1 1 10 1517 1251 120 30 96.690361 events5 1 12 1 1 11 1653 1242 209 50 93.256866 subsequent5 1 12 1 1 12 1877 1248 56 34 67.908257 to-2 1 13 0 0 0 583 1294 1386 45 -1 3 1 13 1 0 0 583 1294 1386 45 -1 4 1 13 1 1 0 583 1294 1386 45 -1 5 1 13 1 1 1 583 1294 43 32 96.640678 its5 1 13 1 1 2 650 1294 155 32 96.778969 issuance5 1 13 1 1 3 827 1295 87 32 96.511421 have5 1 13 1 1 4 938 1290 198 38 95.815369 eliminated5 1 13 1 1 5 1154 1296 61 32 95.815369 thes 1 13 1 1 6 1239 1296 109 41 95.581039 public5 1 13 1 1 7 1371 1296 147 33 58.927113 interest.5 1 13 1 1 8 1540 1297 34 32 58.927113 in5 1 13 1 1 9 1598 1296 195 43 96.286674 continuing5 1 13 1 1 10 1814 1299 99 33 76.753769 these5 1 13 1 1 11 1967 1314 2 2 51.862755 —2 1 14 0 0 0 578 1344 1373 935 -1 3 1 14 1 0 0 582 1344 1369 132 -1 4 1 14 1 1 0 582 1344 1369 44 -1 5 1 14 1 1 1 582 1344 232 41 95.541992 proceedings.5 1 14 1 1 2 840 1344 188 48 95.706436 Complaints 1 14 1 1 3 1051 1346 135 31 95.983017 counsels 1 14 1 1 4 1209 1355 124 31 96.696800 opposes 1 14 1 1 5 1354 1346 77 43 96.027199 this5 1 14 1 1 6 1444 1346 127 43 96.027199 motions 1 14 1 1 7 1592 1348 75 38 95.716766 and,5 1 14 1 1 8 1691 1348 45 43 90.692673 by5 1 14 1 1 9 1758 1347 101 33 90.692673 orders 1 14 1 1 10 1879 1344 37 37 84.285248 of5 1 14 1 1 11 1931 1356 20 32 7.327911 —4 1 14 1 2 0 582 1394 1331 43 -1 5 1 14 1 2 1 582 1394 96 40 96.745880 April5 1 14 1 2 2 697 1395 27 38 96.880936 1,5 1 14 1 2 3 745 1395 90 38 96.977051 1974,5 1 14 1 2 4 853 1395 58 32 97.014763 thes 1 14 1 2 5 927 1390 271 43 96.782585 administrative5 1 14 1 2 6 1215 1396 63 32 96.545761 laws 1 14 1 2 7 1289 1396 107 41 96.279877 judges 1 14 1 2 8 1412 1387 161 50 96.787994 certified5 1 14 1 2 9 1581 1395 31 41 96.509567 it5 1 14 1 2 10 1623 1401 35 29 96.509567 to5 1 14 1 2 11 1673 1395 59 35 92.590240 thes 1 14 1 2 12 1746 1393 167 39 91.551697 Commis-4 1 14 1 3 0 582 1455 83 21 -1 5 1 14 1 3 1 582 1445 83 31 96.906151 sion.3 1 14 2 0 0 579 1461 1367 477 -1 4 1 14 2 1 0 625 1461 1285 81 -1 5 1 14 2 1 1 625 1492 219 40 96.354713 Respondents 1 14 2 1 2 862 1493 166 32 96.481392 advances5 1 14 2 1 3 1045 1493 79 33 96.708420 four5 1 14 2 1 4 1141 1494 150 45 96.500114 grounds5 1 14 2 1 5 1310 1494 52 32 96.656548 for5 1 14 2 1 6 1380 1495 177 32 96.393707 dismissal:5 1 14 2 1 7 1578 1497 45 36 96.539169 (1)5 1 14 2 1 8 1642 1497 70 31 96.434189 Thes 1 14 2 1 9 1731 1461 179 81 96.952881 complaint4 1 14 2 2 0 581 1542 1360 48 -1 5 1 14 2 2 1 581 1553 69 22 96.948479 was5 1 14 2 2 2 667 1542 114 33 96.725037 issued5 1 14 2 2 3 798 1554 42 21 96.725037 on5 1 14 2 2 4 855 1543 62 32 96.545227 thes 1 14 2 2 5 930 1544 194 32 96.217690 unfounded5 1 14 2 2 6 1140 1545 209 40 96.102631 assumptions 1 14 2 2 7 1365 1545 75 32 96.626167 that5 1 14 2 2 8 1456 1545 205 33 96.116814 elimination5 1 14 2 2 9 1677 1547 36 31 96.970581 of5 1 14 2 2 10 1726 1547 183 33 19.908440 territorial4 1 14 2 3 0 580 1589 1350 46 -1 5 1 14 2 3 1 580 1593 182 41 96.580688 restraints5 1 14 2 3 2 786 1604 42 21 95.922333 on5 1 14 2 3 3 850 1593 144 33 96.514397 bottlers5 1 14 2 3 4 1018 1595 109 31 96.462151 would5 1 14 2 3 5 1150 1589 106 38 96.462151 lowers 1 14 2 3 6 1277 1596 58 31 96.911041 thes 1 14 2 3 7 1357 1595 109 40 96.684448 prices5 1 14 2 3 8 1492 1596 36 32 96.194092 of5 1 14 2 3 9 1547 1596 151 33 96.389297 branded5 1 14 2 3 10 1721 1598 68 31 96.520935 soft5 1 14 2 3 11 1811 1598 98 31 93.477303 drinks 1 14 2 3 12 1928 1615 2 2 55.020180 |4 1 14 2 4 0 580 1643 1366 44 -1 5 1 14 2 4 1 580 1643 171 40 96.357277 products;5 1 14 2 4 2 766 1644 44 36 96.100410 (2)5 1 14 2 4 3 825 1644 178 40 96.482666 complaints 1 14 2 4 4 1016 1645 134 32 96.777283 counsels 1 14 2 4 5 1163 1645 72 32 96.476265 lacks 1 14 2 4 6 1246 1645 85 32 96.895142 faith5 1 14 2 4 7 1342 1645 35 32 96.943932 in5 1 14 2 4 8 1388 1646 59 31 96.938858 thes 1 14 2 4 9 1460 1656 77 22 96.492195 cases 1 14 2 4 10 1549 1656 35 22 96.998497 as5 1 14 2 4 11 1598 1647 183 32 96.617714 evidenced5 1 14 2 4 12 1793 1648 45 39 96.690140 by5 1 14 2 4 13 1849 1648 59 32 74.191269 thea 1 14 2 5 0 581 1693 1325 43 -1 5 1 14 2 5 1 581 1693 145 41 96.194824 changes5 1 14 2 5 2 739 1694 83 40 96.297363 they5 1 14 2 5 3 834 1695 86 31 96.680801 have5 1 14 2 5 4 932 1695 97 32 91.383194 made5 1 14 2 5 5 1042 1695 34 31 91.383194 in5 1 14 2 5 6 1088 1695 180 33 96.431160 witnesses5 1 14 2 5 7 1282 1696 63 32 95.968140 ands 1 14 2 5 8 1359 1696 207 40 96.077103 documents;5 1 14 2 5 9 1582 1698 45 36 91.274048 (3)5 1 14 2 5 10 1640 1697 60 32 96.981758 thes 1 14 2 5 11 1712 1708 76 22 96.897911 cases 1 14 2 5 12 1801 1695 105 36 96.517891 raises4 1 14 2 6 0 579 1741 1327 46 -1 5 1 14 2 6 1 579 1741 107 41 96.857758 policy5 1 14 2 6 2 709 1742 175 40 96.893234 questions5 1 14 2 6 3 906 1743 76 32 96.590828 best5 1 14 2 6 4 1004 1743 60 32 96.366974 left5 1 14 2 6 5 1087 1746 36 30 96.860413 to5 1 14 2 6 6 1147 1743 191 42 96.046608 Congress,5 1 14 2 6 7 1351 1744 109 43 96.046608 which5 1 14 2 6 8 1482 1745 61 31 96.533096 has5 1 14 2 6 9 1566 1745 138 40 96.333252 already5 1 14 2 6 10 1725 1746 116 39 96.490181 shown5 1 14 2 6 11 1863 1747 43 32 96.581024 its4 1 14 2 7 0 580 1791 1326 45 -1 5 1 14 2 7 1 580 1791 166 33 96.219254 intentions 1 14 2 7 2 763 1795 34 29 96.219254 to5 1 14 2 7 3 816 1795 53 29 97.000175 acts 1 14 2 7 4 886 1793 34 31 96.933235 in5 1 14 2 7 5 937 1793 66 32 96.958755 this5 1 14 2 7 6 1022 1803 90 30 96.961143 area;5 1 14 2 7 7 1130 1794 66 32 95.858192 ands 1 14 2 7 8 1214 1795 45 36 95.858192 (4)5 1 14 2 7 9 1278 1795 59 31 96.322205 thes 1 14 2 7 10 1353 1794 88 41 89.181335 legal5 1 14 2 7 11 1458 1795 110 32 89.181335 issues5 1 14 2 7 12 1585 1797 188 39 96.645058 remaining5 1 14 2 7 13 1788 1797 35 31 96.444946 in5 1 14 2 7 14 1840 1797 66 32 95.783920 this4 1 14 2 8 0 580 1843 1327 42 -1 5 1 14 2 8 1 580 1852 88 29 96.391388 case,5 1 14 2 8 2 693 1843 90 31 96.586555 after5 1 14 2 8 3 805 1843 58 32 96.279312 thes 1 14 2 8 4 886 1843 114 32 96.311295 others5 1 14 2 8 5 1024 1854 90 21 96.577522 were5 1 14 2 8 6 1137 1844 197 32 96.147514 abandoned5 1 14 2 8 7 1358 1845 44 40 96.294189 by5 1 14 2 8 8 1425 1845 179 40 96.591972 complaints 1 14 2 8 9 1628 1847 133 31 95.670609 counsels 1 14 2 8 10 1783 1847 43 32 95.901665 do5 1 14 2 8 11 1848 1851 59 28 96.197136 nota 1 14 2 9 0 580 1893 801 45 -1 5 1 14 2 9 1 580 1894 149 30 96.747200 warrants 1 14 2 9 2 745 1893 226 45 96.522034 continuations 1 14 2 9 3 987 1893 37 32 96.215614 of5 1 14 2 9 4 1035 1894 99 32 96.800232 these5 1 14 2 9 5 1145 1894 236 41 96.622986 proceedings.3 1 14 3 0 0 578 1941 1357 338 -1 4 1 14 3 1 0 621 1941 1284 38 -1 5 1 14 3 1 1 621 1941 70 33 96.712730 Thes 1 14 3 1 2 708 1942 107 32 96.852440 above5 1 14 3 1 3 830 1953 58 22 96.494499 ares 1 14 3 1 4 904 1943 124 32 96.847748 factors5 1 14 3 1 5 1045 1944 77 32 58.375698 that5 1 14 3 1 6 1135 1944 59 32 58.375698 thes 1 14 3 1 7 1212 1944 222 33 96.199837 Commissions 1 14 3 1 8 1451 1945 109 32 96.741676 would5 1 14 3 1 9 1578 1946 152 32 96.345528 considers 1 14 3 1 10 1744 1947 34 31 93.306244 in5 1 14 3 1 11 1794 1947 111 32 91.989761 deter-4 1 14 3 2 0 579 1990 1325 45 -1 5 1 14 3 2 1 579 1990 127 41 96.239159 mining5 1 14 3 2 2 720 1991 153 32 96.420792 whether5 1 14 3 2 3 886 1992 97 31 96.613693 there5 1 14 3 2 4 998 2002 69 22 96.612320 was5 1 14 3 2 5 1083 2002 122 23 96.820297 reasons 1 14 3 2 6 1220 1995 36 29 96.972198 to5 1 14 3 2 7 1270 1992 129 33 96.179085 believes 1 14 3 2 8 1414 1993 76 33 95.269623 that5 1 14 3 2 9 1504 2004 19 22 95.269623 a5 1 14 3 2 10 1537 2004 134 30 96.611412 person,5 1 14 3 2 11 1688 1995 216 40 96.816483 partnership4 1 14 3 3 0 579 2040 1356 45 -1 5 1 14 3 3 1 579 2049 38 22 97.000328 or5 1 14 3 3 2 630 2040 209 44 96.608871 corporations 1 14 3 3 3 852 2041 60 32 96.750031 has5 1 14 3 3 4 926 2041 146 42 96.829765 violated5 1 14 3 3 5 1085 2042 60 32 96.975647 thes 1 14 3 3 6 1158 2042 64 32 96.585014 laws 1 14 3 3 7 1235 2043 63 31 96.737259 ands 1 14 3 3 8 1312 2042 155 33 96.707802 whether5 1 14 3 3 9 1478 2053 21 22 96.847092 a5 1 14 3 3 10 1512 2043 221 34 93.282196 Commissions 1 14 3 3 11 1744 2046 160 39 35.293381 proceed-5 1 14 3 3 12 1933 2078 2 2 35.293381 _4 1 14 3 4 0 578 2088 1326 48 -1 5 1 14 3 4 1 578 2090 57 41 96.325165 ings 1 14 3 4 2 649 2091 132 45 96.325165 against5 1 14 3 4 3 796 2091 75 32 96.242874 that5 1 14 3 4 4 884 2094 100 38 94.042847 party5 1 14 3 4 5 998 2092 109 39 94.042847 would5 1 14 3 4 6 1123 2093 41 32 96.997528 be5 1 14 3 4 7 1179 2093 33 31 96.976913 in5 1 14 3 4 8 1227 2093 58 32 96.444901 thes 1 14 3 4 9 1298 2088 111 45 96.107910 public5 1 14 3 4 10 1423 2094 155 32 96.107910 interest.5 1 14 3 4 11 1597 2094 85 40 96.886971 Only5 1 14 3 4 12 1696 2095 32 32 96.953766 in5 1 14 3 4 13 1743 2095 58 32 96.600357 thes 1 14 3 4 14 1815 2099 89 29 96.955078 most4 1 14 3 5 0 579 2137 1324 48 -1 5 1 14 3 5 1 579 2140 256 41 96.797089 extraordinary5 1 14 3 5 2 852 2141 270 44 96.570747 circumstances,5 1 14 3 5 3 1140 2137 59 38 96.251610 not5 1 14 3 5 4 1215 2143 116 32 96.251610 shown5 1 14 3 5 5 1346 2143 94 39 96.373695 here,5 1 14 3 5 6 1458 2144 66 39 96.982559 will5 1 14 3 5 7 1540 2144 59 32 96.803612 thes 1 14 3 5 8 1615 2145 288 33 74.826294 Commission’5 1 14 3 5 9 1849 2133 56 56 74.826294 re-4 1 14 3 6 0 578 2187 1324 46 -1 5 1 14 3 6 1 578 2189 86 32 96.627243 views 1 14 3 6 2 683 2190 111 31 96.809387 either5 1 14 3 6 3 812 2190 36 31 96.278992 of5 1 14 3 6 4 862 2190 97 32 96.824692 these5 1 14 3 6 5 979 2187 280 37 96.539703 determinations5 1 14 3 6 6 1279 2202 79 22 96.346130 once5 1 14 3 6 7 1378 2202 20 22 96.576080 a5 1 14 3 6 8 1416 2193 179 40 96.279724 complaints 1 14 3 6 9 1614 2193 59 33 96.484116 has5 1 14 3 6 10 1693 2194 124 32 93.260284 issued.5 1 14 3 6 11 1840 2195 62 32 92.872803 Ac-4 1 14 3 7 0 578 2239 182 40 -1 5 1 14 3 7 1 578 2239 182 40 96.798431 cordingly,2 1 15 0 0 0 582 2323 1371 200 -1 3 1 15 1 0 0 621 2323 1266 46 -1 4 1 15 1 1 0 621 2323 1266 46 -1 5 1 15 1 1 1 621 2323 32 31 84.658737 It5 1 15 1 1 2 664 2323 32 33 84.658737 is5 1 15 1 1 3 712 2325 148 38 96.210670 ordered,5 1 15 1 1 4 880 2325 85 32 96.648285 That5 1 15 1 1 5 978 2325 59 33 97.005028 thes 1 15 1 1 6 1051 2326 167 33 96.761688 aforesaid5 1 15 1 1 7 1232 2328 125 31 96.745155 motions 1 15 1 1 8 1371 2328 53 38 96.986076 be,5 1 15 1 1 9 1440 2328 66 32 96.467072 ands 1 15 1 1 10 1519 2328 27 32 96.555649 it5 1 15 1 1 11 1558 2328 130 41 96.836136 hereby5 1 15 1 1 12 1701 2329 38 39 96.657021 is,5 1 15 1 1 13 1756 2330 131 32 96.731056 denied.3 1 15 2 0 0 582 2374 1371 149 -1 4 1 15 2 1 0 625 2374 1282 46 -1 5 1 15 2 1 1 625 2374 263 33 96.094284 Commissioners 1 15 2 1 2 901 2376 190 41 96.385208 Thompson5 1 15 2 1 3 1105 2388 139 22 95.958702 concurs5 1 15 2 1 4 1258 2378 34 32 95.898659 in5 1 15 2 1 5 1305 2379 58 31 96.257378 thes 1 15 2 1 6 1378 2379 108 32 96.752007 results 1 15 2 1 7 1498 2379 145 33 96.249557 reached5 1 15 2 1 8 1657 2379 45 41 96.931572 by5 1 15 2 1 9 1715 2379 59 33 93.300362 thes 1 15 2 1 10 1787 2380 120 40 93.146881 major-4 1 15 2 2 0 582 2424 1371 48 -1 5 1 15 2 2 1 582 2424 60 40 97.003632 ity,5 1 15 2 2 2 665 2424 61 32 95.877190 but5 1 15 2 2 3 747 2426 108 32 96.732010 would5 1 15 2 2 4 875 2429 77 37 96.710388 stays 1 15 2 2 5 970 2427 99 32 96.874146 these5 1 15 2 2 6 1087 2428 223 44 96.408676 proceedings5 1 15 2 2 7 1330 2429 52 32 96.906601 for5 1 15 2 2 8 1403 2430 59 31 96.314331 1205 1 15 2 2 9 1482 2429 85 41 96.314331 days5 1 15 2 2 10 1586 2430 147 40 93.298569 pending5 1 15 2 2 11 1753 2440 162 30 76.897545 congres-5 1 15 2 2 12 1951 2444 2 2 71.131531 —4 1 15 2 3 0 582 2474 1297 49 -1 5 1 15 2 3 1 582 2474 104 32 96.977005 sional5 1 15 2 3 2 703 2475 109 32 96.900391 actions 1 15 2 3 3 829 2486 41 22 96.900391 on5 1 15 2 3 4 886 2476 186 41 96.958824 legislation5 1 15 2 3 5 1087 2478 184 40 96.839317 regarding5 1 15 2 3 6 1286 2479 60 31 96.998566 thes 1 15 2 3 7 1360 2479 182 44 96.760689 substances 1 15 2 3 8 1559 2480 37 32 96.651413 of5 1 15 2 3 9 1606 2480 67 32 96.502838 this5 1 15 2 3 10 1690 2481 189 40 96.482971 complaint. ROBERTSON INVESTMENT CO., ETC. 1717 1717 2 ca os Compliant