Miam1 Wholesale Drug Corp

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IN THE MATTER OF MIAMI WHOLESALE DRUG CORPORATION ET AL.

COMPLAINT, FINDINGS, AND ORDER IN REGARD TO THE ALLEGED VIOLATION OF SEC. 2 (f) OF AN ACT OF CONGRESS APPROVED OCT. lis, 1914, AS AMENDED BY ACT OF CONGRESS APPROVED JUNE 19, 1936 Docket 8877. Complaint, Apr. 11, 19.,8-Deciaion, Feb. 9, 1939 Wbere a corporation engaged In wholesale drug business and in purchasing, as thus engaged, goods, wares, and merchandise from manufacturers and sellers in the various States, In competition with others similarly engaged and in similar purchase, and in publishing, along with certain individuals, its officers, and in pursuance of a purchasing policy and practice designed and intended to induce favorable discriminatory prices far it on its purchases of goods, wares, and merchandise of like grade and quality to those bought by competitor purchasers, and not as an independent business operated In good faith, a magazine- Induced and persuaded manufacturers and sellers to enter into contracts with it for insertian of advertisements therein under agreements or understandings that charges therefor, for which no substantial benefits and considera· tions accrued to manufacturers and sellers, would be credited on the purchase price of the goods, wares, and merchandise bought by lt from such manufacturers and sellers, and thus obtained substantial discriminations in price, amounting to differentials in favor of it of from 33% percent to 50 percent over other wholesalers competing with It and with customers of it, through credits, discounts, and allowances made on purchases of goods, wares, and merchandise bought by it, by virtue of such contracts and agreements for advertising space In periodical aforesaid, value of which as advertising medium was not substantial; 'With result that it was thereby enabled to and did offer and sell to other wholesalers at prices lower than competitors of its wholesaler-customers could purchase the same commodities or those of Jike grade and quality from the manufacturers, and as saiu wholesaler-customers were enabled to and did offer and sell such commodities to retailers at prices lower than other wholesalers competing with it and its said customers could profitably sell such commodities ta such dealers, effect of such discriminations in price induced and received by them was substantially to lessen competition and to tend to create a monopoly in the sale and distribution of drug products, and to injure, destroy, and prevent competition between and among it and its customers on the ane hand, and their competitors on the other, and between and among customers of each :

1Field, That such acts and practices, as above set forth, constituted violation ot Section 2 (f) of act of Congress approved October 15, 1914, as amended by act of Congress approved June 19, 1936. Mr. John Darsey for the Commission.

Mr. Aaron JJ. Kanner, of Miami, Fla., for respondents. Complaint 28F. T. C.

Complaint The Federal Trade Commission having reason to believe that the parties respondent named in the caption hereof, since June 19, 1936, have violated and are now violating the provisions of section 2 (f) of the Act of Congress entitled "An Act to supplement existing laws against unlawful restraints and monopolies, and for other purposes/' approved October 15, 1914 (the Clayton Act), as amended by section 1 of the Act of Congress entitled "An Act to amend section 2 of the act entitled 'An Act to supplement existing laws against unlawful restraints and monopolies, and for other purposes,' approverl October 15, 1914, as amended (U. S. C., title sec. 13), and for other purposes," approved June 19, 1936, (the Robinson-Patman Act), hereby issues this its complaint against respondents and states its charges with respect thereto as follows, to wit: PARAGRAPH 1. The respondent, Miami 'Vholesale Drug Corporation, is a corporation organized and existing under the laws of the State of Florida, having an office and principal place of business in Miami, Fla. It is now, and for several years last past has been, engaged in the wholesale drug business.

The individual respondents, Arthur S. Lavine, Vivian L. King, and Sam S. Lavine, are president, vice president, and treasurer, respectively, of the respondent corporation. Respondent Rodney S. Pullen, Jr., is in active charge of the management of the business of the respondent corporation as well as the business conducted under the trade name "l\Iiami Magazine." In the course and conduct of the wholesale drug business of the respondent corporation as aforesaid, goods, wares, and merchandise are purchased from manufacturers and sellers located in the various States of the United States, pursuant to which purchases the said goods, wares, and merchandise are shipped and transported to the respondent corporation from the States in which the various manufacturers and sellers are located, and the respondent corporation causes said goods, wares, and merchandise so purchased to be sold, shipped, and distributed, to other wholesalers and to retailers residing in the various States of the United States. There are other corporations, partnerships, firms, and individuals, engaged in the wholesale drug business, who purchase goods, wares, and merchandise from manufacturers and sellers thereof, pursuant to which said purchases, goods, wares, and merchandise are shipped and distributed into and through the various States of the United States to the respective purchasers thereof, and with such corporations, partnerships, firms, and individuals, the respondent corpora- 1\fiAlllfi WHOLESALE DRUG CORP. ET AL. 487 485 Complaint tion and its customers are, and at all times mentioned herein have been, in competition.

PAR. 2. In the course and conduct of the business as hereinabove described, the respondent corporation, with the active cooperation, aid, and assistance of the individual respondents, adopted, follows, and pursues a purchasing policy and practice designed and intended to induce favorable discriminatory prices for the respondent corporation in its purchases of goods, wares, and merchandise of like grade and quality to those purchased by competing purchasers. Pursuant to, and in furtherance of, the said purchasing plan and policy, the parties respondent cause a magazine to be published under the trade name "Miami Magazine." Manufacturers and sellers are persuaded and induced to enter into contracts or agreements authorizing advertisements to be inserted_in the said magazine, whicli contracts or agreements either provide, or it is understood, and so carried out, that the charges made for said advertisements shall be credited on the purchase price of the goods, wares, and merchandise purchased by the respondent corporation from such manufacturers and sellers. Many of such contracts or agreements have been so induced, entered into, and executed since June 19, 1936. The publication of the aforesaid magazine by the parties respondent is not an independent business operated in good faith on a Profit basis, but is a subterfuge operated solely as an incident to the wholesale drug business engaged in by the respondent corporation, for the purpose of obtaining the discriminations in price as aforesaid. The said magazine has no substantial value as an advertising llledium, and. there are no substantial benefits and considerations accruing to manufacturers and sellers for the credits, discounts, and allowances made on purchases of goods, wares, and merchandise by the respondent corporation by virtue of the contracts and agreements for advertising space therein.

. The discriminations in price thus obtained are substantial, amountlug to differentials in favor of respondent of from 33Ya percent to 50 percent over other wholesalers competing with respondent and With customers of respondent; enable respondent to offer and sell, and respondent does offer and sell, to other wholesalers at prices lower than competitors of respondent's said wholesaler customers can Purchase the same commodities, or commodities of like grade and quality, from the manufacturers thereof; and enable respondent and its said wholesaler customers to offer and sell, and they do offer and sell, said commodities to retailers at prices lower than other Wholesale-rs competing with respondent and its said customers can Profitably sell such commodities to retailers. Findings 28F.T.C.

PAR. 3. The effect of the aforesaid discriminations in price, induced and received by the respondents, has been, and may be, substantially to lessen competition and tend to create a monopoly in the sale and distribution of drug products, and to injure, destroy, and prevent com· petition between and among the respondent and its customers, on the one hand, and their competitors, on the other hand, and between and among customers of each.

PAR. 4. The foregoing alleged acts of the respondents are in viola· tion of section 2 (f) of said Act of Congress approved June 19, 1936, entitled "An Act to supplement existing laws against unlawful re· straints and monopolies, and for other purposes," approved October 15, 1914 (the Clayton Act), as amended by section 1 of the Act of Congress entitled "An Act to amend Section 2 of the Act entitled 'An Act to supplement existing laws against unlawful restraints and monopolies, and for other purposes,' appro\'t'd October 15, 1914, as amended (U. S. C., title 15, sec. 13), and for other purposes," approved June 19, 1936 (the Robinson-Patman Act).

REPORT, ,FINDINGS AS TO THE FACTS, AND ORDER Pursuant to the provisions of an Act of Congress entitled "An Act to supplement existing laws against unlawful restraints and mo· nopolies, and for other purposes," approved October 15, 1914 (The Clayton Act), as amended by section 1 of the Act of Congress en· titled "An Act to amend section 2 of the act entitled 'An Act to supplement existing laws against unlawful restraints and monopolies, and for other purposes,' approved October 15, 1914, as amended (U.S. C. title 15, sec. 13}, and for other purposes," approved June 19, 1936 (the Robinson-Patman Act), the Federal Trade Commission on April 11, 1938, issued, and subsequently served, its complaint in this proceeding upon the respondents named in the caption hereof, charg· ing them with the violation of section 2 (f) of the Clayton Act, !1.9 amended.

On November 10, 1938, the respondents filed their answer, in which answer they admitted all the material allegations of fact set forth in said complaint and waived all intervening procedure and further hearing as to the facts. Thereafter the proceeding regularly came on for final hearing before the Commission on the said complaint and answer thereto, and the Commission, having duly considered the mat· ter and being now fully advised in the premises, finds that this pro· ceeding is in the interest of the public, and makes this, its findings as to the facts and its conclusion drawn therefrom. MIAMI WHOLESALE DRUG CORP,' ET AL. 489 485 Findings FINDINGS AS TO THE FACTS PARAGRAPH 1. The respondent, Miami 'Wholesale Drug Corporation, is a corporation organized and existing under the laws of the State of Florida, having an office and principal place of business in Miami, Fla. It is now, and for several years last past has been, engaged in the wholesale drug business.

The individual respondents, Arthur S. Lavine, Vivian L. King, and Sam S. Lavine, are president, vice president and treasurer, respectively, of the respondent corporation.

Respondent Rodney S. Pullen, Jr., is in active charge of the management of the business of the respondent corporation, as well as of the business conducted under the trade name "Miami Magazine." In the course and conduct of the wholesale drug business of the respondent corporation as aforesaid, goods, wares, and merchandise are purchased from manufacturers and sellers located in the various States of the United States. The said goods, wares, and merchandise are shipped and transported to the respondent corporation from the States in which the various manufacturers and sellers are located, and the respondent corporation thereupon causes said goods, wares, and merchandise so purchased to be sold, shipped and distributed to other wholesalers and to retailers residing in the various States of the United States.

There are other corporations, partnerships, firms, and individuals, engaged in the wholesale drug business, who purchase goods, wares, and merchandise from manufacturers and sellers thereof, pursuant to which said purchases, goods, wares, and merchandise are shipped and distributed into and through the various States of the United States to the respective purchasers thereof. The respondent corporation and its customers are, and at all times mentioned herein have been, in competition with such corporations, partnerships, firms, and individuals. PAR. 2. In the course and conduct of the business as hereinabove described, the respondent corporation, with the active cooperation, aid and assistance of the individual respondents, adopted, follows, and pursues a purchasing policy and practice designed and intended to induce favorable discriminatory prices for the respondent corporation in its purchases of goods, wares, and merchandise of like grade and quality to those purchased by competing purchasers. Pursuant to, and in furtherance of, the said purchasing plan and policy, the parties respondent cause a magazine to be published under the trade name ''Miami Magazine." Manufacturers and sellers are persuaded and induced to enter into contracts or agreements authorizing advertisements to be inserted in the said magazine, which con- Conclusion 28F.T. C.

tracts or agreements either provide, or it is understood and so carried out, that the charges made for said advertisements shall be credited on the purchase price of the goods, wares, and merchandise purchased by the respondent corporation from such manufacturers and sellers. Many of such contracts or agreements have been so induced, entered into, and executed since June 19, 1936.

The Commission finds that the publication of the aforesaid magazine by the parties respondent is not an independent business operated in good faith on a profit basis, but is a subterfuge operated solely as an incident to the wholesale drug business engag(ld in by the respondent corporation, for the purpose of obtaining the discriminations in price as aforesaid.

The Commission further finds that the said magazine has no substantial value as an advertising medium, and there are not substantial benefits and considerations accruing to manufacturers and sellers for the credits, discounts, and allowances made on purchases of goods, wares, and merchandise by the respondent corporation by virtue of the contracts and agreements for advertising space therein. The discriminations· in price thus obtained are substantial, amounting to differentials in favor of respondent of from 33% percent to 50 percent over other wholesalers competing with respondent corporation and with customers of respondent corporation. The discriminations in price enable respondent corporation to offer and sell, and respondent corporation does offer and sell, to other wholesalers at prices lower than competitors of respondent's said wholesaler customers can purchase the same commodities, or commodities of like grade and quality, from the manufacturers thereof. The discriminations in price enable respondent corporation and its said wholesaler customers to offer and sell, and they do offer and sell, said commodities to retailers at prices lower than other wholesalers competing with respondent corporation and its said customers can profitably sell such commodities to retailers. PAR. 3. The effect of the aforesaid discriminations in price, induced and received by the respondents, has been substantially to lessen competition and to tend to create a monopoly in the sale and distribution of drug products, and to injure, destroy, and prevent competition between and among the respondent corporation and its customers, on the one hand, and their competitors on the other hand, and between and among customers of each. CONCLUSION The aforesaid acts and practices of the respondents, as herein found, are in violation of section 2 (f) of said Act of Congress :MIAMI WHOLESALE DRUG CORP. ET AL. 491 485 Order approved June 19, 1936, entitled "An Act to supplement existing laws against unlawful restraints and monopolies, and for other purposes," approved October 15,1914 (the Clayton Act), as amended by section 1 of the Act of Congress entitled "An Act to amend section 2 of the act entitled 'An Act to supplement existing laws against unlawful re• straints and monopolies, and for other purposes,' approved October 15, 1914, as amended (U. S. C., title 15, sec. 13), and for other purposes," approved June 19, 1936 (the Robinson-Patman Act). ORDER TO CEASE AND DESIST This proceeding having been heard by the Federal Trade Commission upon the complaint of the Commission and the answer filed on behalf of the parties respondent, in which answer the respondents admit all the material allegations of fact set forth in said complaint, and state that they waive all intervening procedure and further hearing as to said facts, and the Commission having made its findings as to the facts and conclusion that said parties respondent have violated the provisions of an Act of Congress approved October 15, 1914, entitled "An Act to supplement existing laws against unlawful restraints and monopolies, and for other purposes," as amended by an Act of Congress approved June 19, 1936, entitled "An Act to amend section 2 of the act entitled 'An Act to supplement existing laws against unlawful restraints and monopolies, and for other purposes,' approved October 15, 1914, as amended (U. S. C. title 15, sec. 13) , and for other purposes."

It is ordered, That the respondent, Miami Wholesale Drug Corporation, its officers, representatives, agents, and ~mployees, and the respondents, Rodney S. Pullen, Jr., Arthur S. Lavine, Sam S. Lavine, Vivian L. King, Esther S. King, and Elizabeth R. King, in connection with the purchase of drug commodities in interstate commerce by either of said parties respondent, do forthwith cease and desist from :

1. Inducing sellers to contract with either of the parties respondent herein, in connection with the purchases of commodities by either of said parties respondent, for the payment for advertising space in any magazine or publication, published by either of said parties respondent, at prices greater than the recognized value of such space as an advertising medium to the sellers paying therefor. 2. Inducing sellers to discriminate in price between either of the said parties respondent and other purchasers of commodities of like grade and quality, by granting, allowing, and paying to either of the said parties respondent herein, in connection with the purchases 200346m--40--vol.28----84 492 FEDERAL TRADE CO:VI:MISSION DECISIONS Order 28F.T.O.

of either of said parties respondent, any advertising allowances, or anything of value in lieu thereof, which are not granted by such sellers to all of their customers on proportionately equal terms. 3. Receiving and accepting any discriminatory price or the benefit of any discrimination in price obtained in the manner set forth in, and prohibited by, subparagraphs (1) and (2) of this order. It is further ordered, That the parties respondent shall, within 60 days after service upon them of this order, file with the Com· mission a report in writing setting forth in detail the manner and form in which they have complied with this order. DLOOl\UNGDALE BROS., INC. 493 Syllabus