Inter-State Cigarette Merchandisers Association

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IN THE 1ifATI'ER OF INTER-STATE CIGARETTE MERCHANDISERS ASSOCIA- TION ET AL.

COMJ,>LAINT, FINDINGS, AND ORDER IN REGARD TO THE ALLEGED VIOLATION OF SEC. 5 OF AN ACT OF CONGRESS APPROVED SEPT. 26, 1914 Docket 4.'188. Oomplaint, Nov. 28, 1940-Decision, July 31, 1941 Where an unincorporated trade association, together with Its membership of five associations of operators of automatic cigarette vending machines, engaged in such business in the metropolitan area of New York City, and in New Jersey, New York, Pennsylvania, Connecticut, and Massachusetts, who pur• chased such machines from manufacturers and distributors and Installed them 1n various types of retail establishments, such as restaurants, taverns, gasoline stations, etc., by agreement with proprietors thereof; controlling between 85 and 90 percent of the business In the territory concerned and enabled, through their aforesaid associations, more effectively to in1luence such trade for the enhancement of their own profits, and in active and substantial competition with each other and with others except as below set forth; and with the officers, directors, and members of said organiza Uons- .Acting In concert to monopolize business In their respective territories, by means of (1) campaigns designed to force all operators controlling an appreciable number of locations, to join the assoc!atlons, (2) demands that manufacturers refuse to sell machines to nonmembers, (3) appointment of committees to induce manufacturers to stop selling direct to "locations" and to promise not to create new operators or to sell nonmembers, or to induce nonmembers to join the association, ( 4) association agreements to purchase from the four leading manufacturers a specl11.ed number of machines annually in consideration of manufacturers' agreement not to create new operators or sell nonmembers, (5) threatening with boycott and, in many instances, boycotting, machines of noncooperating manufacturers, and (6) use of the combined power of all the associations in various ways to intimidate a·nd coerce manufacturers as aforesaid-- Entered into and carried out understandings, agreements, and conspiracies between and among themselves for the purpose of restrainipg and eliminating competition in the purchase, distribution, and Installation of automatic cigarette vending machines in interstate commerce; and, in pursuance thereof-- (a) Establlshed and attempted to establlsh the members of said associations as a preferred class for the purpose of having manufacturers and distributors confine the sale and distribution of automatic cigarette machines to such member operators exclusively;

(b) Interfered with efforts of competitors of said member operators to obtain such machines; • (c) Required, induced, and compelled manufacturers and distributors, by promises and threats, not to sell or ship machines to competitors of said member operators, and to confine the sale and distribution thereof to said member operators; and (d) Threatened to and did boycott manufacturers and distributors selling rna· chines to competitors of said member operators; INTER-STATE CIGARETTE MERCHANDISERS ASSN. ET AL. 835 834 Complaint With result that manufacturers were forced to comply with the requirements of the various associations and created no new operators in their territories, refused to sell to locations or to wholesale dealers who sold to locations, and to nonmembers of associations, and that, in certain territories, manufacturers refusing to abide by their agreements not to create new operators in consideration of an association's undertaking to purchase a definite quantity of their machines annually, were boycotted by the association members: Held, That such acts and practices, as above set forth, were all to the prejudice of competitors of said member operators and of the public, had a dangerous tendency to and actually did hinder and prevent competition In the sale of automatic cigarette vending machines, unreasonably restrained commerce in said machines, and constituted unfair methods of competition. Mr. Daniel J. M1trphy for the Commission.

Parker, Chapin & Flattau, of New York City, for respondents. Complaint Pursuant to the provisions of the Federal Trade Commission Act, and by virtue of the authority vested in it by said act, the Federal Trade Commission, having reason to believe that the Inter-State Cigarette Merchandisers Association, The Cigarette Merchandisers Association, Inc., Cigarette Merchandisers Association of New Jersey, Inc., The Automatic Cigarette Vendors Association of Eastern Pennsylvania, The Cigarette Machine Operators of Connecticut, Inc., Cigarette Merchandisers Association of New England, and the officers, directors and members of said organizations and associations, hereinafter referred to as respondents, have violated the provisions of the said act, and it appearing to the Commission that a proceeding by it in respect thereof would be in the public interest, h~reby issues its complaint stating its charges in that respect as follows: P .ARAGnAPH 1. Respondent Inter-State Cigarette Merchandisers Association, hereinafter for convenience referred to as the "Inter- State Associations," is an unincorporated association, with its principal office and place of business located at 60 Park Place, Newark, N. J. The membership of said Inter-State Association is composed of respondent organizations and associations of operators of automatic -cigarette vending machines, to wit: The Cigarette Merchandisers Association, Inc., Cigarette Merchandisers Association of New Jersey, Inc., The Automatic Cigarette Vendors Association of Eastern Pennsylvania, The Cigarette Machine Operators of Connecticut, Inc., and Cigarette Merchandisers Association of New England. The said member respondent organizations and associations participate and cooperate in the management and activities of the said Inter-State Association. Each of the said member respondent organizations and associations appoint or elect three authorized. delegates or alternates CO~IMISSION DECISIONS836 FEDERAL TRADE Complaint 33F.T.C.

who actively represent each respective member respondent organization and association at the meetings of the said Inter-State Association. In addition to said authorized delegates, each member respondent organization and association .is further represented in the affairs and activities of said Inter-State Association, by its manager, executive secretary andjor counsel who, by reason of their office in their respective organization or association are associate members of said Inter- State Association.

The respondent officers and directors of the said Inter-State Association are:

President----------------------------- John Sharenow, a representative of the Cigarette Merchandisers Association of New Jersey, Inc.

Vice President------------------------ William King, a representative of The Automatic Cigarette Vendors Association of Eastern Pennsylvania.

Treasurer----------------~---------- Edward Beresth, a representative of The Cigarette Machine Operators of Connecticut, Inc.

Secretary----------------------------· Robert K. Hawthorne, a representative of The Cigarette Merchandisers Association, Inc.

Recorder---------------------------- James V. Cherry, a representative of the Cigarette Merchandisers Association of New Jersey, Inc.

Director______________________________ Anthony J. 1\Iasone, a representative of The Cigarette Machine Operators of Connecticut, Inc.

Director------------------------------ Alfred Sharenow, a representative of The Cigarette Merchandisers Association of New England.

Director-----------------------------· Edward J. Dingley, a representative of The Automatic Cigarette Vendors Association of Eastern Pennsylvania.

PAR. 2. Respondent The Cigarette Merchandisers Association, Inc., is a membership corporation, organized and existing under and by virtue of the laws of the State of New York, with its principal office and place of business located in the Chanin Building in New York City, N. Y. Said respondent corporation is a member, and is represented by three authorized delegates or alternates at meetings, of respondent Inter-State Association. The membership of said respondent corporation consists of certain persons, partnerships, and corporations engaged in the operation of automatic cigarette vending machines in the metropolitan area of New York City, N.Y. The respondent members of said respondent corporation operate approximately 17,000 of said machines which represent approximately 90 percent of such machines operated in the metropolitan area of New York City. INTER-STATE CIGARETTE MERCHANDISERS ASSN. ET AL. 837 834 Complaint The respondent officers and directors of the said respondent corporation and the respective respondent members of said respondent corporation by or with which such officers and directors are employed or connected are as follows :

Name of member t·respondent with which rtJspective officers and d·h"ectors are con- Officers and directors nected President: Robert K. Hawthorne______ P & II Cigarette Service, Bronx, N. Y. First vice pt·esident: Alexander Frazer. Atlas Vending Co., 2840 8th Ave., New York, N.Y.

Se~ond vice president: Alberts. Denver_ Lincoln Cigarette Service (a trade name under which Albert S. Denver as an individual does business), 1645 Bedford Ave., Brooklyn, N. Y.

Treasurer: Samuel Yolen_____________ Modern Cigarette Service -(a trade name under which Samuel Yolen as an individual does business), 172 Fairview Ave., Port Chester, N. Y.

Secretary: Tom Cola__________________ United Cigarette Service, 3734 East Tremont Ave., New York, N. Y.

Manager: Matthew Forbes ___________ _ Director: Michael LascarL___________ Manhattan Cigarette Service, Inc., 421 East 76th St., New York, N. Y.

Director: Jackson Bloom_____________ Cigarette Service, Inc., 36 Cooper Sq., New York, N. Y.

Director: Louis D. Schwartz___________ Smokers Service, Inc., 211 Northland Blvd., Bayside, Long Island, N. Y.

Director: Martin M. Berger __________ , Rowe Cigarette Service Co., Inc., New York, N.Y.

Director: Bernard Rosen_____________ Supreme Cigarette Service, Inc., 881 Main St., New Rochelle, N. Y.

Director: Harold Roth_______________ Herald Vending Corporation, 4124th St., Long Island City, N. Y.

The above-named respondent officers, directors, and members do not constitute the entire membership of said respondent corporation but are representative members thereof, respectively. P.AR. 3. Respondent Cigarette Merchandisers Association of New Jersey, Inc., is a membership corporation organized and existing under and by virtue of the laws of the State of New Jersey with its principal office and place of business located at 60 Park Place, Newark, N. J. The membership of said respondent corporation consists of certain persons, partnerships and corporations engaged in the operation of automatic cigarette vending machines in the States of New· Jersey, New York, and Pennsylvania. Said respondent corporation is a member, and is represented by three authorized delegates or alternates at meetings, of the respondent Inter-State Association. Complaint 33F.T.C.

The respondent officers and directors of the said respondent corporation and the respective respondent members of said respondent corporation by or with which such officers and directors are employed or connected are as follows:

Olflcera anll directora Name of member respondent with which respective officers and directors are connected President and director: Charles W. Unit Vending Corporation, 227 North Strange. Park St., East Orange, N. J. Vice president and director: Max Ja- Hudson County Tobacco Co., 84 Montcobowitz. gomery St., Jersey City, N. J. · Treasurer and director: Henry W. Puck Shops of Jersey City, Inc., 46th Hartmann. Fleming Ave., Newark, N. J. Secretary and director: John Grout ___ _ Jersey Cigarette Service, Inc., 111 4th St., Pelham, N. Y.

Manager: James V. Cherry _________ _ Director: Michael LascarL__________ Public Service Tobacco Co., 1464 North Broad St. (a corporation), Hillside.

N.J.

Director: John Sharenow----------- North Jersey Cigarette Service, Inc., 214 33rd St., North Bergen, N. J.

Director: Samuel M. Malkin__________ Malkin Sales Co. (a trade name under which Harry Malkin and Samuel Malkin as copartners do business), 408 Market St., Newark, N. J.

Director: Harry Zink.______________ Coast Cigarette Service, Inc., 806 Monroe Ave., Asbuq' Park, N. J.

Director: Herman Arleln ______________ Le Peko Co., Inc., 100 Newark Ave., Jersey City, N.J.

The above-named respondent officers, directors and members do not constitute the entire membership of said respondent corporation but are representative members thereof, respectively . . PAR. 4. Respondent, The Automatic Cigarette Vendors Association of Eastern Pennsylvania, is an unincorporated trade association or organization of certain persons, partnerships, and corporations engaged in the operation of automatic cigarette vending machines in the State of Pennsylvania. The principal office and place of business of said respondent association is located at 1411 Fox Building, Philadelphia, Pa. Said respondent association is a member, and is represented by three authorized delegates or alternates at meetings, of the respondent Inter-State Association.

The respondent officers and directors of the respondent association and the respective respondent members of said respondent association by or with which such officers and directors are employed or connected are as follows:

INTER-STATE CIGARETTE MERCHANDISERS ASSN. ET AL. 839 834 Complaint Name oJ member respondent with which ,.,_ apectivtJ officers and directors are con- Offtcera cuiCI directors nected President and director: Walter I. Walday Sales Co. (a trade name under Davidson. which Walter I. Davidson as an individual does business), 5645 North 15th St., Philadelphia, Pa.

Vice president and director: Patrick J. Delaware County Tobacco Co. (a trade Bonoma. name under which E. P. Chrlstake as an individual does business), 310 Edgemont .Ave., Chester, Pa.

Treasurer and director: Leroy A. Automatic Vending Co., 525 Parker Schackleton. St., Chester, Pa. Director: William L. King ___________ _ Quaker Vending Co. (a trade name under which Wllllam L. King, as an individual does business), 605 Wyoming Ave., Phlladelphia, Pa.

Director: W. Harry Steele, Jr _______ _ Steele Vending Co. (a trade name under which W .. Harry Steele, Jr., as an individual does business), 5831 Henry Ave., Philadelphia, Pa.

Director: Harry D'.Alessandro _______ _ Big 4 Distributors (a trade name under which Harry D'Alessandro, .Anthony Lalll, Cosimo Lalli, and Alfred Lalll as copartners do business), 1111 Cal'penter St., Philadelphia, Pa.

Director: Ralph J. Burnard---------- Saks Cigarette Service (a trade name under which Emma 1\I. B»rnard and Amedio Principi as copartners do business), 1423 Conisn St., Philadelphia, Pa.

Director: Joseph Silberman __________ R. Baylin Co. (a trade name under which Richard Baylin as an imllvidual does business), 151 West 3rd St., Chester, Pa.

The above-named respondent officers, directors, and members do not constitute the entire membership of said respondent association but are representative members thereof, respectively. P .AR. 5. Respondent The Cigarette Machine Operators of Connecticut, Inc., is a membership corporation organized and existing under and by virtue of the laws of the State of Connecticut with its principal office and place of business located at 106 Meadow Street, 'Vaterbury, Conn. Said respondent corporation is a member, and is represented by three authorized delegates or alternates at meetings, of the said re~-pondent Inter-State Association. The membership of said respondent corporation consists of certain persons, partnerships, and corporations engaged in the operation of automatic cigarette vending machines in the State of Connecticut. Complaint 33F.T.C.

The respondent officers and directors of the said respondent corporation and the respective respondent members of respondent said corporation by or with which such officers and directors are employed or connected, are as follows :

Name oJ member respondent wlth which respective officers and directors aru con- Officers and directors nected President: Anthony R. NastrL ______ _ Automatic Sales Co., Inc., 106 Meadow St., Waterbury, Conn.

Vice president: Robert Zimmerman ___ _ Self-Service Sales Corporation, 627 Albany Ave., Hartford, Conn.

Secretary: Anthony J. 1\Iasone______ _ Automatic Sales Co., Inc., 106 1\Ieadow St., \Vaterbury, Conn.

Treasurer: J\:l. E. Norris _____________ _ Norris Tobacco Co. (a tmde name under which M. E. Norris as an individual does business), Main Street, Danbury, Conn.

Director: John J. Fitzgerald _______ _ Connecticut Automatic Cigarette Co. (a trade name under which John J.

Fitzgerald as an individual does business), 61 Broadway, New Haven, Conn.

Director: Samuel Aliener____________ 1507 Chapel St., New Haven, Conn. D,director: Nathan Dubowry __________ Connecticut Automatic Sales Co. (a trade name . under which Nathan Dubowry as an individual does business), 93 Lafayette St., New Britain, Conn.

Director: Lena Bonelli--------------- Bonelli Cigarette Service (a trade name under which Lena Bonelli as an individual does business), 401 East Elm S~., Torrington, Conn.

Director: Charles Sparrow___________ Cigarette 1\Iachlnes Sales Co. (a trade name under which Charles Sparrow as an individual does business), 298 Wayne St., Bridgeport, Conn.

The above-named respondent officers, directors, and members do not constitute the entire membership of said respondent corporation but are representative members thereof, respectively. PAR. 6. Respondent Cigarette Merchandisers Association of New England, is a membership corporation organized and existing under and by virtue of the laws of the State of Massachusetts with its principal office and place of business located at No. 1 Federal Street, Boston, Mass. Said respondent corporation is a member, and is represented by three authorized delegates or alternates at meetings, of the said respondent Inter-State Association. The membership of said respondent corporation consists of certain persons, partnerships and corporations engaged in the operation of automatic"cigarette vending machines in the State of Massachusetts.

INTER-STATE CIGARETTE MERCHANDISERS ASSN. ET AL. 841 834 Complaint The respondent officers and directors of the respondent corporation and the respective respondent members of said respondent corporation by or with which such officers and directors are employed or connected are ~s follows:

Name of member t·espondcnt with which respective officers a11tl directors are con- OfTioers and directors nectea Presiueut: Samuel M. Golustein _____ _ l\Ietro Automatic Sales Corporation, 330 Massachusetts Ave., Boston, Mass.

Vice president: Louis Berman ________ _ Vogue Vending Co. (a corporation), 2G2 Middlesex St., Lowell, Mass.

Secretary: William B. Dul'lls _________ _ Grund Novelty & Supply Co. (a trade name under which 'Vllliam B. Burns does business), 66 Southgate St., Wor, cester, Mass.

Manager: Walter R. Guild ___________ _ Director: Albert 1\f. Coulter ___________ 1\[. A. C. Vending Co. (a trade name under which Albert l\1. Coulter and M. L.

Coulter as copartners do business), 6 North Woodfort, Worcester, Mass.

Director: Frank Fender ______________ Fendel Bros. (a trade name under which Frank Fendel as an Individual dots business), 265 Park Ave., Revet·e, 1\Iass.

Director: Oscar Gerson _______________ Gerson Sales Co. (a corporation), 70 A Green St., Boston, Mass.

Director: Julian Karger______________ Enterprise Cigarette Service Co. (a trade name under which Julian Karger and Louis Elfman as copartn<'rs do business), ZiO Broadway, Revere, Mass.

Direc:tor: Cleo C. Kingsley ____________ K. D. Vending Co. (u trade name unuer which Julius Ulrnun and Cleo C. Kingsley us copartners do business), 219 State St., Swampscott, Mass.

Charles E. Knight____________________ ~2 Kimbal Rd., 1\Iethuen, 1\lass. Alfred I. Sh:irenow ___________________ Cigarette Service Co., 266 Salem St., Bedford, Muss.

Jacob Shelman _______________________ Shelley Sales Co., Inc., 382 Watertown St., Newton, Mass.

Hurry Spierer------------------------ Monroe Sales Co. (u trade name under which Harry Spiert>r as un Individual does buslnt>ss), G6 Harv£-st St., Lynn, Mass.

William Spiller----------------- ---- Mal'sachusetts Vending Co. ( u trade name under which Rose D. Spiller as an individual does bnl'lness), 6!) Wnylan<l St., Roxbury, Mass.

The above-name<l respondent officers, directors, and members do not constitute the entire membership of sai<l respond~nt association but are representative members thereof, respectively. 842 FEDERAL TRADE CO:M:MISSION DECISIONS Complaint 33F.T,C.

PAR. 7. Those hereinabove specifically named respondents as officers, directors, and members of the said respondent organizations and associations do not constitute the entire list or number of such officers, directors, or members but are typical R.nd representative thereof. All of the officers, directors, and members of said respondent organizations and associations are not known to the Federal Trade Commission and cannot be joined specifically as parties respondent in this proceeding without manifest inconvenience and delay prejudicial to the public interest. All of the officers, directors, and members of said respondent organizations and associations are, therefore, made parties respondent herein as a class of which those specifically named are representative of the whole. PAR. 8. Said operators of automatic cigarette vending machines; members of said organizations and associations and respondents herein, in the course and conduct of their business, have purchased and are now purchasing automatic cigarette vending machines from manufacturers, producers and distributors, in various States; said respondent operators, by agreement with proprietors, install such machines in various types of retail establishments in which the sale of cigarettes is contemplated, i.e., restaurants, taverns, grills, barrooms, gasoline station, etc.; the places where such machines are installed are commonly known in the trade as "locations;" the said respondent operators have caused and are now causing automatic cigarette vending machines to be shipped and transported in commerce to the places of business and to the locations of such purchasing respondents from points in States other than the States in which such respective points of destination are located.

PAR. 9. In the course and conduct of their respective business heretofore described, except to the extent to which competition in the purchase and location of auto~atic cigarette vending machines has been restrained, lessened, injured, and suppressed by the undertakings, agreements, combinations, and conspiracies hereinafter referred to, the respondent operators of automatic cigarette vending machines have been, and are now, in active and substantial competition with each other and with other operators of such machines in the purchase and location of such machines.

PAR. 10. Said respondent operators of automatic cigarette vending machines, members of the said respondent organizations and associations hereinabove described, constitute a large and important part of the operators of automatic cigarette vending machines in the several States of the United States in which the members of respondent organizations and associations are engaged in business; and such members constitute a group so large and influential in \he trade as to be INTER-STATE CIGARETTE MERCHANDISERS ASSN. ET AL. 843 834 Complaint able to control and influence the flow of trade and commerce in automatic cigarette vending machines within, to, a~d from the several States wherein the said respondent operators are engaged in business. Said members as allied and banded together in associations and organizations are enabled thereby to more effectively exercise control and influence of such trade and commerce for the promotion and enhancement of their own volume of trade and profits. PAR. 11. For more than 3 years last past there were, and have been and are now, several manufacturers, producers, and sellers of automatic cigarette vending machines whose respective places of business were, and are now located in various States other than the States where the respondent operators of automatic cigarette vending machines have their places of business; said manufacturers, producers, and sellers have been, and are now, engaged in the business of manufacturing and selling such machines which they have been, and are now, shipping in commerce between and among the several States of the United States, and who have been, and are now, selling large quantities of such machines to the respondent operators or their agents and shipping such machines in commerce to said purchasers into the various States of the United States other than the States where said manufacturers, producers, and sellers have their places of business. Except to the extent to which competition, between said manufacturers, producers, and sellers in the manufacture and sale of such machines and in the sale thereof for shipment in commerce into the various States of the United States other than the States where said manufacturers, producers, and sellers have their places of business, has been restrained, lessened, injured, and suppressed by the understandings, agreements, combinations, and conspiracies hereinafter referred to, the said manufacturers, producers, and sellers, in the course and conduct of their respective businesses as aforesaid, have been, and are now, engaged in active and substantial competition with each other in the manufacture and sale of such machines, and in the sale thereof for shipment in commerce into the various States of the United States and in the sale thereof to the respondent operators or their agents, and to competitors of respondent operators for shipment to said respondent operators and competitors of respondent operators in commerce into the various States of the United States. PAR. 12. The respondents, viz, said organizations and associations hereinabove described, their officers, directors, and members, parties respondent herein, during nnd in the period of more than 3 years last past have entered into and thereafter carried out understandings, agreements, combinations, and conspiracies for the purpose of re- Complaint 33 F. 'f. C. stricting, restraining, suppressing, and eliminating competition and creating a monopoly in the purchase and .sale of automatic cigarette vending machines in trade and commerce between and among the several States of the United States.

PAR. 13. Pursuant to said understandings, agreements, combinations, and conspiracies, and in furtherance thereof, the said respondents have engaged in and performed, and are now engaging in and {Jerforming the following practices and acts: (a) Establishing the respondent operators of automatic cigarette vending machines as a preferred class for the purpose of confining and requiring the sale and distribution of automatic cigarette vending machines by manufacturers, producers, and sellers thereof to such respondent operators exclusively;

·(b) Interfering with competitors of respondent operators of automatic cigarette vending machines in the said competitors' efforts to purchase and obtain such n1.'lchines;

(c) Preventing competitors of respondent operators of automatic cigarette vending machines from purchasing or obtaining such machines;

(d) Requiring, inducing or compelling, by promises, threats, coercion, ·intimidation and otherwise, manufacturers, producers, and sellers of automatic cigarette vending machines; 1. Not to sell or ship automatic cigarette vending machines to competitors of respondent operators or directly to consumers of automatic cigarette vending machines;

2. To boycott competitors of respondent operators of automatic cigarette vending machines;

3. To confine to the respondent operators the said manufacturers', producers', and sellers' sales and shipments of automatic cigarette vending machines intended for use, consumption or resale in the various States where respondent operators are engaged in business. (e) Boycotting and threatening to boycott manufacturers, producers, and sellers of automatic cigarette vending machines who sell or ship such machines either to competitors of respondent operators or directly to consumers of such machines;

(f) Requiring all members of respondent organizations and associations to carry out, and to agree and pledge themselves to support and carry out, the foregoing program;

(g) Using other methods and means designed to suppress and prevent competition and restrict and restrain the sale of automatic cigarette vending machines in said commerce.

PAR. 14. The capacity, tendency and effect of the aforesaid understandings, agreements, combinations, and conspiracies and the acts INTER-STATE CIGARETTE MERCHANDISERS ASSN. ET AL. 845 834 Complaint and practices engaged in and performed pursuant thereto and in furtherance thereof are, and have been :

(a) To unduly and unlawfully restrain, lessen, injure, and suppress competition in the sale of automatic cigarette vending machines which are ~old to the purchasers thereof for shipment into the various States where the respondents are located;

(b) To unduly and unlawfully impede, hinder, and prevent certain manufacturers, producers, and sellers of automatic cigarette vending machines from selling such machines for shipment from the various States where tlHi said manufacturers, producers, and sellers are located into the various States where the respondent operators are located ;

(c) To unduly and unlawfully restrain, lessen, injure, and suppress competition in the sale and purchase of automatic cigarette vending machines which are shipped in commerce into the various States where the respondents are located from the various States where the manufacturers, producers, and sellers of such machines are located;

(d) To unreasonably and unlawfully restrain, hinder, and prevent operators of automatic cigarette vending machines who are engaged in competition with the respondent operators of such machines from purchasing such machines for shipment to them in commerce into the various States where such competing operators are located from States where manufacturers, producers, and sellers of such machines are located;

(e) To tend to create in certain manufacturers, producers, and sellers of automatic cigarette vending machines a monopoly in the sale of such machines which are sold to the purchasers thereof for shipment into the various States other than the States where such manufacturers, producers, and sellers are located; (f) To tend to create in the respondent operators of automatic ·vending machines a monopoly in the business of purchasing and locating such machines in the various States or parts thereof where the said respondent operators .are located;

(g) To unlawfully and coercively condition the right of persons to engage in business as operators of automatic cigarette vending machines upon such persons becoming members of the respondent organizations and associations and cooperating with the respondents in executing the above-described understandings, agreements, combinations, and conspiracies;

(h) To prejudice and injure the public and manufacturers, producers, and sellers of automatic cigarette vending machines and others who do not confonn to the program of the respondents or who do not desire but are compelled to conform to said program. 435526m-42-vol. 33-:54 846 FEDERAL TRADE COMM:ISSION DECISIONS . Findings· 33F.T. 0.

PAR. 15. Each of the said respondents at the times herein mentioned acted in concert with one or more of the other respondents in doing and performing the acts and practices hereinabove alleged in furtherance of said understandings, agreements, combinations, and conspiracies. PAR. 16. The acts and practices of the respondents as herein alleged are all to the prejudice of competitors of respondents and of the public; have a dangerous tendency to and have actually hindered and prevented competition in the sale of automatic cigarette vending machines in commerce within the intent and meaning of the Federal Trade Commission Act; have unreasonably restrained f;mch commerce in automatic cigarette vending machines, and have a dangerous tendency to create in the respondents a monopoly in the sale of automatic cigarette vending machines, and constitute unfair methods of competition in commerce within the intent and meaning of the Federal Trade Commission Act.

REPORT, FINDINGS AS TO THE FACTS, AND ORDER Pursuant to the provisions of the Federal Trade Commission Act, the Federal Trade Commission on the 26th day of November 1940, issued and served its complaint in this proceeding upon the respondents named in the above caption charging the said respondents with the use of unfair methods of competition in commerce in violation of the provisions of said act. On February 15, 1941, the respondents filed their answer in this proceeding. Thereafter, a stipulation was entered into whereby it was stipulated and agreed that a statement of facts signed and executed in behalf of the said respondents by their counsel, Parker, Chapin & Flattau, and W. T. Kelley, Chief Counsel for the Federal Trade Commission, subject to the approval of the Commission, may be taken as the facts in this proceeding and in lieu of testimony in support of the charges stated in the complaint, or in opposition thereto, and that the said Commission may proceed upon said statement of facts to · make its report, stating its findings as to the facts and its conclusion· based thereon and enter its order disposing of the proceeding without the presentation of argument or the filing of briefs. Thereafter, this proceeding regularly came on for final hearing before the Commission on said complaint, answer, and stipulation, said stipulation having been approved, accepted, and filed, and the Commission having duly considered the same and being now fully ad vised in the premises, finds that this proceeding is in the interest of the public and makes its findings as to the facts and its conclusion drawn therefrom. FINDINGS AS TO THE FACTS PARAGRAPH 1. Respondent Inter-State Cigarette Merchandisers Association, hereinafter for convenience referred to as the "Inter-State INTER-STATE CIGARETTE MERCHANDISERS ASSN. ET AL. 847 834 Findings Association," is an unincorporated trade association, with its principal office and place of business located at 60 Park Place, Newark, N. J. The membership of said Inter-State Association is composed of relf:pondent organizations and associations of operators of automatic cigarette vending machines, to wit: The Cigarette Merchandisers Association, Inc., Cigarette Merchandisers Association of New Jersey, Inc., The Automatic Cigarette Vendors Association of Eastern Pennsylvania, The Cigarette Machine Operators of Connecticut, Inc., and Cigarette Merchandisers Association of New England. The said member respondent organizations and associations participate and coopernte in the management and activities of the said Inter-State Association. Each of the said member respondent organizations and associa.tions appoint or elect three authorized delegates or alternates who actively represent each respective member respondent organization and association at the meetings of the said Inter-State Association. In addition to said authorized delegates, each member respondent organization and association is further represented in the affairs and activities of said Inter-State Association, by its manager, executive secretary and.jor counsel who, by reason of their office in their respective organization or association are associate members of said Inter-State Association.

The respondent officers and directors of the said Inter-State Association are :

President---------------------------- John Sharenow, a representative of the Cigarette Merchandisers Association of New Jersey, Inc.

Vice President_______________________ William King, a representative of The Automatic Cigarette Vendors Association of Eastern Pennsylvania.

Treasurer---------------------------- Edward neresth, a representative of The Cigarette Machine Operators of Connecticut, Inc.

Secretary------------------------~ Robert K. Hawthorne, a representative of The Cigarette Merchandisers Association, Inc.

Recorder----------------------------· James V. Cherry, a representative of the Cigarette Merchandisers Association of New Jersey, Inc.

Director---------------------------- Anthony J. Masone, a representative of The Cigarette 1\Iachine Operators of Connecticut, Inc.

Director----------------------------· Alfred Sharenow, a representative of The Cigarette Merchandisers Associ· ation of New England.

Director ______________ --------------· Edward J. Dingley, 11 representative of The Automatic Cigarette Vendors Association of Eastern Pennsylvania.

Findings 33F.T. C.

PAR. 2. Respondent The Cigarette Merchandisers Association, Inc., is a membership corporation, organized and existing under and by virtue of the laws of the State of ·New York, with its principal office and place of business located in the Chanin Building in New York City, N. Y. Said respondent corporation is a member, and is represented by three authorized delegates or' alternates at meetings, of respondent Inter-State Association. The membership of said respondent corporation consists of certain persons, partnerships, and corporations engaged in the operation of automatic cigarette vending machines in the metropolitan area of New York City,· N. Y. The respondent members of said respondent corporation operate approximately 17,000 of said machines which represent approximately 90 percent of such machines operated in the metropolitan area of New York City. The respondent officers and directors of the said respondent corporation and the respective respondent members of said respondent corporation by or with which such officers and directors are employed or connected are as follows :

Name of membet• respondent with which re· 0/flcers ana directors spective olflcers and directors are connectea President: Robert K. Hawthorne______ P & II Cigarette Service, Bronx, N. Y. First vice president: Alexander Frazer_ Atlas Vending Co., 2840 Eighth Ave .• New York, N. Y..

Second vice president: Albert S. Denver_ Lincoln Cigarette Service (a trade name under which Albert S. Denver as an individual does business), 1645 Bedford Ave., Brooklyn, N.Y.

Treasurer: Samuel Yolen _____________ Modern Cigarette Service (a trade name under which Samuel Yolen as an individual does business), 172 Fairview Ave., Port Chester, N. Y.

Secretary: Tom Cola_________________ United Cigarette Service, 3734 East Tremont Ave., New York, N.Y.

Manager: Matthew Forbes___________ _ Director: Michael LascarL____________ Manhattan Cigarette Service, Inc., 421 East 76th St., New York, N.Y.

Director: Jackson Bloom______________ Cigarette Service, Inc., 36 Cooper Sq .• New York, N. Y.

Director: Louis D. Schwartz__________ Smokers Service, Inc., 211 Northland Blvd., Baysld.e, Long Island, N. Y.

Director: Martin M. Berger----------- Rowe Cigarette Service Co., Inc., New York, N.Y.

Director: Betnard Rosen______________ Supreme Cigareite Service, Inc., 381 Main St., New Rochelle, N. Y.

Director: Harold Roth---------------- Herald Vending Corporation, 41 24th St., Long Island City, N. Y.

INTER-STATE CIGARETTE MERCHANDISERS ASSN. ET AL. 849 834 Findings The above-named respondent officers, directors, and members do not ·Constitute the entire membership of said respondent corporation but are representative members thereof, respectively. PAR. 3. Respondent Cigarette Merchandisers Association of New .Jersey, Inc., is a membership corporation organized and existing under and by virtue of the laws of the State of New Jersey with its principal office and place of business located at 60 Park Place, Newark, N. J. The membership of said respondent corporation consists of certain persons, partnerships, and corporations engaged in the operation of automatic cigarette vending machines in the States of New Jersey, New York, and Pennsylvania. Said respondent corporation is a member, and is represented by three authorized delegates or alternates at meetings, of the respondent Inter-State Association. The respondent officers and directors of the said respondent corporation and the respective respondent members of said respondent corporation by or with which such officers and directors are employed or connected are as follows:

Name of member respondent with which re- Ofl!cera an4 4irectors spective oflcers and directon are connected President and Director: Charles W. Unit Vending Corporation, 227 North Stange. Park St., East Orange, N. J. Vice president and director: Max Hudson County Tobacco Co., 84 Mont- Jacobowitz. . gomery St., Jersey City, N. J. 'Treasurer· and director: Henry W. Pack Shops of Jersey City, Inc., 461/l Hartmann. Fleming Ave., Newark, N.J. ·Secretary and director: John Grout____ Jersey Cigarette Service, Inc., 111 4th St., Pelham, N. Y.

l\lanager: James V. Cherry ___________ _ Director: 1\Iichael LascarL____________ Public Service Tobacco Co. (a corporation), 1464 North Broad St., Hillside, N.J.

Director: John Shareuow _____________ North Jersey Cigarette Service, Inc., 214 33d St., North Bergen, N. J.

Director: Samuell\1.1\Ialkin___________ Malkin Sales Co. (a trade name under which Harry 1\Ialkin and Samuel Malkin as copartners do business}, 408 l\Iarket St., Newark, N. J.

Director: Harry Zink_________________ Coast Cigarette Service, Inc., 800 Monroe Ave., Asbury Park, N.J.

Director: Herman Arlein _____________ Le Peko Co., Inc., 100 Newark Avenue. Jersey City, N.J.

The above-named respondent officers, directors, and members do not constitute the entire membership of said respondent corporation but are representative members thereof, respectively. Findings 33F.T.O.

PAR. 4. Respondent, The Automatic Cigarette Vendors Association of Eastern Pennsylvania, is an unincorporated trade association or organization of certain persons, partnerships, and corporations engaged in the operation of automatic cigarette vending machines in the State of Pennsylvania. The principal office and place of business of said respondent association is located at 1411 Fox Building, Philadelphia, Pa. Said respondent association is a member, and is represented by three authorized delegates or alternates at meetings, of the respondent Inter-State Association.

The respondent officers and directors of the respondent association and the respective respondent members of said respondent association by or with which such officers and directors are employed or connected are as follows:

Name of member respondent with which rtJ- Offlcera and director• spective officers and directors are connected · President and director: Walter I. Walday Sales Co. (a trade name under Davidson. which Walter I. Davidson as an individual does business), 5645 North 16th St., Philadelphia, Pa.

Vice president and director: Patrick J. Delaware County Tobacco Co. (a tratle Bonoma. name under which E. P. Chrlstake as an individual does business), 310 Edgemont .Ave., Chester, Pa.

Treasurer and director: Leroy A. Automatic Vending Co., 525 Parker St., Shackleton. Chester, Pa. Director: William L. King ___________ _ Quaker Vending Co. (a trade name under which Wilham L. King, as an individual does business), G05 Wyoming .Ave., Philadelphia, Pa.

Director: W. Harry Steele, Jr --------- Steele Vending Co. (a trade name under which W. Harry Steele, Jr., as an In-· dlvidual does business), 5831 Henry Ave., Philadelphia, Pa.

Director: Harry D'Alessandro ________ _ Big 4 Distributors (a trade name under which Harry D'Alessandro, Anthony Lalli, Cosimo Lalli, and Alfred Lalll as copartners do business), 1111 Carpenter St., Philadelphia, Pa.

Director: Ralph J. Burnard __________ _ Saks Cigarette Service (a trade name under which Amedio Princlpi antt Emma N. Burnard, referred to in the complaint as Emma M. Bernard, as copartners do business), 1423 Conlyn St., Philadelphia, Pa.

Director: Joseph Silbennan __________ _ R. Baylln Co. (a trade name under which Richard Baylln as an lndlvld· ual does business), 151 West 3d St., Chester, Pa.

INTER-STATE CIGARETTE MERCHANDISERS ASSN. ET AL. 851 834 Findings The above-named respondent officers, directors, and members do not constitute the entire membership of said respondent association but are representative members thereof, respectively. PAR. 5. Respondent The Cigarette Machine Operators of Connecticut, Inc., is a membership corporation organized and existing under and by virtue of the laws of the State of Connecticut with its principal office and place of business located at 106 Meadow Street, ·waterbury, Conn. Said respondent corporation is a member, and is represented by three authorized delegates or alternates at meetings, of the respondent Inter-State Association. Tlle membership of said respondent corporation cqnsists of certain persons, partnerships, and corporations engaged in the operation of automatic cigarette vending machines in the State of Connecticut.

The respondent officers and directors of the said respondent corporation and the respective respondent members of respondent said corporation by or with which such officers and directors are employed or connected, are as follows:

Name of member reapondent with which re- Otflcers and directora spective otflcere ents directora are connected President: Anthony R. Nastrf__________ Automatic Sales Co., Inc., 106 Meadow St., Waterbury, Conn.

Vice president: Robert Zimmerman______ Self-Service Sales Corporation, 627 AI· · bany Ave., Hartford, Conn.

Secretary: Anthony J. Masone __________ Automatic Sales Co., Inc., 106 Meadow St., Waterbury, Conn.

Treasurer: M. E. Norris---------------- Norris Tobacco Co. (a trade name under which M. E. Norris as an individual does business), Main St., Danbury, Conn.

Director: John J. Fitzgerald------------· Connecticut Automatic Cigarette Co., (a trade name under which John J.

Fitzgerald as an individual doer,1 business), 61 Broadway, New Haven,' Conn.

Director: Samuel Aliener_______________ 1507 Chapel St., New Haven, Conn. Director: Nathan Dubowry _____________ Connecticut Automatic Sales Co., (a trade name under which Nathan Dubowry as an individual does business), 93 Lafayette Street, New Britain, Conn.

Director: Lena BonellL----------------· Bonelli Cigarette Service (a trade name under which Lena Bonelli as an individual does busine!';s), 407 East Elm St., Torrington, Conn.

Director: Charles Sparrow-------------- Cigarette Machine Sales Co. (a trade name under which Charles Sparrow as an individual does business), 2!l8 Wayne St., Bridgeport, Conn.

852 FEDERAL TRADE C01YIMISSION DECISIONS Findings 33F.T.C.

The above-named respondent officers, directors, and members do not <!onstitute the entire membership of said respondent corporation but are representative members thereof, respectively. PAR. 6. Respondent Cigarette Merchandisers Association of New England, is a membership corporation organized and existing under and by virtue of the laws of the State of Massachusetts with its principal office and place of business located at No. 1 Federal Street, Boston, Mass. Said respondent corporation is a member, and is represented by Hnee authorized delegates or alternates at meetings, of the said respondent Inter-State Association. The membership of said respondent corporation consists of certain persons, partnerships, and <!Orporations engaged in the operation of automatic cigarette vending machines in the State of Massachusetts.

The respondent officers and directors of the respondent corporation and the respective respondent members of said respondent corporation by or with which such officers and directors are employed or connected are as follows:

Name of member respondent with which re- Oflcers and directors spective officers and directors are connected President: Samuel l\:l. Goldstein_______ Metro Automatic Sales Corporation, 330 Massachusetts Ave., Boston, Mass.

Ylce President: Louis Berman _________ Vogue Vending Co. (a corporation), 262 1\Iiddlesex St., Lowell, Mass.

Secretary: William B. Burns__________ Grand Novelty & Supply Co. (a trade name under which William B. Burns does business), 06 Southgate St., 'Vorcester, 1\Iass.

Manager: Walter R. Guild ___________ _ Director: Albert M. Coulter----------- l\1. A. C. Vending Co. (a trade name under which Albert 1\I. Coulter and l\1. L. Coulter as copartners do business), 6 North Woodfort, Worcester, 1\Iass.

Director: Frank Fender-------------- Fendel Brothers (a trade name under which Frank Fendel as an individual does business), 265 Park Ave., Revere, 1\Iass.

Direc~or: Oscar Gerson _______________ Gerson Sales Co. (a corporation), 70 A Green St., Boston, 1\Iass.

Director: Julian Karger ______________ Enterprise Cigarette Service Co. (a trade name under which Julian Karger nnd Louis Elfman ns copartners do buslne:;s), 2.'iO Broadway, Revere, 1\Iass.

Director: Cleo C. Kingsley ____________ K. D. Yending Co. (a trade name under whirh Julius Ulman and Cleo C.

Kingsley as copartners do business), 219 State St., Swampscott, 1\Iass.

INTER-STATE CIGARETTE MERCHANDISERS ASSN. ET AL. 853 834 Findings Name of member respondent with which OfTlcers and directors respective officers and directors are connected Charles E. Knight------------------- 12 Kirubal Rd., Methuen, Mass. Alfred I. Sharenow ------------------- Cigarette Service Co., 206 Salem St., l\ledford, 1\Iass.

Jacob Shelman_______________________ Shelley Sales Co., Inc., 382 ~·atertown St., Newton, 1\Iass.

Harry Spierer ________________________ l\Ionroe Sales Co. (a trade name under which Harry Spierer as an individual does business), 56 Harvest St., Lynn, Mass.

William Spiller----------------------- Massachusetts Vending Co. (a trade name under which Rose D. Spiller as an individual does business), 69 Wayland St., Roxbury, Mass.

Tho above-named respondent officers, directors, and members do not con~titute the entire membership of said respondent association but are representative members thereof, respectively. P_4.R, 7. Those hereinabove specifically named respondents as officers, directors, and members of the said respondent organizations and associations do not constitute the entire list or number of such officers, directors, or members, but are typical and representative thereof. PAR. 8. Said operators of automatic cigarette vending machines, members of said organizations and associations and respondents herein, in the course and conduct of their business, have purchased and are now purchasing automatic cigarette vending machines from manufacturers, producers, and distributors in various States; said respondent opera torR, by agreement with proprietors, install such machines in various types of retail establishments in which the sale of cigarettes is contemplated, i.e., restaurants, taverns, grills, barrooms, gasoline stations, etc.; the places where such machines are installed are commonly known in the trade as "locations"; the said respondent operators have caused and are now causing automatic cigarette vending machines to be shipped and transported in commerce to the places of business and to the locations of such purchasing respondents from points in States other than the States in which such respective points of destination are located.

In the course and conduct of their respective businesses heretofore described, except to the extent to which competition in the purchase of ~mtomatic cigarette vending machines has been restrained, lessened, injured, and suppressed by the undertakings, agreements, and other facts hereinafter referred to, the respondent operators of automatic cigarette vending machines have been, and are now, in active and sub- Findings 33F.T.C.

stantial competition with each other and with other operators of such machines in the purchase and location of such machines. Said respondent operators of automatic cigarette vending machines, members of the said respondent organizations and associations hereinabo-ve described, constitute a large and important part of the operators of automatic cigarette vending machines in the several States of the United States in which the members of respondent organizations and associations are engaged in business; and such members constitute a group so large and influential in the trade as to be able to control and influence the flow of trade and commerce in automatic cigarette vending machines within, to, and from the several States wherein the said respondent operators are engaged in business. Said members as allied and banded together in associations and organizations are enabled thereby to more effectively exercise control and influence of such trade and commerce for the promotion and enhancement of their own volume of trade and profits.

PAR. 9. The automatic cigarette vending machine industry came into existence about 10 years ago, and is composed of operators and manufacturers. An operator of cigarette vending machines is one who purchases the machines from the manufacturer and solicits proprietors of various types of retail businesses, such as poolrooms, barrooms, restaurants, or other places, for permission to install one or more of said machines on the premises of the owners, upon the agreement that the operator shall service said machines with the various nationally advertised brands of cigarettes, for which privilege and said. service the operator agrees to allow the owner of the premises a commission of anywhere from lh to 1 cent on each package of cigarettes sold through said machine while on the premises of the owner. The establishment where such a machine is placed is, in the parlance of the operator, called a "location" or "stop." The operator purchases his cigarettes either direct from the manufacturer or from a wholesale tobacco dealer. He employs one or more so-called service men, who in New York City are members of a labor union affiliated with the American Federation of Labor, who from time to time call at the locations, taking with them the various brands of cigarettes which they use in servicing said machines, thereby keeping them supplied with the necessary merchandise for resale. These service men, in addition to keeping the machine supplied with cigarettes, also collect the money deposited therein by purchasers and, after accounting to the owners of the locations for their commissions, return the balance to their employer, the operator. The number of locations in which an operator has installed machines ranges from 20 to 5,000. INTER-STATE CIGARETTE MERCHANDISERS ASSN. ET AL. 855 "834 Findings Prior to the organization of the various respondent associations, the number of locations which an operator had at any one time fluctuated. This was due to competition among the various operators for these locations, since in the majority of cases the machine was installed and was permitted to remain on location only at the will of the location owner. The competition consisted, among other things, of an offer of more corp.mission per package of cigarettes, the payment of a bonus or rental privilege in addition to the payment of a commission, the· offer of various types of premiums such as free matches, attractive .electric illumination, clocks, or a more efficient or more attractive looking machine.

PAR. 10. For more than 3 years last past there have been, and are now, several manufacturers, producers, and sellers of automatic cigarette vending machines, the four principal ones being Rowe Manufacturing Co., Inc., New York, N. Y. (which, in addition to manufacturing and selling said machines, also operates its own machines through a number of subsidiary companies in the various territories where respondent operators are located) ; Arthur H. Du Grenier Co., Haverhill, Mass.; U-Need-A-Pak Products Co., Brooklyn, N.Y.; and National Vendors, Inc., St. Louis, Mo. The places of business of the various manufacturers of such machines were, and are now, located in States other than the States where the respondent operators of automatic cigarette vending machines have their places of business; said manufacturers, producers, and sellers have been, and are now, engaged in the business of manufacturing, and selling such machines which they have been, and are now, shipping in commerce between and among the several States of the United States, and have been, and are now, selling large quantities of such machines to the respondent operators or their agents and shipping such machines in commerce to said purchasers into the various States of the United States other than the States where. said manufacturers, producers, and sellers have their places of business. Except to the extent to which competition between said manufacturers, producers, and sellers in the manufacture and sale of such machines, and in the sale thereof for shipment in commerce into the various States of the United States other than the States where said manufacturers, producers, and sellers have their places of business, has been restrained, lessened, injured, and suppressed by the understandings, agreements, and other factors hereinafter referred to, the said manufacturers, producers, and sellers, in the course and conduct of their respective businesses as aforesaid, have been, and are now, engaged in active and substantial competition with each other in the manufacture and sale of such machines, and in the sale thereof for shipmE\nt in commerce into the various States of the United States, Findings 33F.T.O.

and in the sale thereof to the respondent operators or their agents, and to competitors of respondent operators for shipment to said respondent operators and competitors of respondent operators in commerce into the various States of the United States.

PAR. 11. The manufacturers have been constantly ~mdeavoring to improve the efficiency of their machines -and by reason thereof have from time to time manufactured different types and models. As a more efficient model was manufactured and distributed, operators who had purchased previ"ous models which had become obsolete exchanged the obsolescent model for the new model and received as a credit on tho purchase price of the new machine a certain amount as a trade-in allowance. In many instances the operator, instead of exchanging the obsolescent models, sold them to op~rators who made a practice of purchasing and operating only used machines. The manufacturers likewise distributed the old models taken in trade to other operators or to some individual or firm which desired to enter the operating business with used 'machines.

Since the organization of the various respondent associations, the respondents have engaged in a concerted and cooperative effort and have adopted rules designed to prohibit manufacturers from selling their machines direct to locations, to new operators, ~r to operators who are not members of the associations. The respondents have conducted campaigns designed to force all nonmember operators, who at the time controlled an appreciable number of locations, to join the associations, and where such nonmember operators have refused to join the respondents have requested and demanded of manufacturers that the said manufacturers should refuse to sell such machines to such nonmembers. As occasion required, they have appointed committees from among their membership whose duty it was to call upon manufacturers for the purpose of inducing them to stop selling direct to locations, to promise or agree not to create new operators, not to sell to nonmembers of the associations, or to agree to endeavor to induce nonmembers to join the association. On divers occasions the various associations have entered into contracts, agreements, or understandings whereby the associations each agreed to purchase from the four manufacturers a specified number of machines each year in consideration of the agreement, understanding, or promise on the part of manufacturers not to create new operators or not to sell to nonmembers. 'Vhere manufacturers have refu~ed or failed to carry out their agreement not to sell direct to locations, not to create new operators, or not to sell to nonmembers, said associations have refused to carry out the agreement to purchase from said manufacturers, have threatened to boycott said manufacturers' machines, and in many instances the members of said INTER-STATE CIGARETTE MERCHANDISERS ASSN. ET AL. 857 834 Findings associations have boycotted said manufacturers and have refused to purchase machines from said manufacturers.

PAR. 12. The respondent The Cigarette Merchandisers Association, Inc., adopted a constitution, bylaws, and trade practice rules which have been revised from time to time. The objects of the said respondent association as set forth in the preamble of its constitution are as follows:

The objects and purposes of this organization shall be to foster trade and com· merce in the automatic cigarette vending machine business; to reform abuses relative thereto; to diffuse accurate information ln regard to the standing of customers and other matters; to procure uniformity and certainty ln the customs and usages of trade; to s~title equitably and justly differences between its mem· bers; to promote a more enlarged and friendly intercourse among automatic cigarette vendors; to hold meetings and social gatherings for the better realization of these purposes; and to promote a better understanding and relationship of its members towards E·ach other; to create a code of fair competition in the operation of cigarette vending machines; to exchange such information as will improve the conditions of members.

The trade practice rules of the said respondent association include the following:

SEVI'lON 3. The members are prohibited from purchasing additional cigarette machines when such are made by any manufacturer or vendor who sells, or permits the sale of such machines to individual locations ln competition with the operators.

Complaints against members for violating any of the association rules are referred by the president of the association to the grievance committee:

which Committee holds hearings thereon and decides the complaint and reports their decision to the Association. The Association may· mete out such punishment for noncompliance with such decision as to them may seem just and proper, under the circumstances, after an opportunity has been given to the offending member to defend himself before the Association. The action of the Association in such matters is final.

The rules and regulations, objects, purposes, and policies of the association were constantly brought to the attention of the manufacturers of automatic cigarette vending machines through committees which were appointed from time to time to call upon said manufacturers. For example, on June 25, 1936, such a committee was appointed. On August 17, 193G, the following resolution was proposed and adopted :

"That a committee be nppoiJ.ted to call on the manufacturers of cigarette vending equipment in order to determine their Intention>~ toward cooperating with the Association." It was decided, after discussion, that lllr. Miller should first call upon thel:ie manufucturPrs and tten, at a later date, 1\Ir. Dloom, Mr. Orowitz, and Mr. llergt•r would follow Ull with another call. F.lndlngs 33F.T.C..

At the meeting held on November 27, 1936, the following report was made by a member of such committee:

the results of a combined meeting between representatives of the C. M. A. and the Cigarette Machine Manufacturers, which was held at the Hotel New Yorker several weeks ago at which time the Mills Manufacturing Co., Rowe Mfg. Co., and the U-Need-A-Pak Company assured the operators of their willingness to cooperate with them in every way possible in formulating policies for the benefit of the industry.

On March 25, 1937, such a committee was appointed to call upon National Vendors, Inc., in order to secure its cooperation with the plans and policies of the association. The said committee made its report at a meeting of the association on April 8, 1937. At said meeting held April 8, 1937, a committee was appointed to join with a committee of New Jersey operators in calling upon Stewart-McGuire. A minute of said meeting is as follows:

It was further suggestea that this committee as appointed join with a committee of New Jersey operators ln calling upon Stewart-McGuire. Mr. Stein. Manager of the New Jersey Association, stated that such a committee of Jersey operators would be appointed at their next regular meeting, to be held Tuesday. April 13th, 1937, and it was decided that after this, a date convenient to all parties concerned would be selected for such a joint meeting. Mr. Berger, speaking for the Rowe Manufacturing Company, advised the membership that his firm was ready and willing to adopt any plan agreeable to the other manufacturers that might lead to stronger cooperation between the manufacturer and the operator and result in their mutual benefit. Mr. Yolen, representing the Mills Novelty Company, assured the membership of the Association that his firm would also cooperate in every possible manner with the operators and adopt any plan agreeable to other manufacturers. Mr. Willens, representing the Uneeda-Pack Manufacturing Company, assured the membership likewise. A joint conference between manufacturers and operators was held October 13, and October 19,1937, at the Hotel Commodore, New York City. A report of said meeting was presented at the following regular meeting of the association.

The activities of the association, through its committees appointed by it to call upon manufacturers and impress upon them the necessity of cooperating with the association in its efforts, were successful; manufacturers have cooperated to the fullest extent, in consequence of which very few new operators of vending machines have been created in this territory since 1937. Where a new operator has been created, it was done with the consent of the association. At the present time approximately 90 percent of the cigarette vending machines in operation in the metropolitan area of New York City are owned or controlled by members of the association. This has enabled the association to direct most of its efforts toward elimination of competition INTER-STATE CIGARETTE MERCHANDISERS ASSN. ET AL. 859 834 Findings from nonmembers of the association, as well as elimination of competition between their members for one another's locations. The latter · was accomplished first by the adoption of various restrictions and the imposition of penalties upon members who refused or failed to adhere to rules and regulations, and by the creation of a separate corporation whose sole function was to assist the members in eliminating competition from nonmembers, principally by paying a bonus to a member for each location he could show was taken away from a nonq~.member. The manager of the association, in a letter to the members dated September 20, 1937, stated as follows:

You are all aware of the competitive conditions prevalling throughout the industry at the present time, due principally to the number of new operators who have recently entered the field. Unfortunately, most of these operators are not in sympathy with the objects and policies of CIGARETI'E MERCHANDISERS Association and as a consequence are the cause of creating discord in many sections. Unless their activities are controlled, it is very possible that the reforms accomplished by OIGARETTE MERCHANDISERS ASSOCL\TION during the past year will be seriously affected and our future effort towards continuing ·our good work llampered. Even though the effect of this competition has not as yet been felt by all of you, your wholehearted attention and cooperation should be given, so that 1t may be controlled before becoming widespread throughout the territory covered by CIOARETI'E MERCHANDISERS ASSOCIATION. To this end, we ask that you make it a special point to be present at the coming meeting, so that we may have ,the benefit of your views and opinions in considering this problem and in deciding upon a means to cope with it. - In this respect, I might advise that the National Association bas already decided upon a preliminary course of action, with which we will acquaint you at the coming meeting. At a meeting of the association held March 10, 1938, the following report was made of a discussion concerning the question and practicability of a central buying agency. It was proposed to favor only those manufacturers who would agree not to sell to nonmembers. Mr. Levy expressed the opinion that this Is in the nature of a boycott. The situation was likened by Mr. Forbes to the resident buying offices conducted and patronized by department stores.

At several meetings of the board of directors of the association plans were discussed for the adoption of a central buying office. At a meeting of the board of directors held June 9, 1938, the following report was made:

The policy of the Association regarding the manufacturers' cooperation and the curtailment of the practice of creating new operators. It was the suggestion of a member that a central buying office be established on a non-profit basis for all members of the Association. lie felt tllat the time was ripe for the members of the Association to do something constructive and help stabilize the busin<'ss. After discussion, no definite plan was reached, and a recommendation was made to submit this problem to the body at large. Findings 33F.T. C.

At a meeting of the directors held J nne 16, 1938, the following report was made:

The matter has been taken up with a legal mind at a meeting of the Committee. The plan Is legal and feasible and can be worked out. IT'his plan is as follows. The operators enter into an agreement with the Association. The Association is to make all purchases of machines through an office created by the Association. The operators can make individual deals with the manufacturers, if they notify the Association of the deal. A code of fair trade practices Is to be adopted, with penalties for violation of this code. The manufacturers can be placed on the Association accredited list when they agree to restrict the territory of New York to accredited operators. Manufacturers agree to list with the Association all their operations and agree not to extend same. Manufacturers shall not make sales of individual machines to location owners. At the meeting held September 1, 1938, it was unanimously adopted that a central buying plan be established. At the meeting held on September 15, 1938, it was reported to the membership that the association had gone on record as favoring:

a plan for a central buying office and that the Board of Directors had devised the following plan: Vendormatic Service Corporation will be set up to handle this plan. The members are obliged to sign the contract at a given date. PAR. 13. The objects and purposes of the Cigarette Merchandisers Association of New Jersey, Inc., as set forth in its constitution, bylaws, and code of fair trade rules, and as disclosed by numerous resolutions adopted at its meetings, and the things and acts done pursuant thereto, are similar to those of the New York association; to wit, The Cigarette Merchandisers Association, Inc.

In connection with the efforts of the association to monopolize the business of operating cigarette machines in its territory for the benefit of its members, the association requested and obtained the cooperation of the manufacturers of automatic cigarette vending machines in refusing to sell to locations and in refusing to create new operators. The association from time to time appointed committees to call upon manufacturers o£ automatic cigarette vending machines and to Impress upon them the advisability of refusing to create new operators and to refuse to sell to locations, and in various other ways attempted to exert, and did exert, pressure on such manufacturers. The association entered into agreements with manufacturers whereby, in consideration for the manufacturer agreeing not to sell to new operators or to locations, it undertook to purchase on behalf of its members a definite number of machines each year. 'Vhen a manufacturer refused to comply with the association's requests or demands with respect to sales of cigarette vending machines, the manufacturer was boycotted or threatened with a boycott by the association. The associat,ion demanded that its members strictly adhere to the rules and regulations INTER-STATE CIGARETTE MERCHANDISERS ASSN. ET AL. 861 834 Findings of the association. A grievance or arbitration committee heard complaints respecting violation of the rules and regulations by members; the said committee had authority to mete out, and did mete out, penalties for violations thereof.

PAR. 14. The objects and purposes of The Automatic Cigarette Vendors Association of Eastern Pennsylvania as set forth in its constitution, bylaws, and code of fair trade practice, and the resolutions adopted from time to time at its meetings, and the acts and things done thereunder and pursuant thereto, are similar to those of the Cigarette l\fechandisers Association, Inc., and Cigarette Merchandisers Association of New Jersey, Inc. The primary object and purpose of the association, as gathered from its activities, is the creation of a monopoly of the cigarette vending operating business in its territory for the benefit of its m.members. For the accomplishment of its object and purpose, the association from time to time has adopted rules and regulations designed to eliminate competition among its members. The association accepts and secures the cooperation of manufacturers in eliminating competition from nonmembers. The association from time to tim,e impressed upon manufacturers the advisability of the manufacturers' cooperation in limiting sales of their machines to members of the association. In this connection the ass~ciation entered into an agreement with the manufacturers whereby it was to purchase a specific number of machines from each manufacturer during the year, in consideration of said manufacturers' promise not to creato new operators. One of the manufacturers did not abide by its promise and did sell to nonm,members of the association, with the result that no member of the association since that time has purchased machines from that company, nor has the association carried out its part of the contract to purchase annually a specified quantity of machines from that manufacturer.

PAR. 15. The objects and purposes of The Cigarette Machine Operators of Connecticut, Inc., as set forth in its constitution, bylaws, and code of trade practices, are substantially similar to those of the other respondent associations hereinabove referred to. The association has in its membership the operators in the State of Connecticut. The members of the association control 90 percent of the machines now in operation in that State. The preamble of the association's constitution and bylaws is as follows:

To !'liminnte unfair and ruinous comfJ('tition which hns caused st:>rious financial loss and cmbnrrassmrnt to the l"t:>ndors of tobacco products by machines, to im· prove !'economic conditions in the Industry, and to the end that the sale of tobacco products by machines In the State of Connecticut may be stabilized and conducted profitably, this Association Is formed.

435~26~2---vol.SS----~~ Findings 33F.T.C.

Under the title Objects and Purposes of the Association, the following is stated:

The purpose of the Association shall be to establi~:;h such relations and mutual understanding among those engaged in the vending of tobacco products by ma· chines as will contribute to the welfare of the business generally; to consider and adopt such forms of lawful and ethical business practices and principles as seem likely to improve economic conditions; to cooperate with government agencies and with those engaged In the tobacco industry generally to eliminate the evils that now exist or may hereafter arise, and to foster such measures deemed for the best interests of the business and welfare of the public * * *· The association's trade practice rules prohibit. the following as an unfair trade practice:

(the operation of) any cigarette machines when such are made by any manufacturer or vendor who sells or permits the sale of such machines to individual locations, in competition with the operators or to do business with any manufacturer or vendor of such machines who fails to comply with provisions for territorial protection to members of the association. The association from time to time appointed committees to call on manufacturers for the purpose of protesting sales of machines to new operators. The association likewise adopted resolutions which it mailed to manu.facturers in which it was indicated that the members thereof objected to sales of machines to new operators and that such sales would incur the displeasure of members. It also secured written pledges from manufacturers that they would comply with the rules and regulations of the association as they applied to sales to new operators.

At a meeting of the association held September 8, 1936, the following report was made :

A discussion relative to any member being forced to dlseontlnue purchasing machines from a manufacturer because of some breach of territory .rights, and what assistance that member could get regarding machines from other members. PAn. 16. Cigarette Merchandisers Association of New England was organized at a later date than the other heretofore-mentioned respondent associations. Its objects and purposes, as indicated by its constitution, bylaws, and code of fair trade practices, are similar in every respect to the objects and purposes of the other respondent associations. This association has joined forces with the Interstate Association and has participated in its activities. The minutes of meetings of its executive committee and of the membership disclose the appointment of committees to call on manufacturers in refer('nce to the' lat· ter's sale to locations and the imposition of penalties on members for violating the association's fair trade rules. PAR. 17. The objects and purposes of the Inter-State Cigarette Merchandisers Association, as set forth in its constitution and bylaws, are INTER-STATE CIGARETTE MERCHANDISERS ASSN. ET AL. H63 834 Findings similar to the objects and purposes o£ the other respondent associations. Its constitution sets forth:

This Association aims thru collective action. to lay the foundation for auu maintain equitable relations between all factors that affect economic conditions in the Industry. It recommend::! unifot'm acfi(jn In securing construdive lE>gislution toward the elimination of any abuses of power or unfairness. This Association leaves all qu~>stions of manag~ent in ths bm;i::e~ to the determination of each n1member.

At a meeting of the association held May 20, 1939, the question arose: As to what to do where a given manufacturer sold machines to either nonmembers or started an independent overation in a given area. Mr. Alfred Sharenow suggested that the better customers of such ll manufacturer could speak to such manufacturer where there was such a <listurbance in any given area and that the manufacturer would probnbly seriously consider and remedy any such situation.

· Mr. Charles. W. Stange reminded the Interstate Assodation that the purpose of the Inter-State was to eliminate abuses by the manufacturers and that everything should be <lone to acquaint tlle manufacturer with the disturl.umce in a givl'n area.

Mr. Goldstein proposed the following resolution which was ~Pconded by Mr. Nastrl: "That the Inter-State CMA appoint representatives to cooperate with the local associations in·contactin~t the particular manufacturer of a given area in order to straighten out any given mutter." Mr. John Sharenow moved that it was the opinion of the Inter-State Cl\IA that New York Cl\fA and New Jersey Cl\IA appoint a Committee to settle the commission rates in overlapping areas.

The minutes of the meeting o£ the association held October 14, 1939, dearly show that the object and purpose of the association were to use the combined power o£ the membership of all the local associations as consolidated by the Inter-State organization in intimidating and comp~lling manufacturers of automatic cigarette machines to refuse to sell to locations, to nonmembers o£ associations or to new operators. Some of the minutes.of sa~d meeting are as follows: Mr. B!lrest then brought up the question of whether any of the Inter-State members were having trouble with direct sales to locations or with the creation or new opet·ators In any particular area.

Mr. Zimmerman reported that beeuuse of the difficulties arising with new competition crl'ated by a manufacturer1 the ConnPeticut C. l\1. A. called on suld manufacturer for cooperation. The manufacturer Involved did not offer to assist the association in clearing up the difficulties created. Mr. John Sharenow told the memiJer::l that some difficulty had urisPn in New Jersey with a cigarette ven<liug machine manufacturer and that following cont~lderable effort, the Nrw Jer::lly association arrived at an agreement with that muuufarturl'r who has been coopPrnting with the C. 1\1. A. of Nrw Jersl'y since tlmt tim.>.

Mr. AI Shut·enow I'Xpressed himself us b('fng sincerely disuppointed in the rnt>thod used by the Connecticut As~wciation to accomplish what the Inter-Statu 1tad ori{/inal/y set out to do. Aecordlng to :\Ir. ~harenow the ot·lginal purpose Findings 33F.T.C.

for the formation of the Inter-State C. M. A. was to attempt to obtain cooperation from manufacturers in all areas where there are C. M. A.'s and that where any manufacturer would not cooperate, the Inter-State was to appoint a committee made up of members from various States to call on the offending manufacturer. In such a way the full power of the Inter-State Association Clfuld lle used llccause in each area covered lly any memller in the Inter-State there are ce_rtain groups who have strength with each manufacturer.

Mr. Hawthorne suggeF:ted that if a manufacturer refused to cooperate that one ol the best methods open to any State association was to notify their members of the facts and to allow tee members to follow their own best judgments. Mr. Forbes stated that the C. M. A. of New York has no difficulty with any manufacturer and that these manufacturers only sen to any new operator at the suu.oestion of the Associtttion.

Mr. Sharenow said that the reason for the cooperation of all manufacturers with the New York Association was because all manufacturers were sufficiently represented by the membership for them to cooperate with the Association members. He also suggested that inasmuch as the New York .Association is in a friendly status with all manufactul"ers, that they use their strength in llehalf of other Inter-State ,memllet·s.

Mr. Zimmerman made a motion that each individual Manager of the various C. M. A.'s write a letter to any offending manufacturer asking for cooperation wherever necessary.

Mr. King stated that at the present time the Pennsylvania Association is receiving all cooperation requested and that they have bel:!n working on a private matter with one particular manufacturer for a period of one year and, therefore, he did not want the Pennsylvania Association to go on record to write this one particular manufacturer.

l\Ir. Forbes suggested that the services of the President and Treasurer of the New York C. M.A. be used for contacting any manufacturer involved. l\Ir. Al Sharenow made a motion which was passed that in the event of any disturbance the Recorder be immediately notified by the Association in that territory; that Managers of each association have on file a record of their operators according to number of machines and type of machines; and that each Manager contact the proper operators and arrange for them to meet with the offrnding manufacturer.

Mr. Fuhrman suggested that the individual association select whatever representatives were best suited to the particular case and l\Ir~ Forbes suggested using operators who were not purchasers of the machines made by the particular manufacturer involved.

PAR. 18. The various local respondent associations all joined the respondent Inter-State Association, appointed the requisite number of delegates who attended its meetings, and in various ways cooperated together and with the Inter-State Association in attempting to effectuate its objects and purposes.

The president of the Cigarette l\Iachine Operators of Connecticut, Inc., in a letter dated October 23, 1939, to the manager of the Cigarette Merchandisers Association of Nt>w Jersey, Inc., who was also recorder of the Inter-State Association, after referring to competition INTER-STATE CIGARETTE MERCHANDISERS ASSN. ET AL. 865 834 Fi!ldings from an operator who, it was alleged, is controlled by a distributor for the U-Need-A-Pak Corporation, stated:

As this has been a serious situation here for some time, and some action must be taken to see if it can be eliminated, I am requesting you to get in touch with the presidents of the various associations who are members of the Interstate C. M. A., to appoint one or two men to act as a committee to call on the head of the U-Need-A-Pak Corporation, I would sincerely recommend that the men chosen should be those who are large U-Need-A-Pak operators, and who are intimately known to the ofikers of the U-Need-A-Pak Corporation, so that their word will carry more weight.

Arrangements should also be made for an interview with the officers of the Company in question, and I shall be glad to receive any comments or suggestions that would tend to make this meeting a successful one. The recorder, under date of October 25, 1939, replied as follows: I received your letter of October 23rd yesterday and will immediately communicate with the other members of the Inter-State C. M. A. I would like to set a date for this meeting with U-Need-A-Pak Products Corp. for the very near future.

I do hope that we shall be able to straighten out the situation so that business in Connecticut can resume its usual smooth operation. As far as making any appointment for the committee to call on the officers of the company In question, I believe that we should hold the matter in abeyance following the interview with Messrs. Willens and ~einer. The recorder, on November 2, 1939, in a communication further stated: · After receiving your letter concerning the situation in Connecticut, I contacted all the Managers of the Inter-State Association members. In the meantime, I also got in touch with Matthew Forbes who asked me to let him handle the matter, if possible. Mr. Forbes told me yesterday that he had lunch with 1\lr. Willens during the past week and had taken up the situation with him. Mr. Willens has told 1\Ir. Forbes that he will investigate the matter and I am sure that it will be taken care of very shortly without any further contact through the Inter-State members.

At a meeting of the Inter-State Cigarette Merchandisers Association on February 11, 1940, Manager Forbes of the New York association reported that- A situation had arisen in Connecticut which was causing trouble to members of that Association. Both Mr. Forbes and 1\lr. Hawthorne volunteered their services to clear up this matter and the manufacturer agreed to sell the operation to mernhers of the Connecticut C. 1\I. A.

A meeting of the Inter-State Association was held February 11, 1940. 'lhe eastern representative for the National Vendors, Inc., who was present at said meeting, stated:

January 2!), 1!140, he received an Inquiry from the St. Louis office concl'rnlng this operator. He thereupon contacted his representative In Boston, who had sold five machines to this operator without Investigating whether or not this Findings 33F.T.C.

man was already an established cigarette vending machine operator. Mr. Cantor Raw this operator on February 8th at which time they told him that they bad purchased fifty machines from another manufacturer and was given an order which he refused to accept.

Mr. Sparrow of Connecticut stated that the report was made that the Diamond Self Service was entering the field about three weeks before the operation actually was started. The company was backed by a tobacco concern. Originally the- U-Need-A-Pak Products Corp. was requested to sell machines to this new operator but refused. Mr. Kushner, a representative of the U-Need-A-Pak Corp., bad been instructed how to act in this matter by his company. However, the U-Need-A-Pak Corp. had also gone on record that if someone else started a new operator, they would sell equipment to him. Mr. Sparrow said that he heard of the DuGrenier machines which bad been sold through his nephew who bad lost several location.-. He immediately called New York to find out from Mr. Glassgold what the f!ituation was. Mr. Kushner of the U-Need-A-Pak Corp. investigated the location,; and found DuGi-enter machines operating and then wired his firm the facts. Mr. Morris Zimmerman stated that Mr. Sparrow bad been very instrumental in clearing up the former situation in Connecticut. He also said that he had been forewarned of new trouble in Connf'Cticut. Tht• Diamond Self Service, according to Mr. ·zimmerman is headed by a group of racketeers. This same group has started operations in variom~ lines and then sold out for large sums of money. This group is using politics, other types of pressure and actual arrests in order to put machines into locations. Mr. Forbes suggested that a campaign of action should be planned without auy further recourse to committ~e meetings with manufacturers. President 1\Iasone stated that he had a conference with l\Ir. Willens on thp l'vening of February loth concerning this matter. 1\Ir. Willens promised that it the DuGrenier, Rowe and National organizations would each go on record not to make any more sales that he would stop selling ma<:hines to the Diamond Self Service. However, there was one condition to this statement and that was that be must be permitted to fill the last order which he had received. Mr. Sparrow declared that the situation In Hartford is a matter of a per.son~rl grievance. He also said that be had been instrumental in pr~nting the sale of U-Need-A-Pak machines to newly created nonmembers in Connecticut. Mr. Willens has told Mr. Sparrow that since straightening out the situation in Connecticut, there has been only one U-Need-A-Pak machine sold in that State. Again Mr. Sparrow )Jrought up the fact that a new operator was created in Conr,ecticut by Mr. Zimmerman, a member of the Association, who sold one Aristocrat machine thereby starting another competitor in the field. Mr. John Sharenow stated that the same evils existed everywhere, that in ordP.r for a new operator to purchase machines from a manufacturer, he would have to have originally some equipment. However, he felt that the question in this case was would DuGrenler have sold the Diamond Self Service any more machines when they had been addsed of the et'ror which was made. It they would have refused to do so and all other manufacturers had also refused to do so then thp Pituatlon would have straightened out of its('lf. In New York and New Jerst>.\" we have been able to take care of matters with most of the manufacturers anll therefore, we have been able to get the cooperation which we deserve. Mr. Sharenow further asserted that in his opinion a committee could take care of thio; situation and that a manufacturer who bas lost the good wlll of Association operators, must continue for a reasonable len~;th of time to try to win the re!lpect of those operators.

INTER-STATE CIGARETTE MERCHANDISERS ASSN. ET AL. . 867 834 Findings A motion was made and passed to appoint a committee to take up matters of this sort with any manufacturer with whom trouble might arise. Mr. Joh•l Sharenow further stated that he slwuld ask the manufacturers to observe the spirit of our request and not to look for loopholes which could possibly be found. In other words, if a manufacturer were to consult us first before actually shipping machines we could possibly be of assistance to them. On February 19, 1940, Secretary Masone of The Cigarette Machine Operators of Connecticut, Inc., in a communication to the U-Need-A- Pak Products Corporation stated as follows:

On behalf of our Connecticut Association, I want to thank you for the courtesy shown the representatives of our Inter-State Association when we met in your office last week.

Naturally, we are interested in the outcome of that conference with you and your associates, and we are watching with a g1·eat deal of interest any shipments of machines made to the operator we discussed. According to your promise of last week the shipment of machines en route to him at the time of our discussion, must have reached him by this time, and any future shipment of machines made at this time would be against our agreement. It may also interest you to know that we have received further assurances from the other manufacturers that they positively will not ship this concern any machines. PAR. 19. In the territory covered by the several respondent associations and Inter-State Association the members of said associations control between 85 and 90 percent of the business of operating automatic cigarette vending machines. Manufacturers have been forced to comply with the requirements of the various associations and have not created any new operators in territories covered by the various associations; said manufacturers have refused to sell to locations or to wholesale dealers with whom they formerly did business but who sold to locations; said manufacturers have likewise refu~ed to sell to nonmembers of associations. In certain territories manufacturers who have refused to abide by agreements not to create new operators in consideration for the undertaking on the part of an association to purchase a definite quantity of their machines annually have been boycotted by the members of such association. An example is the case of the U-Need-A-Pak Corporation which entered into such an agreement with the Philadelphia association, The Automatic Cigarette Vendors Association of Eastern Pennsylvania. The U-Need-.A-Puk Corporation, subsequent to the making of said agreement did sell its machines to nonmembers. Since that time no member of the Philadelphia association has purchased machines from the U-Need-A-Pak Corporation. The effect of the activities of the various associations, acting indi- ·vidually and in combination with the Inter-State Association, with respect to manufacturers is clearly indicated by extracts from a memor:mdum report dated March 14, 1940, prepared by the president of the DuGrenier Sales Co. to the Arthur H. DuGrenier Manufacturing Co. Findings 33F.T.C.

concerning his meeting with the secretary o£ the Cigarette Merchandisers Association o£ New Jersey, Inc.:

M:r. Cherry called on us for the purpose of reaching an understanding with Du- Grenier that we would not sell cigarette machines to any new accounts in New Jersey. Specifically he wanted us to agree not to deliver to Schnorrbush machines on the order which we have. This led to a general discussion of the policies of his Association, what we could E-expect in return, etc., etc. It is our understanding that the Philadelphia Association does not even permit us to sell machines to non-members. Kline reported to me that Uneeda-Pak was blacklisted and that Association members are not permitted to buy from tTneeda-Pak because they violated this ruling. It is also my understanding that the Connecticut Association tries to enforce the ruling that manufacturers cannot sell to any new accounts although they may be permitted to sell non-members.

The New Jersey Association is attempting to operate on the basis of the Con- Jiecticut Association in that manufacturers may sell non-members but cannot start new operations .

• • • • • • • Be agreed that according to operators, we bad the best looking machine for 1940 and that based on identical prices and identical trade-in allowances, DuGrenier should receive orders for at least 500 machines. That if we failed to secure orderil from the above named customers, we would be justified in believing that such customers were getting trade-in allowances higher than the published figures or were getting rebates from a competitive manufacturer. He stated that the New Jersey As:;oclation working in conjunction with the Interstate group, i. e., New England, Connecticut, New York City, New Jersey and Pennsylvania Associations, were desirous of having the manufacturers fix a uniform trade-in price to which all would adhere and that the Associations were willing to see the manufacturers raise their list price $5.00 per machine so that all machines older than our l\lodel "S" and Rowe's Model Imperial could be taken in by the manufacturers at around $5.00 per machine and destroyed. The Associations were desirous of not having this old equipment re-sold to used machine dealers and come back on the market and to be put in use in their territories. • • • From 1\Ir. Cherry's statement there are virtually no non-member operators in New Jersey now except, Gambino in Manville, N. J., who was sold by l\lr. Paul some months ago and Schnorrbush, who only has possibly five machines. There is no question whatever that the Association members ganging up on any new (lperator can force such new operator to lose so much money operating new cigarette machines that he will be forced to sell out or go out of business. This Is practically what happened to Katzman. The Association allowed Katzman to get a fairly large number of good locations but after things were running fairly ~moothly for him, they began exerting pressure on his locations by offering adyanced commissions, bonuses, etc. so that in order to protect himself and hold what he had, Katzman had to join the Association, but this did not happen until after he had lost many of his better stop;;. From our experience In New Jersey, as well as Plsewhere in the 1\fetropolltnn area, In starting new operations, It seems that tlle headaches are not justified by the results. If we are unable to work out some satisfactory arrangement to sell machines in accordance with Association requirements, we wm be faced with three alterna tlves:

INTER-STATE CIGARETTE MERCHANDISERS ASSN. ET AL. 869 834 Order 1. Sell new operators with resultant c1·edit troubles and possible losses. I do not think that any of us would recommend to a friend of ours that he go into the cigarette machine business as a. new operator in New Jersey knowing the troubles that he would be almost sure to encounter. 2. Sell to locations either directly ourselves or through some dealer or distributor in New Jersey. It Is questionable how much business would result from this policy but certainly we would have far more collection troubles and such procedure would burt us in Southern New Jersey where Kline sells and would hurt us elsewhere with customers.

3. If we tried to do either of the above, there is a probability of failure which would result in this third alternative of doing little if no business in Northern New Jersey.

While it disagreeable to all of us and I have fought against being dictated to by an .Association as to bow and whom we can sell, the fact is that such conditions are not working out particularly adversely for Kline in Philadelphia. Our records show that In that part of New Jersey covered by Kline, be sold 133 machines compared to a total of 82 R & S machines and 39 W & V machines sold by Stewart and McGuire, Inc.

Even granting that our figures are not complete, it is possible that Kline has sold more machines to customers in his New Jersey territory during the past year and a half than S & l\1 sold in the same territory during the previous three or four years. I am inclined to believe that a part of our trouble in the Northern :Jij:ew Jersey territory may be our sales coverage. In other words I think that possibly Kline would have gotten a far greater share of the business from Northern New Jersey than we have been able to obtain. • • * * * * • I have an appointment to see Mr. Lascari .today at about 3:00 P. M. and while I am still interested in making a distributorship arrangement with him and think it might work out to our advantage, I believe that if the manufacturers did agree to a fixed trade-In allowance price for old equipment, as well as for equipment less than five years old, that we might expect to get a fair share of the business. So I will talk to 1\lr. Lascar! along the line of the .Association proposal.

Mr. Cherry states that the .Association realizes that they must give us a fair share of the business on our new machines, else we will be forced to use other methods of getting our share of the business, and, although Cherry may be kidding us to some extent, I think there is some truth in what he says. Certainly he was frank enough to admit that our share of the business should be 500 machines which is more than we had originally thought of as securing through Lascar!.

This memorandum is for the record so that you will know just what Mr. Cherry has said to us and the intentions of the New Jersey .Association. PAR. 20. Each of the said respondents; to wit, the respondent associations, respondent officers and directors, and respondent members herein mentioned, acted in concert with one or more of the other respondents in doing and performing the acts and practices herein stated in furtherance of understandings and agreemrnts.

PAn. 21. It follows from the foregoing facts that for more than 3 years last past the respondent organizations and associations, their officers, directors, and members herein mentioned have entered into and 870 . FEDERAL TRADE COl\:UIISSION DECISIONS Order 33F.T.C.

carried out understai1dings, agreements, and conspiracies between and among themselves for the purpose of restricting, restraining, suppressing, and eliminating competition in the purchase, distribution, and installation of automatic cigarette vending machines in interstate commerce between and among the several States of the United States, and that pursuant to such understandings, agreements, and conspiracies, the said respondents have engaged in and performed the following practices and acts:

(a) Established and attempted to establish the members of the respondent organizations and associations, operators of automatic <:igarette vending machines, as a preferred class for the purpose of having manufacturers and distributors of automatic cigarette vending machines confine the sale and distribution of such machines to such respondent member operators exclusively;

(b) The said respondents interfered with and prevented competitors of the said r~spondent member operators in the said competitors' efforts to obtain such machines ;

(c) Said respondents required, induced, and compelled manufacturers and distributors of automatic cigarette vending machines, by promises and threats, not to sell or ship automatic cigarette vending machines to competitors of the said respondent member operators, and to confine the sale and distribution of such machines to the said respondent member operators;

(d) Said respondents threatened to boycott, and have boycotted, manufacturers and distributors of automatic cigarette vending· machines selling such machines to competitors of the said respondent member operators.

CONCLUSION The acts and practices of the respondents as above set forth are all to the prejudice of competitors of respondent member operators and of the public, have a dangerous tendency to and have actually hindered and prevented competition in the sale of automatic cigarette vending machines in commerce within the intent and meaning of the Federal Trade Commission Act, have unreasonably restrained such commerce in automatic cigarette vending machines, and constitute unfair methods of competition in commerce within the intent and meaning of the Federal Trade Commission Act. ORDER TO CEASE AND DESIST This proceeding having been heard by the Federal Trade Commission upon the complaint of the Commission, the answer of the respond· ents, and a stipulation as to the facts entered into between the INTER-STATE CIGARETTE MERCHANDISERS ASSN. ET AL. 871 834' Order respondents herein by their counsel, Parker, Chapin & Flattau, and W. T. Kelley, Chief Counsel for the Commis~ion, which provides, among other things, that without further evidence or other intervening procedure the Commission may issue and serve upon the respondents herein findings as to the facts and conclusion based thereon and an order disposing of the proceeding, and the Commission having made its findings as to the facts and conclusion that said respondents have violated the provisions of the Federal Trade Commission Act: It is ordered, That the respondents:

1. Inter-State Cigarette Merchandisers Association, its officers as follows: President John Sharenow; Vice President William King; Treasurer Edward Beresth; Secretary Robert K. Hawthorne; Recorder James V. Cherry; and its directors as follows: Anthony J. Masone, Alfred Sharenow, and Edward J. Dingley; 2. The Cigarette Merchandisers Association, Inc., its officers as follows: President Robert K. Hawthorne; First Vice President Alexander Frazer; Second Vice President Albert S. Denver; Treasurer Samuel Y olen; Secretary Tom Cola; Manager Matthew Forbes; its directors as follows: Michael Lascari, Jackson Bloom, Louis D. Schwartz, Martin M. Berger, Bernard Rosen, Harold Roth; and its members with which its respective officers and directors are connected; • 3. Cigarette Merchandisers Association of New Jersey, Inc., its officers and directors as follows: President and Director Charles W. Stange; Vice President and Director Max J acoLowitz; Treasurer and Director Henry ,V. Hartmann; Secretary and Director John Grout; Manager James V. Cherry; its directors as follows: Michael Lascari, Jolm Sharenow, Samuel M.l\falkin, Harry Zink, Herman Arlein; and its members with which its respective officers and directors are connected;

4. The Automatic Cigarette Vendors Association of Eastern Pennsylvania, its officers and directors as follows: President and Director Walter I. Davidson; Vice President and Director Patrick J. Bonoma; Treasurer and Director J... eRoy A. Shackleton; its directors as follows: William L. King, W. Harry Steele, Jr., Harry D'Alessandro, Ralph J. Burnard, Joseph Silberman; and its members with which its respective officers and directors are connected;

5. The Cigarette Machine Operators of Connecticut, Inc., its officers as follows: President Anthony R. N astri; Vice President Robert Zimmerman; Secretary Anthony J. Masone; Treasurer M. E. Norris, its directors as follows: John J. Fitzgerald, Samuel Aliener, Nathan Dubowry, Lena Bonelli, Charles Sparrow; and its members with which its respective officers and directors are connected; 872 FEDERAL TRADE COMMISSION DECISIONS ' Order 33F.T.C.

6. Cigarette Merchandisers Association of New England, its officers as follows: President Samuel M. Goldstein; Vice President Louis Derman; Secretary William B. Burns; Manager 'Valter R. Guild; its directors as follows: Albert :M. Coulter, Frank Fendel, Oscar Gerson, Julian Karger, Cleo C. Kingsley, Charles E. Knight, Alfred I. Sharenow, Jacob Shelman, Harry Spierer, William Spiller; and its members with which its respective officers and directors are connected; and their respective agents, representatives, and employees, in connection with the purchase and location of automatic cigarette vending machines in commerce as "commerce" is defined in the Federal Trade Commission Act, do forthwith cease and desist from doing and performing by understanding, agreement, or combination between themselves, or between any two or more of them, or with others, any of the following acts and practices :

1. Establishing, or attempting to establish, the members of the aforesaid respondent organizations and associations or any other group of operators of automatic cigarette vending machines, as a preferred class for the purpose of confining and requiring the sale and distribution of automatic cigarette vending machiiies by manufacturers, producers, and sellers thereof to such member operators exclusively . • 2. Interfering, or attempting to interfere with competitors of the members of the aforesaid respondent organizations and associations, operators of automatic cigarette vending machines, in the said competitors' efforts to purchase and obtain such machines. 3. Preventing, or attempting to prevent, competitors of the members of the aforesaid respondent organizations and associations, operators of automatic cigarette vending machines, from purchasing or obtaining such machines.

4. Requiring, inducing or compelling, by promises, threats, coercion, intimidation and otherwise, manufacturers, producers and sellers of automatic cigarette vending machines;

(a) Not tD sell or ship automatic cigarette vending machines to rompetitors of the member operators of the aforesaid respondent organizations and associations, or directly to consumers of automatic cigarette vending machines;

(b) To boycott competitors of the member operators of the aforesaid respondent organizations and associations;

(c) To confine to the member operators of the aforesaid respondent organizations and associations, the said manufacturers', producers' and sellers' sales and shipments of automatic vending machines intended for use, consumption, or resale in the various States where the member respondents are engaged in business;

INTER-STATE CIGARETTE MERCHANDISERS ASSN. ET AL. 873 834 Order 5. Boycotting and threatening to boycott manufacturers, producers, and sellers of automatic cigarette vending machines who sell or ship such machines either to competitors of the member operators of the aforesaid respondent organizations and associations or directly to consumers of such machines.

It is further ordered, That the respondents shall within 60 days after service upon them of this order, file with the Commission a report in writing, setting forth in detail the manner and form in which they hav~ complied with this order.

874 FEDERAL TRADE COl\fl\fis."iion DECISIONS Complaint 33F.T,C.