Marlboro Tobacco Board of Trade

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IN THE 1U'rI'R OF MARLBORO TOBACCO BOARD OF TRADE ET AL.

COMPI AINT, FI DINGS, AND ORDERS II\ REGARD TO THE ALLF.GED VIOLATIOK O:P SEC. 5 OF AK ACT OF CONGRESS APPROVED SEPT. 26, 1914 Docket 5857. Complaint, Mar. 19.51-Decis-ion, Sept. , 1951 \Vhere a number of concerns in various states, which (1) were engaged as sellers buyers, brokers, warehousers, packers, processors or manufacturers of tobacco products; and which (2), in the case of three operated auction warehouses near the town of Upper IIIarlboro, Md., through which there had been marketed, prior to the 1949 tobacco sellng period, the entire loose leaf tobacco crop sold in said vicinity; and which (3) were members of an association or "Board of Trade, which they organized to regulate and control the marketing of tobacco in said town and adjacent territory (natural 01' preferential market for tobacco gro\vers in three Maryland counties, where was produced the major portion of the leaf tobacco grown in the state). and which so dominated and controlled said market area that it was impossible to engage in the tobacco market therein without having been admitted to membership- Entered into and carried out agreements and understandings between and among themsel"les to . suppress competition in the sale and purchase of tobacco in said market area; and pursuant thereto concertedly and collectively- (1) Established and maintained a monopoly in the auction sale of tobacco on said market, in their aforesaid three member warehouses; (2) Denied membership in their said association or board to a tobacco warehouse corporation which desired to conduct a fourth tobacco auction warehouse in such area in addition to the aforesaid tl1ree, which bad been unable to handle all the tobacco presented for sale by the Maryland growers, with resulting hardship and inconvenience;

(3) Required that all member warehouses charge uniform fees; (4) :BJstablished and maintained a boycott of a potential competitor of said board' s member warehouses; and (5) Made use of said board as a medium for effectuating and carrying out said agreements, etc. and the acts and practices herein set out; Capacity, tendency and effect of which agreements, and the things done pursuance thereof were to unreasonably restrain competition and trade in the sale. purchase and distribution of tobacco and tobacco products in various states and in foreign countries; and deprive the public of the advanta of competitive prices and other advantages which they would receive and enjoy under conditions of unobstructed competition; and othenvise to operate as a restraint upon free and legitimate competition in such trade and industry:

Held That such acts and practices, under the circumstances set forth, were all to the prejudice of the public, and had a dangerous tendency to and did actually binder and prevent competition and restrain trade between and among said member respondents and others in the sale, purchase and distribution of their said products; placed in themselves the power to control and enhance prices and terllS find conditions of si11e; had a dnn erous tend- 270 FEDERAL ' TRADE COMMISSION DECISIONS Complaint 48 F. T. C. eneV to create in said El€mber warehouses amonopoly in the nnction and sale of tobacco in comnwrce; nnreasol1flbly restrain cd such commerce in the merchandise concerned; and constituted unfair methods of competition commerce and unfair acts and practices therein. Before illi' . Fi' an1c Hicr trial examiner. 1IT. GeQj'ge W. Williams andllh. Rufus E. Wilson for the Commis- 81011.

Barton, Wilmer, BTaMble, Addison Semans of Baltimore, Md. for respondents, and alo lg with llh. Wiliam B. OZi1" , of Fuquay Springs for Arthur R. Talley.

Davies, Richbe1'g, lye/ings, Beebe Landa of 'Vashington, D. C. for R. .J. Reynolds Tobacco Co.

COMPLAINT Pursuant to the provi3ions of the Federal Trade Commission Act and by virtue of the amhority vested in it by said act, the Federal Trade Commission havhg reason to believe that each and an of the parties named in the cap ion hereof fLnclllcreinafter more particularly described, designated, a;ld referred to as respondents, have violated llel arc violating the provisions of section 5 of the said act, and it appearing to the Commi ,sion that a proceeding by it in respect thereof would bc in the public inte.rest, hereby issues its complaint stating its charges in that respect a: follows:

PARAGRAPH 1. The :'cspondent :Marlboro Tobacco Board of Trade is an unincorporated' association organized on or ,about Septembe.r 6 IDED with its principal offce and place of business located in the lawn of Upper i"rlboro (sometimes referred to as Marlboro), tate of MarJJanrl. The membership of said respondent Marlboro Tobacco Baarel of Tracle hereinafter referred to as respondent Board is composed of corporations, partnerships and individu0-1s located in the various States oE the United States and who are generally pngnged in the tobacco marketing business either as sellers, buyers brokers, warehouses, packers, processors, or the manufacturers of various tobacco pro duds, such as cigarettes and pipe smoking t.obaccos.

The name,s of the offcers of said respondent Boarel ,,- , individually anel as such offcers of srjd respondent BonI'd, a.rc named as respondents herein, and in such capacity hayc been, and are now, in the posi tion of dominating and controlling the affrt1rs of said respondent Board, including the pnctices sct forth he.rein, are: James J. Bnehheist"r, president.

A. Ha.milton King, secretary-treasurer.

MARLBORO TOBACCO BOARD OF TRADE ET AL. 271 269 Complaint PAn. 2. Respondent Edelen Bros. ,Yarehouse, Inc. , is a corporation organized, existing, and doing business under and by virtue of the laws of the State of Maryland with its principal offce located at 315 South Charles Street, in the city of Baltimore, within said State of j\faryland awl operating a tobacco auction warehouse in or near the town of Upper Marlboro, also within said State of Maryland. The following-named individuals are now, or have been during the time mentioned herein, officers and directors of said respondent Edelen Bros. ,Yarehouse, Inc., and as such and individually are named as respondents herein, and in such capacity have been and are now in the position of dominating and controlling the affairs of said corporation, including the practices set forth herein: Robert S. a11e80n, president.

Peter IV. Duvall, vice president.

"\Yilson C. BO\vling, treasurer.

W. R. Schult, secretary.

Respondent l\iarlboro Tobacco 1farket, Inc; , is t corporation organized, existing and doing business under and by virtue of the laws of the State of Maryland, with its principal offce located in the town of Upper "'1orlboro within said State of :\1maryland, where it is engaged in operating a tobacco auction warehouse. The following-named individuals are now, or have been during the time mentioned herein, offcers and directors of said respondent, l\iarlbora Tobacco Market, Inc. , and as S'uch, and indivic1ual1y, are named as respondents herein, and in such capacity have been and are now in the position of dominating and controlling the affairs of said corporation, including the practices set forth herein: Frank M. Rah, president.

Robert L. Rah, secretary.

Paul F. Summers, treasurer.

Respondent Edw. J. O'Brien & Co. (Inc. ), is a corporation organized, existing and doing business under and by virtue of the laws of the State of Kentucky, with its principal offce located at 815- West Main Street in the city of Louisvile within said State of Kentucky. :-aid respondent Edw. .J. O'Brien & Co. (Inc. ), is a tobacco buyer and maintains a branch offce a.nd tobacco warehouse in or near the town of Upper Marlboro, State of Maryland, under the tnule name of E. T. O'Brien & Co.

The following-named individuals are now, or have been during the time mentioned herein, offcers and directors of said respondent, Edw. J. O'Brien & Co. (Inc. ), and as such, 'md inc1ivic1uary, arc named 213840--54-- 272 FEDERAI TRADE COMMISSION DECISIONS Complaint 48 F. T. C. as respondents heI'ein nl1d in such capacity have been and are now in the position of dominating and controlling the affairs of said corporation, including the practices set forth herein: Edw. J. O'Brien, Jr., president.

Joseph Boyd O'Bri,'n, vice president.

James Graves O'Bdcn, secretary-treasurer.

Respondent Central Leaf Tobacco Co. is a corporation organized existing and doing bus: ness under and by virtue or the laws or the State of Virginia, with its principal offce located at Third and Cary Streets, in the city or Hichmond, within the said State or Virginia. Said respondent, Central Leaf Tobacco Co., is a tobacco buyer and maintains a branch offcu and tobacco warehouse in or near the town of Upper Marlboro, State of Maryland.

The ro11owing-named individuals are now, or have been during the time mentioned herein, offcers of said respondent, Central Leaf Tobacco Co., and as such, and individually, are named as respondents herein and in such capacity, together with the members of the board of directors hereinafter named, haTc been, a.nd are now, in the position of dominating and controlling the affairs of said corporation, including the practices set forth hcrcin:

J. Shields Harve:y, president-treasurer.

Greenhmv 1vlanry, .Tr., vice president.

L. L. Harvey, vice president.

J. M. Duhling, secretary.

C. L. Ball, Jr., assi:ant secretary.

R. J. \Vilkerson, assistant treasurer.

The following-namec: individuals arc now, or have been during the time mentioned herein, members of the board of directors of said respondent, Central Leaf Tobacco Co., and as such, and individually, are named as respondents herein and in such capacity, together with the offcers herein above' named, have been and are now in the position of dominating and controlling the affairs or said corporation, including the practices set forth herein:

J. Shields Harvey. J. Ross Newell. Greenhaw Maury, Jr. George R. Penn. L. L. Harvey. Mrs. A. B. Tuck. W. P. Henry.

Respondent Planter '; Tobacco Warehouse, Inc., is a corporation organized, existing and doing business under and by virtue or the laws of the State of Marylancl, with its principal offce and place of business located in or near the town or Upper Marlboro, within the said 1ARLBORO TOBACCO BOARD OF TRADE ET AL. 273 269 Complaint State of Maryland. Said respondent is engaged in operating a tobacco auction warehouse.

The following-named individuals are- now, 01' have been during the time mentioned herein, offcers and directors of said respondent, Planters Tobacco Warehouse, Inc., and as such, and individually are named as respondents herein, and in such capacity have been and arc now in the position of dominating and controlling the affairs of said corpora. tion, including the practices set forth herein: Gushl,vC A. Buchhcister, president.

George Y. Klinefelter, vice president.

James J. Duchheister, secretary-treasurer. Respondents Alfred H. 1'olzman, G. Nelson Davis, and Orville IV. Davis are copartners trading under the name and style of Southern Maryland Tobacco Co., a partnership, engaged in purchasing tobacco with their principal offce and place of business located in or near the town of Upper Marlboro, State of Maryland, and as such, and individually, are named as respondents herein. Respondents George Cassels-Smith and Edward Gieske are copartners trading lUH1er thf nnmp find ptyh of Gie,"-Jce &. NiFl1HWn, a partner1'ship, engaged in purchasing tobacco, with t.their principal offce and place of business located in or near the town of Upper J\farlboro State of J\iaryland, and as such, and individually, are named as respondents herein.

Respondent Arthur R. Taney is an individual operating as an independent tobacco broker, having his offce and place of business in the city of Fuquay Springs, State of North Carolina. The membership of the respondent Board is as above described and from time to time the membership therein is changed by the addition and withdrawal of members so that all of the members of said Board, at any given time, cannot be properly described herein for the purpose of naming them as respondents without considerable inconvenience and delay, and also said respondent Board's membership constitutes a class so numerous as to make it impracticable, ,without considerable inconvenience and dejay, to name them all as respondents herein; wherefore, the respondents hereinbefore named as respondents, and as such offcers, directors and members are also made respondents as representative of and as representing all of the members of said respondent Board, incJl1ding those members not specifically named herein.

PAn. 3. Tobacco, produced in the State of Maryland, is brought by the. growers thereof to the respondent tobacco auction warehouses members of respondent Board as aforesaid, where it is sold at auction ,, 274 FEDERAL TRADE COMlvIISSION DECISIONS Complaint 48 F. T. C. to purchasers, or agents ')1' representatives thereof, who are also members of said respondent Board and who are, in a great many instances engaged in the export tobacco trade or in the manufacture of tobacco products in States other than that of Maryland and shipped or otherwise transported by them from said State of Maryland to other States within the United States and to foreign countries and there has been, and now is ;, constant current :incl course of trade and commerce in said tobacco and tobacco products between and among the several States of the United States, as well as with foreigl1 countries.

PAR. 4. Respondent Board was organized by its members t.o regulate and control the markctilg of tobacco in the ";)1:rlboro and adjacent territory " and to that end to provide for rules and regulations that would be uniform in their application and in the mutual interests of the produce.rs, warehousemen and buyers. The rules and regulations adopted, commonly referred to as bylaws ' ere and are a part of the agree,mont under which said Board was organized, and the pertinent provisions thereof, among others, arc as follows: 4. Any person, firm or corporation may become a member of the ::iarlboro Tobacco Board of Trade upon producing evidence satisfactory to the warehouse, of his financial responsibilty and his good character and upon the payment of membership fee hereinafter provided for; and further agreeing to abide by all rules and regulations of the Board of Trade. 5. No person, firm or corporation shall be entitled to pl1chase tobacco on the Marlboro Tobacco Market 111101313 he or it is a member in good standing of the l\arlboro Tobacco Board of Trade.

Every member of the Iarlb()ro Tobacco Board of Trade sellng 6. * * * tobacco at auction shall charge uniform fees for all tobacco sold at auction an(l shall not make any rebate or pay any gratuity or perform any services or do any other act which may in any way be calculated to reduce the Commission and other charges.

To effectuate and enforce said bylaws, fines are provided, jn certain instances, for their viol lotion. In 1947 the following new bylaw ,was added:

26. 'l' hat the ::1a1'lboro Tobacco BOard of Trade shall be authorized and empowered to employ a supervisor under such terms and conditions they might think right and proper and that any supervisor employed shall have full authority to enforce all the By-Laws of the Marlboro Tobacco Board of Trade; to arbitrate all difference ' of opinion or interpretations which may arise; to regulate and adjust sellng' hours; to impose fines for the violation of the rules and regulations of the l\! H'lboro Tobacco Board of Trade and to perform any other duties necessary to promote the honest and effcient sale of tobacco on said markets.

PAR. 5. There are five counties in the State of yfaryland within hieh tobacco is prodlleecl, namely, Prince Georges, Anne Arundel MARLBORO TOBACCO BOARD OF TRADE ET AL. 275 269 Complaint C"lvert, Charles, and St. Marys. Prior to the 1949 market period there were eight auction warehouses in these respective counties from which the entire crop of loose-leaf Maryland tobacco was sold. Three of the said warehouses are located in or near the town of Upper :\Iarlboro, in Prince Georges County, J\id. Thc others are located in or near 'Valdorf, La Plata, and Hughesville, Charles County, Md. In the year 1949, there were 34 950 000 pounds of loose-leaf tobacco marketed from the five counties hereinabove named, the greater portion of which, consisting of 22 564 000 pounds, was produced in Prince Georges, Anne Arundel and Calvert Counties. Of this amount Prince Georges County "lone accounted for 10 187 000 pounds. The town of Upper 3iar1boro, and its vicinity, because of its accessibility, is at the present time, and heretofore has been, the natural or preferential lTwrket for a. substantial number of the tobacco growers in Prince Georges, Anne Arundel, and Calvert Counties. Up to and innnediately prior to the opening of the 1949 tobacco selling period the entire loose-leaf tobacco crop sold in the town of Upper 1\arlhoro and vicinity was marketed through three auction 'iyarehouses, as aforesaid, namely, respondents Edelen Bros. warehouse, Inc., Planters Tobacco 'Varehouse, Inc., and :\larlhoro Tobacco Market, Inc., a11 of which are located a.pproximate1y one-fourth mile to the east of the said town of "Upper Marlhoro, on United States HighWlty 301. In the past few years the three respondent warehouses aforesaid have been and are now unable to handle all the tobacco when and as presented in the usual course of business for sale by the J\iary land growers, as the floors of said warehouses become so crowded at times that it becomes necessa.ry to close down in order to clear out the tobacco thereon. This operates as a hardship and inconvenience to the growers who are then compelled to leave it on their trucks, find storage, or return same to their farms, to be brought again to the market on another clay. The market for the sale of Maryland tobacco opens on or about the first of 1ay of each year and normally does not close until some time during the month of August. In the 1949 market season a fourth tobacco auction warehouse was opened at 1Vaysons Corner, Anne Arundel County, which is some 2.6 miles from the nearest respondent warebouse near the said town of Upper Marlboro but in that market area, for the purpose of buying and selling tobacco at auction. PAR. 6. Said respondent Board, and its members, operating under and by virtue of its bylaws, have in the past and now continue, among other things, to aJJot or apportion, regulate and adjust the seJJing time among ;.said member warehouses, pass upon applications for membership in said respondent Board, although sole authority in this respect is actually vested in the warehouse members thereof, impose 276 FEDERAL '1'TRADE COMMISSION DECISIONS Complaint 48 F. T. C. fines for violations of said bylaws, require the charging of uniform fees and at all times herein mentioned the Upper Marlboro tobacco market has been dominated and controlled, and is now under the domination and control of respondent Board and its members. The authority of said ,'respondent Board is respected, acknowledged and adhered to by the buyers, agents, and representatives or the principal tobacco manllfac ;uring companies and by the independent buyers and speculators rend whose presence is necessary for a successful saJe so that it is virtually impossible for any person, firm or corporation to engage in the tobacco business, other than as a producer in the:Marlboro market area, without first having been admitted into membership in respondent Board.

During the years 194D and 1950 numerous applications were made by the offcers of the warehouse at vVaysons Corner to respondent Mariboro Tobacco Board of Trade for admission to membership in aid respondent Board. Katwithstanding that admission to membership in said respondent Board is, according to the provisions of its bylaws, as aforesaid, ncminal1y open to any applicant of good character and financial responsibility engaged in the tobacco industry of Jlarlboro and adjacent territory, " said respondent Board refused and still continues to r::duse to admit the aforesaid warehouse into membership of said respondent Board. Consequently, the refusal of respondent Board to admit the "\Vaysons Corner warehouse, or any other like situated warehouses, and although in the Upper Marlboro market area, into its monbcrship, as aforesaid, or to allot said warehouse selling time was in practical effect, to exclude it completely' from the Upper :llarlboro market and to eliminate it as a competjtor of respondent Board' s r1member warehouses as hereinafter set forth. PAR. 7. The respondent members of said respondent Board who own and operate tobacco auction warehouses in said area, as aforesaid would be in competition with each othet for the tobacco of growers in connection with the sale and marketing thereof, and with such other tobacco auction \varehouse, as aforesaid, if it were not for the act of said respondent3 in refusing to admit such warehouse into membership in said respondent Board. As a result thereof respondent Board's member warehouses continue to enjoy a virtual monopoly in the auction sale of tobacco in the market area in or surrounding the town of Upper 1\a,%oro.

PAn. 8. Said respondents, beginning on or about September 1939 and particularly within the last 2 years, including the present time have entered into, ma ;ntained and carried out agreements, understandings, combinations and conspiracies, between and among themselves, to suppress, hinder, stifle and lessen competition in the sale MARLBORO TOBACCO BOARD OF TRADE ET AL. 277 269 Complaint and purchase of tobacco in the market area of Upper Marlboro, State of Maryland.

Pursuant to, and in furtherance of, and to make effective said agree ments, understandings, combinations and conspiracies, said respondents have cooperatively, concertedly and collectively adopted, engaged , and carried out, the following methods, acts and practices: 1. Established and is now maintaining a monopoly in respondent member warehouses in the auction sale of tobacco on the Upper Marlboro market.

2. Denied membership in respondent Board to a tobacco auction warehouse corporation, enga.ged or that desired to engage, in the busi. ness of conducting a tobacco auction warehouse in such area. 3. Required that all respondent Inember warehouses charge uniform fees.

4. Established and maintained a boycott of potential competitor of respondent Board's member warehouses.

5. Used respondent Board as a medium for effectuating and carrying out the said agreements, understandings, combinations, and conspiracies alleged herein and have by and through said respondent Board carried out and done, and are now carrying out and doing, the acts a.nd practices herein alleged.

PAR. 9. The capacity, tendency and effect of the aforesaid agreements, understandings, combinations, and conspiracies in the methods acts, and practices and things done and performed by respondents in pursuance thereof are, and have been, to unreasonably lessen, suppress stifle and restrain competition and trade in the sale, purchase, manufacture, and distribution of tobacco and tobacco products, in the vari QUS Sbltes of the United States and with foreign countries, and to deprive the purchasing, using, and consuming public of the advantage of competitive prices, terms, and conditions in connection with the purchase thereof, and other advantages which they would receive and enjoy under conditions of normal, unobstructed, free and fair competition in said trade and industry and to otherwise operate as a restraint upon, obstruction and detriment to, the freedom of fair and legitimate competition in such trade and industry. PAR. 10. The acts and practices of said respondents, and the things done and performed by them herein alleged, are all to the prejudice of the public; have a dangerous tendency to hinder and prevent, and actually hindered and prevcnted, competition and restrained trade between and among said members of respondents and others in the sale, purchase manufacture, and distribution of their said articles of merchandise in commerce, within the intent and meaning of the Federal Trade Commission Act; and placed in respondents the power , ,, Decisions 48 F. T. C.

to control and enhance prices and other terms and conditions in connection with the sale, pnrchasc, manufacture, and distribution of the saiel articles of merehandisc; have a dangerous tendency to create in said respondent mernber 1vitl'ehouses a monopoly in the auction sale of tobacco in said commerce; have unreasonably restrained such commerce in their said articles of merchandise, and constitute unfair methods of competition and unfair acts ancl practices in commerce within the intent and :cueaning of section 5 of the Federal Trade Commission Act.

Declsion OF TIE CO!lUIISSION Pursuant to rule XX II of the Commission s rules of practice, and as set forth in the COEllnission s "Decision of the Commission and Order to File Report of Compliance " dated September 5 , 1951, the initial decision in the LJstant matter of trial examiner Frank Riel' as set out as follows became on that date the decision of the Commission.

INITIAL DECISION BY FRAXK HlER, TRIAL EXA IIXER Pursuant to the prov sions of the Federal Trade Commission Act the Federal Trade Couunission on l\iarch 7, ID51, issued and subsequently served its complaint in this proceeding upon respondents Marlboro Tobacco Board of Trade, an unincorporated association James J. Buch11eister :l1d A. IIamilton IGng, individually and as offcers of the Marlboro Tobacco Board of Trade, its members; Edelen Bros. 'Yarehouse, Inc., a corporation, Robert S. J a,meson Peter 'V. Duvall, 'Vilson C. Bowling and 'V. R. Schult, individually and as offcers and directors (If Edelen Bros. 1Varehouse, Inc. ; ::.farlboro Tobacco iarket, Inc. " corporation, Frank 1. Hall, Robert L. Hall and Paul F. Summers individually and as offcers and directors of Nlarlboro Tobacco :Ua,'ket, Inc. ; Edw. J. O'Brien & Co. (Inc. ), a corporation, Eclw. J. O'Brien, Jr., Joseph Boyd O'Brien and James Graves O'Brien, indivi(lually and as offcers and directors of Edw. J. Brien & Co. (Inc. ); Central Leaf Tobacco Co., a corporation, J. Shields Harvey, Greenhow Maury, Jr., L. L. Harvey, J. M. Duhling, C. L. Ball, Jr., R. J. 'Vilkerson, "iV. P. Henry, J. Ross Newell, George R Penn, and Mrs. A. 1:. Tuck, individually and as offcers and directors of Central Leaf T(lbacco Co. ; Plant.ers Tobacco 'Varehouse, Inc. a corporation; Gustav" A. B\1chheister, George Y. Klinefelter, and James J. Buchheister, individually and as offcers and directors of Planters Tobacco vVaTehollse, Inc. ; Alfred H. ToJzman, G. elson Davis, and Orville W. Davis, individually and as copartners trading MARLBORO TOBACCO BOARD OF TRADE ET AL. 279 269 Decision , a under the name and style of Southern :'Iaryland Tobacco Co. partnership; George Cassels- Smith and Edward Gieske, individually and as copartners trading under the name and style of Gieske & Niemann, a partnership; and Arthur R. Talley, an individual, the above-named respondent members, offcers and individuals named also as representative,s of the entire membership of respondent ::1a1'boro Board of Trade, charging them with the use of unfair methods . of competition and unfair acts and practices in commerce in violation of the provision of said act. After respondents filed their answers in this proceeding, a stipulation was entered into and incorporated in the record with the approval of the trial examiner, theretofore duly, designated by the Commission, on behalf of all respondents named with the exception of respondents Greenhaw' :Maury, Jr., and R. J. Reynolds Tobacco Co., with counsel supporting the complaint. By the terms of said stipulation, it was agreed that the attorneys supporting the complaint have and can produce competent witnesses who, if called, would testify that all the allegations of fact in the complaint are true and correct, that the record may be taken as if they had been so called and had so testified, that the stipulation should be made a part of the record and may be taken as the facts in this proceeding and in lien of evidence in support of the charges stated in the complaint, or in opposition thereto, that the trial eX tminer may proceed thereupon to make his initial decision stating his findings as to the facts, including inferences which he may draw from said facts and his conclusions based thereon and to enter his order disposing of the proceeding without the filing of proposed findings and conclusions or the presentation of oral argument. Said stipulation further provided that the Federal Trade Commission may, if the proceeding comes before it on appeal from the initial decision of the trial examiner or by review upon the Commission own motion, set aside the stipulation and rema,nd the case to the trial examiner for further proceeding under the complaint. By said stipulation, each respondent agreeing thereto waived any right to offer or have received in evidence any testimony, documents or other evidence in opposition to the allegations of the complaint waived any right to submit any proposed findings, conclusions or reasons therefor and aU other intervening procedure, and waived any right to challenge or contest any findings as to the facts in this proceeding based on the stipulation on the ground that such findings do not have substantial supporting evidence or that they are otherwise not proper and lawful.

Said stipulation further provided that it was entered into solely for the purpose of this proceeding, for the review thereof and for the Findings 48 F.

enforcement of any order issued in connection therewith and for no other purpose; that respondents do not admit or concede the accuracy of any findings to be made herein but agree that they may be made; and do not admit that they have violated or intended to violate any law.

Thereafter this proceeding regularly came on for final consideration by said trial examiner upon the complaint, answers thereto, said stipulation and the record, said sbpulation having been approved by the trial examiner, who after duly considering the record herein finds that. this proceeding is in the interest of the public and makes the following findings as to the facts, conclusion drawn therefrom and order: FINDINGS AS TO THE FACTs PARAGRAPH 1. The respondent Marlboro Tobacco Board of Trade is an unincorporated association organized on or about September 6 1939, with its principal offce and place of business located in the to"n of Upper :Marlboro (sometimes referred to as :Marlboro), State of :Mary land. The mem bership of said respondent :Marlboro Tobacco Board of Trade, hereinaiter referred to as respondent Board, is composed of corporations, partnerships and individuals located in the various States of the United States and who are generally engaged in the tobacco ma.rketing business either as sellers, buyers, brokers, warehouses, packers, processors or the manufacturers of various tobacc products, such as cigarettes and pipe-smoking tobaccos. The names of the offcers of said respondent Board, who, individually and as such offcers of said respondent Board, have been, and are now, in the position of dominating and controlling the affairs of said respondent Board, including ihe practices set forth herein, are James J. Buchheister, president;, and A. Hamilton King, secretary-treasurer. PAR. 2. Respondent Edelen Bros. Warehanee, Inc., is a corporation organized, existing and doing business under and by virtue of the laws of the State of Ma:olancl with its principal offce located at 315 South Charles Street, in the city of Baltimore, within said State of Maryland and operating a tobacco auction warehouse in or near the town of Upper Marlboro, a180 within said State of Maryland. The following-named individuals are now, or have been during the time mentioned herein, offcers and directors of sajd respondent Edelen Bros. 'Varehouse, Inc., :lnd in such capacity have been and are now in the position of dominating and controlling the affairs of said corporation, including the practices set forth herein: Robert S. Jameson president; Peter W. DunlJ, vice president; Wilson C. Bowling, treasurer; and W. R. Schult, ,secretary.

lARLBORO TOBACCO BOARD OF TRADE ET AL. 281 269 Findings Respondent Marlboro Tobacco Market, Inc., is a corporation organized, existing and doing business under and by virtue of the laws of the State of Maryland, with its principal offce located in the town of Upper Marlboro within said State of Maryland, where it is engaged in operating a tobacco auction warehouse. The following-named individuals are now, or have been during the time mentioned herein, offcers and directors of said respondent, Marlboro Tobacco Market, Inc., and in such capacity have been and are now in the position of dominating and controllng the affairs of said corporation, including the practices set forth herein: Frank M. Hall president; Robert L. Hall, secretary; and Paul F. Summers, treasurer. Respondents Edw. J. O'Brien & Co. (Inc. ) is a corporation organized, existing, and doing Dusiness under and by virtue of the laws of the State of Kentucky, with its principal offce located at 815-17 West Main Street in the city of Louisvile within said State of Kentucky. Said respondent Edw. J. O'Brien & Co. (Inc. ) is a tobacco buyer and maintains a branch offce and tobacco warehouse in or near the town of Upper Marlboro, State of Maryland, under the trade name E. J. Brien & Co.

The following-named individuals are now, or have been during the time mentioned herein, offcers and directors of said respondent, Edw. J. O'Brien & Co. (Inc. ), and in such capacity have been and are now in the position of dominating and controlling the affairs of said corporation, including the practices set forth herein: Edw. J. O' Brien Jr., president; Joseph Boyd O'Brien, vice president; and James Graves O'Brien, secretary-treasurer.

Respondent Central Leaf Tobacco Co. is a corporation organized existing, and doing business under and by virtue of the laws of the State of Virginia, with its princip,tJ offce located at Third and Cary Streets, in the city of Richmond, within the said State of Virginia. Said respondent, Central Leaf Tobacco Co. is a tobacco buyer and maintains a branch offce and tobacco warehouse in or near the town of Upper Marlboro, State of Maryland. The following-named individuals are now, or have been during the time mentioned herein, offcers of said respondent, Central Leaf Tobacco Co., and in such capacity, together with the members of the board of directors hereinafter named, have been, and are now, in the position of dominating and controlling the affairs of said corporation including the practices set forth herein: J. Shields Harvey, presidenttreasurer; L. L. Harvey, vice president j J. Duhling, secretary; , assistant C. L. Ball, Jr., assistant secretary; and R. J. 'Vilkerson treasurer. The following-named individuals are now, or have been during the time mentioned herein, members of the board of directors 282 FEDERAL TRADE C01J:\IISSION DECISIOXS Findings 48 F. T. c.

of said respondent, Central Leaf Tobacco Co. a.nd in such capacity, together with the offcen; hereinabove named, have been and are now in the position of dominating and controlling the affairs of said corporation, including the practices set forth herein: J. Shields Harvey, L. I.1. Harvey, VV. P. Henry, J. Ross Newell, George R. Penn, and Mrs. A. B. Tuck. Respondent Greenhow Maury, Jr., since July 1949 has had no connection with Central Leaf Tobacco Co. or the board. Respondent Planters Tobacco 'Varchouse, Inc., is a corporation organized, existing, and doing business under and by virtue of the laws of the State of iYbryland., with its principal offce and place of business located in or near the town of Upper Marlboro, within the State of l\lal'ylancl. Said respondent is engaged in operating a tobacco auction ,varehouse.

The following-named individuals are now, or have been during the time mentioned herein, arRecl's and directors of said respondent, Planters Tobacco ,VtLrchollse, Inc., and in such capacity have been and are now in the position of dominating and controlling the ailairs of said corporation, including; he practices set forth herein: Gustave A. Buchheister, president; George Y. IGincfelter: vice president; James J. Buchheister, secretary-treasurer.

Hespondents Alfred E. Tolzman, G. Kelson Davis, and Orville VV. Davis are copartners tr ding under the name and style of Southern :Maryland Tobacco Co. R partnership, engaged in purchasing tobacco with t.their principal Offce and place of business located in or near the town of Upper Marlboro, State of Maryland. Respondents GeorgeC'assels Smith and Edward Gieske are copartners trading under the Lame and style of Gieske & Kiemann, a partnership, engaged in purchasing tobacco, with their principal offce and place of business located in or near the town of Upper Marlboro State of iYbrJ'land.

Respondent Arthur R, Talley is an individual operating as an independent tobacco brokor, having his offce and place of business in the city of Fuquay Springs, State of North Carolina. R. J. Reynolds Tobacco Co. was erroneously and inadvertently listed as a member of the 1Ia:,-boro Tobacco Board of Trade through the unauthorized action of its tobacco buying agent. It at no time was a',are of this, until this proceeding was commenced, never paid dues or took any part in the ads and practices here.in founel. Respondent Board has a large and frequently changing membership, wherefor respondents specifically named herein, were named and are treated herein as betng representative of the entire membership of respondent Board.

1ARLBORO TOBACCO BOARD OF TRADE ET AL. 283 268 Finc1ings PAR. 3. Tobacco, produced in the State of Maryland, is brought by the growers thereof to the respondent tobacco auction warehouses members of respondent Board, as aforesaid, where it is sold at auction to purchasers, or agents or representatives thereof, who are also members of said respondent Board and who are, in a great many instances engaged in the export tobacco trade or 1n the manufacture of tobacco prollnets in States other than that of l\Iaryland and shipped or other1'- "ise transported by them from said State of Maryland to other States within the United States HllCl to foreign countries, anclthere has been and nOlI' is, a constant current and course of trade and commerce in said tobacco and tobacco products bet\yeen and among the several States of the United States, as well as with foreign countries. \H. 4. Hcsponc1cnt Board was organized by its members to regulate and control the marketing of tobacco in the ":L\arlboro a.nd adjacent territory" and to that end to provide for rules and regulations that would he uniform in their applicat.ion and in the mutual interests of the producers, ,varehousemen and buyers. The rules and regulations adopted, commonly referred to as by Ia \Vs, Iyere and are a part of the agreement under which said Board was organized, and the pertinent pro\,jslons thereof, among others, are as follows: 4. Any VcrE'on firm or COnJora1ion may become a member of the Marlboro Tobacco Board of Trade upon producing evidence satisfactory to the \varehouse of bis financial responsibilty and his good character and upon the pa:rment of membership fee hereinafter providec1 fol' ; anj further agreeing to abide by all rules and regulations of the Board of Trade. 5. o person, firm or corporation shall be entitled to purchase tobacco on the IvCarlboro Tohacco Market unless he or it is a member in good standing of the MarlbOl.o 'Tobacco Board of Trade.

livery member of the Marlboro Tobacco Board of Trade sellng 6. I!tobacco at auction shall charge uniform fees for all tobacco sold at auction and shall not make any rebate or pay any gratuity or perform any services or do any other act which may in any way be calculated to reduce the Commission and other charges.

To effectuate and enforce said byl L'vs, fines are provided, in certain instances for their violation. In 1947 the following new bylaw was added:

26. That the 1Iarlboro Tobacco Board of Trade shall be authorized and empowered to employ a supervisor under such terms and conditions they might think right and proper and that any supervisor employed shall have full author. ity to enforce all the Bylaws of the Marlboro Tobacco Board of Trade; to arbitrate all differences of opinion or interpretations which may arise; to reg-ulate and adjust sellng hours; to impose fines fol' tbe violation of the rules and regu- Iations of the 11arlboro Tobacco Board of Trade and to perform any other duties necessary to promote the honest and effcient sale of tobacco on said markets. 284 FEDERAL TRADE CO:\L\IISSIOX DECISIOKS Findings 48 F.

PAn. 5. There are fiv" counties in the State or Maryland within which tobacco is produced, namely, Prince Georges, Anne Arundel Calvert, Charles, and St. Marys. Prior to the 1949 market period there were eight auction 'iyareLOllses in these respective counties from which the entire crop or loose-loar Maryland tobacco was sold. Three or the said 'Va.rehouses are located in or near the town of Upper IHarlboro in Prince Georges County, Md. The others are located in or near Waldorf, La Plata, and Hughesville, Charles County, ld. In the year 1949, thero were 34 950 000 pounds or loose-lear tobaeco marketed from the five counties hereinabove named, the greater portion of which, consisting of 22 564 000 pounds, was produced in Prince Georges, Anne Arnndel, and Calvert Counties. Or this amount Prince Georges County alone accounted ror 10 187 000 pounds. The town or Upper Marlboro, and its vicinity, because or its accessibility, is at the present time, and heretorore has been, the natural or prererential market ror a substantial number or the tobacco growers in Prince Georges, Anne Arundel, and Calvert Counties. Up to and immediately prior to tbe opening or the 1949 tobacco sellng period the entire loose-lear tobacco crop sold in the town or Upper Marlboro and vicinity was market through three auction warehouses, as aforesaid, namely, responde::lts Edelen Bros. Warehouse, Inc., Planters Tobacco Warehouse, In" , and Marlboro Tobacco Market, Inc., all or which are located appro:rimateJy one-rourth mile to the east or the said town or Upper Marlboro, on United States Highway 301. In the past rew years the three respondent warehouses aforesaid have been and are now unable to handle all the tobacco when and as presented in the usual course or business for sale by the Maryland growers, as the floors of said warehouses become so crowded at times that it becomes necessary to close down in order to clear out the tobacco thereon. This operates as a hardship End inconvenience to the growers who are then compelled to leave it on their trucks, find storage, or return same to their rarms, to be brought again to the market on another day. The market ror the sale or Maryland tobacco opens on or about the first or Mayor each year and normally does not close until sometime during the month or August. In the 1949 market SBason a rourth tobacco auction warehouse was opened at 'Vaysons Corner, Anne Arundel County, which is some 2.6 miles from the nearest respondent warehouse near the said Town or Upper Marlboro but in that market area, ror the purpose or buying and selling tobacco at auction. PAR. 6. Said respondent Board, and its members, operating under and by virtue or its bylaws, have in the past and now continue, among other things, to allot or apportion, regulate and adjust the SBllng time among said member warehouses, pass upon applications for MARLBORO TOBACCO BOARD OF TRADE ET AL. 285 269 Findings membership in said respondent Board, although sole authority in this respect is actually vested in the warehouse members thereof impose fines for violations of said bylaws, require the charging of uniform fees and at all times herein mentioned the Upper Marlboro tobacco market has been dominated and controlled, and is now under the domination and control of respondent Board and its members. The authority of said respondent Board is respected, acknowledged and adhered to by the buyers, agents and representatives of the principal tobacco manufacturing companies and by the independent buyers and speculators and whose presence is necessary for a successful sale so that it is virtually impossible for any person, firm, or corporation to engage in the tobacco business, other than as a producer, in the Marlboro ma.rket area, without first having been admitted into membership in respondent Board.

During the years 1949 and 1950 numerous applications were made by the offcers of the warehouse at vVaysons Corner to respondent Marlboro Tobacco Board of Trade for admission to membership in said respondent Board. N ot,vithstanding that admission to membership in said respondent Board is, according to the provisions of its byhtws, as aforesaid, nominally open to any applicant of good chareter and financial responsibility engaged in the tobacco industry of ":Marlboro and adjacent territory," said respondent Board refused and stil continues to refuse to admit the aforesaid ,varehouse into membership of said respondent Board. Consequently, the refusal of respondent Board to admit the Waysons Corner warehouse, or any other like situated warehouses, and although in the Upper Marlboro market area, into its membership, as aforesaid, and to allot said warehouse sellng time was, in practical effect, to exclude it completely from the Upper Marlboro market and to eliminate it as a competitor of respondent Board's member warehouses as hereinafter set forth. l\1embership carries with it a fair allocation of sellng time. PAR. 7. The respondent members of said respondent Board wbo own and operate tobacco auction warehouses in said area, as aforesaid, would be in competition with each other for the tobacco of growers in connection with the sale and marketing thereof, and with such other tobacco auction warehouse, as aforesaid, if it were not for the act of said respondents in refusing to admit such warehouse into membership in said respondent Board. As a result thereof respondent Board' s member warehouses continue to enjoy a virtual monopoly in the auction sale of tobacco in the market area in or surrounding the town of Upper Marlboro.

P AU. 8. Said respondents, beginning on or about September 1939 and particularly within the last 2 years, including the present time 286 FEDERAL TRADE COMMISSION DECISIO),T Conclusion 48 F. T. Go have entered into, maintained, a,ncl carried out agreements, understandings, combinations and conspiracies, between and among themselves, to suppress, hillclrr, stifle, and lessen competjtion in the sale and IJnrchase of tobacco i l the market area of Upper J\Iarlhoro, State of Maryland.

Pursuant to, and in fllrJwrallee of, and to make e:tect.yc said1 agreements, understandings, combinations nud conspiracies, said respondents have cooperatively, concerteelly and collectively mloptetl, engaged , and carried out, the following methods, acts and practices: 1. Established and is 110W lnaintaining a monopoly in respondent member lrarehollscs in tiw auction sale of tobacco on the Upper l\iarlbora market.

2. Denied membership in respondent Board to a tobacco Hucbon warehouse corporation, engaged or that desired to engage in the business of conducting a toba,ceo auction warehouse in sneh area. 3. Require that all respondent member -warehouses charge uniform fees.

4. Establish and mainsain a boycott of potential competitor of respondent Boa.rd's member -warehouses.

5. Used respondent Board as a medium for effectuating and carrying out the said agreeme;lts, understandings, cornbinations and conspiracies found herein anel have by and through said respondent Board carried out and done, and are now carrying out and doing, the acts and practices hen' in founel.

PAR. 9. The capn,city, tendency and effect of the a:foresaill agreements, understandings, combinations and conspiracies in the methods acts and practices and things done and performed by respondents in pursuance thereof are, and have been, to unreasonably lessen: suppress EtHic and restraln compel:ition and trade in the sale, purchase, and iiistribution of tobacco and tobacco products, in the various States of the Enited States and with foreign countries, and to deprive the purchasing, using and consuming public of the advantage of competitive prices, terms, and conditions in connection with the purchase thereof, and other advantages which they would receive and enjoy under conditions of normal, unobstructed, free, and fair competition in said trade and industry and to otherwise operate as a restraint upon, obstruction and detriment t0 the freedom of fair and legitimate competition in such t.trade and industry. CONCLUSION The acts and practices of said respondents, and the things done and performed by them, as herein found, are all to the prejudice of , . , . ) ; lARLBORO TOBACCO BOARD OF TRADE ET AL. 287 269 Order the public; have a dangerolls tendency to hinder and prevent, and a.cttLaIl y hindered and prevpnted, competition and restrained trade between and among said member respondents and others in the sale. purchase, and distribution of their said artic.es of merchandise il commerce, wit.hin the in1:ent and meaning of the Federal Tracie Commission \.ct; and placed in respondents the power to control and enhance prices and other terms and conditions in connection with the sale, pllrcha, , and distribution of the said articles of merchandise; have a. dangerous tendency to create in saiel respondent member wareh011ses a monopoly in the auction sale of tobacco in said commerce; have unreasonably restrained such commerce in their said articles of merchandise, and constitute unfair methods of competition and unfair acts and practices in commerce' within the intent and meaning of section 5 of the Federal Trade Commission Act. ORDER It is m'dercd That respondents 1\a1'boro Tobacco Board of Trade an unincorporated membership associat.ion, its offcers and directors individually and as such offcers and directors, its members, or any group of such respondents, their agents, representatives, and e11ployees, James J. Buchheister, individually and as president, and A. Hamilton ICing, individually and as secretary-treasurer, respectively, of such association; Edelen Bros. \Varehouse, Inc., a corporation, its offcers, directors, representatives, agents, and employees; Robert S. Jameson, Peter ,V. Duvan, Wilson C. Bowling and ,V. R. Schult individually and as president, vice president, treasurer and secretary, respectively, of respondent Edelen Bros. Warehouse, Inc. ; 1\arlboro Tobacco J\iarket, Ine., a corporation, its offcers, directors, representatives, agents, and employees, Frank I. Hall, Robert L. Have and Paul F. Summers, individually and as president, secretary, and treasurer respectively, of 1arlboro Tobacco Market, Inc.; Edw. J. O'Brien & Co. (Inc.), a corporation, its offcers, directors, representatives, agents and employees, and Edw. J. O'Brien Jr. Toseph Boyd O' Brien and James Graves O Brien, individually and as president, vice president and secretary-treasurer, respectively, of Edw. J. O'Brien & Co. (Inc. Central Leaf Tobacco Co., a corporation, its offcers, directors, repre- J. Shields Harvey, L. L.sentatives, agents, and employees, and Harvey, J. :\1. Duhling, C. L. Ball Tr. and R. J. ,Vilkerson, individually and as president-treasurer, vice president, secretary, assistant seeretary and assistant treasurer, respectively, of Central Lea.f Tobacco Company; and J. Shields Harvey, L. L. Harvey, ,V. P. Henry,.J. Ross Newell, George R. Penn, and Mrs. A. B. Tuck, individually and as 213840-54- 288 FEDERAL TRADE COMMISSION DECISIOXS Order 48 F.

directors of said Central Leaf Tobacco CO. ; Planters Tobacco Warehouse, Inc., a corporatioll, :its offcers, directors, rcpresentatives, agents and employees, Gustave 1\. Buchheistcr, George Y. KJinefelter, and James J. Buehheister, individually and as president, vice president and secretary-treasurer, respectively, of Planters Tobacco "Varehouse Inc. ; Alfred H. Tolzman, G. Nelson Davis, and Orvile ,Y. Davis individually anel as copartners trading under the name and style or Southern Maryland Tobacco Co., a partnership, their representatives agents, and employees; George Cassels- Smith and Edward Gieske individually and as copaltners trading under the name and style of Gieske & Niemann, a partnership, their representatives, agents and employees; and Arthur R, Tally, his representatives, agents, and employees in, or in connecticn with, the offering for sale, sale, purchase and distribution of tobacco and tobacco products in commerce, as commerce" is defined in the Federal Trade Commission Act, do forthwith cease and desist frma entering into, continuing, cooperating in or carrying out, or directing, instigating or cooperating in, any planned common cuurse ,)f action, agreement, understanding, conlbination or conspiracy between and among any two or more of said respondents or between anyone or more of said respondents and others not parties hereto to do or perform any of the following things: 1. Refusing membership in the Marlboro Tobacco Board of Trade of the American Tobacco Growers Corp., referred to in the complaint as the Waysons Corner VI warehouse, or any other person, firm or corporation similarly situated.

2. Establishing, fixing Qr maintaining fees or adhering to any fees so established, fixed or maintained.

3. Employing or utilizing the Marlboro Tobacco Board of Trade or any other medium or rentral agency as an instrumentality, aid, or vehicle in performing or doing any of the things prohibited by this order.

It is further ordered Chat the complaint herein be, and it hereby , dismissed as to the R. J. Reynolds Tobacco Co., a corporation, and Greenhow :\laury, Jr., an individual.

ORDER TO :FILE REPORT OF C03:IPLIANCE It is ordered That the respondents herein shall, within 60 days after service upon them of thif; order, file with the Commission a report in writing setting forth in detail the manner and form in which they have compJicd with the crder to cease and desist Cas required by said declaratory decision and order of September 5 , 1051j. Commissioner Mason not participating.

ATOj\HC PRODUCTS, INC., ET AL. 289 Syllabus